Q] R K Swamy has been one of the largest Indian majority-owned marketing services group. Why did you plan to launch an IPO?
Narasimhan: It’s a strategic initiative. You don’t launch these things casually; it takes a lot of effort. The Indian market is very well poised, and we have to go where the nation wants us to go. All our capacities have to be increased ahead of the demand, therefore, there is a requirement to invest.
Another initiative is the RK Swamy Centre for Study of Indian Markets where we want to go deep into the market and understand the nuances. We also want to create a data marketing platform for the auto business, a brand and marketing consulting group, and do more in customer data analytics. All these initiatives are directed towards existing and new clients, and in an emerging marketplace which will get more competitive. The IPO lays a financial foundation for the organization, giving it the surety that the company can withstand the competitive pressures and move along with these initiatives.
Srinivasan: As we grew in this space, we found some gaps that needed support and money. For example, we have felt the need to do more videos. Through our digital video studio, we want to produce high-quality video communication at scale. We are also putting the money to be raised in IPO for technological and digital upgradation. Further, there is a need for computerization and software upgradation, which are critical for handling large data. That requires a big-scale infrastructure investment. Overall, a sum of 173cr is required for these different heads. We could have done this without IPO, but it would have taken much longer to implement.
Q] Why is this the right time to launch the IPO?
Srinivasan: We started this process four years ago, but COVID intervened. At the time, we had no idea what the market was going to be like, and our decision to go with an IPO had nothing to do with the volatility after the surge in the market. We took four or five months to approve the first draft and it’s a long-drawn process. A lot of planning is required before you go to the regulator. Then the regulator takes time, and of course, corrections are made.
Narasimhan: Now is the right time. RK Swamy is the holding company providing marketing communication services, we have brought in Hansa Research and Hansa Customer Equity as wholly-owned subsidiaries, the consolidation is now complete. The prep for the IPO started much earlier. It has taken us a lot of time to execute our strategies, and get our own house organized before we can invite external investors. That’s the journey that we have been on.
Q] The current price band of the IPO is set between 270-288 INR per equity share of face value of 5 INR each. Apart from the evaluation parameters, what was the rationale behind setting this price band?
Narasimhan: The setting of price band is done by the merchant bankers, but as far as I understand, the price band setting is done based on three factors. The first is the qualitative factor of the company - company history, promoter’s experience, client base, etc. The second is the financial metrics, such as performance, growth, and margin. The third and most important factor is that this story is taken to investors, and they, in collaboration with the merchant bankers arrive at a price band.
Q] RK Swamy Limited has existed for over five decades and has seen two generations of ownership. With new investors and collaborators coming in, how do you plan to sustain the core values and control in the company?
Narasimhan: The investors who are coming in are essentially buying into our core values. They are not asking us to change any of those anchor principles that have brought this company to this level. They are partners who understand that. It is for us to embrace the investors and orient them to the way we think. We don’t want to change the principles which are making us successful. If somebody is giving us valuable feedback, we would also gain from their experience. The most important thing is to keep the core of the institution intact.
Srinivasan: We’ll have still two-thirds of the ownership. So, how to control the ownership is not an issue. We have a strong professional lineup, who have been with us for several years. The top 50 people have been with us for more than 14 years. I think we are poised for a good future with all this.
