AGS Transact
Technologies incorporated
on 11 December 2002 is one of the largest integrated omni-channel payment
solutions providers in India in terms of providing digital and cash-based
solutions to banks and corporate clients. It provides customized products and
services comprising Automated Teller Machine (ATM) and Cash Recycler Machine (CRM)
outsourcing, cash management and digital payment solutions including merchant
solutions, transaction processing services and mobile wallets.
The company is the second largest
company in India in terms of (i) revenue from ATM managed services under the
outsourcing model, and (ii) revenue from cash management and number of ATMs
replenished as of 31 March 2021. The company has deployed 221,066 payment terminals
and was one of the largest deployers of Point of Sale (POS) terminals at
petroleum outlets in India, having rolled out Integrated Payment Solutions (IPS)
at more than 16,000 petroleum outlets with 28,986 terminals in India.
The company has also pioneered IPS
with Oil Marketing Companies (OMCs). The company has derived 95.6% of revenues
from operations in India, although it has expanded internationally to offer
automation and payment solutions to banks and financial institutions in other
Asian countries comprising Sri Lanka, Singapore, Cambodia, Philippines, and
Indonesia.
AGS Transact
Technologies started
providing banking automation solutions in India in 2004. Its deployed products
from international solution providers such as Diebold Nixdorf and established its
own country-wide service infrastructure and automation solutions expertise to
provide related services. Beginning in 2009, the company leveraged its banking
automation solutions expertise and service reach to offer ATM outsourcing and
managed services by, among other things, entering into two cooperation
agreements with Diebold Nixdorf for banking and retail products.
As part of strategy to strengthen
presence in the cash value chain, offer an integrated payments platform and
improve operational efficiencies, AGS
Transact Technologies commenced offering transaction switching services
in 2011 and cash management services in 2012. In 2014, the company expanded
offerings into digital payment solutions, enhancing integrated digital platform
and Software-as-a-Service (SaaS)
capabilities. In 2016, the company also entered an alliance with ACI Worldwide
(ACI), a leading international payments
solution provider, which has further strengthened value proposition to
customers.
Ravi B Goyal is the Promoter, Chairman
and Managing Director of the company and has approximately 26 years of
experience in the technology sector. He is responsible for the management of
the overall operations of the company and their subsidiaries.
The company operates business in three
segments, 1) Payment Solutions, 2) Banking Automation Solutions and 3) Other
Automation Solutions (for customers in the retail, petroleum and colour
sectors).
The Payment Solutions segment comprises ATM and CRM outsourcing and
managed services, cash management services, Intelligent Cash Deposit (iCDs),
digital payment services which include toll and transit solutions, Fastlane, transaction switching
services, services through POS machines and agency banking. The customers in the
Payment Solutions segment include ICICI Bank, Axis Bank, HDFC Bank and Federal
Bank.
In ATM and CRM outsourcing and managed
services businesses, the company is responsible for the end-to-end management
of ATMs and CRMs, starting from site identification and development, followed
by machine deployment, maintenance, and management on behalf of the customers. The
company owns the ATMs and CRMs in outsourcing services business, while the ownership
of ATMs and CRMs remains with the customers themselves under managed services
business. The portfolio consisted of 14,099 ATMs and CRMs under outsourcing
business and 19,161 ATMs and CRMs under managed services business in India end
August 2021. The company also provides outsourcing solutions for 1,273 ATM and
kiosks in Sri Lanka end August 2021.
The cash management services of
subsidiary, Securevalue India (SVIL), build on ATM outsourcing and managed
services businesses, and include cash replenishment, cash pick-up,
cash-in-transit (CIT), cash
vaulting and cash processing services for ATMs managed by the company and by
other operators. The company provides cash management services to 46,214 ATMs
through a fleet of 2,513 cash vans including 267 dedicated cash vans to banks,
and 475 vaults and spoke locations, covering approximately 1,860 cities and
towns in India end August 2021. SVIL is the second largest cash management
company in India, in terms of revenue from cash management and number of ATMs
replenished end March 2021. SVIL is the only cash management company that has
followed Ministry of Home Affairs (MHA)
guidelines on a pan-India basis. It has also implemented cassette swaps for
outsourcing services business. One of major customers in cash management
services is BTI India Payments and Hitachi Payment Services.
The merchant services include
device-based and device-less payment solutions, prepaid and loyalty programs,
Cash@POS, payment gateway and remote payment solutions, loans against card
receivables and other VAS. The company has 180,993 merchants as clients end
August 2021. In a span of two years, the company has become one of the largest
deployer of POS terminals at petroleum outlets in India. The focus is on
serving the oil marketing industry, private and public sector banks, and
corporate merchants. Of 221,066 POS terminals deployed with clients end August
2021, 183,985 terminals were located at retail and corporate outlets and
37,081terminals were located at OMCs.
