What you must know about Protean eGov Technologies IPO?

Protean eGov Technologies Ltd, formerly known as NSDL e-Governance Infrastructure Ltd, was incorporated in the year 1995, around the time, India was shifting towards a technology driven capital market system. Protean eGov Technologies Ltd is engaged in the business of developing citizen-centric and population-scale e-governance solutions. Till date, Protean eGov Technologies Ltd has played a pivotal role in developing national infrastructure for capital market development in India; which includes some of the most mission critical technological infrastructure in India. It directly works with several ministries of the government of India and has since implemented and managed over 19 mission critical projects across various ministries. Its role in developing and nurturing the digital infrastructure in India towards empowering the average investor has been a yeoman role.

One of its most critical projects with deep relevance was the introduction of projects like PAN issuance, which has helped to widen and deepen the tax base in India. It also created CRA infrastructure to enable universal social security system for all Indians, including the Atal Pension Yojana. One of the most recent and agnostic models of ecommerce; the Open Network for Digital Commerce (ONDC), was also a project brainchild of Protean eGov Technologies Ltd. It contributed to the open-source community and protocols that power ONDC. Today, it has become as a veritable tool for small retailers to go online at low costs. Being entirely an offer for sale, there will be no fresh funds coming into the company from the IPO. The IPO will be ICICI Securities, Equirus Capital, IIFL Securities and Nomura Financial Advisory. Link Intime India Private Ltd will be the registrar to the issue.

Highlights of the IPO issue of Protean eGov Technologies Ltd

Here are some of the key highlights to the public issue of Protean eGov Technologies IPO.

• Protean eGov Technologies Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹752 to ₹792. The final price will be discovered within this band through the process of book building.
   
• The IPO of Protean eGov Technologies Ltd will be entirely an offer for sale (OFS) with no fresh issue component in the IPO. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. However, OFS is just a transfer of ownership and does not entail dilution of equity or of EPS.
   
• The offer for sale (OFS) portion of the IPO of Protean eGov Technologies Ltd comprises the sale of 61,91,000 shares (61.91 lakh shares), which at the upper price band of ₹792 per share will translate into an offer for sale (OFS) size of ₹490.33 crore.
   
• Protean eGov Technologies Ltd  is a professionally managed company with no identifiable promoter group. The OFS selling will be entirely by the investor shareholders only. Some of the key participants offering shares in the OFS include NSE Investments Ltd, SUUTI (UTI administrator), HDFC Bank, Axis Bank, Deutsche Bank, Union Bank of India and 360 One Special Opportunities Fund (part of the IIFL group).
   
• Therefore, the overall IPO of Protean eGov Technologies Ltd will also mirror the OFS and will entail the sale of 61,91,000 shares (61.91 lakh shares), which at the upper price band of ₹792 per share will translate into total IPO issue size of ₹490.33 crore.

The offer for sale portion will only result in transfer of ownership. There will 11 shareholders offering shares under the OFS portion. Being a professionally managed company, all the shareholders offering shares in the OFS of Protean eGov Technologies Ltd will be investor shareholders only.

Promoter holdings and investor quota allocation

As stated earlier, Protean eGov Technologies Ltd is a professionally managed company so there is no identified promoter for the company. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The stock of Protean eGov Technologies Ltd will be listed on the BSE since under extant regulations, a company where NSE group has a stake cannot be listed on the NSE. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee quota. Employees will have a discount of ₹75 on the IPO price. The anchor portion, will be carved out of the QIB portion and the anchor bidding and allocation will happen a day ahead of the opening of the IPO.

Lot sizes for investing in the IPO of Protean eGov Technologies Ltd

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Protean eGov Technologies Ltd, the minimum lot size is 18 shares with upper band indicative value of ₹14,256. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Protean eGov Technologies Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Protean eGov Technologies IPO and how to apply?

The issue opens for subscription on 06th November 2023 and closes for subscription on 08th November 2023 (both days inclusive). The basis of allotment will be finalized on 13th November 2023 and the refunds will be initiated on 15th November 2023. In addition, the demat credits are expected to happen on 16th November 2023 and the stock will list on 17th November 2023 on the NSE and the BSE. Protean eGov Technologies Ltd will be special for more than one reason. It is actually a fintech company and will be a good model to evaluate the fintech potential in India. Also, it will be a litmus test for larger size mainboard IPOs in India. Let us now turn to the more practical issue of how to apply for the IPO of Protean eGov Technologies Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Protean eGov Technologies Ltd

The table below captures the key financials of Protean eGov Technologies Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of Protean eGov Technologies Ltd which can be enumerated as under

1. In the last 3 years, revenue growth has been rather erratic although that could be attributed to the project implementation at different stages. However, as a digital infrastructure player, its value would be more than just the sum of parts or the numbers since its criticality and hidden value may not be fully identified.
    
2. Profits and ROE are not really comparable due to the huge volatility and the tepid profits in the latest fiscal FY23. For the latest year, net margins of 13.66% and ROE of 12.49% is still attractive and should be able to justify the valuations. What would really matter is the net margins and ROE that is long term sustainable.
    
3. The company has had below average sweating assets, but it may not too relevant to a digital infrastructure company. However, the ROA for the latest year at 9.69% is fairly attractive.

On the weighted average EPS of ₹29 per share, the stock is available in the IPO at a P/E of 27.3 times, which is attractive if the current growth rate can be sustained in profits. That would make the stock a lot cheaper in relative terms. However, that may not really be the whole story as this is a rare fintech company that is also consistently profitable with a strong share of government sponsored projects. Over the years, the company has built strong entry barriers that would be tough for any new player to replicate. Also, its scale and pan-India infrastructure would be a cutting edge. Investors in the IPO can look at participating with a long term view and more to participate in a solid fintech play, at a time when financialization of savings is likely to grow by leaps and bounds.