PE funds open their wallets for online kids’ players

After several online and offline players in the kids’ wear category were forced to exit, global PE firm Bain Capital sued EY (Ernst & Young) in the US court against their investment advice in domestic kids’ wear chain Lilliput. PE investors have been skeptical about the kids’ brands and retailer. However, the scenario is gradually changing with investors showing willingness in putting funds in kids’ category.

The largest baby and kids retailer Firstcry has already raised 69 million dollars (over Rs 439 crores) from a host of funds such as Saif Partners, IDG Ventures and Valiant Capital. incubating VC arm of Mahindra Group, Mahindra Partners, which already enjoys strong offline presence with Mom & Me in the category, acquired Babyoye.com to grow in the online space.

However, the players in this segment are still not making money. While Babyoye was fortunate to get picked up by Mahindra Retail. Sources point out that Mahindra Partners, which invested Rs 450 crores in setting up Mom & Me stores for its group company Mahindra Retail continues to bet big on future prospects despite reporting losses of more than Rs 200 crores. As of now, the company witnesses about 26 percent of total revenues being driven by e-commerce. It now aims to increase the same to 35 percent, while achieving operational profitability by the next financial year.

Another online player, Hopscotch managed to raise 11 million dollars (around Rs 70 crores) in a second round of funding led by Facebook co-founder Eduardo Saverin and Los Angeles headquartered early stage investor Velcos Capital, earlier this year.