Brainbees Solutions Limited — Q2 FY25 earnings call

Call held 14 Nov 2024

Management summary

FirstCry delivered a strong Q2 FY25 performance characterized by robust top-line growth across all four business segments and significant operating leverage. The company's core India Multi-channel business continues to drive profitability, while the GlobalBees segment saw a massive growth spike due to advanced seasonal sales. Management remains focused on a multi-channel strategy, downplaying threats from quick commerce by highlighting their extensive logistics network and the planned nature of mother/baby purchases.

Highlights

  • Consolidated Revenue from operations reached ₹1,904 crores, representing 26% YoY growth.

  • Consolidated Adjusted EBITDA grew 66% YoY to ₹80 crores, with margins expanding 100bps to 4.2%.

  • Cash Profit After Tax surged 209% YoY to ₹27.9 crores.

  • Annual Unique Transacting Customers (AUTC) increased by 16.5% YoY to 9.4 million.

  • GlobalBees segment delivered exceptional 55% YoY revenue growth and 154% growth in Adjusted EBITDA.

  • India Multi-channel (core business) Adjusted EBITDA grew 38% YoY to ₹110 crores (8.6% margin).

  • International business (Middle East) revenue grew 25% YoY with EBITDA losses narrowing by 390bps to 18.9%.

  • Total modern store count reached 1,124 as of September 30, 2024.

Key financials

  1. Revenue ₹1,904 Cr +26%YoY
  2. Adjusted EBITDA ₹80 Cr +66%YoY
  3. Adjusted EBITDA Margin 4.2%
  4. Cash Profit After Tax ₹27.9 Cr +209%YoY
  5. GMV ₹2,528 Cr +21%YoY
  6. Gross Margin 37.3%

What they filed

Q1 FY27: revenue up 14.7%, net profit up 633.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue596 711 616 591 711 +19%750 +5%680 +10%678 +15%
EBITDA16 49 20 3 41 +156%28 −43%27 +35%25 +733%
Net profit7 38 15 3 28 +300%46 +21%32 +113%22 +633%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue GrowthAdjusted EBITDA Margin
India Multi-channel19%8.6%
International (Middle East)25%-18.9%
GlobalBees55%2%
Others (Education)44%—

Guidance & targets

Market Share|Other

  • Total Addressable Market (TAM) Market Share|Other · next 4-5 years · Medium confidence $120 billion
    our overall TAM will be close to $120 billion... in next four to five years

    — Supam Maheshwari, MD & CEO

  • India Childcare Market Size Market Share|Other · next 4-5 years · Medium confidence $64 billion
    In India, the childcare market itself will become a $64 billion in over next four years or five years.

    — Supam Maheshwari, MD & CEO

Capacity

  • International Offline Stores Capacity · next year · Medium confidence 2 stores
    I think you should see a couple of stores in the next year.

    — Supam Maheshwari, MD & CEO

Market context

  • D2C Sector CAGR (GlobalBees) Revenue · next few years · Medium confidence 30%+
    the overall industry report states that the D2C sector... will continue to demonstrate a 30%+ CAGR for few years. So we are pretty much in line with that on an annual basis.

    — Supam Maheshwari, MD & CEO

Risks & concerns

  • GST Regulatory Action

    medium

    Search and seizure operation by GST authorities in Maharashtra (Nov 2024) regarding input tax credit mismatches and IPO expenses.

    Management acknowledged

  • Quick Commerce Competition

    low

    Potential for quick commerce platforms to capture sales of standardized products like diapers.

    Analyst downplayed

  • Consumption Slowdown in Urban Areas

    low

    Management stated Q2 numbers show no visible impact and they are gaining share from unorganized players.

    Analyst downplayed

Areas of evasion (1)

  • Specific breakdown of gross margin expansion basis points per lever (category mix vs home brand mix).

Q&A highlights

3 direct
GlobalBees Growth Drivers Direct
While the performance has been extraordinarily good because of seasonality being advanced... industry continues to grow at... 30% plus.

Clarifies that the 55% growth spike was partly due to festive sales shifting from October to September, setting realistic expectations for future quarters.

Asked by Garima Mishra, KIE

Quick Commerce Impact Direct
Category overlap is very minimal. It's just probably diapers where and it's not as significant... majority of our business... is fashion.

Management argues that FirstCry's fashion-heavy mix and existing same-day delivery network in 40 cities insulate them from quick commerce disruption.

Asked by Sachin Salgaonkar

GST Search and Seizure Direct
We have paid a total amount of INR 1.74 Cr to the GST authorities, which includes the mismatch amount as well as the interest component for four years.

Proactive disclosure of a regulatory search (Nov 6-10) and the subsequent settlement, demonstrating transparency regarding compliance risks.

2 min read 5 chapters

Detailed narrative

Multi-channel Strategy Drives Core Growth

The India Multi-channel segment, FirstCry's core business, grew revenue by 19% YoY in Q2 FY25. Adjusted EBITDA for this segment reached ₹110 crores, a 38% increase, with margins improving to 8.6% from 7.4% in the previous year. Management emphasized that customers frequently overlap between online and offline channels, with offline stores now numbering 1,124 across 500+ cities. They added approximately 40 stores in Q2 and plan to continue aggressive expansion, citing that competitors in other retail categories often have 1,600 to 2,000 stores.

GlobalBees Momentum and Seasonality

GlobalBees reported a standout 55% YoY revenue growth in Q2, though management noted this was aided by the advancement of seasonal sales from October to September. Despite the seasonal boost, the segment showed underlying strength with Adjusted EBITDA margins improving to 2% from 1.2% YoY. Management expects the segment to align with the broader D2C industry growth rate of 30%+ CAGR over the next few years. They also highlighted that no single brand in the GlobalBees portfolio accounts for more than 15% of total sales, indicating a well-diversified house-of-brands model.

International Expansion and Path to Profitability

The International business, primarily focused on UAE and KSA, grew revenue by 25% YoY to ₹208 crores in Q2. While still loss-making, Adjusted EBITDA losses narrowed significantly from 22.8% to 18.9% YoY. Management highlighted that the Average Order Value (AOV) in the international business is roughly 3.9 times that of the India business. To further penetrate these markets, FirstCry has hired a head for its international offline foray and expects to open its first couple of physical stores in the Middle East next year.

Logistics Moat Against Quick Commerce

Addressing investor concerns regarding quick commerce, CEO Supam Maheshwari highlighted FirstCry's existing logistics infrastructure as a major competitive advantage. The company already offers same-day delivery in 40+ cities and next-day delivery in over 1,000 cities. Management argued that mother and baby purchases are typically 'planned' rather than 'impulse,' and the minimal category overlap with quick commerce (limited mostly to diapers) makes the threat less material for their fashion-led business model.

Education Segment's High-Margin Potential

The 'Others' segment, which includes the preschool education business, demonstrated significant growth of 44% YoY in Q2. This segment operates on an asset-light franchise model and currently includes 300+ schools. Management noted that this is a high-profit business, with H1 FY25 EBITDA margins reaching 23%, up from 16% in H1 FY24. They see massive headroom for growth as the Indian preschool market remains 80% unbranded and highly unorganized.

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