Protean eGov Tech floats Rs 490.33-cr IPO: Should you buy into the issue?

Protean eGov Technologies Rs 490.33 crore IPO has received a positive rating from most analysts

The public issue of Protean eGov Technologies opened for subscription on November 6 and the Rs 490.33-crore IPO received a positive rating from most analysts based on the company’s dominant position in the domestic e-governance market and reasonable valuation. The price band for the offer, which will close on November 8, has been fixed at Rs 752-792 per share.

The issue is entirely an offer-for-sale (OFS) of 61.91 lakh shares. Entire proceeds, excluding the IPO expenses, will go to selling shareholders and the company will not receive any money from the offer.

Anchor Investors

Ahead of the issue, the e-governance solutions developer raised Rs 143.5 crore from anchor investors. Prominent names like SBI Life Insurance, Baroda BNP Paribas Mutual Fund, Aditya Birla Sun Life Insurance Company, LIC Mutual Fund, and Societe Generale invested in the company through the anchor book.

Also Read: Protean eGov Technologies IPO: Top 10 key things to know before buying the issue

Financial Performance

Protean eGov-Tech’s net profit fell sharply by 25.6 percent to Rs 107 crore in FY23 compared to Rs 143.9 crore a year back, largely due to a significant increase in employee cost and lower other incomes. PAT margin came down to 14.4 percent from 20.8 percent. However, revenue from operations grew by 7.4 percent to Rs 742.2 crore from Rs 690.9 crore during the same period.

Along with net profit, the return ratios too fell in the year ended March 2023. The RoE (return on equity) dipped to 12.5 percent in FY23 from 18.3 percent in FY22 and RoCE (return on capital employed) slipped to 13.6 percent from 20.4 percent in the same period.

Key Concerns

The company’s business is substantially dependent on e-governance and other projects awarded by government establishments. The prices it can charge for e-governance services are dependent on recommended or mandatory fees fixed under the terms of the agreements entered into with central or state governments.

Should you subscribe to Protean eGov Technologies IPO? Let's check out the brokerage views.

Choice: Subscribe

At the higher price band, the company is demanding a TTM P/E multiple of 27.2x which is at a discount to the peer average of 42.5x. “Considering the dominant position in the domestic e-governance market, its capabilities to roll out nationally critical and population-scale greenfield technology solutions and attractive demanded valuations, we assign a ‘Subscribe’ rating for the issue,” said analysts at Choice Equity Broking.

Also Read: Protean eGov Technologies IPO | Investors pick Rs 143.5 crore shares in anchor book

Reliance Securities: Subscribe

According to analysts at Reliance Securities, Protean eGov is a secure, scalable and advanced technology platform having horizontal and vertical scalability, with consistent profitability, positive cash flows and limited capital expenditure and working capital required to scale growth in its key areas. Hence, the brokerage recommends a ‘subscribe’ rating for the issue.

Canara Bank Securities: Subscribe

Protean has strategically expanded across the digital and e-governance ecosystem. “As a niche player with a strong growth potential with market leadership, Protean has a strong balance sheet and cash flow. We recommend subscribing for listing gains and long-term,” said analysts at Canara Bank Securities.

BP Equities: Subscribe

“The issue is valued at a P/E of 29.9x on the upper price band based on FY23 earnings, which is fairly valued. We, therefore, recommend a ‘Subscribe’ rating for the issue,” said analysts at BP Equities.

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