Key Business Highlights
Business segments of AGS Transact
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.
|Title||5 Months FY22||FY2021||FY2020||FY2019|
|Cash generated from operations||226.01||425.06||470.2||510.93|
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.
|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||-|
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.
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.
Review By CA Priyanka Choudhary on 11th Jan 2022
About CA Priyanka Choudhary
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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