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.