AGS Transact Technologies Ltd IPO

Rating AVOID Issue Offer Issue Opens on Jan 19, 2022Issue Close on Jan 21, 2022Total IPO size (cr) 680.00Fresh issue(cr) NilOffer For Sale (cr) 680.00Price Band (INR) 166-175Market Lot 85Face Value (INR) 10Retail Allocation 35%Listing On NSE, BSE

Objects of the issue

• To carry out an offer for sale.
• To achieve the benefits of listing

Issue Break-up (%) QIB Portion 50NIB Portion 15Retail Portion 35 Shareholding (No. of Shares) Pre Issue 120,392,576Post Issue 120,392,576 Indicative Timetable Finalization of Basis of Allotment 27-01-2022Refunds/Unblocking ASBA Fund 28-01-2022Credit of equity shares to DP A/c 31-01-2022Trading commences 01-02-2022

Incorporated in 2002, AGS Transact Technologies Ltd was one of the largest integrated Omni-channel payment solutions providers in India in terms of providing digital and cash-based solutions to banks and corporate clients, as of March 31, 2021.

The company provide customized products and services comprising ATM and CRM outsourcing, cash management and digital payment solutions including merchant solutions, transaction processing services and mobile wallets.

The company operate its business in three major segments: Payment Solutions;  Banking Automation Solutions; and other Automation Solutions (for customers in the retail, petroleum, and color sectors).

• It is the second-largest company in India in terms of revenue from ATM managed services and also the largest deployer of POS  terminals at petroleum outlets in India.
• It not just serves the Indian market but has also expanded internationally in other Asian countries including Sri Lanka, Cambodia, Singapore,  Indonesia, and the Philippines.
• As of August 31, 2021, it had approximately 50 banking customers,  including ICICI Bank Limited, HDFC Bank Limited and Axis Bank  Limited.
• The company’s colour operations primarily comprise the supply of automatic paint dispensers and related services, and serve customers including Asian Paints Limited, Kansai Nerolac Paints  Limited and Berger Paints India Limited.
• As of August 31, 2021, it had installed a network of  221,066 merchant POS, 17,924 petroleum outlets, 72,000 ATMs and CRMs offering cash management services, 46,800 cash billing terminals, and installed 88,521 colour dispensing machines.

The business serves customers in 2200 cities and towns through  446,000 machines or customer touchpoints.

Outlook & Valuation:

The company's revenue has been flat over the last three years, mostly on the declining side where revenue in FY21  fell to Rs 1,797 cr from Rs 1,833 cr in FY20.

The company's profit, on the other hand, has been decreasing. The company's profit fell from Rs  83 cr in FY20 to Rs 54.7 cr in FY21.

The company's margin also shrank.  The company is one of India's leading Omni-channel payment solution providers with a strong network.

However, the government's focus on digital payments will further decrease the use and availability of cash can have an adverse effect on business activities.

The IPO is priced at a  PE of 38x and P/BV of 3.71x on the NAV of Rs 47.11, which is slightly higher than its listed peers however, they are not comparable on an apple-to-apple basis, also the IPO is purely OFS based. Thus we assign an "AVOID" rating to the IPO.

IPO Note

AGS TRANSACT TECHNOLOGIES LTD

KEY MANAGERIAL PERSONNEL

Mr Ravi B. Goyal is the Chairman and Managing Director of the Company.

He is responsible for the management of the overall operations of the company and its subsidiaries. He has approximately 26 years of experience in the field of technology.

• Mr Stanley Johnson P is an Executive Director on the Board of the Company. He has been instrumental in strengthening and expanding the company’s banking outsourcing operations across India.
• Mr Vinayak R. Goyal is an Executive Director on the Board of the Company. He works closely with management to drive strategic and business initiatives for the Company.
• Mr SaurabhLal is the Chief Financial Officer of the Company and of its Subsidiary, SVIL. He has over 15 years of experience in the financial service industry.
• Mrs Sneha Kadam is the Company Secretary and Compliance Officer of the Company and its Subsidiary,  SVIL. She is an associate member of the Institute of Company Secretaries of India. She has over eight years of experience as a company secretary in Indian companies.
• Mr Ricardos El Khoury is the Chief Executive Officer and a director of its Subsidiary, Novus SGP. He has approximately 28 years of experience in the information technology sector.
• Mr Mehernosh Parekh is the Chief Operating Officer and a Director of its Subsidiary, SVIL. He holds a Bachelor of Commerce degree from theUniversity of Bombay. He has work experience in the cash management industry.

COMPETITIVE STRENGTHS

• An integrated omnichannel payment and cash solutions provider.
• Customer Driven Portfolio with Strong Capabilities to Develop Customized Solutions In-house.
• Diversified Product Portfolio, Customer Base, and Revenue Streams Leading to Cross-Selling Opportunities.
• Long-Standing Relationships with Technology Providers and Customers.
• Dedicated In-house Infrastructure and Technological Capabilities.
• Experienced Board of Directors and Senior Management.

KEY STRATEGIES

• Focus on Growing of Digital Payment Solutions Business.
• Focus on Enhancing the Integrated Technology Payments Platform.
• Focus on Cash Management Services and international expansion.

KEY CONCERNS

• Covid -19 epidemic has had and may continue to have some adverse effects on their business.
• A small number of clients account for a large amount of their revenue.
• A decrease in the use of cash as a mode of payment could have an adverse effect on its business.
• Engaged in fee-based activities and their financial performance may be adversely affected by an inability to generate income from such activities.
• The RBI and other government authorities heavily regulate the sectors in which they operate.

IPO Note

AGS TRANSACT TECHNOLOGIES LTD

COMPARISON WITH LISTED INDUSTRY PEERS(AS OF 31st MARCH 2021)

There are no listed companies in India whose business portfolio is comparable with that of the company’s business and comparable to the scale of operations. Hence, it is not possible to provide an industry comparison.

FINANCIALS (RESTATED CONSOLIDATED)

Particulars (Rs. In Millions) FY 2021 FY 2020 FY 2019Equity Share Capital 1,185.81 1,185.81 1,185.81Other Equity 4,400.81 3,803.74 3,063.53Net Worth 5,586.62 4,989.55 4,249.34Gross Debt 16,223.41 11,590.17 11,053.03Revenue from Operations 17,589.44 18,004.43 18,057.42EBITDA 4,767.60 4,954.61 4,428.75Profit Before Tax 824.27 1,195.24 788.89Net Profit for the year 547.92 830.14 661.94

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Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of SME-IPO and various risks and uncertainties associated with the investment in the IPO of the  Company.

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Investments in Securities market products and instruments included in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low-risk tolerance.

Such investments are subject to market risks including, without limitation, price, volatility liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risks factors before making any investment in the Equity Shares of the Company.

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