AGS Transact Technologies IPO is the first to test the waters in 2022. It was been almost a wait of one month for IPO investors. AGS Transact Technologies entails to raise Rs 680 crore through the issue which is entirely an offer for sale. AGS Transact Technologies Limited is among India’s leading integrated omni-channel payment solutions providers, delivering digital and cash-based services to banks and corporate customers.

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AGS Transact Technologies Limited IPO Details:

Issue OpensWed, 19th January, 202
Issue ClosesFri, 21st January, 2022
Issue DetailsOffer for Sale aggregating upto ₹ 680 Cr
Face Value₹ 10/-
Issue Size (₹ Cr)₹ 680 Cr
Bid Lot85 shares
Price Band₹ 166 – 175
QIB50% of the offer
NIB15% of the offer  (₹ 102 Cr)
Retail35% offer ( 13,600,000 Shares, ₹ 238 Cr)

Updates :

  • ANCHOR ISSUE: AGS Transact Technologies Limited mobilized Rs 204 crore from 17 anchor investors. The anchor book was subscribed by BNP Paribas Arbitrage , Ashoka India Equity Investment Trust Plc, Kuber India Fund, Saint Capital Fund, Tara Emerging Asia Liquid Fund, Cohesion MK Best Ideas, and Authum Investment and Infrastructure.
  • Among others, HDFC Balanced Advantage Fund, Nippon India Small Cap Fund, IIFL Special Opportunities Fund, Abakkus Growth Fund, Quant Mutual Fund, and Resonance Opportunities Fund participated in the anchor book. One third of total anchor book were allocated to three domestic mutual funds through total seven schemes..

AGS Transact Technologies Limited IPO Review: Video Presentation

About AGS Transact Technologies Limited (India)

  • AGS Transact Technologies Limited is among India’s leading integrated omni-channel payment solutions providers, delivering digital and cash-based services to banks and corporate customers.
  • AGS Transact is country’s  second largest company in terms of revenue from ATM managed services.
  • It is largest deployer of Point of Sale (POS) terminals at petroleum outlets.
  • Besides providing customized products and services comprising ATM and CRM outsourcing, cash management and digital payment solutions.
  • It offers merchant solutions, transaction processing services and mobile wallets and few other services.
  • The company has deployed Point of Sale (POS) terminals at petroleum outlets in Indi and has rolled out Integrated Payment Solutions (IPS) at more than 16,000 petroleum outlets in India.

AGS : Journey so far

  • AGS Transact Technologies started providing banking automation solutions in India in 2004.
  • It deployed products from international solution providers like Diebold Nixdorf and established its own country-wide services.
  • In 2009, started to offer ATM outsourcing and managed services
  • AGS Transact Technologies commenced offering transaction switching services in 2011 and cash management services in 2012.
  • In 2014, the company expanded offerings into digital payment solutions,
  • In 2016, the company also entered an alliance with ACI Worldwide (ACI), a leading international payments solution provider.
  • As of August 31, 2021,they had 34 branch offices across India and an employee base of 12,935 personnel, including 1,562 engineers and 6,158 ATM officers.

AGS Transact Technologies Limited IPO: Financials

Particulars / (₹ In Cr)2021(05)2021(12)2020(12)2019(12)
Revenue from Operations753.41,758.941,800.441,805.74
Revenue Growth (%)-2.30%-0.29%
EBITDA194.06476.76495.46442.88
EBITDA Margin (%)25.50%26.50%27.00%24.30%
Profit before Tax-5.582.43119.5278.89
Net Profit for the period-18.1154.7983.0166.19
Net Profit Margin (%)-2.38%3.05%4.53%3.63%
EPS -Diluted (₹ )(1.53)^4.556.95.53
Equity Share Capital118.58118.58118.58118.58
Net Asset Value (₹ )45.8547.1142.0835.84
Post IPO Equity120.39
FV10
IPO Price175
EPS ( FY21)4.55
PE( based on Fy21 ann)38.45
P/B3.82
Market Cap2107
Market Cap / Sales1.20

Salient Points

  • AGS TTL IPO has been hanging around from more than a decade now.
  • This is the 4th attempt by company at IPO
  • PE investors invested in the company in 2012.
  • Push for digital solutions and demonetizations added to woes of company and may have led to delay in IPO as there were concerns on future growth of cash segment.
  • In 2018 existing private equity investors TPG and Actis, were keen to exit post demonetization as IPO chances had dimmed.
  • Company’s promoters raised funds to the tune of 600 crore from structured debt market route to given an exit to these PE investors who held 42% stake.
  • Post-IPO, the promoter and promoter group will hold about a 66.1 per cent stake in the company

Cons

  • High debt in the books of the company.
  • debt-equity ratio of 1.1:1  even after IPO.
  • Company is taking a not so common route to reduce debt, essentially taken to provide exit to former PE investors TPG and Actis in April 2018.
  • The IPO proceeds which is entirely OFS by promoter, will be used  to liquidate company’s Rs. 650 cr. compulsory convertible preference shares in a promoter company.
  • The  proceeds of this will repay Rs. 560 cr of company debt (NCDs which carry a high interest rate of more than 12% and are listed on NSE)
  • Government is encouraging to formalize the economy and reduce share of cash in India’s GDP .

AGS Transact Technologies Limited IPO: Assessment

  • Debt remains a concern even after IPO. High debt-equity ratio of 1.1:1 with annual interest burden to the tune of about Rs. 75 cr.
  • While Currency circulation in the country rose during the pandemic. The  digital adoption is accelerating, and the Government aims to reduce share of cash in India’s GDP. 
  • AGS Transact revenue has remained stagnant since FY19, as ATM management and AMC services, accounting for 2/3rd revenue, declined by 12%, while product revenues dropped by 30%.
  • ATM and cash management services are the cash cows contributing both to the topline and bottom line. ATM margins have improved  after the RBI allowed Rs 17 per ATM transaction. Of this Rs. 14 comes to AGS per transaction.
  • Digital payment and cash management services have reported growth but they together are about  27% of its revenue.
  • While Co. is focusing on growing its digital payment solutions business Revenue outlook is hazy as majority is cash related business.
  • AGS Transact’s net margins are lower than and CMS is debt free.
  • P/BV is in line with CMS Info Systems Ltd. and SIS Ltd., who are are close peers but SIS is in multiple lines.
  • AGS Transact, was active in the unlisted space, and has been a sharp correction. It corrected sharply from its peak of Rs 500 to Rs. 170-180.
  • Currently, as much as 87.3 per cent of the revenue is recurring, of which 12 per cent come from digital.
  • Recently listed CMS Info Systems, the leading cash management company is trading at 4.4 times its BV and at PE of 27.4 times FY2021 earning. AGS PE is 38.5.
  • SIS has CAGR of 13% between FY2019 to FY2021. It also posted healthy RoE of 16-20% during last five years making it a better bet in this space.

AGS Transact Technologies IPO: Apply or Not

Risk : High
Expected Reward : Moderate Loss/ Moderate Profit
Reported GMP : Rs. 10
Listing Gains : Not Sure
Hold for Long Term : Not sure. Peers SIS followed by CMS may be better.
Subscription : Expected to be average. May be helped as Ist IPO 2022

I am not sure to apply in this IPO. If I apply, it will be on Day 3 and based on demand for IPO.
Above are my views only. Please do your own diligence

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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