The RK Swamy IPO, which opened for subscription on Monday, March 4, witnessed a remarkable start as investors displayed strong enthusiasm. According to BSE data, the subscription status stood at 2.19 times on the first day, indicating significant demand. Notably, the retail portion was fully subscribed within the first hour of opening, and by the end of the day, it was oversubscribed by an impressive 7.87 times.
In RK Swamy IPO, Allocation Breakdown Highlights Emphasis on Institutional Buyers and Employee Participation.
The IPO of RK Swamy, which has allocated a significant portion of shares for institutional buyers, reserves at least 75% of shares for qualified institutional buyers (QIBs). Non-institutional Institutional Investors (NIIs) are allotted up to 15% of the shares, while retail investors can access a maximum of 10% of the offer. Additionally, equity shares worth up to ₹7.50 crores are set aside for employees, with an attractive employee discount of ₹27 per share.
The price band for the RK Swamy IPO has been established at ₹270 to ₹288 per equity share, with a face value of ₹5. The lot size for the IPO is 50 equity shares, and investors can subscribe in multiples of 50 equity shares thereafter.
During an interview with CNBC-TV18 on Monday, R K Swamy’s Group CEO and Whole Time Director, Narasimhan Krishnaswamy, highlighted the company’s data-driven approach and heavy reliance on digital efforts across all operational facets. Krishnaswamy emphasized the company’s bootstrap journey over the past 50 years and the need for acceleration and reset in the current landscape.
In the interview, Krishnaswamy outlined the revenue distribution, with 40% typically generated in H1 and 60% in H2, accompanied by a gross margin of approximately 68%. He emphasized that growth will be propelled by an expanding clientele, new business ventures, and regional expansion strategies. Additionally, Krishnaswamy highlighted the higher margins typically observed in H2 and the significance of technology updates in enhancing operational effectiveness.
RK Swamy IPO Details Unveiled
The RK Swamy IPO includes a fresh issue of ₹173 crore, along with an offer-for-sale (OFS) of up to 8,700,000 equity shares with a face value of ₹5 each by the promoters and other investors.
The selling shareholders consist of:
- Srinivasan K Swamy, who will offload 1,788,093 equity shares.
- Narasimhan Krishnaswamy, who will offload 1,788,093 equity shares.
- Evanston Pioneer Fund L.P., which will offload 4,445,714 equity shares.
- Prem Marketing Ventures LLP, which will offload 678,100 equity shares.
The net proceeds from the fresh issue are anticipated to be utilized for various purposes including:
- Financing the company’s working capital requirements.
- Financing capital expenditures to establish a digital video content production studio.
- Financing investments in the development of the company’s IT infrastructure and that of its Material Subsidiaries, Hansa Research and Hansa Customer Equity.
- Financing the establishment of new customer experience centers and computer-aided telephone interview centers.
- Financing general corporate purposes.
The book running lead managers for the R K Swamy IPO are SBI Capital Markets Limited, IIFL Securities Ltd, and Motilal Oswal Investment Advisors Limited. These esteemed entities will oversee the IPO process and manage the issuance of shares to investors.
Additionally, KFin Technologies Limited has been appointed as the registrar for the IPO. KFin Technologies Limited will manage the IPO application process, allotment of shares, and refund procedures, ensuring a smooth and efficient IPO experience for investors.
RK Swamy IPO Grey Market Premium (GMP) Today
As per investorgain.com, the Grey Market Premium (GMP) for RK Swamy IPO stands at +90. This indicates that RK Swamy shares are trading at a premium of ₹90 in the grey market.
Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of RK Swamy shares is indicated at ₹378 apiece. This suggests a 31.25% increase compared to the IPO price of ₹288.
The ‘grey market premium’ serves as an indicator of investors’ willingness to pay more than the issue price, reflecting market sentiment towards the IPO.
RK Swamy IPO Review: Brokerage Analysis
Reliance Securities: Reliance Securities highlights RK Swamy’s extensive relationships with government entities, leveraging them to raise awareness about policies, promote initiatives, and market various schemes, including those related to health and education. The brokerage emphasizes the company’s robust management, facilitating engagement with domestic and global customers across various industries. They note that private companies typically allocate around 3% of their revenues for product endorsement, which is expected to drive sustained growth. Reliance Securities believes that improving margins, expanding into newer cities, and innovative digital campaigns will enhance overall customer experience, thus recommending investors to “SUBSCRIBE” to the issue for the long term.
Canara Bank Securities Ltd: Canara Bank Securities Ltd underscores RK Swamy Limited’s diverse service portfolio encompassing media, creative, data analytics, and market research. Ranked among India’s top ten integrated marketing communications service groups, RK Swamy offers comprehensive solutions in integrated marketing communications, full-service market research, customer data analytics, and marketing technology, presenting itself as a one-stop shop for clients. The brokerage highlights the company’s position as a leading player in the industry, providing integrated solutions for marketing needs.
The company’s top line has shown a Compound Annual Growth Rate (CAGR) of 19% from FY21 onwards. For FY23, the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITA) and Profit After Tax (PAT) margins are projected to be 20.97% and 10.68%, respectively. Additionally, for FY23, Return on Equity (ROE) and Return on Capital Employed (ROCE) are expected to be 22.20% and 28.95%, respectively.
The company aims to utilize the funds raised for the establishment of a studio with post-production facilities, an auto marketing platform, and a data repository platform. With a Price-to-Earnings (P/E) ratio of 40.96x for FY23 and an annualized P/E of 80x for FY24, which may seem relatively high, especially considering that the second half of FY2024 is anticipated to contribute 60-65% of the company’s earnings. Despite the apparent valuation, the brokerage recommends subscribing to the IPO for potential listing gains.
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