Crayons Advertising coming with an IPO to raise Rs 41.80 crore

Crayons Advertising

• Crayons Advertising is coming out with a 100% book building; initial public offering (IPO) of 64,30,000 shares of Rs 10 each in a price band Rs 62-65 per equity share.
• The issue will open for subscription on May 22, 2023 and will close on May 25, 2023.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 6.20 times of its face value on the lower side and 6.50 times on the higher side.
• Book running lead manager to the issue is Corporate Capital Ventures.
• Compliance Officer for the issue is Gagan Mahajan.

Profile of the company

Crayons Advertising is integrated marketing and communications agency, providing 360 degree solutions to its wide array clients. The company was incorporated by the founder and Chairman Kunal Lalani with an object and vision to provide advertising solutions. The company is in the same industry for the past 36 years and is continuously expanding its business horizons with the moving trends across the world, reflecting its growing expertise in the marketing and advertising industry.

Wide area of scope of work being offered and provided by Crayons to its clients make it is one of the few agencies that can truly claim to be a fully integrated and independent in providing the marketing and communications solutions. By integrated it mean that it offer world class creative, exceptional brand marketing strategy, pragmatic online & offline media planning & buying, cutting-edge digital expertise, on ground & virtual activation capabilities, and design solutions that help its clients’ in brand building. It provides high-end ecosystem and end-to-end ad-tech communication solutions platform for advertising media services consisting of Brand Strategy, Events, Digital Media, Print Media, Outdoor (OOH) Media services which covers advertisement modes such as Newspapers, Brochures, Magazines, Television Channels, FM channels and display of Outdoor Hoardings, etc. In all such mediums of advertising “Creative” exists i.e. all the services are given keeping in my the necessity of being creative, so that Crayons can deliver most compelling communications to grab attentions of the public at large.

Proceed is being used for:

• Funding of working capital requirements of the company.
• Capital expenditure on infrastructure and cutting-edge technology for expansion.
• General corporate expenses.

Industry overview

The Indian advertising market was valued at nearly Rs 670 billion in 2020. The market is further expected to grow at a CAGR of 11% during the forecast period of 2022-2027 to reach Rs 1253.2 billion by 2026. The major factors driving the Indian advertising market growth are rapid urbanisation, the growing acceptance of technology, the increasing population, and favourable government regulations in the region. The value chain analysis of the product has also been covered in this report encompassing all the activities in the value chain such as procurement, manufacturing, sales and distribution. Furthermore, the study assesses the industry based on Porter’s five forces model, which evaluates the level of competition in the industry by analyzing factors such as bargaining power of buyers and suppliers, threat from substitutes and new entrants.

Rapid urbanization and economic growth of India are encouraging businesses to increase investments in aggressive marketing strategies, promotional activities, innovative packaging solutions, and celebrity endorsements. In addition, the rising focus of companies on improving customer retention and attracting new buyers represents one of the key factors positively influencing the market. Apart from this, the growing adoption of digital advertising solutions due to the increasing penetration of high-speed internet connectivity in India is creating a positive market outlook. This, along with the widespread utilization of smartphones, laptops, and tablets facilitates the use of digital advertising. The increasing reliance of individuals on social media platforms is also offering numerous opportunities to companies to promote their services and products. Shifting consumer preference toward online shopping and continuous improvements in the e-commerce infrastructure are offering lucrative growth opportunities to leading advertising industry players. Furthermore, the expansion of media and entertainment channels and the advent of subscription-based channel models are strengthening market growth. Additionally, the emerging trend of advertisement through key sporting events, including the Indian Premier League and sports expo in India, is offering a favourable market outlook. Moreover, the rising spending of the Government of India (GoI) on political advertising is propelling market growth.

Pros and strengths

Meeting expectation of clients and maintaining Long Term Relationship with clients: Maintaining good relationship with customers is a most critical factor in its business to keep growing. Through regular interaction with its clients and understanding the client requirements such as location, target audience, concept, ad design etc. and choosing the most appropriate media source which enables it to not only attract new customers but also leads to recurring business with its existing clients. It will continue to focus on timely and accurate delivery of quality services which will help in forging strong relationships with its customers and gaining increased business from them.

