RK Swamy IPO Review

RK Swamy is facing an IPO issue of Rs. 423.56 Cr will open on March 4, 2024. The issue will close on March 6 and be listed on the exchange on March 12, 2024. In this article, we will analyze the strengths and weaknesses of RK Swamy Limited IPO Review 2024. Read on. !

RK Swamy IPO Review

About RK Swami company

RK Swamy is one of the leading marketing services providers offering single window solutions for creative, media, data analytics and market research services. The company is India’s eighth largest integrated marketing communications group by operating revenue.

The group includes Aditya Birla Sun Life AMC, Himalaya Wellness Co., Cera Sanitaryware Ltd, Dr. We have over 50 years of experience in the industry servicing leading brands like Reddy’s Labs, Hawkins Cookers, Royal Enfield, etc. The comprehensive range of services provided by the company can be divided into the following segments:

1. Integrated Marketing Communications: This includes analyzing customer data, delivering and managing customer experiences, managing online reputation, and managing campaigns and loyalty.
2. Full Service Market Research: This includes customer/audience segmentation, consumer surveys, brand equity and customer satisfaction, and consumer intelligence.

Hansa Research’s subsidiaries focus on brand equity, customer satisfaction and market research. We conducted a 10-year India Reader Survey from 2003 to 2012, covering over 2 million direct interviews.

The company was founded by late RK Swamy in 1973 in Chennai, Tamil Nadu. It is currently run by promoters Srinivasan and Narasimhan Swamy, who have 40-50 years of experience in the advertising and marketing services industry.

Industry introduction

The Marketing Services Market in India grew at a CAGR of 5.6% in FY19-23 to reach Rs. 1.93 Lakh Chrome industry is expected to grow at a CAGR of 12.5% ​​to 14.5% by FY28. This increase was supported by higher marketing spending by Indian companies, higher corporate profits, and higher gross domestic product.

Advertising contributes significantly to the overall marketing services industry. Corporate spending on marketing activities also increased as corporate revenues grew at a compound annual growth rate (CAGR) of 8.9% for 748 publicly traded companies between fiscal years 2019 and 2023.

In FY23, the total market size of Integrated Marketing Communications in India was Rs. 93,100 Cr and has expanded at a CAGR of 4.6% at Rs. In fiscal year 19, it was 77.671 trillion won. This figure is higher than the global integrated marketing communication industry growth rate of 4.4% during the same period, showing that the speed of recovery has accelerated from the COVID-19 level.

The industry is expected to grow at a CAGR of 13-15% to reach Rs.1.7-1.8 Lakh Cr by FY28, driven by a shift towards digital advertising and spending amid widespread economic recovery and rising internet subscribers.

In FY23, TV accounted for the largest share of advertising revenue at 38%, followed by digital advertising at 33%. Digital advertising is expected to become the most preferred advertising medium by FY28, accounting for over 50% of advertising spend, with TV accounting for 22-27%.

This is due to changes in consumer behavior and the increasing affordability of digital infrastructure. In FY23, FMCG was the largest contributor to the integrated marketing communications segment, accounting for approximately 30% market share, followed by e-commerce and consumer goods.

RK Swamy IPO Review – Finance

RK Swamy reported a profit of Rs. 293 Cr in FY23, up 25% from Rs. 234Cr in FY22. Over the past three years, revenue growth has been consistently at a CAGR of 30% since FY21.

Integrated Marketing and Communications is the largest segment, accounting for 49% of RK’s revenue. This segment has been expanding its revenues at a CAGR of 43%.

Customer data analytics and marketing technology is the company’s second-largest segment, accounting for 27% of revenue and growing 18% since FY22. The full-service market segment is the third largest segment, accounting for 24% of sales.

Operating expenses are the company’s largest expense, accounting for 32% of total revenue. These costs were only 25% of revenue in FY21, but they have increased significantly. However, employee benefits costs declined from 46% of revenue in FY21 to 37% of revenue in FY23.

The company’s net profit increased 62% in one year. 19.3 Cr in FY22 to Rs. 31.3Cr in 2023. The company’s EBITDA margin and PAT margin were approximately 21% and 10%, respectively.

