Table of Contents
Business Introduction:
AGS Transact Technologies Ltd is a leading provider of omnichannel payment solutions in India. It is India’s second-largest company in terms of revenue generated by ATM managed services and also the largest deployer of point-of-sale terminals at fuel stores.
Not only does it cater to the Indian market, but also to other Asian countries such as Sri Lanka, Cambodia, Singapore, Indonesia, and the Philippines.
AGS Transact Technologies Ltd Business Segments:
1. Payment solutions include ATM and CRM outsourcing (Cash Recycling Machines), cash management, digital payment solutions, transaction switching, point-of-sale machine services, and agency banking. As of August 31, 2021, it had an outsourcing portfolio of 14,099 ATMs and CRMs and a managed service portfolio of 19,161 ATMs and CRMs. It has also installed POS (Point of Sale) terminals. It’s the card-swiping machine usually found at the shopping malls and prominent Indian fuel stations such as Hindustan Petroleum and Indian Oil Corporation, as well as corporate clients such as Dr. Lal Pathlabs, Patanjali Ayurved, RJ Corp Ltd, VRIPL Retail Pvt Ltd, and Organic India.
2. Banking Automation Solutions, which include the sale of ATMs and customer relationship management systems, as well as self-service terminals, currency technology products, and related services, As of August 31, 2021, AGS Transact has a banking customer base of more than 50, including ICICI Bank. Axis Bank Pvt. Ltd. and HDFC Bank Pvt. Ltd.
3. Other automation solutions include system automation solutions, system integration, remote management, and other service options for customers in petroleum, retail, etc.
As of August 31, 2021, it had established a network of 2,21,066 merchant point-of-sale terminals, 17,924 gasoline outlets, 72,000 ATMs and cash management services, 46,800 cash billing terminals, and 88,521 color dispensing devices. Through 4,46,000 machines or consumer touchpoints, the company serves customers in more than 2200 cities and towns.
About Founders & Promoters:
Ravi B Goyal and Vineha Enterprises are the company’s promoters, with a combined stake of 97.45 percent. Ravi B. Goyal and his wife, Anupama R. Goyal, own 100% of Vineha Enterprises.
Ravi B. Goyal is the company’s chairman and managing director. Anupama R. Goyal serves on the board as a non-independent and non-executive director.
The independent and non-executive directors are Sudip Bandyopadhyay, Vijay Chugh, Rahul Narain Bhagat, and Subrata Kumar Mitra. The board’s executive directors are Stanley Johnson P. and Vinayak R. Goyal. Saurabh Lal is the company’s Chief Financial Officer, as well as the Chief Financial Officer of its subsidiary, Securevalue India Ltd.
Financial Information:
AGS Transact’s profit fell to Rs 54.79 crore in the fiscal year 2021 from Rs 83.01 crore the previous year. Revenue decreased slightly to Rs 1,758.94 crore from Rs 1,800.44 crore in the previous quarter.
It recorded a loss of Rs 18.1 crore on revenue of Rs 753.4 crore for the five months ending August 31, 2021. Its overall earnings were harmed in part by lockdowns prompted by the COVID-19 pandemic.
| Particulars (In crores) | Aug-21 | FY21 | FY20 |
|---|---|---|---|
| Total Assets | 2,917.03 | 2,913.83 | 2,241.39 |
| Revenue from operations | 762.3 | 1,797.15 | 1,833.52 |
| Net profit | -18.1 | 54.79 | 83.01 |
The company reported flat sales for the last three years, with the majority of that revenue dropping. Its income decreased to Rs 1797 crore in FY21 from Rs 1833 crore in FY20. On the other hand, the company’s profit and margin trends are deteriorating as well. Profitability decreased from Rs 83 crore in the fiscal year 2020 to Rs 54.70 crore in fiscal year 21. It recorded a loss of Rs 18.11 crore in August 2021 but generated revenue of Rs 753.4 crore.
As of August 2021, the company’s net debt stood at Rs 880.97 crore, down from Rs 897.26 crore in FY21.
SWOT – Risk Analysis:
Opportunity & Strength
- One of the largest providers of integrated omnichannel payment and cash management solutions,
- The product portfolio, customer base, and revenue stream diversification have led to the non-dependence of a single stream of income.
- Being in the business for over a decade, the company has the Capacity to design in-house solutions.
- Long-standing relationships with multinational technology companies, such as Diebold Nixdorf and ACI.
- The internal infrastructure and technological capabilities are robust and strong.
