Mahindra Retail is selling its franchise business to Brainbees Solutions, which runs baby and kidscare chain FirstCry, for Rs 362.1 crore on slump sale basis as part of a business consolidation pact.The two firms have also agreed to invest in the merged entity.
Under the pact, FirstCry will issue equity shares aggregating to Rs 354.6 crore to Mahindra Retail along with a payment of Rs 7.5 crore in cash, the company said in a BSE filing.
Additionally, FirstCry has also raised $34 million of new equity capital from the Mahindra Group, equity fund Adveq and Infosys co-founder Kris Gopalakrishnan and other existing shareholders.
“The merged entity will conduct its business under the brand name FirstCry.com – A FirstCry Mahindra Venture,” Mahindra Retail, which operates maternity and childcare chain BabyOye, said in a statement.
It further said: “In terms of the structure of the transaction, Mahindra Retail and FirstCry have consolidated their operations, with Mahindra Retail selling its franchise business to FirstCry, and operating all company stores under a FirstCry master franchisee agreement.”
The Board of Directors of the two companies have already approved this strategic move.
Mahindra Retail has over 120 stores across the country operating under the ‘babyOye by Mahindra’ brand. FirstCry, which started operations in late 2010, has over 180 FirstCry branded franchisee stores in over 100 cities in the country.
The new entity FirstCry.com will have a parent base of over 4 million, a footprint of over 300 stores spread across 125 cities, the statement added.
Mahindra group Chairman Anand Mahindra said future belongs to click and brick businesses, and that consolidation is the way to thrive and establish industry leadership.
“I am optimistic that this consolidation of the strengths that both groups bring to the partnership will result in a winning proposition. We are hugely excited by the possibilities,” he added.
FirstCry was founded by serial entrepreneur Supam Maheshwari, who had previously built and successfully sold Brainvisa Technologies. He will continue as the CEO of the combined entity FirstCry.com.
“We are delighted to partner with a prestigious business house like Mahindra, both as a retail brand and as an investor…Our partnership with the Mahindra Group will bring in synergies that will help us scale and achieve our profitability goal much faster,” CEO Supam Maheshwari said.
Together, the partners would continue to scout for more opportunities for inorganic growth, Maheshwari added.
Mahindra Retail had acquired Babyoye.com in February 2015.