The GTV transacted through POS
terminals at OMC retail outlets was Rs 9517.8 crore in 5MFY2022 and Rs 13365.63
crore in FY2021. The company has orders in hand from major OMCs including Hindustan
Petroleum Corporation (HPCL) and
Indian Oil Corporation (IOCL). Other
corporate customers for digital portfolio include Dr. Lal Pathlabs, Patanjali
Ayurved, Sunshine Teahouse (Chaayos), RJ Corp, VRIPL Retail, Om Sweets, Lata
Mangeshkar Medical Foundation and Organic India.
In April 2021, to further enhance
digital capability and to leverage on the Pre-Paid Payment Instrument (PPI) authorization
issued to subsidiary, India Transact Services (ITSL), the company has started
open loop Ongo prepaid card,
which can be used by consumers to pay for transactions.
The company also provides transaction
switching services, where it integrates a variety of payment channels,
including internet payment gateways and several mobile payment systems, to
route, switch, and process electronic transactions even across non-banking
segments.
The Banking
Automation Solutions business segment, which commenced in 2004, comprises sale of
ATMs and CRMs, currency technology products and self-service terminals and
related services and upgrades. The company has approximately 50 banking
customers, including ICICI Bank, HDFC Bank and Axis Bank.
Other
Automation Solutions business segment encompasses the sale of machines and related
services to customers in the retail, petroleum and colour segments. The company
supplies automation products and provides implementation services, system
integration, remote management and support and help desk services. The colour operations
primarily comprise the supply of automatic paint dispensers and related
services, and serve customers including Asian Paints, Kansai Nerolac Paints and
Berger Paints India.
The revenue from payment solutions
segment accounted for 76.8%, banking automation solutions 9.1% and other automation
for 14.1% of revenues in FY2021. The revenue from overseas operations accounted
for 4.4% of total revenue in FY2021.
The company had installed, maintained,
or managed a network of approximately 72,000 ATMs and CRMs, provided cash
management services to 46,214 ATMs through SVIL, installed 221,066 merchant POS
and approximately 46,800 cash billing terminals, automated approximately 17,924
petroleum outlets and installed approximately 88,521 colour dispensing
machines. The operations covered approximately 2,200 cities and towns,
servicing approximately 446,000 machines or customer touch points end August
2021.
The work force comprised of 12,935 personnel.
The technology development team comprised 213 employees and has developed and
customized ATM client software and digital applications.
The company intends to be a leader in
payment solutions by delivering secure, innovative products that engage a
customer across the product value chain in a cost-effective manner. It would focus on growing
digital payment solutions business, pivot from payments-as-a-service to
payments-as-a-convenience through ongo card and ecosystem, ATM and CRM
outsourcing and managed services, enhancing integrated technology payments
platform, cash management services and expand internationally
The Offer and the
Objects
The initial
public offer (IPO) consists entirely of an offer of sale (OFS) comprising
raising of Rs 680 crore by issuing 4.10 crore equity shares of face value of Rs
10 each at lower price band of Rs 166 and 3.89 crore equity shares at upper
price band of Rs 175.
The issue is
to be made through the book-building process and will open on 19 January 2022 and
will close on 21 January 2022.
The company
expects to receive the benefits of listing of the Equity Shares, including to
enhance visibility and brand image among existing and potential customers.
The promoter
shareholding at 98.23% would decline post issue to 66.07%.
The Company and Ravi B. Goyal (the
Promoter Selling Shareholder) have entered into an agreement pursuant to which
Ravi B. Goyal has agreed to purchase the compulsorily convertible preference
shares (CCPS) of Vineha Enterprises, corporate promoter of the company, (VVPL) currently
held by Company from his share of the Offer Proceeds. The company proposes to
utilize such sale proceeds from the sale of VEPL CCPS primarily to redeem the
outstanding Listed NCDs issued by Company.
Strengths
The company is one of the largest
integrated omni-channel payment solutions providers in India in terms of providing
digital and cash-based solutions serving diverse industries such as banking,
retail, petroleum, toll and transit, cash management and fetch in India and
other select countries in Asia.
The services of the company help
increase the speed and accuracy of cash as well as digital payment
transactions.
The size and wide reach of operational
network of the company enables to realize economies of scale.
The payment platform of the company accepts
payments through a broad spectrum of options including magnetic stripe, chip and
pin, contactless, Bharat QR, Unified Payment Interface (UPI) and Aadhaar Pay, making it a partner of choice for merchants.
The company also provides support
services such as a 24x7 call centre, merchant management services, software
development, operations services, and monitoring services.
Since the company commenced business
in 2004, it has developed in-house technology and expertise to deal with the
entire product life cycle of ATMs, CRMs and related services, including
manufacturing of ATMs, site identification, site build up, deployment,
maintenance and operations including monitoring, cash management, first line
maintenance and second line maintenance.
