R K Swamy makes weak debut, lists at 13% discount to its issue price

R K Swamy (RKSL) made a weak stock market debut on Tuesday as its shares got listed at Rs 250, a 13 per cent discount against its issue price of Rs 288 per share, on the National Stock Exchange (NSE). The stock of the advertising & media agency firm opened at Rs 252 on the BSE.

Post listing, the stock hit a high of Rs 284.90 and a low of Rs 243 on the NSE. At 10:05 AM, RKSL was trading at Rs 281.80, 13 per cent higher from its opening level and 2 per cent lower against its issue price. A combined 4.7 million equity shares have changed hands on the NSE and BSE thus far in trade.

RKSL's Rs 423.56-crore initial public offer (IPO) was subscribed 25.78 times. The retail portion was subscribed 33.31 times, Non Institutional Investors (NIIs) portion was booked 34.24 times; and Qualified Institutional Buyers (QIB) portion 20.58 times.

RKSL is one of the leading integrated marketing service groups in India, offering a single-window solution for creative, media, data analytics, and market research services.

According to analysts, RKSL is well positioned to leverage its core competitive strengths built over five decades and focus on delivering an attractive combination of service offerings.

The total addressable market is expected to grow in double digits for Integrated Marketing Communications (13-15 per cent CAGR till FY28) with higher growth in digital share, Customer Data Analytics and MarTech (13-15 per cent CAGR till FY28) and Full-Service Market Research (9-10 per cent CAGR till FY28).

"RKSL clients are primarily engaged in the BFSI, automotive, and fast moving consumer goods (FMCG) industries with relationships with an average age of 13 years for top 10 clients and age of 10 years for top 50 clients and have received various awards over the last many years for their creative services.

Revenues grew at a CAGR of 30 per cent with improvement in margins and profitability over the past few years," said analyst at Reliance Securities in their IPO note.

RKSL's long-standing customer relationships with government companies and agencies to create awareness about its policies, promote various new initiatives, health and educations schemes, state wise marketing services are the key positives.

Its strong management helps to tap domestic and global customers in various segments of industries as private companies spend around 3 per cent of their revenues for product endorsement which will drive sustained growth for the coming years, the brokerage firm said.

Analysts believe with improvement in margins, newer cities, and innovative campaigns in digital medium improving the overall customer experience helps to build brands leveraging the success for clients.

"From valuation perspective, RKSL's P/E ratio of 41x, based on FY23 earnings, is reasonable considering the industry average P/E of 69x. 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. While the IPO presents an opportunity for substantial returns, investors must be prepared for potential cyclical returns and a longer investment horizon," brokerage firm BP Equities said in their IPO note.