What you must know about Crayons Advertising IPO

Crayons Advertising Ltd, is an SME IPO on the NSE which is opening for subscription on 22nd May 2023. Let us first get a key background of the company. The company was incorporated in the year 1986 and was positioned as an integrated marketing and communications agency. As an ad agency, the company offers a 360-degree view to the client problem spectrum and also offers a 360-degree solution to the clients. It has been around for 36 years and has built a good standing in the niche area that it operates in.

Crayons Advertising Ltd offers top of the line creative brand marketing strategy, online and offline media planning as well as media buying and actually creative execution. Crayons has kept pace with the big digital shift and now offers cutting-edge digital expertise, on-ground as well as virtual activation capabilities. It is able to work on agnostic solutions that can be customized and work equally effectively across print, television, and internet medium. Most of the solutions are intended to help the client in consistent brand building.

Crayons is not just a plain vanilla agency but offers the full advertising ecosystem from media planning to media buying to creatives to design strategy to outreach and monitoring of conversions. It offers communication services and advertising media services as two verticals. The latter consists of brand strategy, Events, Print Media, Digital Media, and Outdoor (OOH) Media services. In terms of front end deliverables, Crayons offer various advertisement modes including Newspapers, Brochures, Magazines, Television Channels, FM channels, and display of Outdoor Hoardings.

Key terms of the SME IPO of Crayons Advertising Ltd

Here are some of the highlights of the Crayons Advertising Ltd IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 22nd May 2023 and closes for subscription on 25th May 2023; both days inclusive.
   

• The company has a face value of Rs10 per share and the entire issue is by way of fresh issue of shares. There is no OFS component in this issue.
   

• The price band for the book built issue is yet to be fixed and only after that we will know the exact size of the IPO.
   

• Crayons Advertising Ltd will issue a total of 64.30 lakh fresh shares. This move would be equity dilutive and EPS dilutive. Once the price band is determined, we would also know the exact value of the IPO.
   

• The company has allocated 50% of the issue size for the QIB investors, 15% allocated to HNI / NII investors and the balance 35% is being offered to the retail investors.
   

• The company has appointed SS Corporate Services Ltd as the market marker for the SME IPO issue of Crayons Advertising. A total of 3.22 lakh shares will be allocated to the anchor investors to reduce volatility in the stock price and provide liquidity.
   

• The company currently has an EPS of Rs0.90 and return on net worth (RONW) at 4.33%. These are low by peer group standards and could have a bearing on the valuation of the stock post IPO listing.
   

• The company has been promoted by Kumar Lalani and Vimi Lalani and the promoter stake in the company stands currently at 99.75%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately from 99.75% to 73.50%.

While Corporate Capital Ventures Private Ltd will be the lead manager to the issue, Skyline Financial Services Private Ltd will be the registrar to the issue.

Key dates to be aware of in the Crayons Advertising Ltd IPO (SME)

The SME IPO of Crayons Advertising Ltd opens on Monday, 22nd May 2023 and closes on Thursday 26th May 2023. The Crayons Advertising Ltd IPO bid date is from 22nd May 2023 10.00 AM to 25th May 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 25th May 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Crayons Advertising Ltd

The table below captures the key financials of Crayons Advertising Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins have been fairly low and the sales growth has been quite erratic, but that could be due to the pandemic disruption in FY21. However, the company has an established model with a matured market. A lot will depend on how the company is able to successfully manage this transition smoothly. However, investors must remember that this is a traditionally low margin business. That could be an overhang on valuations. The IPO of Crayons Advertising would fit better into a high risk IPO category.