AGS Transact Tech IPO: Company's financial not impressive, avoid this public offer, says Anil Singhvi

The three-day initial public offering (IPO) of omni-channel payment solution, AGS Transact Technologies Limited, opened for public subscription from Wednesday, January 19, 2022. The three-day public issue will close on Friday, January 21,2022.  

The payment solutions provider AGS Transact Technologies issue is a Rs 680-crore public offer. The company has reduced the size of the IPO after it had filed for preliminary papers with capital markets regulator Sebi to mop-up Rs 800 crore through an initial share-sale in August. The offer comes in a price range of Rs 166-175 per share. The minimum quantity is 85 shares or one lot for retail investors.   

What should investors do? 

Speaking of what retail investors should do with this public offer, Zee Business Managing Editor Anil Singhvi on Wednesday recommended them to avoid this issue. He said financial of the company is not impressive and AGS Transact Technologies had also incurred loss in current year.  

See Zee Business Live TV Streaming Below:

"Despite free cash flow, debt is on the higher side in the company. Besides, it also has record of delay in paying salary to employees, GST and few creditors in the past, which does not augur well for this omni-channel payment solution provider," he said.   

Furthermore, talking of positives about the company, Singhvi said It is the second largest company in Cash management and ATM Services and boasts of good domestic funds in anchor book. 

What analysts say?

Earlier, majority of analysts too either recommend investors to avoid this issue or gave a 'Neutral' rating for the subscription of the IPO.  

#IPOAlert : आज से 21 जनवरी तक खुला AGS ट्रांजैक्ट का IPO, प्राइस बैंड ₹166-175/शेयर pic.twitter.com/Gjak8CQaDs

— Zee Business (@ZeeBusiness) January 19, 2022

Aayush Agrawal, Senior Analyst, Swastika Investmart Ltd, said one should avoid this public issue stating that the company’s bottom and top lines have been either weak or muted for the last three years and the share price is slightly higher than listed its peers. It estimated the PE of 38x and P/BV of 3.71x on the NAV of Rs 47.11 for AGS Transact.  

“The government's focus on digital payments will further decrease the use and availability of cash can have an adverse effect on business activities,” he added. 

"The company derives majority of its revenues by providing various services to the banking sector. It primarily operates into three segments: Payment Solutions; Banking Automation Solutions; and other Automation Solutions," said Angel One’s DVP- Equity Strategist, Jyoti Roy. 

Roy said at the higher end of the price band AGS Transact would be trading at P/E multiple of 38.5xFY21 EPS which is at a premium to what CMS Infosystems shares are available at, Roy pointed out.  "We have a NEUTRAL recommendation on the IPO given the premium valuations, high client concentration and losses in first months of FY22," added Jyoti.  

What AGS Transact Tech do? 

AGS Transact Tech provides customised products and services comprising ATM and Cash Recycler Machines (CRM) outsourcing, cash management and digital payment solutions including merchant solutions, transaction processing services and mobile wallets.  Currently, AGS Transact Tech is India's largest company for ATM managed services. As of March 2021, the company had deployed 2,07,335 payment terminals.