Mumbai: In the ten days leading up to filing the Draft Red Herring Prospectus (DRHP), Maheshwari sold more than 6 million shares in FirstCry, and a total of 9 million shares were offloaded in the six months preceding this period.
The founder and managing director of FirstCry, Supam Maheshwari, divested 6.2 million shares in the company within the 10 days preceding the filing for an initial public offer, as revealed in the draft red-herring prospectus (DRHP). Priced at Rs 487.44 each, the highest recorded during a secondary share sale in December, Maheshwari’s sold shares are valued at over Rs 300 crore. The CEO is also listed as a selling shareholder in the upcoming public issue.
Before the DRHP filing, Maheshwari held 35,097,831 shares, constituting a 7.46 percent stake. However, by the application submission date, his ownership had decreased to 28,893,347 shares, equivalent to a 5.95 percent stake in the company.
Sources indicate that, aside from SoftBank, FirstCry founders participated in a recent share sale, valuing the company at over Rs 23,000 crore. Moneycontrol estimates, based on DRHP details, suggest that the December secondary sales occurred at a valuation of approximately Rs 23,700 crore or Rs 487.44 per share.
FirstCry is anticipated to set its IPO pricing within the range of $3.5-3.75 billion in valuation. If the valuation reaches the upper limit of this range, it would represent a 31 percent premium for individuals who acquired the shares at Rs 487.44 each in December.
The DRHP showed that Maheshwari has offloaded 9.34 million shares during six months before the date of filing of the DRHP. At the price of Rs 487.44 apiece, this share transfer would be worth over Rs 455 crore.
The IPO filing also revealed that a board resolution on December 27, when FirstCry filed its application to go public, transferred 14.9 million shares at Rs 243 apiece to the company’s ESOP trust.
According to a unicorn chief financial officer who did not wish to be named, such transfers to ESOP trust may be undertaken to dilute the shareholding of a promoter in lead up to an IPO or dilute the shareholding of a foreign investor to comply with foreign direct investment norms.
The FirstCry CEO’s stake in the company saw fluctuations, decreasing to 5 percent and 3.7 million shares by the end of FY21. Subsequently, it increased to 17 percent with 15.2 million shares at the close of FY22 and further rose to 9 percent with 38.2 million shares by the end of FY23. This increment in shares can be attributed in part to a share subdivision leading up to the IPO and partly due to employee stock options (ESOPs) granted to him.
In FY22, Supam Maheshwari received 14.85 million shares as ESOPs, expected to vest over time. According to the Draft Red Herring Prospectus (DRHP), the founder of FirstCry reported a remuneration of Rs 200 crore in FY23, Rs 29 crore in FY22, and Rs 14 crore in FY21, inclusive of short-term employment benefits and share-based payments. In the first quarter of FY24, Maheshwari’s remuneration amounted to Rs 26 crore.
FirstCry‘s ESOP costs or share-based payment expenses doubled from Rs 46 crore in FY21 to Rs 92 crore in FY22, and increased almost fourfold from Rs 92 crore in FY22 to Rs 361 crore in FY23. The ESOP cost in the first quarter of FY24 was Rs 45 crore.
Despite the increasing expenses, the SoftBank-backed company witnessed its losses widen from Rs 79 crore in FY22 to Rs 486 crore in FY23. In its IPO, FirstCry aims to raise Rs 1,816 crore through a primary issue of equity shares. Existing investors, including Mahindra and Mahindra (M&M), SoftBank, Premji Invest, TPG, NewQuest, and others, will collectively sell a total of 5.4 crore shares in the offer-for-sale (OFS).