Experienced Promoters and Technically Sound Operation Team: The company’s Promoter have significant industry experience and has been instrumental in the consistent growth of the company. Its management and team combine expertise and experience to outline plans for future development of the company.

Well equipped with advance technology: The company is well equipped with all the advance equipment’s as may be generally required in its industry. This provides the company edge over its competitors. It uses several software to create the ad. 

Risks and concerns

Advertising business depends on availability of space or sites for publishing of ads: The company’s main requirement for advertisement in the print media, electronic media and outdoor media is dependent on the availability of ad space in that particular media such as availability of particular space in newspapers or spot time in broadcasting radio stations or availability of space at particular hoarding sites on which client wants to publish/display the advertisements. It procure these spots, spaces or sites on rents/ lease from respective publication houses, radio stations and agencies, whenever there is a requirement. As on date of Red Herring Prospectus, it does not have any long term tie up or has not entered into any agreements with any such agencies. Any non-availability of these space/sites for whatever reason, could adversely affect its sales and profitability. Further, any price volatility of these space/sites and its inability to adjust to the same could adversely affect results of its operations and profitability.

Rely on third parties for providing services: The company’s offering of services includes Digital marketing, Ground events/activations, Events Management, Outdoor Media (OOH), Print Media, etc. It does not own any of the media and it does not keep inventory of any media on its own. It plans to buy media for its clients as per the timing of their requirements. It book or buy the media from its various vendors. Further it also take services of and is dependent on third party designers, campaign management companies and other media suppliers for delivery of efficient services to its clients. Its operating expenses include the purchase of third party services and purchase of media and material required.

No long-term contracts with clients: The company does not have any long-term contracts with its clients and any change in the business pattern of its existing clients could adversely affect the business of its Company. As a result, its customers can terminate their relationships with it due to a change in preference or any other reason on immediate basis, which could materially and adversely impact its business. Consequently, its revenue may be subject to variability because of fluctuations in demand for its products and services. The company's customers have no obligation to work with it and may either cancel, reduce, or delay the business. The business by the company's customers are dependent on factors such as the customer satisfaction with the level of service that the company provides, fluctuation in demand for the company's products, customer’s inventory management, amongst others. 

Outlook

Crayons Advertising is an Integrated marketing and communications agency. They offer 360-degree solutions to a wide array of clients. It is one of the few agencies that can truly claim to be fully integrated and independent in providing marketing and communications solutions. It has provided a wide area of scope of work being offered and provided to its clients. They offer world-class creative, exceptional brand marketing strategy, pragmatic online & offline media planning & buying, cutting-edge digital expertise, on-ground & virtual activation capabilities, and design solutions that help clients in brand building. The company offers a high-end ecosystem and end-to-end ad-tech communication solutions platform. These are for advertising media services consisting of Brand Strategy, Events, Print Media, Digital Media, and Outdoor (OOH) Media services. On the concern side, the company’s business operations require it to obtain and renew from time to time, certain approvals, licenses, registrations and permits, some of which may expire and for which it may have to make an application for obtaining the approval or its renewal. Also, the company does not have any control over the registration of a trademark and a trademark may also be opposed by third parties that claim to have prior or superior rights. 

The company is coming out with an IPO of 64,30,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 62-65 per equity share. The aggregate size of the offer is around Rs 39.87 crore to Rs 41.80 crore based on lower and upper price band respectively. On performance front, total revenue has increased by Rs 8,743.75 lakh and 82.01% from Rs 10661.22 lakh in the fiscal year ended March 31, 2021 to Rs 19404.97 lakh in the fiscal year ended March 31, 2022. The increase in revenue is on account of increase in sale due to the expansion of geography. Net Profit has increased by Rs 148.37 lakh and 1143.95% from Rs 12.97 lakh in the fiscal year ended March 31, 2021 to profit of Rs 161.34 lakh in the fiscal year ended March 31, 2022. Meanwhile, the company focuses on improving efficiencies at all level of operational process so as to achieve cost reductions to achieve competitive edge. To remain aggressive and gain new business, it offers competitive prices to its customers. This helps it to sustain the competition and claim a position of strength in the marketplace.