Heavy debt-burden and large contingent tax liabilities could drag prospects.
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AGS TRANSACT OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Offer Size | Rs 680 Cr |
| Fresh Issue | Nil |
| Offer for Sale | Rs 680 Cr (3,88,57,143 equity shares) |
| Face Value | Rs 10 |
| Price Band | Rs 166 –175 |
| Min Quantity | 85 Nos. |
| Implied M-Cap | Rs 2,106 Cr |
| Equity Cap | Rs 120 Cr |
| Free Float | 33.93% |
| Lead Manager | ICICI Sec, HDFC Bank and JM Financial |
| Registrar | Link Intime |
| Listing | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
|
| Opening :19-Jan-2022 | Closing :21-Jan-2022 |
| Allotment : 27-Jan-2022 | Refunding :28-Jan-2022 |
| Demat Credit :31-Jan-2022 | Trading :1-Feb-2022 |
The Offer
The Mumbai-based AGS Transact Technologies Ltd (AGS) is going public with an offer for sale of Rs 680 Cr (3,88,57,143 equity shares at the cap price). The offer is being made through the book-building route with a price band of Rs 166-175 for Rs 10 paid-up share. Applicants for the IPO should bid for a minimum quantity of 85 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Tuesday, February 1, 2022.
ICICI Securities, HDFC Bank and JM Financial have been roped in as lead-managers to the offer. Link Intime will act as the registrar to the issue. The bidding opens on Wednesday, January 19, 2022 and closes on Friday January 21, 2022.
The objects of the IPO are to carry out the Offer for Sale by the selling shareholders and achieve the benefits of listing on the stock exchanges.
Lineage
Originally incorporated in December 2002 as AGS Infotech Private Ltd by three individuals namely Ravi B Goyal (50,000 equity shares), Badrinarain K Goyal (25,000 shares) and Kunjbihari S Goyal (25,000 shares), the name of the company was changed to AGS Transact Technologies in June 3, 2010. Currently, Ravi Goyal and Vineha Enterprises Private Ltd (VEPL) are presented as promoters holding 55.20% and 42.41% respectively. While Ravi Goyal has been one of the original promoters of the company, VEPL has acquired the 42.41% control of the Company in April 2018 from TPG Star SF Pte Ltd and Oriole Ltd. As much as 90% of VEPL’s capital is held by Ravi Goyal.
AGS is 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. The company provides customized products and services comprising ATM and CRM outsourcing, cash management and digital payment solutions including merchant solutions, transaction processing services and mobile wallets. As of March 31, 2021, AGS was the second largest company in the country in terms of revenue from ATM managed services under the outsourcing model as well as revenue from cash management and number of ATMs replenished. At the end of August 2021, AGS had deployed 221,066 payment terminals and it was one of the largest deployers of point of sale (POS) terminals at petroleum outlets in India.
AGS started providing banking automation solutions in India in 2004. The company deployed products from international solution providers such as Diebold Nixdorf and established its own country-wide service infrastructure and automation solutions expertise to provide related services. Since 2009 AGS leveraged its banking automation solutions expertise and service reach to offer ATM outsourcing and managed services by entering into two co-operation agreements with Diebold Nixdorf for banking and retail products. As part of its strategy to strengthen its presence in the cash value chain, offer an integrated payments platform and improve its operational efficiencies, the company started offering transaction switching services in 2011 and cash management services in 2012. In 2014 the company expanded its offerings into digital payment solutions, enhancing its integrated digital platform and Software-as-a-Service (SaaS) capabilities. In 2016 it also entered into an alliance with ACI Worldwide a leading international payments solution provider, which has further strengthened AGS’ value proposition to customers.
Key Management
Promoter Ravi Goyal (59) is the chairman and managing director of the company. Promoter’s spouse, Anupama Goyal (56) has been designated as a non-executive director. Promoter’s son Vinayak Goyal (29) is an executive director on the board. He holds a Bachelor of Science degree in Computer Engineering from Purdue University, USA, and has previously worked with Avendus Capital Private Ltd as an analyst.
