Radiowalla Network NSE SME IPO review (Apply)

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Review By Dilip Davda on March 22, 2024

•    RNL is a unique player in the customer engagement services with new techniques with added entertainment. 
•    It marked growth in its top and bottom lines. 
•    Based on annualized FY24 earnings, the issue appears fully priced. 
•    It serves many renowned customers like LIC, HUL, ITC, Tanishq etc.
•    Investors may park funds for the medium to long term rewards. 

ABOUT COMPANY:
Radiowalla Network Ltd. (RNL) is into the business of customer engagement services which includes in-store radio services (exclusive radio channel for a brand) on subscription model basis, corporate radio (private radio channels for employee engagement in organization) and advertisement services which includes digital signage solution, content management services and point of purchase advertising to our clients. RNL exclusively caters to the business-to-business (B2B) sector.

In the realm of In-Store Radio, it furnishes audio services to diverse clients, including malls, retailers, and hospitals, addressing their background audio requirements. It offers background music services, which involve providing a selection of music to enhance the ambient atmosphere of various spaces. The company delivers AI-driven playlists of continuously updated music.

In the domain of Corporate Radio, it extends audio services to corporate clients, encompassing both musical and non-musical components. The music facet comprises of a specified background music to enhance the ambient atmosphere of the office places of clients. The non-musical facet comprises internal communications, announcements, birthday wishes, significant company news, and any other information that the company intends to convey to its employees. RNL's background music services aim to create a pleasant and customized auditory experience tailored to the specific needs and preferences of clients and their respective environments.

Under Audio Advertising, the company offers programmatic Advertising which is data-driven approach to buying and placing digital advertisements in real-time. Instead of the traditional manual process of ad buying, where human negotiations and manual insertion orders are involved, programmatic advertising relies on algorithms and technology to automate the buying of ad inventory. It allows for precise targeting, efficient use of advertising budgets, and the ability to reach the right audience at the right time.

Under Visual Advertising, it offers Digital out of Home Advertising (DOOH) and Static Branding Opportunities. Digital Out of Home Advertising (DOOH) represents a contemporary advertising approach wherein the company deploys digital standees, video walls, LED displays, touch screen kiosks, and commercial-grade monitors for clients and overseeing the management of their content. This dynamic method ensures a modern and engaging visual experience for the audience.

In Static Branding Opportunities, RNL creates a platform for brand visibility and engagement, implementing strategies that involve direct interaction with the target audience. These activities aim to enhance brand recognition and generate valuable leads for clients. As of the date of RHP, it had 54 employees on its payroll. 

It has entered into a collaboration agreement with Retailor association of India for advertising its services to the retailors. The Company is involved in business transactions with international clients located globally and has to conduct the transactions in accordance with the rules and regulations prescribed under FEMA. RNL's client list includes names like HUL, ITC, BIS, Tanishq, Orra, Paragon, LIC, to name a few. According to the management, it enjoys lion market share following its tech-savvy and cost effective solutions and is confident of gaining grounds going forward.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1875200 equity shares of Rs. 10 each to mobilize Rs. 14.25 cr. at the upper cap. It has announced a price band of Rs. 72 - Rs. 76 per share. The issue opens for subscription on March 27, 2024, and will close on April 02, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.61% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 3.10 cr. for investment in technology, Rs. 1.90 cr. for capex, Rs. 4.50 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Narnolia Financial Services Ltd., and Maashitla Securities Pvt. Ltd. is the registrar of the issue. SS Corporate Securities Ltd. and Prabhat Financial Services Ltd. are the market maker for the company. 

Having issued initial equity shares at par value, the company issued/converted further equity shares in the price range of Rs. 33.33 - Rs. 1110.00 per share between September 2011 and October 2023. It has also issued bonus shares in the ratio of 10 for 1 in November 2023. The average cost of acquisition of shares by the promoters is Rs. 3.62, Rs. 6.04, and Rs. 44.68 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 5.17 cr. will stand enhanced to Rs. 7.05 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 53.57 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/ -(loss) of Rs. 5.90 cr. / Rs. 0.10 cr. (FY21), Rs. 10.50 cr. / Rs. 0.47 cr. (FY22), and Rs. 14.03 cr. / Rs. 1.02 cr. (FY23). For 7M of FY24 ended on October 31, 2023, it earned a net profit of Rs. 1.14 cr. on a total income of Rs. 8.72 cr. 

For the last three fiscals, it has reported an average EPS of Rs. 16.25, and an average RONW of 74.27%. The issue is priced at a P/BV of 0.65 based on its NAV of Rs. 117.54 as of October 31, 2023, and at a P/BV of 2.19 based on its post-IPO NAV of Rs. 34.73 per share (at the upper cap).

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 27.43. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT Margins of 1.74% (FY21), 4.48% (FY22), 7.30% (FY23), 13.07% (7M-FY24), and RoCE margins of 202.92% (FY21), 113.40% (FY22), 35.86% (FY23), 21.28% (7M-FY24). 

DIVIDEND POLICY:
The company has not declared any dividends for any financial year so far. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORD:
This is the 9th mandate from Narnolia Financial in the ongoing fiscal. Out of the last 8 listings, all listed with premiums ranging from 4.35% to 110.36% on the day of listing. 

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