R K Swamy IPO Final Subscription at 25.94 times

About R K Swamy IPO 

The stock of R K Swamy has a face value of ₹5 per share and the price band for the book building IPO has been set in the range of ₹270 to ₹288 per share. The IPO of R K Swamy will be a combination of a fresh issue of shares and offer for sale (OFS) component. The fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership. The fresh issue portion of the IPO of R K Swamy comprises the issue of 60,06,944 shares (60.07 lakh shares approximately), which at the upper price band of ₹288 per share will translate into a fresh issue size of ₹173.00 crore. The offer for sale (OFS) portion of the IPO of R K Swamy comprises the sale / offer of 87,00,000 shares (87.00 lakh shares), which at the upper price band of ₹288 per share will translate into an OFS size of ₹250.56 crore.

Out of the OFS size of 87.00 lakh shares, two promoter shareholders (Srinivasan K Swamy and Narasimhan Krishnaswamy) will offer 17,88,093 shares each. In addition, among the investor shareholders; Evanston Pioneer Fund will offer 44,45,714 shares while Prem Marketing Ventures LLP will offer 6,78,100 shares. Thus, the total IPO of R K Swamy will comprise of a fresh issue and an OFS of 1,47,06,944 shares (147.07 lakh shares approximately) which at the upper end of the price band of ₹288 per share aggregates to total issue size of ₹423.56 crore. The IPO of R K Swamy will be listed on the NSE and the BSE on the IPO mainboard. The total shares are subject to change later on finalization.

The fresh funds will be used for capex for the digital video content studio, working capital needs, funding IT infrastructure investments, and funding the setting up of new customer experience centres. Promoters currently hold 83.03% in the company, which will get diluted post the IPO. The IPO will be lead managed by SBI Capital Markets, IIFL Securities and Motilal Oswal Investment Advisors, while KFIN Technologies Ltd will be the IPO registrar.

How subscriptions evolved in the IPO period

While the QIB portion and the HNI / NII portion picked up traction on the last day, the overall journey was quite rapid for the retail investors. In fact, the QIB portion got fully subscribed only on the last day of the IPO while the retail portion and the HNI portion got comfortably fully subscribed on the first day of the IPO itself. As a result, the overall IPO also saw the subscription book filling up on the first day of the IPO itself. The IPO was kept open for a total period of 3 consecutive trading days. While the retail portion did start off strong, the eventual traction slowed in the subsequent days, which is the general norm for retail, but still got subscription almost as much as the HNI / NII investors and more than QIB investors. Here is the day-wise progress in IPO subscription of the total available quota. The available over subscription in the table below represents the oversubscription; net of the anchor allocation of shares, done one working day prior to the opening of the IPO.

As can be seen from the above table, the overall IPO got 25.94 times subscribed at the close of the third and final day of the IPO on 06th March 2024. Here is a quick look at how the various categories saw traction on the last day of the IPO.

• The QIB portion got 0.01 times subscribed at the end of the first day of the IPO. However, on the last day of the IPO, the subscription moved from 0.37X to 20.58X.
   

• The HNI / NII portion got 2.99 times subscribed at the end of the first day of the IPO. However, on the last day of the IPO, the subscription moved from 9.76X to 34.36X.
   

• Retail portion got 8.12 times subscribed at the end of the first day of the IPO. However, on the third and final day of the IPO, the subscription moved from 18.60X to 34.03X.
   

• The overall IPO got 2.24 times subscribed at the end of the first day of the IPO. However, on third and final day of the IPO, overall subscription moved from 6.08X to 25.94X.

Rapid update on the overall IPO response

The IPO saw fairly steady response on the Day-1 and Day-2, with most of the action visible only on Day-3 of the IPO, as is normally the case. However, the IPO did close with relatively healthy subscription numbers at the close of Day-3. In fact, the IPO of R K Swamy got fully subscribed on the first day of the IPO itself. As per the combined bid details put out by the BSE at the close of Day-3, R K Swamy IPO was subscribed 25.94X overall, with best demand coming from the HNI / NII segment, followed by the Retail segment and the QIB segment in that order.