Stanley Johnson (48) has been appointed as an executive director with effect from June 9, 2021. He holds a Bachelor of Science degree from Mumbai University. He also holds a Masters in Computer Applications degree from The International University, U.S.A. Stanley has been associated with the company since August 16, 2010. He has been instrumental in strengthening and expanding AGS’s banking outsourcing operations across India. Stanley has over 26 years of experience in the field of payment industry. Prior to joining AGS, he was associated with FIS Payments Solutions and Services India Private Ltd.
Stakeholders
AGS has a fairly large equity capital of Rs 120 Cr. As on the date of the RHP, the company had 842 Shareholders. The promoter group consists of 9 shareholders of whom, main promoters Ravi Goyal and VEPL collectively hold Rs 117.51 Cr constituting 97.61%. Seven others hold just 0.62% (7.5 lakh shares). Employees and others hold 1.77% (21.27 lakh shares). Post offer for sale, whereas the promoters and the existing shareholders would hold 66.07% and 1.65% at a negative cost of holding, public will have 32.28% at the IPO cost of Rs 175 a share.
Business
AGS operates its business under three segments: Payment Solutions, Banking Automation Solutions and Other Automation Solutions. Payment Solutions segment comprises ATM and CRM outsourcing and managed services, cash management services, iCDs, digital payment services which include toll and transit solutions, Fastlane, transaction switching services, services through POS machines and agency banking. Its customers in the Payment Solutions segment include ICICI Bank, Axis Bank, HDFC Bank and Federal Bank.
Under the ATM and CRM outsourcing and managed services businesses, the company is responsible for the end-to-end management of ATMs and CRMs, starting from site identification and development, followed by machine deployment, maintenance and management on behalf of the customers. While AGS owns the ATMs and CRMs in its outsourcing services business, ownership of ATMs and CRMs remains with the customers themselves under its managed services business. As of August 31, 2021, its portfolio consisted of 14,099 ATMs and CRMs under its outsourcing business and 19,161 ATMs and CRMs under its managed services business in India. The company also provided outsourcing solutions for 1,273 ATM and kiosks in Sri Lanka, as of August 31, 2021.
The cash management services conducted by its subsidiary Securevalue India Ltd (SVIL) include cash replenishment, cash pick-up, cash-in-transit, cash vaulting and cash processing services for ATMs managed by AGS and by other operators. As of August 31, 2021, they provided cash management services to 46,214 ATMs through a fleet of 2,513 cash vans including 267 dedicated cash vans to banks, and 475 vaults and spoke locations, covering approximately 1,860 cities and towns in India. SVIL was the second largest cash management company in India, in terms of revenue from cash management and number of ATMs replenished, as of March 31, 2021.
AGS’ merchant services include device-based and device-less payment solutions, prepaid and loyalty programs, Cash@POS, payment gateway and remote payment solutions, loans against card receivables and other VAS. As of August 31, 2021, it had 180,993 merchants as clients. AGS focuses on serving the oil marketing industry, private and public sector banks and corporate merchants. Of its 221,066 POS terminals deployed with clients as of August 31, 2021, 183,985 terminals were located at retail and corporate outlets and 37,081terminals were located at OMCs. In fiscal 2021 the GTV transacted through its POS terminals at OMC retail outlets was Rs 13,366 Cr.
Financial Track
Though AGS has been operating for nearly two decades, its profitability during the first 15 years was far from convincing. On a consolidated basis, the company turned around in 2018. In fiscals 2019 and 2020 the company posted impressive financials. Nevertheless, in fiscal 2021 it witnessed reverses both in terms of revenue and profits. During the first five months of the current fiscal, it has suffered a severe setback with the bottom line turning into red on declining top line. However, the company’s operating margin has remained attractive at above 24%.
In the absence of fresh issue, the most worrying factor is the company’s disproportionately large borrowings whose gearing is more than twice of its equity. At the end of August 2021, the company’s borrowings stood at Rs 1,244 Cr while its productive assets were worth Rs 1,011 Cr and its net worth was only Rs 545 Cr.