RK Swami – Key Player

As of FY23 financials, RK Swamy will be the third largest advertising company listed on Indian exchanges. The largest company, Affle (India), is almost five times the size of RK Swamy Ltd. Although small, RK maintains strong net profit margins, reporting the highest return on equity among its peers.

RK Swamy Ltd has a basic EPS of Rs. 7.03 is on the higher end of the price range of Rs. 288 is valued at a price-to-earnings ratio of 41x. While the ratios may seem quite expensive, they are still significantly cheaper than their listed peers.

Company Strengths

1. Integrated service provider with 50 years of experience: The company can provide single pane of glass solutions for creative, media, data analytics as well as market research services depending on customer requirements.
2. Performance in data analytics and marketing technology: The company operates its own data analytics business that uses AI-based insights, media planning tools, and customer relationship management tools. Analysts India magazine describes the company as “Top 50 Companies for Business Data Scientists”.
3. Ability to create digital content at scale: The company has the expertise and experience needed to create content for famous brands. We have created digital content in 18 languages ​​and produced over 2,828 videos for distribution to client-owned and paid digital platforms.
4. Diversified customer base through long-standing relationships: Over the years, the company has served over 4000 client organizations. These clients are diverse across multiple industries including BFSI, Automotive, FMCG, Consumer Durables, Central Government NGOs, etc.
5. Experienced Professional Management: The promoters of the company have over 40-50 years of experience in the marketing industry. They serve on the Board of Directors of prestigious advertising associations. The rest of our senior management team also has over 30 years of experience in a variety of industries.

company’s weaknesses

1. Customer concentration risk: The company served more than 380 customers in the last six months of FY24. Despite having a large customer base, the company’s top 10 customers contribute 42% of its revenue. Losing a single customer can have a serious impact on your bottom line.
2. Competitive Risk: The company must continually evolve its technological capabilities to understand the market efficiently and effectively for its customers. Failure to upgrade your technology or provide adequate data can impact customer satisfaction and ultimately cost your business.
3. High working capital requirements: The company secures space for its customers through media houses and other digital platforms. In March 2021, the Newspaper Association of India passed a resolution mandating marketing companies to make payments within 60 days.
4. Services subject to availability: Some of the routine services provided by the company may be publishing clients’ advertisements in print media, electronic media and outdoors. All of these services are subject to space availability, and spaces in high demand can seriously increase costs.
5. Seasonal revenue characteristics: The advertising industry is a seasonal industry with 60-65% of annual revenue generated in the third and fourth quarters.

RK Swamy Limited IPO Review – GMP

As of the date of writing this article, the gray market premium for RK Swamy Ltd stock is yet to be announced. We will update the article with our respective expectations as soon as GMP is updated.

RK Swamy IPO Review – Key IPO Information

promoter: Srinivasan K Swamy (Sundar Swamy) and Narasimhan Krishnaswamy (Shekar Swamy)

Book Operations Lead Manager: SBI Capital Ltd, IIFL Securities Ltd and Motilal Oswal Investment Advisors.

Proposal registered by: K-Pin Technologies

purpose of the problem

1. Rs 54 Cr will be utilized to finance the working capital requirements of the company.
2. Rs 11 Cr will be spent as capital expenditure for setting up of DVCP studio.
3. Rs 33.34 Cr will be invested in IT infrastructure development by its subsidiaries Hansa Research and Hansa Customer Equity.
4. Rs 21.73 Cr will be invested in setting up of new CEC and CATI of the company.
5. The remaining amount will be utilized for general corporate purposes.

conclusion

In conclusion, RK Swamy is a leading marketing company with over 50 years of experience. We have outstanding expertise across the industry servicing many renowned brands. The fact that these brands are famous can partly be credited to RK Swamy Ltd! The upcoming IPO is a great opportunity to invest in marketing services companies in India.

The marketing services industry is expected to witness strong growth in the coming years, especially in digital advertising. This presents a good growth path for RK Swamy, given its strengths in data analytics and digital content creation.

However, risks such as customer concentration, competition, working capital requirements and seasonality of revenue are factors that investors must consider. The IPO valuation also looks expensive at PER of 40 times.

Overall, RK Swamy IPO review appears to be best suited for investors who are high-risk and positive about the long-term prospects of the marketing services industry. So what do you think about the upcoming IPO? Let us know in the comments below.

Written by Nasir Hussein

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