The Rs 680 crore initial public offering of AGS Transact Technologies Ltd is slated to kick off for subscription today. The issue is entirely offer for sale where promoters exit partially. The price band for the issue was at Rs 166-175 a piece.
The firm has garnered mixed reviews from brokerages, with two of them suggesting investors to avoid the issue which will close on 21 January.
Brokerages have red flagged higher valuations amid tepid earnings. The firm reported flat revenue over the last three years with mostly on the declining side. In FY21 its revenue fell to Rs 1797 crore from Rs 1833 crore in FY20. On the other hand, its profit and margin trend is declining too. Its profit fell from Rs 83 crore in FY20 to Rs 54.70 crore in FY21. As of August 2021, it reported a loss of Rs 18.11 crore while its revenue stood at Rs 753.4 crore.
As of August 2021, its net debt was at Rs 880.97 crore against Rs 897.26 crore as on FY21.
Brokerage firm Yes Securities finds its revenue outlook for the ATM managed services operations, which represent 46% of total revenue, tepid. Its ATM and management services de-growing both in FY20 and FY21 at -5.2% and -4.0%, respectively despite it being a unique full-service player in ATM managed services.
"Bank ATM management is highly penetrated with the banking system having ceded more than 90% of ATMs to outsourcing. Revenue traction for this industry was relatively lackluster even prior to the pandemic with a FY17-20 CAGR of 10% and growth projections are modest with a FY23E-26E expected CAGR of 4.8%", Yes Securities says in its report.
Its cash management services is a fast-growing business which has grown 59% and 45%, respectively in FY20 and FY21 but still only occupies 13% of total revenue for so far August 2021, Yes Securities adds. The brokerage firm has an "Avoid" rating on the IPO.
According to Emkay Research, the IPO provides an opportunity to invest in a cash-cum-digital play from a long-term perspective. Emkay says that the recent data shows that cash circulation still remains high despite an increase in digital payment which provides long term visibility to ATM business. Emkay expects ATMs will continue to grow at a slower pace.
Brokerage firm Swastika expects that the government's focus on digital payments will further decrease the use and availability of cash can have an adverse effect on business activities. "The IPO is priced at a PE of 38x and P/BV of 3.71x on the NAV of Rs 47.11, which is slightly higher than its listed peers however, they are not comparable on an apple-to-apple basis, also the IPO is purely OFS based", Swastika adds.
Recently Moneycontrol reported that AGS Transact Technologies Ltd are down nearly 68% in the unlisted market from its recent peak of Rs 550 a share hit in October 2021. Currently it is quoting at Rs 185-195 per share, a dealer said. This is down about 10% from the current price band. The sharp fall as well as the price band has unsettled investors who acquired stocks from the unlisted market, analysts said.
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