What is common among RK Swamy Limited, Bright Outdoor Media and Crayons Advertising? They are all India's homegrown ad agencies that took the bold step to launch their Initial Public Offering (IPO) over the last two years.

Mumbai-based Bright Outdoor, Delhi-based Crayons and Chennai-based RK Swamy have been around in the business for over four decades and are considered market leaders. Their revenues were above Rs 500 crore when they took a call to go public.

Another Mumbai-based OOH agency Laqshya Media Group, whose revenue is also over Rs 500 crore, is geared up to launch its full-fledged IPO soon as the company seeks to scale up its revenue to Rs 1,000 crore in the next couple of years. Satyabrata Das, Strategic Alliances Specialist / COO Mediakeys of Laqshya Media Group, has confirmed the news with e4m.

“Many other agencies, spanning various scales, are either in the process of filing or have alredy filed for public listing,” says Ashraye Lalani, Director, Technology & Growth, Crayons Advertising.

Yogesh Lakhani, Bright Outdoor’s Chairman & MD, also shared that several of his industry peers were seeking his guidance as they contemplate going public.

The trend has energised the entire advertising ecosystem, which is worth Rs 1 lakh crore as of now and comprises nearly 40,000 ad and media agencies. It has the potential to change the dynamics with stakeholders – brands and media platforms – forever.

IPO could be a new phenomenon for the Indian ad sector, but globally, large ad agencies have been listed for decades. It all began with Manhattan-based Papert Koenig Lois (PKL), which is believed to be the first advertising agency to go public in the early 1960s.

Grey, FCB, J Walter Thompson and Ogilvy & Mather followed suit in the next couple of years. UK-based Saatchi & Saatchi launched an IPO in 1975, while Japanese firm Dentsu went public in 2001. Havas Media, which is part of a listed French Vivendi, is ready to be listed in France next year, company officials told e4m.

Ambitious growth plans

As the Indian economy maintains steady growth amid global stagnation, it's quite natural for ad agencies to have ambitious plans to expand their businesses, pursue acquisitions, invest in innovative technologies, and embark on global ventures.

Lakhani, who is also an actor-producer, says, “This was a natural step for the outdoor player like us, as more areas of growth came to the fore for out-of-home advertising. We took the IPO route as it provides access to a significant amount of capital from public investors to expand the business at pace.”

“Bright Outdoor didn’t have a single LED screen until it came up with an IPO last year. It now owns 25 LED screens, one-fourth of the total LEDs in the commercial capital. The cost of one LED screen was roughly Rs 1.5 crore. After 25, 15 more LED screens are being erected as of now. I couldn't have scaled up so fast without the IPO,” says Lakhani, whose firm’s market capitalization is at Rs 650 crore.

“I am also expanding my services across railways stations, bus stations, kiosks, toll naka among others. I am keen to do more with events and celebrities as I am connected with the film industry. But I would also like to create more experiential options such as a resort. This is already factored in our growth plans,” he says.

Rachana Lokhande, Founder of Glocal Bridge, shared, “When you are self-funded, you can only invest what you earn. However, as technology continues to advance and the demand for asset digitization grows, additional investments are necessary. Going public through an IPO can provide an infusion of funds to further these developments and expand the business.”

Ashraye Lalani echoes the sentiments, “In an era characterized by rapid technological evolution and the proliferation of immersive media platforms, maintaining a competitive edge in our diverse service portfolio is not merely a goal, but an imperative. By embracing the opportunities afforded by a public listing, we aim to infuse our spectrum of services with cutting-edge technology, both in terms of inputs and outputs, thereby elevating the sophistication and efficacy of our offerings.”

He further said that the company’s decision to commence with an SME IPO serves as a strategic stepping stone toward its ultimate aspiration of listing on the main board.

RK Swamy (Market cap Rs 1,300 Cr) is currently observing the silent period, hence they were unavailable for a comment.