Weakness & Threat
- The COVID-19 pandemic has had a number of adverse effects on the business, results of operations, and financial situation, such as less cash withdrawal, lower usage of cash management services, overload usage of digital payment platforms, etc.
- The Digital mode of the transaction has made cash transactions obsolete and thus fewer people use ATMs. Reduced cash payments could have a negative impact on the business, results of operations, cash flows, and financial position.
- Over 45% of companies revenue is from 3 main banks (ICICI, AXIS, and Bank of Baroda). Losing business from them and the company’s financials will have an adverse effect.
- AGS Transact Technologies operates in such an industry that is highly regulated by the RBI.
- The company is undergoing several outstanding litigations or legal proceedings.
- And then there are always security concerns regarding ATMs both technologically (such as cyber-attack) and physically (such as theft).
Management Analysis:
The company is in the business since 1994 with stable and well-experienced management.
AGS Transact Technologies Ltd IPO Details:
| Particulars | Information |
|---|---|
| IPO Issue opens on | January 19, 2022 |
| IPO Issue closes on | January 21, 2022 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs. 10 per equity share |
| IPO Price | Rs. 166 - 175 per equity share |
| Minimum Order Quantity | 1 lot = 85 Shares, Amounting Rs. 14,875 |
| Maximum Order Quantity | 14 lot = 1,105 Shares, Amounting Rs. 1,93,375 |
| Listing At | NSE and BSE |
| Issue Size | Amount aggregating up to Rs. 680 crore |
| Fresh Issue | - |
| Offer for Sale | Amount aggregating up to Rs. 680 crore |
| Allotment date | January 27, 2022 |
| Initiation of Refunds | January 28, 2022 |
| Credit of share to Demat Account | January 31, 2022 |
| IPO Listing date | February 1, 2022 |
Use of IPO Proceeds:
- To conduct a sale offer on behalf of selling stockholders.
- To maximize the benefits of equity shares being listed on a stock exchange.
Industry Overview:
A spike in private consumption and government efforts to promote the Indian economy through “Made in India” plans have all contributed to the payments sector’s rapid growth. The number of transactions increased from 31,383.9 million in the fiscal year 2019 to 46,405.8 million in the fiscal year 2021, but their value decreased from 1,739,214.4 billion in the fiscal year 2019 to 1,471,579.0 billion in the fiscal year 2021 due to the COVID-19 epidemic.
Conclusion:
The industries in which AGS operates are extremely competitive, and this competition is likely to intensify, which could have a negative impact on the business, results of operations, cash flows, and financial condition.
AGS Transact offers a range of tailored products and services, including automated teller machines (ATMs) and cash recycling machines, as well as outsourcing, cash management, and digital payment solutions, such as merchant solutions, transaction processing services, and mobile wallets.
As of March 31, 2021, it was India’s second-largest company in terms of income from ATM managed services provided through an outsourcing model, as well as revenue from cash management and the number of ATMs supplied. As of August 31, 2021, it had installed 221,066 payment terminals and was one of the major providers of point-of-sale terminals in India’s petroleum stations.
It had roughly 50 banking customers as of August 31, 2021, including ICICI Bank Ltd., HDFC Bank Ltd., and Axis Bank Ltd.
| Particulars | Rating (Out of 10) |
|---|---|
| Business Prospects | 7 |
| Financial Information | 6 |
| SWOT | 7 |
| IPO Valuation | 7 |
| Overall | 6.75 |
Will I Subscribe to this AGS Transact Technologies Ltd IPO?
As of now, there’s a Grey Market premium of around 20-30 per share. That will most likely drop in the coming days. In any case, I will apply this IPO only for its IPO gains and will apply on the third & final day based on the demand the IPO holds.
In any case, I’m not buying this company for the long term. And, will give a 6/10 rating to the company.
How to Apply for AGS Transact Technologies Ltd?
Steps to be followed to apply for “AGS Transact Technologies Ltd” via Zerodha console:
Step 1: Visit the Zerodha website and log in to Console.
Step 2: Go to Portfolio and click the IPOs link.
Step 3: Go to the “AGS Transact Technologies Ltd” row and click the ‘Bid’ button.
Step 4: Enter your UPI ID, Quantity (In lots), and Price.
Step 5: ‘Submit’ IPO application form.
Step 6: Visit the UPI App (net banking or BHIM) to approve the mandate.
Do not have a brokerage account? Apply for Zerodha – India’s top brokerage service.
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