Cyber Media Research & Services coming with an IPO to raise upto Rs 14.04 crore

Cyber Media Research & Services

• Cyber Media Research & Services (CMRSL) is coming out with a 100% book building; initial public offering (IPO) of 7,80,000 shares in a price band Rs 171-180 per equity share.
• The issue will open on September 27, 2022 and will close on September 29, 2022.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 17.10 times of its face value on the lower side and 18 times on the higher side.
• Book running lead manager to the issue is Swastika Investmart.
• Compliance Officer for the issue is Savita Rana.

Profile of the company

The company is engaged in ad tech and data analytics business in an industry which is expanding rapidly. The company has four revenue streams i.e., Digital Marketing, Programmatic Media Buying, Publisher Monetization, and Data Analytics. These together form the pillars of the digital marketing landscape, i.e. it provides proprietary solutions that enable advertisers and publishers to match the right ad with the right user. This drives higher conversions and sales for advertisers and enables publishers to earn more. The company has been growing its offerings and customer base, and is well positioned to build multiple revenue streams in the digital landscape. Automation in this industry is driving significant changes, and data acts a critical enabler. The company’s algorithms leverage large sets of data, process it via its AI engines to provide the right results, therefore simplifying digital marketing. CMGalaxy, Auxo Ads and CyberAds is CMRSL’s propriety products for different stakeholders in the ecosystem.

The post-Pandemic world will see significant shift in consumer behaviour towards digital. The Company has positioned its products along the entire ad tech value-chain. CMGalaxy and CyberAds offer solutions to advertisers that allow them to manage their media spends prudently. Auxo Ads allows publishers to receive better ad bids therefore improving their revenues. The company sees this as an ideal time to scale its revenues by aggressively promoting its products and capture market share at an accelerated pace, and enjoy strong tail-winds for the coming decade.

Proceed is being used for:

• Funding working capital requirements.
  
• Funding investments in new projects and general corporate purposes.
  
• Meeting the offer expenses.

Industry Overview

Businesses today are witnessing a large-scale digital transformation which is paving the way for the convergence of media. Digital has now become the centre point to business operations and delivery. The transformation, catalysed by the pandemic, is also helping the Indian advertising industry evolve. The sector, which currently stands at Rs 70,715 crore, is witnessing a growth of 18.6% over 2020. It is expected to reach Rs 93,119 crore by the end of 2023, growing at a CAGR of 14.75%. The digital advertising industry has witnessed a growth in market size from Rs 15,782 crore in 2020 to Rs 21,353 crore in 2021, growing at 35.3%. Digital media is expected to grow at 29.5% CAGR to reach a market size of Rs 5,809 crore by 2023. In 2021, television claimed the largest share of media spending (42%, Rs 29,279 crore), followed by digital (30%, Rs 21,353 crore) and print (24%, Rs16,599 crore). Currently, FMCG has the highest contribution of 34% (Rs 23,736 crore) towards the Indian advertising industry, followed by e-commerce (14%, Rs 9,619 crore) and automotive (7%, Rs 4,745 crore).

At the end of 2021, 75% (Rs 16,015 crore) of digital media revenue was contributed by spends on mobile devices while the spends on desktops stood at 25% (Rs 5,338 crore). At the consumers’ end, almost all internet technology adoption is happening on mobile devices. The largest proportion of the spends on mobile devices is claimed by social media (30%, Rs 4,734 crore) and online video (30%, Rs 4,728 crore) as the majority of the consumer content consumption happens around these two formats. The highest share of spends on desktop is claimed by social media (28%, Rs 1,484 crore) and paid search (28%, Rs 1,463 crore).

By the end of 2022, the report estimates that the share of advertising spends on mobile devices will reach 77% (Rs 21,374 crore). Furthermore, with the advent of new applications and the availability of better connectivity technologies and affordable devices, the advertising spends share on mobile devices is expected to grow at a CAGR of 32.06% to reach 78% (Rs 27,931 crore) by the end of 2023. Spends on digital media programmatic buying contributed 40% (Rs 8,541 crore) by the end of 2021 as the pandemic has led to increased buying of digital media inventory through programmatic. Direct buying of digital media inventory contributes 60% (Rs 12,812 crore) currently. It is expected that programmatic buying of digital media will reach a share of 42% (Rs 11,659 crore) by 2022. It is expected to grow with a CAGR of 37.35% to reach a spend share of 45% (Rs 16,114 crore) by the end of 2023.

