Shares of Brainbees Solutions, the parent company of omnichannel children’s brand FirstCry, dropped by over 6% on Monday, hitting an all-time low of INR 520.25 on the BSE. The decline comes on the heels of an extensive tax inspection by the Mumbai state tax authorities, sparking investor concern.
The inspection, conducted by the Assistant Commissioner of State Tax in Mumbai, commenced on November 6 and concluded on November 10. According to an official exchange filing, Brainbees Solutions affirmed its full cooperation throughout the inspection, responding to clarifications and providing detailed records requested by authorities.
The company disclosed that it had paid INR 1.74 crore, including interest, to rectify discrepancies in its Goods and Services Tax (GST) filings for the fiscal years 2018-19, 2019-20, 2020-21, and 2022-23. Additionally, officials raised concerns regarding GST implications on expenses related to the company’s IPO, specifically on costs incurred from fresh share issuance. Brainbees Solutions indicated that it has provided comprehensive explanations addressing these queries.
Shares of Brainbees Solutions were trading at INR 529.10 by 3:10 PM, showing a 6.34% decline from previous levels. The slump in share price began on November 7, shortly after the company informed exchanges about the ongoing tax investigation targeting its Pune headquarters and a warehouse in Bhamboli.
In another recent development, Brainbees Solutions received notices from the Income Tax Department regarding INR 79.7 crore in Employee Stock Option Plan (ESOP) expenses for assessment years 2018-19 to 2021-22.
The company, founded in 2010 by Supam Maheshwari and Amitava Saha, debuted on the BSE and NSE with significant gains earlier this year, listed at a 34% premium on the BSE and a 40% premium on the NSE. Despite market volatility, FirstCry has continued to grow, reporting a 10% increase in operating revenue for Q1 FY25, reaching INR 1,652.07 crore. Its consolidated net loss has also narrowed by 31% year-over-year, standing at INR 75.68 crore compared to INR 110.42 crore in Q1 FY24.
With FirstCry’s presence in the omnichannel baby and children’s retail market, this inspection and subsequent financial impact could weigh heavily on investor sentiment as the company navigates regulatory scrutiny alongside its market growth strategies.
