AGS Transact Technologies Limited - IPO Note

Payment Solutions

AGS Transact Technologies Limited - IPO Note

Payment Solutions

Price range
Rs. 166 – 175
Issue Period:
Jan 19, 2022
Jan 21, 2022
January 18, 2022

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 680 cr.
Public Issue
3.885 cr. shares
Market cap post IPO
1,999 – 2,107 cr.
Equity Pre - IPO
12.04 cr.
Equity Post - IPO
12.04 cr.
Issue type
Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

Customer Driven Portfolio; Capabilities to Develop Customized Solutions In-house
The company interacts with customers to understand their requirements and work to develop future roadmaps. The success of this approach is evident in the comprehensive suite of merchant solutions launched by the company over the years. AGS has developed the following customized solutions in-house:

  • Voice-guided ATM and CRM software and biometric-based solutions for banks.
  • Check deposit terminal application.
  • Cash clearance and loading for CRMs.
  • Novus TRANSACT Switch and Novo YOUPAY.
  • A cloud-based software to keep merchants updated with the latest services and offerings.
  • Ongo Prepaid and Ongo Rewards.
  • Intelligent Cash Deposit (iCDs) to facilitate automated retail cash pick-ups in cash management business.
  • Solutions to enable payment through a web link generated by merchants.

Diversified Product Portfolio, Customer Base, and Revenue Streams Could Lead to Cross-Selling Opportunities
AGS derives revenue from a various 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. As of August, 2021, its customers included ~50 banks and +180,990 merchants. AGS and RBL Bank have signed a strategic partnership to provide an integrated prepaid card solution based on the National Common Mobility Card (NCMC) at Bangalore Metro Rail Corporation Limited stations, which includes the provision, procurement, and issuing of NCMC cards.

In the petroleum sector, AGS can integrate POS terminals into its fuel automation solutions. It also monetises POS network by offering VAS for both consumers and merchants, which may be integrated into the POS systems. The management believes that the company’s diversified product and services portfolio, customer base, and revenue streams in multiple jurisdictions enable AGS to mitigate the concentration risks that are associated with operations in a specific segment, industry, or geographic region, and present AGS with cross-selling opportunities.

Established Relationships with Technology Providers and Customers
AGS has established relationships with global technology providers, such as Diebold Nixdorf and ACI. The company has entered a cooperation agreement with Diebold Nixdorf, under which AGS assembles ATMs in India. Together with ACI, the company has launched a suite of solutions covering processing, and fraud monitoring and reconciliation. As per the company, its established relationship with technology providers has enhanced its market position and enabled it to be the leaders in the payment solutions industry.

Further, AGS has established relationships with financial institutions such as ICICI Bank, Axis Bank, HDFC Bank, Federal Bank, Dhanlaxmi Bank, and RBL Bank. Its ATM outsourcing and managed services contracts typically range from three to ten years and in international operations, these contracts typically range for a period of three to five years. In addition, it works with retail chains (More Retail Private Limited), colour companies (Asian Paints, Kansai Nerolac, and Berger Paints), and petroleum companies (IOCL and HPCL).

Pivot from Payments-as-a-Service to Payments-as-a-Convenience
The company intends to grow its digital payments business by attracting more merchants and consumers to join Ongo ecosystem. It aims to do this by pivoting from ‘payment-as-a-service’ to ‘payment-as-a-convenience’. Ongo ecosystem allows consumers to use one single payment system to make payments at POS terminals through various modes of payment. By offering ‘payment-as-a-convenience’ to consumers, the management believes that the company will be able to tap into a variety of services and platforms and expand its revenue streams.

Focus on ATM and CRM Outsourcing and Managed Services
The management expects the demand for ATMs, CRMs, and related services, to grow on the back of the Government’s direct benefit transfer program, the Pradhan Mantri Jan-Dhan Yojana, Replacement of existing ATMs, etc. It intends to increase the share of such outsourced ATMs and CRMs. At the same time, it intends to reduce costs of operating such ATMs and CRMs by improving operational efficiency through central information management, tracking system, etc.

Expand Internationally
While the company expects India to remain the focus of its future business initiatives and various managed services and outsourcing bundles, it is also looking at opportunities in Asia's developing markets, where it has recently had success in deploying digital platforms and securing multi-year managed services and outsourcing deals.

It intends to continue to use India-developed technology and products to deliver solutions to other nations in order to promote financial inclusion, demonstrate cross-sector knowledge, and diversify its business. Simultaneously, its overseas activities bring experience and insights that the company feels it can apply to its Indian business.


