Started in 2002, AGS Transact Technologies Limited is a Mumbai based India's leading providers of end-to-end cash and digital payment solutions and automation technology. They provide customised products and services comprising ATM outsourcing and cash management, as well as digital payment solutions including merchant solutions, transaction processing services and mobile wallets. As of March 31, 2018, they were the second largest company in India in terms of number of ATMs managed, revenue from ATM managed services and number of ATMs provided with cash management services, and the fourth largest company in India in terms of revenue from cash management (As per India ATM Managed Services Market Outlook to 2023, Ken Research, June 2018). For the FY18, AGS derived 97.4% of the revenues from India and expanded internationally to offer automation and payment solutions to banks and financial institutions in other Asian countries such as Sri Lanka, Singapore, Cambodia, and Philippines. The total revenue from operations was Rs 14,813.17 million for the FY18, and the total revenue from operations grew at a CAGR of 10.7% between the FY 2016 and 2018. AGS started providing banking automation solutions in India in 2004. Company 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 2009, they leveraged the banking automation solutions expertise and service reach to offer ATM outsourcing and managed services by, among other things, entering into a cooperation agreement with Diebold Nixdorf for banking and retail products. In 2014, they expanded the offerings into digital payment solutions, enhancing the integrated digital platform and Software-as-a-Service ('SaaS') capabilities. They also entered into an alliance with ACI Worldwide ('ACI'), a leading international payments solution provider, in 2016. AGS operates its business in the following segments:1. Payment Solutions: The Payment Solutions segment comprises ATM outsourcing and managed services, cash management services, intelligent cash deposit machines ('iCDs'), transaction switching and digital payment solutions, merchant solutions, automatic vehicle fuelling (or Fast lane), toll and transit solutions and agency banking. The customers in the Payment Solutions segment include ICICI Bank Limited, Axis Bank Limited, HDFCBank Limited, RBL Bank Limited, BTI Payments Private Limited, Hindustan Petroleum CorporationLimited, Indian Oil Corporation Limited, Lanka IOC, Utkarsh Small Finance BankLimited, and Ly Hour Pay Pro and DaraPay in Cambodia.2. Banking Automation Solutions: It comprises the supply and installation of ATMs and other automated banking products and the provision of services, including maintenance, software and hardware upgrades and spare parts. As of June 30, 2018, they have supplied and installed approximately 54,000 ATMs and they have approximately 50 banking customers, including ICICIBank Limited, Axis Bank Limited and HDFC Bank Limited.3. Other Automation Solutions (for customers in the retail, petroleum and colour sectors): This business segment encompasses the retail, petroleum and colour operations. As part of the Other Automation Solutions segment, company supplies automation products and provide implementation services, system integration, remote management and support and help desk services. Customers for the retail sector offerings include Future Retail Limited, while customers for the petroleum sector offerings include HPCL and IOCL. The colour operations primarily comprise the supply of automatic paint dispensers and related services, and serve customers including Kansai Nerolac Paints Limited and Berger Paints India Limited. As of June 30, 2018, AGS had installed, maintained or managed a network of approximately 72,000 ATMs, provided cash management services to approximately 28,900 ATMs through the subsidiary, Secure value India Limited ('SVIL'), installed approximately 71,000 merchant POS and 37,000 cash billing terminals, automated approximately 8,000 petroleum outlets and installed approximately 54,000 colour dispensing machines. For the three months ended June 30, 2018, SVIL replenished a daily average amount of Rs 8,016.97 million, and they processed 193.60 million and 427.14 million switching transactions in the three months ended June 30, 2018 and in the financial year 2018, respectively. Company's operations covered approximately 2,200 cities and towns, servicing approximately 235,000 machines or customer touch points, as of June 30, 2018. As of June 30, 2018, including the subsidiaries, AGS has 33 branch offices across India and an employee base of approximately 9,900 personnel, including approximately 1,700 engineers and 3,400 ATM officers, engaged in the core operations. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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