AGS Transact Technologies IPO in progress: Should you subscribe to the issue?

Payments solutions provider AGS Transact Technologies opened its initial public offer (IPO) on January 19. The firm has fixed a price band of Rs 166-175 for the first IPO of 2022. The issue will close on January 21. The company is expected to list on exchanges on February 1.

The company raised Rs 204 crore from anchor investors on Tuesday.

It allotted over 1.16 crore equity shares to anchor investors at Rs 175 apiece, aggregating the transaction size to Rs 204 crore.

Ashoka India Equity Investment Trust Plc, Kuber India Fund, Saint Capital Fund, IIFL Special Opportunities Fund, Abakkus Growth Fund, HDFC Mutual Fund (MF), Nippon India MF and Quant MF are among the anchor investors.

The IPO size has been cut to Rs 680 crore from Rs 800 crore. The issue will be entirely an offer for sale wherein promoter Ravi B Goyal will offload shares worth up to Rs 677.58 crore.

The allotment of shares is likely to be done on January 27, 2022.

Half of the issue size has been reserved for qualified institutional buyers, 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors.

Lot size of the AGS Transact IPO is 85 shares for which one will have to spend Rs 14,875. A retail individual investor can apply for up to 13 lots or 1,105 shares by spending Rs 193,375.

Promoters of the company are Ravi B Goyal and Vineha Enterprises. Together, they hold 97.61 percent stake in the company.

The shareholding of AGSTTL Employees Welfare Trust stands at 1.51 percent . The objects of the issue are to carry out an offer for sale by selling shareholders and to realize the listing benefits of equity shares on the stock exchange.
ICICI Securities, HDFC Bank and JM Financial are the book-running lead managers for the issue.

Swastika Investmart has assigned an avoid rating to the IPO.

"The company's revenue has been flat over the last three years, mostly on the declining side where revenue in FY21 fell to Rs 1,797 cr from Rs 1,833 cr in FY20. The company's profit, on the other hand, has been decreasing. The company's profit fell from Rs 83 cr in FY20 to Rs 54.7 cr in FY21. The company's margin also shrank. The company is one of India's leading Omni-channel payment solution providers with a strong network. However, 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. Thus we assign an "AVOID" rating to the IPO," the brokerage said.

Anand Rathi has given a 'subscribe for long term' rating to the IPO.

"The diversified product portfolio, customer base and revenue streams leading to cross-selling opportunities for the company. However, the company's business is dependent on their Banking partners. The company also has threats from new fintech companies undertaken by newage digital Payment system viz micro-ATM, Aadhaar Enabled Payment System (AePS), UPI etc. While evaluating on the financial front at the upper end of the IPO price band the valuation seems to be reasonable, factoring all the above scenarios, we assign 'Subscribe-Long Term' rating to this IPO," said the brokerage.

Prior to this, the company had made several attempts to go public.

In 2018, AGS Transact Tech had filed draft papers with Sebi to raise Rs 1,000 crore through an IPO. It had secured the regulator's nod too but did not go ahead with the plan. The company had filed draft papers with the regulator in 2015 to raise up to Rs 1,350 crore through an initial share-sale. Prior to that, the firm had filed preliminary papers with Sebi in 2010 to float an IPO.

AGS Transact Technologies provides customised products and services comprising ATM and CRM outsourcing, cash management and digital payment solutions including merchant solutions, transaction processing services and mobile wallets.