Visibility & Market Positioning

Listing on the stock exchange can enhance an ad agency's brand visibility and credibility. Being a publicly traded company can attract attention from potential clients, partners, and investors, as it demonstrates transparency, accountability, and a certain level of success.

Lloyd Mathias, a seasoned marketer and angel investor, stated, “Apart from access to capital, listed companies enjoy greater visibility, perceived stability, and access to institutional investors, which can help them stand out in a crowded and competitive industry. I won’t be surprised if more Indian ad agencies go for an IPO to fulfill their dreams to expand across India and even go global, starting with Asia Pacific.”

Lakhani, who has massive expansion plans, first within Mumbai and then beyond, admits, “Out of millions of companies in India, only 6,500 are listed at the Stock Exchange. Of course, I take pride that my own business is among those elite ones. It is a lot easier for us to file tenders in the BMC (Mumbai civic body) because of greater transparency and accountability which is the trademark of listed companies.”

“The IPO has undeniably played a pivotal role in our ability to meet both short-term objectives and lay robust foundations for long-term growth,” said Lalani, adding that the firm has established Crayons Studio and procured cutting-edge hardware to bolster its in-house content creation capabilities.

The company is currently preparing for the release of its inaugural feature film on OTT platforms to expand its market presence.

Going public also helps promoters to boost their personal image which eventually helps them in expanding their business. IPO signals that not only the company but its promoters are also confident about their future prospects. This vote of confidence can bolster the market's perception of the promoters' expertise, leadership, and vision, industry leaders say.

Currency for Acquisitions

Publicly traded ad agencies have the advantage of using their stock as a currency for making acquisitions. By issuing shares as part of acquisition deals, these agencies can conserve cash and leverage their stock's valuation to acquire complementary businesses or talent.

Global agencies like dentsu and WPP have been on acquisition sprees for decades all over the world. They acquired a bunch of small Indian ad agencies to expand their offerings.

Besides, IPO can provide ad agencies with increased strategic flexibility. They can use their publicly traded status to raise additional capital through secondary offerings and issue debt securities.

Employee Incentives, Succession Plans

Going public can provide ad agencies with a mechanism to attract and retain top talent through stock-based compensation packages. Stock options, restricted stock units (RSUs), and other equity incentives can serve as powerful tools for motivating employees and aligning their interests with those of the company, industry executives say.

Shradha Agarwal, Co-Founder and CEO of Grapes, agrees, “IPO can give the desired impetus to wealth creation, allowing the agencies to generate revenue that takes their valuation to the next level. Besides, it can be considered a wise strategy for driving succession planning where the public offering comes with the ability to give a well-structured framework to the organization that can function by itself.”

Value for Stakeholders

Going public allows existing shareholders, including founders, employees, and early investors, to monetize their holdings and realize value from their investments. This liquidity event can be particularly appealing for stakeholders who have been with the company since its early stages, ad executives say.

Moreover, Out-of-Home advertising is a crucial aspect of the city landscape, a portion of the OOH revenue goes back to the cities, which benefits the consumers.

“If the public invests in your company, they will have more of a stake in its success. This can help to change the industry's perception of being disorganized and lacking transparency,” said Lokhande.

Not all that glitters is gold

Veteran adman Dr Sandeep Goyal, MD of Rediffusion, calls the move of ad agencies going public “a mixed bag”. “Going public gives more elbow room to the promoters. Also, it provides them an exit route. But being listed puts growth pressure on the business which is not easy to handle,” Dr Goyal states.

He also points out, “Being listed doesn’t matter to clients. In an ad agency, all that matters is the creative product.”

“Looking at the wide gamut of advantages of IPO, before venturing into offering the agencies should be careful enough to understand that not all of them will be able to reap the same level of benefit. Understanding the complex nature of IPO, the mid and small-sized agencies will find it much more difficult to file for offering as compared to big agencies,” says Agarwal.

While there have been instances of companies disappearing post IPO after raising capital, a commitment to prudent investment, regulatory compliance, and a focus on growth are foundational for a positive outcome, Lokhande quips.