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AGS Transact Consolidated Financials (in Cr) |
||||||
| Period Ended |
Aug-21 |
Mar-21 | Mar-20 | Mar-19 | Mar-18 |
Mar-17 |
| Months |
5 |
12 | 12 | 12 | 12 |
12 |
| Revenue |
753 |
1759 | 1800 | 1806 | 1481 |
1336 |
| Operating Profit |
185 |
439 | 462 | 425 | 205 |
152 |
| OPM% |
24.6 |
24.9 | 25.7 | 23.5 | 13.9 |
11.3 |
| Other Income |
9 |
38 | 33 | 18 | 14 |
17 |
| EBIDTA |
193 |
475 | 495 | 443 | 219 |
168 |
| EBIDTA % |
25.4 |
26.5 | 27.0 | 24.3 | 14.7 |
12.4 |
| Interest |
97 |
133 | 130 | 137 | 83 |
78 |
| Depreciation |
102 |
260 | 245 | 227 | 113 |
100 |
| Net Profit |
-18 |
59 | 83 | 63 | 6 |
-22 |
| Equity Capital |
120 |
120 | 120 | 120 | 120 |
119 |
| Reserves |
425 |
440 | 380 | 306 | 284 |
275 |
| Borrowing |
1244 |
1024 | 565 | 461 | 577 |
548 |
| Fixed Assets |
1011 |
1020 | 1141 | 1055 | 613 |
559 |
Valuation
AGS has kept an IPO cap price of Rs 175 which compares well in terms of Price to Cash EPS, Book Value, EBIDTA, Revenue and Fixed Assets of the listed peers like CMS Info and SIS. But, in terms of Price/Earnings AGS looks costly as compared to its listed peers. The company’s heavy debt burden too is dragging its bottom line, return on equity and return on capital employed.
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HOW AGS COMPARES WITH LISTED PEERS |
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Financials |
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| (Amount in Cr) |
AGS Transact |
CMS Info Sys |
SIS |
| Market Cap |
2107 |
4365 |
6466 |
| Borrowing |
1024 |
0 |
1165 |
| Fixed Assets |
1020 |
353 |
435 |
| Revenue |
1759 |
1316 |
9485 |
| Other Income |
38 |
6 |
120 |
| EBIDTA |
475 |
309 |
723 |
| Interest |
133 |
8 |
127 |
| Net Profit |
59 |
170 |
367 |
| Equity Cap |
120 |
148 |
73 |
| Reserves |
425 |
911 |
1757 |
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Stock Features |
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| Current Price (Rs) |
175 |
295 |
440 |
| Face Value (Rs) |
10 |
10 |
5 |
| Book Value |
45 |
72 |
125 |
| Promoter Stake % |
66.1 |
65.6 |
72.8 |
| Debt/Equity |
1.9 |
0.0 |
0.6 |
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Profitability |
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| OPM % |
24.9 |
23.1 |
9.3 |
| Net Margin % |
3.3 |
12.8 |
3.9 |
| Cash EPS |
26.48 |
15.75 |
32.58 |
| Earnings Per Share |
4.91 |
11.47 |
24.88 |
|
Return |
|||
| RONW % |
10.8 |
16.0 |
20.1 |
| ROCE % |
13.7 |
23.2 |
20.4 |
|
Discounting |
|||
| Price/Earnings |
35.6 |
25.7 |
17.7 |
| Price/Cash EPS |
6.6 |
18.7 |
13.5 |
| Price/Book Value |
3.9 |
4.1 |
3.5 |
| Price/EBIDTA |
4.4 |
14.1 |
8.9 |
| Price/Revenue |
1.2 |
3.3 |
0.7 |
| Price/Fixed Assets |
2.1 |
12.4 |
14.9 |
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Distribution |
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| Dividend % |
10.0 |
24.5 |
0 |
| Yield % |
0.6 |
0.8 |
0 |
| Pay-out % |
20.4 |
21.4 |
0 |
Concern
- The company is facing several taxation cases whose contingent liabilities could be over Rs 290 Cr.