AGS Transact Technologies IPO - Information Note
5paisa Research Team
Last Updated: 15th January 2022 - 06:50 pm
AGS Transact Technologies Ltd is a 20 year old company operating in the payment solutions space. Its 3 broad verticals of operations are payment solutions, banking automation solutions and retail level automation.
AGS ranks as India’s second largest in terms of revenues from managed ATM services and in terms of revenues from cash management services. AGS has deployed over 221,000 payment terminals and is India’s largest deployer of POS (point of sale) terminals at petrol pumps.
The company is currently predominantly held by the promoter Ravi Goyal and post the issue, the promoter stake will come down from 98.23% to 66.07%. AGS also offers its ATM outsourcing solutions to other countries like Sri Lanka, Singapore, Cambodia, Philippines and Indonesia.
AGS has also deployed products and solutions from Diebold Nixdorf. AGS competes with other similar payment solutions players like CMS Info Systems, Brinks, FIS, FSS, Hitachi Payments, NCR Corporation, SIS Prosegur and others.
Key terms of the IPO issue of AGS Transact Technologies
|
Key IPO Details |
Particulars |
Key IPO Dates |
Particulars |
|
Nature of issue |
Book Building |
Issue Opens on |
19-Jan-2022 |
|
Face value of share |
Rs.10 per share |
Issue Closes on |
21-Jan-2022 |
|
IPO Price Band |
Rs.166 - Rs.175 |
Basis of Allotment date |
27-Jan-2022 |
|
Market Lot |
85 shares |
Refund Initiation date |
28-Jan-2022 |
|
Retail Investment limit |
13 Lots (1,105 shares) |
Credit to Demat |
31-Jan-2022 |
|
Retail limit - Value |
Rs.193,375 |
IPO Listing date |
01-Feb-2022 |
|
Fresh Issue Size |
Nil |
Pre issue promoter stake |
98.23% |
|
Offer for Sale Size |
Rs.680 crore |
Post issue promoters |
66.07% |
|
Total IPO Size |
Rs.680 crore |
Indicative valuation |
Rs.2,107 crore |
|
Listing on |
BSE, NSE |
HNI Quota |
15% |
|
QIB Quota |
50% |
Retail Quota |
35% |
Data Source: IPO Filings
Here are some of the key aspects of the AGS Transact Technologies Ltd business model
1) Strong and deep relationships with leading banks and financial institutions in India, which has resulted in AGS being the second largest in outsourced ATM services.
2) Deep understanding and expertise in technology and process controls as well as a strong international presence across South East Asia to expand its global footprint.
3) AGS is an existing profit making company with EBITDA margins of above 25% on a consistent basis over the last 3 years.
4) It provides the full suite of support to banks covering cash logistics, automation field support, hardware support, software support and maintenance contracts.
5) Payment solutions are 76% of revenues, which is a business with high levels of EBITDA margins but substantially lower levels of net margins.
How is the AGS Transact Technologies Ltd IPO structured?
The IPO of AGS Transact Technologies Ltd is an entire offer for sale with no fresh issue component
1) The entire Rs.680 crore AGS Transact Technologies IPO will be in the form of an offer for sale and there will be no fresh issue component. Hence there will be no fresh funds coming into the company and no dilution of the equity base.
2) The OFS component will comprise issue of 3,88,57,000 shares and at the upper price band of Rs.175, the OFS is worth Rs.680 crore. That will also be the size of the overall IPO issue of AGS Transact Technologies Ltd.
3) Out of the 388.57 lakhs shares being offered as part of the OFS, the main promoter Ravi Goyal will offer the bulk of 387.19 lakh shares valued at Rs.677.58 crore. Other five selling shareholders will offer a combined 1.38 lakh shares worth Rs.2.42 crore.
4) Post the offer for sale, the promoter (Sion Investments) stake will come down from 98.23% to 66.07%. Public shareholding overall will go up to 33.93% post the IPO.
Key Financial parameters of AGS Transact Technologies Ltd
|
Financial Parameters |
Fiscal 2020-21 |
Fiscal 2019-20 |
Fiscal 2018-19 |
|
Sales Revenues |
Rs.1,758.94 cr |
Rs.1,800.44 Cr |
Rs.1,805.74 Cr |
|
EBITDA |
Rs.476.76 cr |
Rs.495.46 Cr |
Rs.442.88 Cr |
|
Net Profit / (Loss) |
Rs.54.79 cr |
Rs.83.01 Cr |
Rs.66.19 Cr |
|
EBITDA Margins |
26.50% |
27.00% |
24.30% |
|
Net Profit Margins (NPM) |
3.05% |
4.53% |
3.63% |
|
Return on Equity |
10.29% |
16.70% |
15.91% |
Data Source: Company RHP
While revenues were flat over to lower in the last 1 year, the profits have also fallen over the last two years due to higher cost of servicing in the midst of supply chain constraints. While EBITDA margins are extremely impressive, the net margins at 3.05% have been under pressure, which is also visible from the pressure on the ROE.
AGS Transact Technologies Ltd is expected to have a listing market cap of Rs.2,107 crore assigning a P/E ratio of 38.5 times FY21 earnings. If you compare the valuation of AGS with the previous IPO of CMS Info, which is also in the same line of business and has higher ROE, the P/E of AGS is twice that of CMS. That is a note of caution on post listing performance.
Investment Perspective for AGS Transact Technologies Ltd IPO
Here is what investors must consider before investing in the AGS Transact Technologies Ltd IPO.
a) The company operates in a very niche area where business is assured and long term relationships built over time stand in good stead. AGS has that advantage.
b) The company is not diluting its equity base and there will only be a transfer of ownership and to that extent, the EPS is unlikely to be impacted by the base.
c) It has seen above average peer group EBITDA margins but the net margins are lower than the peer group, which has had an impact on the return on equity of the company.
d) The omnichannel approach to cash management is likely to help the company when there is a greater shift towards digital non-cash transactions in India.
e) At a P/E of 38.5X, and an ROE of 10.3% the stock is much more expensive compared to its competitor CMS Info, which came out with an IPO in December 2021.
The company has a good model but comes with distinct valuation risks. Also the company has been forced to reduce the size of its IPO to Rs.680 crore due to market conditions. In relative terms, AGS is more expensively priced in the peer group.
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