LS Digital Group, India’s largest homegrown integrated digital marketing services company, has made its third acquisition with the buyout of digital marketing agency Social Panga as part of its strategy to provide end-to-end services to brands, a top company executive said.
The Social Panga acquisition deal, which is split 50/50 between cash and equity, will help the company bolster its creative and communication practice, LS Digital Group founder and CEO Prasad Shejale told ET.
Social Panga’s co-founders Himanshu Arora and Gaurav Arora will join the LS Digital Group as co-founders. With the addition of Social Panga’s 370 employees, LS Digital’s total headcount will swell to 1,500.
“Social Panga has joined the LS Digital Group. Social Panga co-founders have built an awesome company in integrated communications and production. Last year, they did an EBIT of Rs 50-60 crore,” Shejale said, adding, “This is the third company that has joined LS Digital Group after Langoor and F1 Studioz.”
Shejale said that the co-founders of companies becoming part of LS Digital Group will own equity in the holding company to unlock value in the future.
“There is a value we will create when we go public because all of them have equity in LS Digital Group as part of their deal. Whatever upside we get, everyone will have a share in it. This structure will work because the founders will work for the group,” he said.
As it looks to provide digital marketing transformation to clients, LS Digital is focusing on six key areas—media, UI/UX, creative & communication, data & insights, CX and tech & innovations.
Shejale said Langoor, F1 Studioz and Social Panga will help the company bolsters its capabilities in UI/UX, creative & communication and customer experience, respectively.
The business is looking to raise new funding from private equity firms to scale operations.
LS Digital had last year raised Rs 140 crore in two funding rounds. In July, Florintree Advisors picked up 35% of the company for Rs 80 crore. Subsequently, it raised Rs 60 crore from high-profile investors like former CEO of iGate Phaneesh Murthy, InCred founder Bhupinder Singh and IIFL Wealth founder and CEO Karan Bhagat.
The company, which recorded net revenues of Rs 300 crore in FY23, would continue its acquisition drive. “We will look for acquisitions in two areas of data & insights and tech & innovations,” he added.
Shejale noted that the company has delivered a CAGR of 50% over the past five years. It has added multiple clients across new-age and traditional categories. The average ticket size of clients is Rs 50 lakh.
“We will achieve an EBIT of Rs 95-100 crore FY24,” said the LS Digital chief.
It has also begun serving clients from abroad since it can do so at a competitive price.
“The game that IT services companies played in the 90s, we will play the same game in integrated marketing services. It’s a billion-dollar opportunity in the next two years,” he said.
LS Digital faces competition from traditional advertising firms, which are acquiring tech companies to provide end-to-end marketing services to clients, and consulting firms, which are buying creative shops to bolster their creative offering and consumer understanding.
ET had earlier reported that the company is looking to raise Rs 200 crore in a Series B round at a valuation of Rs 1,000 crore. “We are in talks with certain private equity funds to raise funding,” Shejale said.
The company has also raised Rs 75 crore in venture debt because it is confident that its rapid expansion will enable it to repay its debts.
“The costliest way of raising capital is equity if you believe in the future and I am very averse to it. We raised Rs 30 crore in venture debt from BlackSoil and now we have raised another Rs 45 crore. Our ability to service debt is fantastic,” he said.
