IPO Analysis: AGS Transact Technologies Ltd
IPO Rating: AVOID
About the issue:
AGS Transact Technologies Ltd is engaged in the business of offering payments solutions, banking automation, servicing digital transactions, etc. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises an offer for the sale of shares worth Rs 680 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 166 to Rs 175 per equity share. The IPO opening date is January 19, 2021, while it will be closing on January 21, 2021. The issue will be listed on the exchange on February 1, 2021. The IPO market lot size is 85 shares. A retail-individual investor can apply up to a maximum of 13 lots (1105 shares or Rs 193,375).
The objects of the offer are:
AGS Transact IPO Details:
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IPO Opening Date
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Jan 19, 2022
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IPO Closing Date
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Jan 21, 2022
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Issue Type
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Book Built Issue IPO
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Face Value
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₹10 per equity share
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IPO Price
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₹166 to ₹175 per equity share
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Market Lot
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85 Shares
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Min Order Quantity
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85 Shares
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Listing At
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BSE, NSE
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Issue Size
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[.] Eq Shares of ₹10
(aggregating up to ₹680.00 Cr)
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Offer for Sale
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[.] Eq Shares of ₹10
(aggregating up to ₹680.00 Cr)
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QIB Shares Offered
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Not more than 50% of the offer
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Retail Shares Offered
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Not less than 35% of the offer
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NII (HNI) Shares Offered
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Not less than 15% of the offer
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About the company:
AGS Transact Technologies Ltd is one of India's leading omni-channel payment solution providers. 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 also expanded internationally in other Asian countries including Sri Lanka, Cambodia, Singapore, Indonesia, and the Philippines. The firm primarily operates in 3 business segments;
Payment Solution services such as ATM and CRM outsourcing, cash management services, digital payment solutions, transaction switching services, POS machine services, agency banking, etc. As of August 31, 2021, it has a portfolio of 14,099 ATMs and CRMs under outsourcing and 19,161 ATMs and CRMs under managed service segment. It has also deployed POS terminals at leading Indian petroleum outlets such as Hindustan Petroleum, Indian Oil Corporation while Dr Lal Pathlabs, Patanjali Ayurved, RJ Corp Ltd, VRIPL Retail Pvt Ltd, Organic India are the corporate clients.
Banking Automation Solutions i.e., Sale of ATM and CRM, self-service terminals, currency technology products, and relevant services. As of August 31, 2021, AGS Transact has 50+ banking customer bases i.e., ICICI Bank. Axis Bank, and HDFC Bank Ltd.
Other Automation Solutions for customers in petroleum, retail, and colour segments such as system automation products, system integration, remote management, and other service offerings.
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 touch points.
Competitive strengths:
An integrated omni-channel payment and cash solutions provider.
Diversified product portfolio, customer base, and revenue stream.
Strong capabilities to develop customized in-house solutions.
Long-standing relationship with global technology providers i.e. Diebold Nixdorf, ACI.
Strong in-house infrastructure and technological capabilities.
Company Financials:
It has an established track record of delivering robust financial performance as well as continued growth. For the financial years 2021, 2020 and 2019, EBITDA was Rs 476.76 crore, Rs 495.46 crore and Rs 442.87 crore, respectively, and its EBITDA Margin was 26.5 per cent, 27.0 per cent and 24.3 per cent, respectively. However, it witnessed a degrowth of 34 per cent in PAT in FY21 over FY20.
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Particulars
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For the year/period ended (₹ in Millions)
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31-Aug-21
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31-Mar-21
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31-Mar-20
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Total Assets
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29,170.33
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29,138.32
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22,413.95
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Total Revenue
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7,623.04
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17,971.52
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18,335.26
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Profit After Tax
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- 181.05
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547.92
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830.14
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Recommendation:
The number of ATMs (including white label ATMs) operating in India’s ATMs market increased from 212,061 as of March 31, 2016, to 238,588 as of March 31, 202, at a CAGR of 2.39 per cent which has been quite slow. The ATM industry in India, in terms of number of ATM transactions and revenues for MSP, was negatively influenced by the COVID-19 pandemic. However, cash is still king in the Indian economy as the share of cash in circulation reached over 14.5 per cent of the GDP during financial year 2021. In the future, banks will look to deploy more cash recyclers, which is expected to support revenue growth for AGS Transact Technologies Limited (“AGS Transact”).
By having a diversified product portfolio and customer base, it is able to capitalize on cross-selling opportunities. It has built healthy relationships with Indian financial institutions like CICI Bank Limited, Axis Bank Limited, HDFC Bank Limited, Federal Bank Limited, Dhanlaxmi Bank Limited and RBL Bank Limited, having procured repeat orders from them. It seeks to expand services to fuel merchants by providing IPS which are integrated to the merchants’ POS machines and Android-based POS, enabling merchants to provide services to their consumers beyond payments.
Talking about the financials, the revenues have slowed down and the profit after tax too has taken a hit. The IPO issue is coming out with no fresh issue and is just offer for sale, which may be a concern for investors. Hence, we recommend to AVOID investing in the IPO.