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AGS Transact Technologies IPO  Fundamental Analysis

Key Business Highlights

  • Incorporated in Mumbai in the year 2002, AGS is an integrated Omni-channel payment solution in terms of providing digital and cash-based solutions to banks and corporate clients. AGS provides end-to-end cash and digital payment solutions and technology for the banking, retail, petroleum, ecommerce and fintech sectors in India, Sri Lanka, Singapore, Cambodia, Philippines and Indonesia. It has three subsidiaries Indiatransact (digital solutions), Secure value (cash management) and Novus Technologies (banking automation).
  • The Issuer started providing banking automation solutions in India in year 2004. AGS deployed products from international solution providers such as Diebold Nixdorf and established country-wide service infrastructure and automation solutions expertise to provide related services.
  • AGS deployed 2,21,066 payment terminals as on August 31, 2021, and were one of the largest deployers of POS terminals at petroleum outlets in India, having rolled out IPS at more than 16,000 petroleum outlets with 28,986 terminals in India as on March 31, 2021.
  • For the 5MFY22 and FY 21, FY20 and FY19, 95.9%, 95.6%, 95.5% and 96.1%, respectively, revenues from operations was contributed by India.
  • In the year 2014, the company expanded its product offerings into digital payment solutions, enhancing its digital platform and Software-as-a-Service (SaaS) capabilities. In year 2016, AGS entered into an alliance with ACI Worldwide (ACI), a leading international payments solution provider.
  • The Issuer operates in three broad business segments: Payment Solutions, Banking Automation Solutions and Other Automation Solutions. For the 5MFY22 and FY21, FY20 and FY19, aggregate revenue from customers in the banking sector were 66.9%, 68.1%, 71.7% and 70.8% of total revenue from operations respectively.

Business segments of AGS Transact

  1. Banking automation- It comprises sale of ATMs and CRMs, currency technology products and self-service terminals and related services and upgrades. As of August 31, 2021, AGS had approximately 50 banking customers, including ICICI Bank Limited, HDFC Bank Limited and Axis Bank Limited. The company installed, maintained, or managed a network of approximately 72,000 ATMs and CRMs as on Aug 2021. The company has entered into a cooperation agreement with Diebold Nixdorf, under which it assembles ATMs in Daman, India. This segment offers ATM hardware and software solutions in India with varying designs, cash management and dispensing configurations, security solutions, that include fingerprint sensors, and software and hardware. The Banking Transaction Terminals include variety of automated self-service banking platforms that include automated cheque deposit terminals and multifunction self-service kiosks, where non-cash financial transactions such as balance inquiry, mini-statement and PIN change can be conducted.
  2. Payment Solutions- It comprises cash solutions which consist of ATM and CRM outsourcing and managed services, cash management and ICD, digital payment services which include toll and transit solutions, Fastlane, transaction switching services, services through POS machines and agency banking. Customers in the Payment Solutions segment include, RBL Bank Limited, Utkarsh Small Finance Bank Limited, Hindustan Petroleum Corporation Limited (HPCL) and BTI India Payments Private Limited etc.
  3. Cash Management- Commenced in the year 2012, it carries out ATM cash replenishment, CIT, retail cash management or doorstep banking complete line maintenance and cash processing and vaulting services through its subsidiary SVIL (Securevalue India). The Issuer 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. Cash Management services are offered to Banks, Financial Institutions, large retailers and petrol stations.
  4. Other Automation Solutions
  • Retail Automation - Retail sector offerings include cash and card billing hardware and software, store automation peripherals, store automation solutions and kiosks. Retail sector clients are offered products and services for automating the cash and card billing terminals at their establishments, enabling them to manage their customer check-out lanes and customer billing processes in an automated manner.
  • Fuel Retail Automation - Petroleum sector operations involve automation of downstream supply chain operations of petroleum companies, including outlet automation. The offerings include assisting oil companies (OMCs) in implementing their quality and quantity assurance initiatives for customers and providing an infrastructure to cater to various demands of the customers. Customers in this sector include petroleum companies such as IOCL and HPCL. As of August 31, 2021, AGS had automated approximately 17,924 petroleum outlets across India.
  • Transit Solutions- The Issuer entered transit business through automatic fare and electronic toll collection systems in year 2016. AGS aims to foster smart card-based travel by integrating Automatic Fare Collection (AFC) into leading travel infrastructure systems. The Issuer has successfully deployed and launched completely automated smart ticketing system at Punjab Bus Metro Society at Amritsar and an automated fare collection system at Kochi Metro Rail Limited at Kochi.
  • Colour Automation - Colour sector offerings include automatic paint dispensers capable of delivering the right shade of colour, which is supplied to paint companies. The entire life cycle of these machines including deployment, implementation, and maintenance is done and operational and software training is also undertaken for the customers. AGS has entered into an agreement with Fast and Fluid Management B.V. for the manufacture and licensing of technology with respect to XSmart, a model of paint dispenser, and have the right to purchase and resell XSmart and parts for XSmart in India, Sri Lanka, Nepal, and Bangladesh. As of August 31, 2021, AGS had installed approximately 88,521 colour dispensing machines across India. Customers include Kansai Nerolac Paints Limited and Berger Paints India Limited.

