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

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Protean eGov Technologies, the citizen-centric & population scale e-governance solutions developer, will be the second company launching an initial public offering in the current month.

The subscription for the offer will start on November 6 and the last day for bidding will be November 8, 2023. The anchor book of the issue was opened for a day on November 3.

The price band for the offer has been fixed at Rs 752-792 per share.

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The Mumbai-based professionally managed company intends to raise Rs 490.33 crore via public issue of 61.91 lakh equity shares at the upper price band.

The issue comprises only an offer-for-sale (OFS) by the investors, which means the entire issue proceeds (excluding IPO expenses) will go to selling shareholders. Hence, the company will not receive any money from the offer.

360 One Special Opportunities Fund and 360 One Special Opportunities Fund – Series 2, Series 3, Series 4, and Series 5 are the selling shareholders in the OFS.

In addition, HDFC Bank, Axis Bank, Deutsche Bank A G, Union Bank of India, NSE Investments, and Administrator of the Specified Undertaking of the Unit Trust of India will also offload shares via OFS.

The weighted average cost of acquisition per share for 360 One Special Opportunities Fund and its series is Rs 950.10, which is 20 percent higher than the current upper price band Rs 792 per share, while for other selling shareholders, the weighted average cost of acquisition per share is in the range of Rs 10-112 per share.

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The firm has reserved 1.5 lakh equity shares for its employees, who will get those shares at a discount of Rs 75 per share to the final issue price.

The issue excluding employee' shares is the net issue. Half of the net issue size has been reserved for qualified institutional buyers, and 15 percent for high networth individuals (non-institutional investors). And the remainder 35 percent shares are kept for retail investors.

Investors can bid for a minimum 18 shares in the issue, and in multiples of 18 shares thereafter.

For retail investors, the minimum application size will be Rs 14,256 for 18 shares, and their maximum investment will be Rs 1,99,584 (252 shares), as they can not invest beyond Rs 2 lakh in the IPO.

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The main objectives of the offer are to carry out the OFS by the selling shareholders, and achieve the benefits of listing the equity shares on the bourses. The company also expects that the proposed listing will enhance its visibility and brand image.

IT-enabled solutions company Protean eGov Technologies, which is earlier known as NSDL e-Governance Infrastructure, collaborates with the government and creates digital public infrastructure and develops citizen-centric e-governance solutions.

It has developed and implemented 19 projects across seven ministries across India including modernising the direct tax infrastructure (through projects like Permanent Account Number (PAN) issuance, the Tax Information Network), strengthening the old age security system (under National Pension System-NPS), and enabling the universal social security system for all Indians (under Atal Pension Yojana).

In fact, it continues to be a market leader in provision of e-governance services such as management of the Tax Information Network, PAN processing, NPS and Atal Pension Yojana. Also it is one of the key contributors to the open source community and protocols that are powering Open Network for Digital Commerce (ONDC).

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The net profit in the year ended March FY23 fell sharply by 25.6 percent to Rs 107 crore compared to previous year, largely due to significant increase in employee cost and lower other income. However, revenue from operations grew by 7.4 percent to Rs 742.2 crore during the same period.

Net profit in the first quarter of FY24 grew sharply by 51.4 percent on-year to Rs 32.2 crore and revenue from operations during the period increased by 40.6 percent to Rs 220.4 crore. EBITDA (earnings before interest, tax, depreciation and amortisation) grew by 57.2 percent year-on-year to Rs 34.08 crore with margin expansion of 163 bps at 15.46 percent.

Protean is a professionally managed company owned by public shareholders, with NSE Investments being the largest shareholder with 24.77 percent stake. 360 One Special Opportunities Funds cumulatively hold 29.56 percent shareholding.

Apart from selling shareholders in the OFS, State Bank of India, Citicorp Finance India, The Hong Kong and Shanghai Banking Corporation, Standard Chartered Bank, Punjab National Bank, Bank of Baroda, and Canara Bank also hold shares in the company.

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Suresh Kumar Sethi is the Managing Director and Chief Executive Officer of the company, while Jayesh Waman Sule is the Whole-time Director and Chief Operating Officer.

a) Protean is substantially dependent on projects from government entities and agencies.

b) The business will suffer if the company fails to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in technology and in the industries.

c) Client contracts can typically be terminated without cause, which could negatively impact its revenues and profitability.

d) There are pending litigations against the company amounting to Rs 179.3 crore.

e) Its sales cycle is lengthy and depends upon many factors outside its control.

f) The company may be liable to its clients or to regulators for damages caused by inadvertent disclosure of confidential information and sensitive data.

g) If the company is unable to protect its intellectual property and proprietary information, the business, financial condition, cash flows and results of operations may be adversely affected.

h) It faces competition from global and Indian enterprise solution companies.

Protean in consultation with the BSE will finalise the basis of allotment of IPO shares by November 13 and will credit equity shares to the demat accounts of eligible investors by November 16.

The trading in its equity shares will commence on the BSE, with effect from November 17, as per the IPO schedule.

In the grey market, its shares were available at 14 percent premium to the upper price band, analysts on anonymity said. The grey market is an unofficial platform wherein IPO shares can be bought and sold till the listing. Investors generally look at the grey market to know about the possible listing price.

ICICI Securities, Equirus Capital, IIFL Securities, and Nomura Financial Advisory and Securities (India) are the merchant bankers to the issue, while Link Intime India is the registrar to the offer.