FirstCry Shares Rally Despite Fresh Legal Troubles

In a fresh bout of troubles, kids-focused omnichannel retailer FirstCry’s parent BrainBees Ltd intimated the bourses that it has now received an “order of compounding” from the Senior Inspector, Legal Metrology Department, Varanasi, on November 16. 

According to its regulatory filings, the company has been asked to pay a compounding fee of INR 50K to the authority for violations provisions of Section 18 (1), 36 (1) of Legal Metrology  Act, 2009. The act specifies the manufacturing, packing, selling, pricing etc. of pre-packaged commodities in the prescribed standard quantities or number for any retailer.

FirstCry has sought the disposal of the case by compounding procedure under Section 48(3) of the Legal Metrology Act, 2009. Further, it also said that the compounding fee will not have any material impact on its financials or operations beyond the penalty amount.

Despite the fine, shares of the company rallied 5.95% to INR 550 during intraday trading today (November 18). The company’s shares zoomed more than 12% to touch INR 582 earlier in the day. Meanwhile, its market capitalisation stood at $3.37 Bn. 

This is the second instance of legal troubles for the company within this month. On November 11, the company paid INR 1.74 Cr (including interest) to tax authorities in Mumbai on account of mismatch in GST returns during the financial years FY19, FY20, FY21 and FY23.

Two days after the disclosure, the company’s shares slumped to an all time low of INR 513.80 on November 13. 

Despite the legal issues, the company reported a healthy uptick in its financial health in the second quarter of the ongoing fiscal year 2024-25 (Q2 FY25). On November 14, FirstCry’s parent reported that it managed to cull its losses by 47.4% to INR 62.85 Cr in the quarter from INR 119.41 Cr in the year-ago quarter. 

Its revenue from operations reached INR 1,935.85 Cr, up from INR 1,527.68 Cr in Q2 FY24.

Its top line grew on the back of a healthy 16% YoY growth in its Indian multi channel operations’ annual unique transacting customers (UTC). Across its portfolio businesses FirstCry, Baby Hug, among others, the company registered a UTC of 9.4 Mn in Q2 FY25.

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