The company is the only company in
India to provide the full range of services in the ATM managed services market,
namely: ATM equipment and supply, maintenance of ATMs, managed services, ATM replenishment
and CIT and retail cash management and cash pickup and delivery.
The company is the second largest
company in India in terms of (i) revenue from ATM managed services under the
outsourcing model, and (ii) revenue from cash management and number of ATMs
replenished.
The size of operations, experience and
overall infrastructure gives a significant competitive advantage to the company.
The ability to provide services across
the cash and digital value chain from transaction touchpoints, channel
handlers, core processing, settlement and clearing, authorization systems and
back office has allowed the company to become the preferred partner for cash
and digital payment solution needs of customers.
The experience and expertise, coupled
with knowledge of the industries in which customers operate, enable the company
to provide them with customized solutions evident in the comprehensive suite of
merchant solutions launched over the years.
The company has diversified product portfolio, customer base and
revenue streams leading to cross-selling opportunities. The company derives
revenues from a variety of products and services catering to customers across
diverse industries such as banking, retail, petroleum and colour. In each of
these industries, it offers a combination of automation solutions along with
payment and maintenance services.
The company has long-standing
relationships with leading global technology providers, such as Diebold Nixdorf
and ACI, which has enhanced market position and enabled the company to be the
leaders in the payment solutions industry.
The company has also established
relationships with leading Indian financial institutions, leading retail
chains, colour companies and petroleum companies.
The company has dedicated
in-house infrastructure, skills and technological capabilities, which are critical
to the growth of the business enabling to realize economies of scale and
increase productivity.
India is the third largest ATM market
in the world based on number of installed ATMs
The number of banks outsourcing their
ATM servicing is also rising as banks focus increasingly on their core business
and operations and seek to increase their productivity and reduce costs.
An increase in the interchange fee per
ATM transaction from Rs 15 to Rs 17 for financial
transactions in India is expected to further support ATM infrastructure growth
and deployment.
After the implementation of the
cassette swap and the MHA guidelines, cash replenishment charges will also
increase to Rs 12500 to Rs 13000 per ATM per month from Rs 6500 to Rs 7500 per
month earlier.
Weaknesses
The Coronavirus pandemic has had and may continue to have certain
adverse effects on business, as the continuing impacts of Coronavirus are
unpredictable.
The company derives a significant portion of revenues
from customers in the banking sector in India. The revenue from
customers in the banking sector were 68.1% of total revenue in FY2021.
Any adverse development in the growth
of the number of ATMs in India, reduction in transaction fees or a decline in
the usage of the ATMs managed, operated, and maintained by the company could
have an adverse effect on business.
The company derives a substantial portion of revenues from
a limited number of customers. Top 10 customers contributed 62.8% of
revenues in FY2021. The revenues of the company would be impacted if one or more of top
customers were to suffer a deterioration of their business, cease doing
business with the company or substantially reduce its dealings with the
company.
A decrease in the use of cash as a mode of payment could have an
adverse effect on business. In the event of a decline in the use of cash as a mode of
payment, banking customers may decide not to expand their ATM network or may
downsize their current ATM network.
The company relies on consumers using one or more of its
services and is vulnerable to changes in consumer preferences and behavior.
The industries in which the company operates are highly regulated by
the Reserve Bank of India and other government agencies.
The company maintains a significant amount of cash
within its company-owned devices and at vault locations, which is subject to
potential loss due to theft or other events, including natural disasters.
The company has experienced
delays in making payments in respect of provident fund, employees’ state
insurance, income tax, goods and services tax (GST), cess and other statutory dues. In respect of delays in
making GST payments, the GST liability was Rs 71.12 crore for the company, Rs
20.30 crore for SVIL and Rs 0.29 crore for ITSL aggregating to Rs 91.72 crore
on a consolidated basis.
Due to non-payment of GST liabilities
within a specified timeline, certain GST registrations of Company and
Subsidiary, SVIL, have been made inactive.
Potential new currency designs may require modifications to certain
automated banking products in portfolio that could have an adverse effect on
business.
The company may face cyber threats attempting to disrupt
products and services and theft or leakage of sensitive internal data or
merchant or cardholder information, possibly causing disruptions in the
transactions processed on or through its products or services.
The industries in which the company operates are highly competitive and
such competition may increase, which have adversely affected business.
The company
has a substantial amount of
outstanding indebtedness, which requires significant cash flows to service. The outstanding
amount of Gross Debt was Rs 1654.5 crore, including an aggregate amount of Rs
560.63 crore of Listed NCDs.
The business significantly depends on
the use of cash remaining the predominant mode of payment in India. However,
the non-cash payments have increased significantly in India and could result in
a significant reduction in the use of cash and affect business.
