Scaling the Influencer Economy: YAAP DIGITAL’S IPO Under the Microscope

Yaap Digital Limited, a digital marketing and content solutions firm, is raising funds through an IPO by aggregating around ₹85.67 crores through a fresh issue of 55.25 lakh shares on NSE Emerge. The funds raised will be used to partly finance the acquisition of GoZoop Online as the company aims to expand in the rapidly growing digital advertising space in India.

The Opportunity and The Risks

Digital Advertising in India: Structural Tailwinds, Execution Risks

India’s digital advertising industry is growing at about 18 to 20% each year. It now accounts for over 40% of total advertising spending, making it the largest media segment in the country. The industry size is estimated between ₹45,000 and ₹50,000 crore. Digital advertising continues to take market share from traditional media because it offers measurable returns on investment, performance tracking, and targeted customer acquisition. If current growth trends continue, the market is expected to surpass ₹70,000 crore in the next few years.

Key drivers of growth include performance marketing, the rise of direct-to-consumer brands, startup funding, and increasing internet penetration, with over 800 million users. Social commerce, influencer marketing, which is growing by more than 25% annually, and AI-driven campaign optimisation are helping brands increase their spending. Marketing budgets are increasingly favouring measurable, conversion-focused channels instead of pure branding expenditures.

Despite this growth, the industry is still highly fragmented with low barriers to entry and fierce pricing competition. Typical EBITDA margins for agencies range from 8 to 15%, and working capital cycles can stretch due to client billing terms. In this environment, scale, client retention, and maintaining margin discipline are essential for long-term profitability.

Business Model

Yaap Digital is a digital marketing agency that offers branding, content creation, influencer marketing, media buying, and performance-driven campaigns. The company earns money by creating and running digital campaigns for various brands. It charges fees based on the campaign’s scope, retainer contracts, and media management services. In FY25, the company reported revenue of ₹15,254.49 lakh, showing strong growth in client projects.

The business model is mostly asset-light. Costs mainly come from direct campaign expenses and employee salaries, rather than large capital investments. In FY25, direct expenses were ₹10,238.96 lakh, which is about 67% of revenue, while employee expenses were ₹2,191.39 lakh, or about 14% of revenue. This setup allows for operating leverage as revenue increases. This can be seen in the EBITDA margin, which improved to around 11.5% in FY25.

However, the business still requires significant working capital due to how clients bill and the time it takes to execute campaigns. Finance costs of ₹159.08 lakh in FY25 show that the company relies on short-term funding to manage its receivables. Profitability is closely tied not only to revenue growth but also to maintaining margins and efficiently converting cash.

Revenue Streams & Business Mix
Yaap Digital is a full-service digital marketing and media solutions company. Its revenue model focuses on four main areas: media and performance marketing, creative and branding solutions, influencer marketing, and digital strategy and technology services. The company posted revenue from operations of ₹15,254.49 lakh in FY25, an increase from ₹7,757.93 lakh in FY23, showing rapid growth in these areas.

1. Media and Performance Marketing (Main Revenue Source)

This area includes paid media buying on platforms like Google, Meta, YouTube, and programmatic advertising, along with performance campaigns and customer acquisition strategies that focus on return on investment. The company usually earns revenue through:

• A percentage of media spend managed

• Fixed retainership fees

• Performance-linked incentives

The significance of this revenue stream is clear in FY25, with direct expenses of ₹10,238.96 lakh, about 67% of revenue. This suggests a significant portion of media costs is passed through. This segment offers recurring revenue but operates with narrow profit margins.
2. Creative, Branding and Content Solutions

This includes campaign ideas, digital films, social media content, brand strategy, and design services. Revenue here mostly comes from:

3. Project-based billing

• Retainer contracts for ongoing brand management.

• Margins in this area are usually higher than traditional media buying. This is because costs largely come from employee-driven expenses rather than pass-through costs. However, revenue can vary based on campaign budgets.

4. Influencer Marketing

• Yaap runs influencer-led campaigns on social platforms. This segment benefits from India’s fast-growing influencer market, which has over 25% industry growth. Revenue comes from:

• Campaign management fees.

• Talent coordination margins.

• Integrated influencer and media strategies.

This area helps with cross-selling and increases the amount spent per client.

5. Strategy and Technology-Led Services

This includes digital consulting, analytics, AI-driven campaign improvement, and performance measurement tools. This sector helps with client loyalty and long-term retention, even though it makes up a smaller part of overall media-related revenue.

Cost Structure and Operating Mix

• Direct Expenses: ₹10,238.96 lakh (67% of FY25 revenue)

• Employee Expenses: ₹2,191.39 lakh (14% of FY25 revenue)

• EBITDA Margin: ~11.5% in FY25

The business mix shows that Yaap follows a media-heavy yet asset-light model. Revenue growth relies on increasing campaign volumes and client mandates, while profitability depends on managing employee costs and improving media margins.

Scale Through Strategic Acquisition

A portion of IPO proceeds goes toward acquiring GoZoop Online. This significantly boosts our consolidated revenue and client base. The goal is to grow quickly, rather than only depend on organic growth. This approach will improve our competitive position in a fragmented industry.

