RK Swamy sees negative listing. Should investors exit?

Prashanth Tapse of Mehta Equities believes that RK Swamy would get more traction post-listing as it would be the first of its kind and a pure play for a one-stop marketing solutions company to be listed on the exchanges.

Dhruv Mudaraddi of StoxBox said the company, with an integrated marketing services approach, is strategically positioned to capitalise on the country's burgeoning digital infrastructure growth spurred by initiatives such as the 'Digital India' campaign and the expansion of 4G and 5G networks.

"Our sense is that the inherent nature of the digital marketing analytics business is such that it entails higher initial risk followed by a phased replication model upon successful rollout," he said.

Mudaraddi advised investors who have received allotment to hold shares from a medium to long term perspective.

The IPO of RK Swamy was subscribed about 25.78 times on the third and final day of the bidding process. The issue received consolidated share bids of over 21.22 crore over the three-day issue period against 8,232,946 shares available for subscription. The retail category was booked 33.31 times while the non-institutional investors' quota was picked 34.24 times. The quota for qualified institutional buyers (QIB) was subscribed 20.58 times.

The company sold its shares in the range of ₹270-288 per share for its ₹423-crore IPO. At the upper band price, the total issue size will be at ₹423 crore and the total market capitalisation of the company is pegged at ₹1,450 crore.

The IPO was a mix of fresh shares worth ₹173 crore, and an offer-for-sale (OFS) of 87 lakh equity shares by promoters and investors.

Promoters Srinivasan K Swamy, and Narasimhan Krishnaswamy sold 17.88 lakh equity shares each in the OFS, while investors Evanston Pioneer Fund LP offloaded 44.45 lakh equity shares and Prem Marketing Ventures LLP 6.78 lakh equity shares via the OFS.

The promoters own 84.44% shares in RK Swamy, and the rest 15.56% shares are held by the selling public shareholders Evanston Pioneer Fund LP, and Prem Marketing Ventures LLP. Prem Marketing Ventures LLP will be exiting the marketing services provider after the issue.

RK Swamy will spend ₹54 crore of the net fresh issue proceeds for working capital requirements. In fact, the fund size required for working capital has been reduced to ₹54 crore, from ₹87 crore earlier.

Further, ₹10.98 crore will be used for setting up a DVCP studio, ₹33.34 crore for investment in IT infrastructure development, and ₹21.74 crore for setting up of new CEC and CATI of the company.

SBI Capital Markets, IIFL Securities and Motilal Oswal Investment Advisory acted as the merchant bankers to the IPO, while Kfin Technologies was the registrar.

RK Swamy Ltd is the largest Indian majority-owned integrated marketing services provider in India, offering a single-window solution for creative, media, data analytics, and market research services.

During fiscal 2023, one of India's pioneering advertising agencies RK Swamy released over 818 creative campaigns on behalf of clients across various media outlets, handled over 97.69 terabytes of data, and conducted over 2.37 million consumer interviews across quantitative, qualitative, and telephonic surveys.

RK Swamy reported a net profit of ₹7.93 crore and a revenue of ₹142.55 crore for the period ended on September 30, 2023. The company clocked a net profit at ₹31.26 crore and sales of ₹299.91 crore for the financial year ended March 31, 2023.