The government’s digital transaction push is having a negative impact on one segment of the payments business, ATMs. AGS Transact (AGST), India’s largest turnkey ATM solutions provider to banks, is feeling the pressure from existing private equity investors, who are keen to exit. With its IPO plan snuffed out by demonetisation, company’s promoter Ravi B Goyal is eyeing the structured debt market route to raise between `450 crore and `600 crore to give the company’s private equity (PE) shareholders, TPG and Actis, an exit. Together, the two PE funds hold a little above 40% in the company. While TPG had acquired a 26% stake in 2011 at a valuation of `500 crore, Actis had bought a 16% stake in 2012 at twice the valuation (`1,000 crore). TPG had tried to exit AGS earlier too, with financial services firm Avendus running the process, but no deal went through. TPG declined to comment on the story and Actis did not respond to a mail from FE.
As more and more digital payments options emerge, the investor sentiment towards the cash dispensing business is waning, said investment bankers. Data released by the Reserve Bank of India on digital payments in January reveal a 4% month-on-month growth to 1.1 billion transactions. “There are headwinds in the sector…An IPO for the company will be difficult as growth and sustainability of the business remain a concern,” a person familiar with the transaction said. It is believed that Goyal was in talks with Piramal’s fund management platform for raising the debt. However, it could not be confirmed.
The promoter, however, is dismissive of pressures from digital transactions on growth of the cash business. “As far as headwinds in the sector are concerned, we feel that cash is back again. Post Diwali, cash transactions have picked up and both digital and cash will co-exist. On fund raise and IPO, nothing has been finalised as yet,” Goyal said. In FY18, AGS is expected to report about `1,600 crore in revenues and `220 crore of EBIDTA. The company has debt of `700 crore.
By Manisha Singhal