A better route to enhance & expand our business: Crayons Advertising's Kunal Lalani on going public

Going public is always a significant milestone for any company and it's not every day that an advertising agency decides to take this step. Crayons Advertising, a 36-year-old agency, recently announced the filing of its Draft Red Herring Prospectus (DRHP) with NSE Emerge for its initial public offering.

The company plans to offer 64.30 lakh Equity Shares with a face value of Rs 10 each through the book-building process.

In an exclusive conversation with BestMediaInfo.com, Kunal Lalani, Founder and Chairman, Crayons Advertising, spoke about the company's decision to go public and what it means for the future of the agency.

Factors leading to Crayons Advertising's decision to go public

Traditionally in the advertising industry, the growth route was getting involved with the multinational agencies who generally use the route of acquisition. That is one path of growth - Collaborating and becoming larger or becoming a part of a bigger network and trying to grow with that, Lalani said.

Furthermore, he said, “But MNCs are all listed abroad and for them, India was never market to grow. They just used India as one of the pegging factors for their global reach or approach. So, for some reason in our industry, nobody was looking at using this route to grow and strengthen their business plan. Eventually, any large growth needs funding which can be done in two ways either debt or equity. Covid-19 has taught all of us that debt is easier to get but on bad days it’s the worst thing to happen.”

“So, to maintain a good balance between debt and equity, we thought this is a better route to enhance and improve or expand our business and bring more accountability and professionalism. Once you go public, you need to run the company more professionally. So, we felt that this is the right time to grow our business further,” Lalani added.

Aim to double agency’s topline in next three years

“We are very bullish on the digital transformation that is happening and technology being an integral part of every aspect of advertising, that is where we are investing and that is why we plan to provide much more efficient and cost-effective services to our clients. Therefore, we see that we are definitely going to double our topline in the next three years,” Lalani said.

In a press meet held on Wednesday, the agency spokespersons announced their plans to double its revenues in the next three years, mainly riding on digital and events verticals. The Indian advertising market was valued at nearly Rs 670 billion in 2020. The market is expected to grow at a CAGR of 11% from 2022-2027 to reach Rs 1253.2 billion by 2026, a statement by the agency read.

Differentiating from other ad agencies

Unlike other countries in the world, India is a very big part of non-multinational clients which includes the public sector, government and all the owner-owned and owner-managed businesses and entrepreneurs, Lalani stated.

“There are a significant number of them in India and now the government has given the impetus to MSMEs. So, advertising will be the first thing for them to grow so we know our space completely and that is the space we are operating in which has a tremendous potential right now. That’s one thing which sets us apart from others. Those multinationals function differently, mostly dealing with multinational clients so their concepts are different,” he added.

Advice for small businesses planning to go public

Most of the people in the SMEs (Small and mid-size enterprises) category are a bit circumspect that they will get more answerable and accountable if they go public, but that is a good sign, Lalani stated.

“If you establish something over 20-30 years, why would you not look at it? It’s a much worthwhile exercise to take and it gives you a lot more opportunities to do things. Yes, accountability becomes more but isn’t it good? Isn’t it good to get better talent? When you are in that space, a lot more people come to you versus thinking of you as a small or medium size company. That visibility changes the whole thing. I am already promoting this to a lot of my clients telling them that they must look at it as if it's not a devil and is worth doing,” he added.

Future projects

“When we talk about content and creativity, as you see OTT is not just for the elite. It is going to be a huge transformation where even the non-digital parts, which we call daily soaps, everything is slowly going to move on to that. So, the shift is not only about the product but also the vehicle or the platform. We are looking at creating a bank of content for everyone including TV, OTT, clients and be able to provide all types of services to them,” Lalani said.

He also said that staying ahead of the curve is an ongoing effort for the agency and for that one has to be abreast with all the latest information, updates and inputs to stay on top of emerging trends.

According to an official statement by the agency, upon listing, Crayons will be India's first major homegrown advertising agency to go public.

“Today, we are aiming for an orbital shift, given our integrated proposition, the strong economic tailwinds for the advertising sector and sustained mandate flow in our digital and events verticals. We are raising funds to build further our digital capabilities, which will enable us to not only cater to the brands in Bharat, but also offer our new-age tech-led solutions to the world going forward,” Lalani stated.

The proceeds from the initial public offering will be used in building infrastructure and technology for expansion (Rs 15.28 crore) and funding working capital requirements (Rs 14.50 crore).

Recently, the company announced that it won mandates, including TATA Sons, National Skill Development Corporation, Indian Oil Corporation, TATA Croma and Bank of Baroda.

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