RK Swamy IPO subscribed 11.3 times on Day 3; retail portion booked 26x

The initial public offering (IPO) of RK Swamy continued to witness a decent response from the investors during the second day of the bidding process. The issue was overall subscribed 2.19 times on day one and ended day two with overall subscription of more than 6 times.

The Chennai-based RK Swamy is selling its shares in the price band of Rs 270-288 apiece. Investors can apply for a minimum of 50 shares and its multiples thereafter. It is looking to raise Rs 423.56 crore via IPO, which is entirely a sale of Rs 173 crore and offer-for-sale (OFS) of up to 87,00,000 equity shares.

According to the data, the investors made bids for 9,27,38,800 equity shares, or 11.28 times, compared to the 82,32,946 equity shares offered for the subscription by 1.10 pm on Wednesday, March 06. Bidding for the issue, which had opened on Monday, March 4, will conclude on Wednesday, March 6.

The allocation for retail investors was subscribed 25.91 times, while the portion reserved for non-institutional investors saw a subscription of 109 times. Employee portion was booked 2.01 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for only 1.24 times as of the same time.

RK Swamy has been engaged in the business of integrated marketing communications, customer data analysis, full-service market research and syndicated studies for more than five decades. Incorporated in 1973, RK Swamy is a data-driven, integrated marketing services provider that leverages digital initiatives.

The grey market premium of RK Swamy has remained stable after day one's response as the company is commanding a premium of Rs 50 in the unofficial market, suggesting a listing pop of about 23 per cent for the investors. However, the premium in the grey market stood around Rs 60 earlier, when the issue was announced.

Analysts are mostly positive on the issue of RK Swamy citing its long and sound historical record, consistent financial performance, long-term relations with repeat customers and rising demand and expanding market size. However, rising competition, demand for more working capital and changing trends may dent a company's business.

The IPO is priced at a P/E of 46.5 times on FY23 EPS, which is a 33 per cent discount to peers. RK Swamy is a leading marketing service company specializing in integrated marketing communication, customer data analytics, and market research. Over the period of FY21-FY23 the company’s Revenue, EBITDA and PAT has grown at a CAGR of 30 per cent, 70 per cent and 219 per cent, respectively, said IndSec Research.

"The marketing services industry is expected to grow at a CAGR of 12.5-14.5 per cent over FY23-FY28E period on the back of higher emphasis on analytics, rise in digital and social media marketing, increasing prominence on experiential marketing etc. Overall robust financial track record and positive industry outlook make this IPO an attractive proposition," it said with a 'subscribe' rating.

Ahead of its IPO, RK Swamy mobilized Rs 187.22 crore from 18 anchor investors as the company allocated 65,00,937 equity shares at Rs 288 apiece. The company will offer 75 per cent of the net offer for the qualified institutional investors (QIBs), while non-institutional investors (NIIs) will get 15 per cent of shares. Retail investors will get 10 per cent of the net offer.

Mehta equities believes the company asks valuations seems reasonably priced in the line of industry it serves. Given, RK Swamy as an intimidating player in India's marketing services landscape, offering a holistic approach to address client’s marketing and advertising requirements, said Mehta Equities.

"With its proven track record of success, diversified service portfolio and expansive network, we believe RKSL is a long-term investor story. Hence, considering all the limitations, we recommend investors to 'subscribe' the IPO for Long term perspective," it added.

SBI Capital Markets, Motilal Oswal Investment Advisors and IIFL Securities are the book running lead managers of the RK Swamy IPO, while Kfin Technologies is the registrar for the issue. Shares of the company are set to list at Dalal Street on March 12, Tuesday, 2024 on both BSE and NSE.

 

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