Financial Review of AGS Transact Technologies

The financial profile of the Issuer is showing a volatile and weaker trend as seen by its margins and revenues. AGS Transact posted revenues of Rs 762.30 for 5MFY22 and recorded loss of Rs (18.11) crore for FY22. The total revenues for FY21 reduced by 2% to 1797.15 crore from Rs 1833.53 crore in FY20. The reduction was due to the decrease in revenue from payment solutions and banking automation solutions which was partly offset by increase in revenues from other automation solutions and other income. PAT reduced by 34% to Rs 54.79 crore in FY21 from Rs 83.01 crore in FY20. The revenues have remained stable for FY20 as seen in the table. EBITDA margins have remained in the range of 24-26% for FY19-21. Net margins are showing a declining trend being 3.05%, 4.53% and 3.63% for FY21, FY20 and FY19 respectively.

Debt to equity is at a higher side of 3.05x as at the end of FY21. Return on net worth has been (3.33%), 9.81%, 16.64% and 15.58% respectively for 5MFY22, FY21, FY20 and FY19 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title 5 Months FY22 FY2021 FY2020 FY2019
Total Revenue 762.3 1797.15 1833.53 1823.63
Other Income 8.9 38.21 33.08 17.89
PAT -18.11 54.79 83.01 66.19
EBITDA 194.06 476.76 495.46 442.88
Total Assets 2917.03 2913.83 2241.4 2054.43
Cash generated from operations 226.01 425.06 470.2 510.93
EBITDA Margin 25.46% 26.53% 27.02% 24.29%
Net Margin -2.38% 3.05% 4.53% 3.63%

Valuation and peer comparison of AGS Transact Technologies

The Issue is priced at 37.88x with EPS of 4.62 as at the end of FY21calculated at the upper price band of Rs 175 per share. Sector P/E is 90x which indicates that the Issue is fairly priced. Price to book value is 3.71x at NAV of Rs 47.11 per share at the end of FY21. The Issuer has no peers as per the RHP. However, CMS Infosystems is the closest peer of the Issuer; it was listed in December last year. For reader’s information, CMS was listed at Rs 220 against issue price of Rs 216 but the shares surged thereafter and were quoting at Rs 311.50 on 17th Jan 2022.

Table 2 - AGS Transact Technologies valuation and peers comparison
Particulars CMS AGS Transact
Face value per share 10 10
Total Income for FY 21 (Cr) 1321.92 1797.15
EPS (As on 17 Jan 22) 11.09 4.62
NAV per share 66.52 47.11
Return on net worth 17.12% 9.81%
P/E (As on 17 Jan 22) NA NA
P/B (As on 17 Jan 22) 4.89 -
Market Cap (INR Cr) 3,196.8 -
Share price 311.5 -

The Issue Snapshot

AGS Transact IPO with an offer size of Rs 680 crore (100% OFS) opens on 19th Jan 2022 with price band of Rs 166-175 per share. Retail quota is 35% and minimum application amount is Rs 14,875. The Issue closes on 21st Jan and is expected to be listed on Feb 1 2022. The amount received by the promoter from offer for sale would be deposited into an escrow amount and then this amount would be utilized to pre-pay or redeem the Listed NCDs issued by the Company.

Sector Outlook

The revenue of ATM managed services market in India declined by approximately 7% from Rs 1,21,984.7 during FY20 to Rs 1,13,408.4 million during FY21 due to the pandemic. Millenials shifted to digital payment methods which led to the decline of cash withdrawals and usage of ATMs in the country, which in turn led banks to halt plans for setting up ATMs. The Indian digital payment space has seen extraordinary growth in the last few years, with the volume of transactions increasing at a CAGR of 36%. New and innovative payment products such as UPI, NETC, FASTag and BBPS have contributed to the growth of the digital payment industry and this is expected to continue as RBI is also promoting digital payments.

Conclusion and Investment Strategy

AGS Transact has a diversified product portfolio but still the majority of the revenues are contributed by banking automation solutions, which includes supply and installation of ATMs and other automated banking products, ATM site development and other related services. The Issuer is also engaged in digital payment services which includes toll and transit solutions, transaction switching services, services through POS machines and agency banking.

The financials of the company appears to be volatile and weak as its topline remains static in FY20 and declined in FY21. The net profit margins show a weak and volatile trend throughout the last three fiscals. Further, AGS posted losses in 5MFY22. Other negative points that come in the limelight are high debt of the company being equal to its total revenues. The company’s object to repay its debt (NCD) from the IPO proceeds appears to be another negative. Hence considering these factors, one may avoid this IPO and look for investments in other IPOs in the market that may be launching soon.


Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 11th Jan 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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