Highly Dependent of the Banking Sector: Significant portion of revenues is generated from the customers in the banking sector in India. A substantial portion of the revenue is generated from a limited number of customers [ICICI Bank (~18%), Axis Bank (~14.5%), and Bank of Baroda (~7%) in FY21].

Dependent on Growth and Usage of ATMs in India: The business is significantly dependent on the maintenance and growth of the ATM network in India and on the use of cash as a mode of payment. In the event of a decline in the use of cash as a mode of payment, the banking customers may decide not to expand ATM network or may downsize current ATM network, which could impact the business of AGS.

Highly Regulated Industry: The Reserve Bank of India closely regulates the industry in which AGS operates. Implementation of new rules or changes to current ones affecting its services (RBI might either prohibit banks from employing third-party assistance for ATM installation and maintenance or limit the number of ATMs that banks can set up) could have a negative impact on the business.

Offer for Sales: The entire issue is an OFS and the company will not receive any proceeds for expansion or growth purpose.

Legal Proceedings: There are outstanding legal proceedings (Criminal, Civil, and Taxation) involving the Company, Directors, Subsidiaries, and one of the Promoters.

Technology Providers: Any adverse development or termination of the firm's partnership with Diebold Nixdorf, which contributes significantly to the company's success, could have a negative impact on the company's business and financial condition. If Diebold terminates agreement with the company and supplies products either directly or appoints another company to assemble its products in India, AGS may lose its market share.

Company Description

Incorporated in December 2002, AGS Transact Technologies (AGS) is an integrated omni-channel payment solutions provider. It provides end-to-end cash and digital payment solutions and technology for the banking, retail, petroleum, ecommerce and fintech sectors. It operated in three broad segments:

  • Payment Solutions: Includes ATM and CRM outsourcing and managed services, cash management services, iCDs, digital payment services which include toll and transit solutions, Fastlane, transaction switching services, services through POS machines and agency banking.
  • Banking Automation Solutions: Includes sale of ATMs and CRMs, currency technology products and self-service terminals and related services and upgrades.
  • Other Automation Solutions: Includes sale of machines and related services to customers in the retail, petroleum, and colour sectors.


The revenue of the company in last three years has been flat and in current fiscal, the topline is expected to be in the same range. In first five months of the FY22, the company has posted negative bottom line. On business front, we see challenges as we think other mode of payments such as UPI have gained traction, which can be witnessed by quantum of the transactions. Though cash remains the king in India, but preference towards transacting via popular UPI apps could impact the frequency of cash withdrawals from ATMs, which in turn, impact the performance of the company. We would like to track more developments in the quarterly result performance along with the debt position (debt to equity of 2.21x of FY21) before we develop conviction of the AGS’s business model.

At the upper price band of Rs. 175, the issue is priced at 38.5x of FY21 diluted earnings.

We advise investors to give this issue, a pass.

Key Information

Use of Proceeds:
The total issue size is Rs. 680 crores, which is entirely an OFS. The company will not receive any net proceeds from the issue.

Book running lead managers:
ICICI Securities Limited, HDFC Bank Limited, and JM Financial Limited

Ravi B. Goyal (Promoter, Chairman and Managing Director), Stanley Johnson P (Executive Director), Vinayak R. Goyal (Executive Director), and Saurabh Lal (Chief Financial Officer)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Year End March (Rs. in Crores) 2018 2019 2020 2021
Net Sales 1481.32 1805.74 1800.44 1758.94
Growth % 21.90% 21.90% -0.29% -2.30%
Material Cost 340.90 352.55 274.21 263.01
Employee Cost 233.34 274.88 280.08 277.17
Other Expenses 693.45 753.32 783.78 780.22
EBITDA 213.62 424.99 462.38 438.55
EBITDA Margin 14.42% 23.54% 25.68% 24.93%
Depreciation & Amortization 112.90 227.33 244.67 259.65
EBIT 100.72 197.66 217.71 178.90
EBIT Margin % 6.80% 10.95% 12.09% 10.17%
Other Income 14.05 17.89 33.08 38.21
Interest & Finance Charges 82.78 136.66 130.40 133.06
Profit Before Tax - Before Exceptional 32.00 78.89 120.40 84.05
Profit Before Tax 32.00 78.89 120.40 84.05
Tax Expense 17.43 12.70 36.51 27.64
Net Profit 14.57 66.19 83.88 56.41
Net Profit Margin 0.98% 3.67% 4.66% 3.21%
Consolidated Net Profit 14.57 66.19 83.01 54.79
Net Profit Margin after MI 0.98% 3.67% 4.61% 3.12%

Source: Ace equity