In fact, the institutional QIB segment and the HNI / NII segments saw some very good traction on the last day. The HNI portion did do well and a lot of the surge of funding applications and corporate applications did come in on the last day of the IPO. Retail portion was relatively less aggressive on the last day, although it was fully subscribed on Day-1 of the IPO itself, but subsequent traction was a tad more cautious. Firstly, let us look at the details of overall allocation of shares to various categories of investors. It may be noted that in the final allocation of shares, minor variations are normal as part of intra-segment adjustments. These, however, do not impact the total number of shares materially.

Data Source: BSE

Having understood the allocation of shares across various categories, Let us look at how the subscription data played out for the IPO at an overall level and at a more granular level.

As of close of 06th March 2024, out of the 82.33 lakh shares on offer in the IPO, R K Swamy saw bids for 2,135.32 lakh shares. This implies an overall subscription of 25.94X at a macro level. The granular break-up of subscriptions was in favour of the HNI / NII investors followed by the Retail investors and the QIB Investors in that order. QIB bids and NII bids typically gather most of the momentum on the last day, and that was the case in this issue also in the case of QIB bids. Both the QIB and the NII bids picked momentum on the last day and added to its heft of the previous days. Here are the details of the category-wise subscription.

Data Source: BSE

Subscription status of QIB Portion

On 01st March 2024, R K Swamy completed the bidding for its anchor allocation. There was a robust response as the anchor investors participated through the process of book building. A total of 65,00,937 shares were allotted to the anchor investors. The allocation was done at the upper IPO price band of ₹288 per share (including premium of ₹283 per share) which resulted in an overall allocation of ₹187.23 crore. The anchors absorbed 44.12% of the total issue size of ₹424.34 crore. It may be noted that half the anchor portion is locked for 1 month from the date of allotment i.e. up to April 06th, 2024. The other 50% is locked for 3 months from the date of allotment i.e., up to June 05th 2024.

The QIB portion (net of anchor allocation as explained above) had a quota of 43.34 lakh shares of which it has got bids for 892.04 lakh shares at the close of Day-3, implying a subscription ratio of 20.58X for QIBs at the close of Day-3. QIB bids typically get bunched on the last day and while the heavy demand for the anchor placement had given an indication of the institutional appetite for the R K Swamy IPO subscription overall, the actual demand did turn to be quite robust for the IPO.

Subscription status of HNI / NII Portion

The HNI portion got subscribed 34.36X (getting applications for 744.50 lakh shares against the quota of 21.67 lakh shares). That is a relatively strong response at the close of Day-3 largely because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, come in on the last day of the IPO, and that was visible as the overall HNI / NII portion added to its heft on the last day of the IPO. Apart from the QIB portion, even HNIs saw good traction on the last day.

Now the NII/HNI portion is reported in two parts viz. bids below ₹10 lakhs (S-HNI) and bids above ₹10 lakhs (B-HNI). The bids above the ₹10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above ₹10 lakh bid category got subscribed 35.73X while the below ₹10 lakh bid category (S-HNIs) got subscribed 31.61X. This is just in the form of additional information and is already part of the overall HNI bids explained in the previous para.

Subscription status of Retail Individuals

The retail portion was subscribed a healthy 34.03X at the close of Day-3, showing relatively strong appetite. It must be noted that retail allocation is 10% in this IPO. For retail investors; out of the 14.45 lakh shares on offer, valid bids were received for 491.55 lakh shares, which included bids for 417.78 lakh shares at the cut-off price. The IPO is priced in the band of (₹270 to ₹288 per share) and has closed for subscription as of the close of Wednesday, 06th March 2024.

Next Steps in the R K Swamy IPO

The issue opened for subscription on 04th March 2024 and has closed for subscription on 06th March 2024 (both days inclusive). The basis of allotment will be finalized on 07th March 2024 and the refunds will be initiated on 11th March 2024. In addition, the demat credits are expected to also happen on 11th March 2024 and the stock will list on 12th March 2024 on the NSE and the BSE. R K Swamy will test the appetite for such digital marketing stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 11th March 2024 under ISIN (INE0NQ801033).