RK Swamy IPO: Business Model, Key Details, Financials, KPIs, Strengths, and Weaknesses
This blog is for you if you’re someone who never lets an investment opportunity pass by and you’re willing to take a chance. We bring you another firm that plans to raise capital from the public straight from the booming initial public offering (IPO) market.
Business Model
R.K. Swamy established R.K. Swamy Advertising Associates, which later became RK Swamy Ltd. in 1973. The company’s initial focus was mostly on offering marketing and advertising services to customers in India. In just five years, it became a major force in the Indian advertising market. The company and BBDO created a collaboration later in 1985, and the two ultimately became RK Swamy BBDO.
The company’s clientele is dispersed throughout India. It has provided services to almost 4000 organizations, and in the fiscal year 2023, it served over 475 clients.
The company employs 2391 people and operates 12 locations nationwide, with its head office in Chennai, Tamil Nadu.
Major Clients
The business’s clientele is diverse and dispersed around the country. Public and private sector businesses, NGOs, and international corporations are the organization’s clients. The company’s clientele work in various industries, such as banking and finance, insurance, automotive, fast-moving consumer products, etc.
Some well-known customers are the State Bank of India, Lloyd, Nabard, Havells, LIC, Cera, Hawkins, Larsen & Turbo, Orient Cement, NTPC, SIDBI, and Shriram Transport Finance Company.
Promoter Holding
Promoters Srinivasan K. Swamy (also known as Sundar Swamy) and Narasimhan Krishnaswamy (also known as Shekar Swamy) own approximately 83.03% of the company.
Details of the Issue
With a fresh issuance of 173 crores and an offer for sale of 250.56 crores, the business is seeking to raise 423.56 crores. With a market lot of 50 shares, the IPO’s lower price band is set at 270 INR per share, while the higher price band is set at 288 INR per share.
The major details of the issue are as follows –
| Face Value of Share | 5 INR per share |
| Price Band | INR 270 – 288 per share |
| Market Lot | 50 Shares |
| Total Fresh Issue Size | 423.56 Crores |
| Fresh Issue | 173 Crores |
| Offer for sale | 250.56 Crores |
| Employee Discount | INR 27 per share |
Timeline of the IPO
| IPO Open Date | 4th March 2024 |
| IPO Close Date | 6th March 2024 |
| Finalization of Allotment | 7th March 2024 |
| Initiation of Refund & Credit of shares into demat account | 11th March 2024 |
| Listing Date on NSE & BSE | 12th March 2024 |
IPO Allotment Size
| Applicant | Market Lot | Share | Amount (INR) |
| Retailer (Min) | 1 | 50 | 14400 |
| Retailer (Max) | 13 | 650 | 187200 |
| Small High Net Worth Individual (Min) | 14 | 700 | 201600 |
| Small High Net Worth Individual (Max) | 69 | 3450 | 993600 |
| Big High Net Worth Individual (Min) | 70 | 3500 | 1008000 |
Investor Allocation Quota
The specifics of the issue’s classification into several categories are shown in the table below.
| Investors Category | Share Allocation (%) | Number of Shares Allocated |
| Employees Reservation | 1.77% | 260417 |
| Qualified Institutional Buyers | 73.67% | 10834895 |
| High Net Worth Individual | 14.73% | 2166979 |
| Retail Investor | 9.82% | 1444653 |
Objective of the Issue
The money raised from the IPO will be used to open a studio for producing digital video material, as well as new customer service locations and a computer-aided telephone interviewing facility. A portion of the proceeds will go toward the company’s IT infrastructure expansion.
Financial Highlights
Balance Sheet
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| Non-Current Asset | 68.826 | 54.774 | 86.512 |
| Current Asset | 244.826 | 351.440 | 303.547 |
| Total Asset | 313.652 | 406.441 | 390.059 |
| Equity | 45.231 | 16.349 | 3.3 |
| Non-Current Liability | 22.448 | 17.838 | 122.830 |
| Current Liability | 245.973 | 372.254 | 263.929 |
Income Statement
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| Revenue from operations | 292.613 | 234.413 | 173.546 |
| Total Income | 299.913 | 244.971 | 183.220 |
| Total Expenses | 237.007 | 200.549 | 154.394 |
| Profit before tax | 42.580 | 24.7 | 4.676 |
| Profit after tax | 31.258 | 19.255 | 3.077 |
Cash Flow Statement
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| Net Cash flow from operating activities | 29.165 | 64.009 | 49.945 |
| Cash flow from investing activities | (13.829) | (21.220) | (21.571) |
| Cash flow from financing activities | (44.263) | (33.487) | (27.607) |
KPIs
| Particulars | 31st March 2023 | 31st March 2022 | 31st March 2021 |
| EBITDA Margin | 20.97% | 18.13% | 15.73% |
| Return on Equity (ROE) | 101.52% | 159.99% | 6.25% |
| Debt Equity Ratio | 0.76 | 3.09 | 22.63 |
| Profit after Tax Margin | 10.42% | 7.86% | 1.68% |
| Return on Capital Employed (ROCE) | 28.95% | 20.08% | 8.58% |
Strengths
1. The business has a solid five-decade track record and has made a name for itself in the industry.
2. They enjoy a well-known clientele with enduring relationships that bring them recurring business.
3. The business has shown consistent growth as revenue from operations has shown approx. 25% increase on a YoY basis.
4. Over time, the company’s debt-to-equity ratio has improved. For the financial year ended 2021, the debt-to-equity ratio was 22.63, while in 2023, it came down to 0.76.
Weaknesses
1. Over time, the company’s cash flow from operating activities has declined by around 50% on a YoY basis.
3. The major portion of this issue is offer for sale(OFS); only 173 crores out of 423.56 crores can be utilized towards expansion.
4. The industry is expanding quickly, bringing in new competitors who could pose a threat to the business.
Conclusion
The advertising industry is expanding quickly. To start a business or maintain one that already exists, any organization must properly promote its goods and services. RK Swami is a firm that has been in this profession for the past 50 years and is well known in the marketplace. The organization manages the marketing and promotion for leading businesses in practically every industry.
Though the company has shown major growth prospects, the business is not without risks. Therefore, consider your risk before making any investment decision.
Frequently Asked Questions (FAQs)
Q1. Are RK Swamy Limited employees eligible for a discount?
Ans. Yes, employees of the company are eligible for an INR 27 per share discount on the IPO issue price.
Q2. Has there been an improvement in RK Swamy Limited’s profit after-tax margins?
Ans. Indeed, the company’s PAT margins have increased over the last three years. In 2021, the margin was 1.68%, and by the end of the fiscal year in 2023, the margin was 10.42%.
Q3. Is RK Swamy a debt-free company?
Ans. Although RK Swamy is not a debt-free company, the ratio has improved over time. As per the company’s red herring prospectus, as of the financial year that concluded in 2023, the debt-to-equity ratio stands at 0.76.
Q4. How much must a retailer invest to participate in this IPO?
Ans. A retailer investor must invest a minimum of 14400 INR.
Q5. What is RK Swamy Limited’s primary business?
Ans. RK Swamy Limited’s primary business is marketing, advertising, and promoting different companies’ goods and services.
Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.