Pros and strengths

Long standing customer relationships: The company has long-standing relationships with its customers. This is, in part, due to the high criticality of its services and technical knowhow to many of its customer's business needs. It establishes long-term relationships with its customers for multi-layered engagement with various departments and divisions of the customer’s organisations. The company’s broad range of services offerings helps it to cross-sell its services to its existing customers as well as to acquire new customers. It also conducts regular senior management reviews with its key customers to engage with them for feedback and future opportunities. It combines its comprehensive range of services with industry-specific expertise to provide tailored solutions to its customers across business verticals, industries and geographies. Its commitment to customer satisfaction enables it to strengthen its relationships.

Scalable business model: The company’s business model is order driven, and comprises of optimum utilization of its existing resources, developing linkages with expertise of its development team and achieving consequent customer satisfaction. This business model has proved successful and scalable for it in the last few financial years. It can scale by venturing into different sectors where technologically advanced management is required and also by providing better products and solutions in the sectors that it already have presence in. The business scale generation is basically due to the development of new markets both international and domestic, innovation in the product range and by maintaining the consistent quality of the services.

Focused on driving innovation: The company is focused on driving innovation and adopting solutions in line with rapidly evolving technological trends. Its inherent culture of innovation has enabled it to develop a track record, expand the range of its offerings and improve the delivery of its products and services. It has a dedicated team of skilled individuals with technical background and domain expertise in each of its industry verticals with a focus on evolving technologies. These teams follow a structured innovation and solutions development process and work with delivery functions to identify the key concerns of its customers and generate solutions, ideas and concepts to address such concerns.

Risks and concerns

Significant revenue comes from top ten customers: The company’s top ten customers contribute approximately 85.58% of its revenues for the period ended March 31, 2022. Any change in the demand for its services by these customers and growing competition may affect its ability to retain them. It cannot assure that it shall generate the same quantum of business, from these customers. Loss of business from one or more of them may impact affect its revenues and profitability.

Substantial amount of outstanding indebtedness: As of March 31, 2022, the company’s long term borrowings were Rs 683.37 lakh & short term borrowings were Rs 288.08 lakh and it may continue to incur additional indebtedness in the future. Its level of indebtedness has important consequences to the company, such as: increasing its vulnerability to general adverse economic, industry and competitive conditions; limiting its ability to borrow additional amounts in the future; affecting its capital adequacy requirements; and increasing its finance costs.

Stiff competition: The competition it faces in the sale of its services and general economic and business conditions as well as changes in the IT industry standards and landscape, can put pressure on it to change its pricing models. If its competitors offer deep discounts on certain services that the marketplace considers more valuable, it may need to lower prices or offer other favourable terms in order to compete successfully. Any such changes may reduce its sales or margins and could adversely affect its business and operating results.

Outlook

Cyber Media Research & Services is engaged in ad tech and data analytics business. The Company has four revenue streams i.e., Digital Marketing, Programmatic Media Buying, Publisher Monetization, and Data Analytics. The Company ties up with web channels & publishers to monetize their ad inventory. Also, it signs directly with brands for their digital marketing campaigns. On the concern side, the company derives a significant portion of its revenues from its ten customers approximate to 85.58%. The loss of, or a significant reduction in the revenues it receives from, one or more of these clients, may adversely affect its business.

The company is coming out with a maiden IPO of 7,80,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 171-180 per equity share. The aggregate size of the offer is around Rs 13.34 crore to Rs 14.04 crore based on lower and upper price band respectively. On performance front, revenue from operations had increased by 89.89% from Rs 2971.38 lakh in Fiscal 2021 to Rs 5642.46 lakh in Fiscal 2022. The change was primarily due to increase in sales. After accounting for taxes at applicable rates, the company reported a net profit of Rs 151.30 lakh in Fiscal 2022 as compared to a net profit of Rs 66.29 lakh in Fiscal 2021. The company constantly endeavours to improve its technical process, and will increase service activities to optimize the utilization of resources. It has invested significant resources, and intend to further invest in its activities to develop customized systems and processes to ensure effective management control. It regularly analyzes its existing policies to be carried out for its technical and designing process which enables it to identify the areas of bottlenecks and correct the same. This helps it in improving efficiency and putting resources to optimal use.