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AGS Transact Technologies IPO opens for subscription: GMP steady, should you subscribe or not?

AGS Transact Technologies’ Rs 680 crore IPO opened for subscription today.

AGS Transact Technologies
In the grey market, shares of AGS Transact Technologies are trading a slight premium over the IPO price.

AGS Transact Technologies’ Rs 680 crore IPO opened for subscription today. The first public issue of 2022 is entirely an offer for sale (OFS) by existing shareholders of the company, including the promoter Ravi B Goyal. Ahead of the IPO, AGS Transact Technologies has managed to raise Rs 204 crore from 17 anchor investors at the upper end of the price band of Rs 166-175 per equity share. Meanwhile, in the grey market, shares of the company continue to trade a slight premium over the IPO price. AGS Transact Technologies IPO will close on January 21.

The anchor portion of the IPO saw marquee domestic institutional investors pick up a stake in the company. HDFC Balanced Advantage Fund, Nippon Life India Small Cap Fund, BNP Paribas Arbitrage, IIFL Special Opportunities Fund, and Abakkus Growth Fund are some of the anchor investors in AGS Transact. Non-anchor investors can buy shares of AGS Transact from today in a bid lot of 85 equity shares in a fixed price band of Rs 166-175 per share. AGS Transact will not receive any funds from the IPO as the issue is entirely an offer for sale.

Emkay Global: Subscribe

Analysts at Emkay Global believe AGS provides an opportunity to invest in a cash-cum-digital play from a long-term perspective. “The IPO size has been toned down to Rs 680 crore. At the higher price band of Rs 175, the stock is valued at 3.7x FY21/3.8x annualized FY22E BV, similar to its peers like CMS Info Systems (recently listed with decent upmove) trading at 4.4x FY21/3.7x annualized FY22E BV and SIS with multiple business lines trading at 3.7x FY21 BV,” they added. Analysts believe that continued focus on ATM/CMS business, digital business scale-up and cost management to drive profitability for AGS.

Choice Broking: Subscribe for long term

AGS Transact is demanding a P/E multiple of 38.5x (to its FY21 earning of Rs. 4.6), according to Choice Broking. This, they say, is at a premium to peer average of 21.8x. “With ease in pandemic restriction, anticipating a ramp-up in ATM deployments by banks and further evolution in the digital payment space, we feel the company is well placed to benefit from its diversified product & services portfolio, varied customer base and multiple revenue streams. Thus we assign a “Subscribe for Long Term” rating for the issue,” Choice Broking said.

Marwadi Shares and Finance: Subscribe with caution

Marwadi Shares and Finance have highlighted the high debt on the books of AGS Transact Technologies and have hence given a ‘subscribe with caution rating’. “Considering the FY-21 adjusted EPS of Rs.4.55 on a post-issue basis, the company is going to list at a P/E of 38.46x with a market cap of Rs.21,069 mn,” they added.

Yes Securities: Avoid

Analysts at Yes Securities note that the revenue outlook for the ATM managed services business, which represents 46% of the total revenue of AGS, is tepid. The brokerage firm has given an Avoid rating to the issue while adding that AGS Transact would trade at an FY21 P/E of 37.9x on the higher end of the price band. Yes Securities believes the ATM management has mild growth prospects and with 84% market share there is little room for AGS to grow. On the other hand, the CMS is a fast-growing business for the firm but occupies only 13% of total revenue. 

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