If the RBI introduces a digital
currency in the future, it may also impact the amount of cash in circulation.
Valuation
AGS Transact
Technologies witnessed 2% yoy decline in revenues to Rs 1758.94 crore in
FY2021, after remaining flat at Rs 1800.44 crore for FY2020 over FY2019.
However, the company has improved OPM from 23.5% in FY2019 to 24.8% in FY2021
and maintained nearly stable OPM at 24.5% in five months ended August 2021.
The company
posted 25% growth in the net profit to Rs 83.01 crore in FY2020, but the net
profit declined 34% to Rs 54.79 crore in FY2021. The company has posted net
loss of Rs 18.11 crore in 5MFY2022 with lower revenues and higher operating and
finance cost.
AGS Transact
Technologies posted RoEs of 15.5% in FY2019 and 16.6% in FY2020, while RoEs
have eased to 9.8% in FY2021 and turned negative at 8.0% (annualized) for five
months ended August 2021.
The post
issue book value (BV) of AGS Transact Technologies is Rs 45.3. P/BV works out
to 3.7 times at the lower price band of Rs 166 per share and 3.9 times at the
upper price band of Rs 175 per share.
The
consolidated EPS of AGS Transact Technologies for FY2021 works out to Rs 4.6 and
offer is made at PE of 38.5 times at upper price band of Rs 175.
The post
issue m-cap for AGS Transact Technologies works out to Rs 2107 crore at upper
price band.
Among the
comparable peers, SIS, the second largest cash logistics services provider in
India with diversified business, is trading at 3.8 times its book value end
September 2021 and PE of 18.9 times FY2021 consolidated EPS.
The recently
listed CMS Info Systems which is the leading cash management company is trading
at 4.4 times its book value end August 2021 and PE of 27.4 times FY2021
consolidated EPS
The overall
OPM of SIS has hovered in the range of 5% to 6% for last five years. The
revenues of SIS have increased at CAGR of 13% between FY2019 to FY2021. SIS has
also posted healthy RoE of 16-20% during last five years.
CMS Info Systems has improved the OPM
from 17.3% in FY2019 to 18.4% in FY2020, 22.5% in FY2021 and further higher to
23.9% in five months ended August 2021. The revenues of CMS Info Systems have increased
at CAGR of 7% between FY2019 to FY2021. CMS Info Systems has consistently
improved RoE from 12.9% in FY2019 to 15.8% in FY2020, 17.1% in FY2021 and 19.1%
(annualized) for five months ended August 2021.
AGS
Transact Technologies expects to benefit from dominant position in cash
management business, strong growth potential of digital payment products
business, improving cost efficiency, higher revenue from hike in ATM
interchange fees and change in cassette swap norms, reduction in high-cost debt.
AGS Transact
Technologies: Issue highlights
|
For Offer for Sale
Offer size (in shares crore)
|
|
- On lower price band
|
4.10
|
- On upper price band
|
3.89
|
Offer size (in Rs
crore)
|
680.00
|
Price band (Rs)
|
166-175
|
Minimum Bid Lot (in
no. of shares )
|
85
|
Post issue capital (Rs
crore)
|
|
- On lower price band
|
120.39
|
- On upper price band
|
120.39
|
Post-issue promoter
& Group shareholding (%)
|
66.1
|
Issue open date
|
19-01-2022
|
Issue closed date
|
21-01-2022
|
Listing
|
BSE, NSE
|
Rating
|
45/100
|
AGS Transact
Technologies: Consolidated Financials
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
2108 (5)
|
Sales
|
1805.74
|
1800.44
|
1758.94
|
753.40
|
OPM %
|
23.5
|
25.6
|
24.8
|
24.5
|
OP
|
424.99
|
461.51
|
436.93
|
184.36
|
Other Income
|
17.89
|
33.08
|
38.21
|
8.90
|
PBDIT
|
442.88
|
494.59
|
475.14
|
193.27
|
Interest
|
136.66
|
130.40
|
133.06
|
97.13
|
PBDT
|
306.21
|
364.19
|
342.08
|
96.14
|
Depreciation
|
227.33
|
244.67
|
259.65
|
101.64
|
PBT
|
78.89
|
119.52
|
82.43
|
-5.50
|
Tax
|
12.70
|
36.51
|
27.64
|
12.61
|
PAT
|
66.19
|
83.01
|
54.79
|
-18.11
|
Minority interest
|
0.00
|
0.00
|
0.00
|
0.00
|
Net Profit
|
66.19
|
83.01
|
54.79
|
-18.11
|
EPS (Rs)*
|
5.5
|
6.9
|
4.6
|
-
|
*EPS annualized is on
post issue equity capital of Rs 120.39 crore of face value of Rs 10 each
Figures in Rs crore
Source: AGS Transact Technologies Issue Prospectus
|
|