Deepening Performance Marketing Capabilities

With digital ad spending shifting toward campaigns focused on return on investment, Yaap is concentrating on performance-driven projects such as search, social, and programmatic advertising. Performance marketing increases visibility for repeat business and helps retain clients better than purely creative projects.

Integrated Full-Stack Offering

By providing branding, content, influencer marketing, and media on one platform, the company aims to increase the amount each client spends. Selling additional services across different areas increases revenue for each account and strengthens client loyalty.

Margin Expansion via Operating Leverage

With an estimated EBITDA margin of about 11.5% for FY25, management seems focused on increasing revenue faster than fixed employee costs. Better cost control and a higher-margin service mix can enhance profitability.

Investment in AI & Technology

The company plans to develop AI-driven content and campaign optimisation capabilities. Integrating technology can boost campaign efficiency, shorten turnaround times, and improve client retention.
Promoters

Yaap Digital is promoted by Atul Jeevandharkumar Hegde, Sudhir Menon, and Subodh Menon. After the IPO, promoters will keep majority control, with a minimum promoter contribution locked in for three years according to SME regulations. This ensures they remain invested.

Key Promoters

• Atul Jeevandharkumar Hegde, Chairman and Managing Director  

He is the founder and main driving force behind the company. He leads strategy and client growth. Under his leadership, revenue increased from ₹7,757.93 lakh in FY23 to ₹15,254.49 lakh in FY25. This shows significant growth and operating efficiency.

• Sudhir Menon, Promoter and Non-Executive Director  

He provides strategic and governance oversight, bringing experience in media and business operations.

• Subodh Menon, Promoter and Non-Executive Director  

He supports corporate strategy and growth efforts, including expansion through acquisitions.

Assessment

The promoter group blends execution capability with strategic oversight. Rapid revenue growth and profitability turnaround indicate strong leadership, though margin sustainability and working capital discipline remain key monitorables.

Promoter Holding

Sector-Wise Revenue Contribution

Takeaway

FY25 revenue is heavily focused on BFSI at 68.59%, which creates significant risk due to dependence on this sector. Any slowdown in BFSI advertising budgets could greatly affect revenue and margins. However, data from the first nine months of FY26 show improving diversification. This will be an important factor to watch after the listing.

*FY23 EBITDA very low, so ratio inflated

Working Capital Intensity

Yaap follows a receivable-heavy agency model. Trade receivables were ₹40.65 crore in FY25, which is roughly 97 debtor days. This amount rose sharply in 9M FY26. Growth is driven by the credit cycle, so collection efficiency is crucial for liquidity and scalability.

Asset-Light but Cash-Dependent

With fixed assets of about ₹3 crore and FY25 revenue reaching ₹152.54 crore, the model remains very asset-light. However, capital is absorbed through receivables instead of capital expenditures, which makes working capital discipline more important than using assets effectively.

Cash Flow Volatility

Operating cash flow has varied. It was positive in FY23 at ₹20.29 crore and in FY24 at ₹35.10 crore, but it dropped to negative in FY25 at ₹5.29 crore and became sharply negative in 9M FY26 at ₹51.02 crore. Earnings growth has not consistently turned into cash.

Profitability Profile

Revenue doubled from ₹77.58 crore in FY23 to ₹152.54 crore in FY25. During this time, the EBITDA margin improved to about 11.5%, and the ROE stood at around 74% in FY25. Sustainability now depends on cash conversion and controlling working capital.

Peer Comparison

IPO Objectives

YAAP is launching a new issue of 5,525,000 equity shares. There is no Offer for Sale; this is a growth capital raise.

The proceeds will be used for:

• Partly funding the acquisition of GoZoop  

• Supporting working capital as revenue grows  

• Expanding technology, talent, and capabilities  

• General corporate purposes  

As revenue has grown rapidly over the past three years, more capital is needed to manage receivables, media advances, and campaign execution without relying too much on short-term debt.

Investment Thesis

• The digital ad industry is growing over 20% annually  

• Strong revenue growth is expected (FY23 to FY25)  

• EBITDA improved from a loss in FY23 to double digits by FY25  

• ROCE is around 45% in FY25  

• Asset-light and scalable model  

Growth momentum is clear.

LMVT Framework

Leadership  

Founder-driven business with a proven ability to turn around operations. The next phase needs careful capital allocation and successful integration of acquisitions.

Moat  

It's a competitive industry with low entry barriers. The advantages come from client relationships, campaign execution, and the influencer ecosystem; this is more about operations than structure.

Valuation  

Margins are improving, but we still need to closely monitor cash flow volatility and working capital management. Maintaining a 12-15% EBITDA margin is crucial.

Tailwinds  

There is a strong shift toward digital and performance marketing. The influencer ecosystem is expanding quickly in India.

Bottom Line

YAAP is a rapidly growing digital marketing platform benefiting from strong industry trends.

The opportunity is clear. The real challenge is maintaining discipline in execution, especially regarding acquisition integration and cash conversion. If margin expansion continues and working capital is well managed, long-term value creation is achievable.