AGS Transact Technologies Limited - Interesting valuations

Brief -

The company is one of India’s leading Omnichannel payment solution providers. It is the second-largest company in India in terms of revenue from ATM-managed services and also the largest deployer of POS terminals at petroleum outlets in India.

Segments -

  1. **Payment solution (79% of revenue)**a. Cash payment solution (63% of revenue)-I. ATM & Cash Recycling Machine outsourcing - The company is responsible for sourcing sites and owning, deploying, maintaining and managing the ATMs and related assets.II. ATM & Cash Recycling Machine management - Banks own the ATM & company responsible for site sourcing, switching and transaction processing.b. Digital payment solution (16% of revenue) - Point of sale machine deployment (majority at pertol pumps) & also integrate a variety of payment channels, including internet payment gateways and several mobile payment systems, to route, switch and process electronic transactions even across non-banking segments.
  2. Banking automation solution (11% of revenue) - It involves sale of machines and related services to customers in the retail, petroleum and colour segments.
  3. Other automation solution (10% of revenue) - Automating fuel pump machines by installing tags on car to identify car & refill the tank. The payment is deducted from the tag.

What’s brewing currently for the company?

  1. Strong tender pipeline & concentration in industry - The PSU banks have a good tender pipeline of ATM which will be outsourced to players.

  1. Stricter RBI norms - The RBI has been tightening norms of ATM management with key norms being -a. Minimum net worth requirement of 100 cr networth, secured van with specification of safety & protocols to be followed.b. Cassette swap requirement - Cassettes (tray which holds cash in ATM) with banks need to be refilled from bank vault & directly placed into the ATM. This will increase capital requirement & ATM management & outsourcing players will benefit as realization per ATM will increase due to higher capital required.
  2. Leading to consolidation in the industry - Globally the ATM management & outsourcing business is concentrated with few players. In India the industry seems to be moving towards global norm.

  1. Leadership in PoS (Point of sale) machine deployment at Petrol pumps - The company’s management claims to have 50% market share in the petrol pump PoS segment with strong order book for the segment.

Risks -

  1. Digital payments (specially UPI) increased usage.
  2. RBI - imposed ban on AGS Transact on opening new white label ATM (the machines established, owned, and operated by non-bank entities.)
  3. Vulnerability of IT system - as majority of back end is digitalized, any attacks or loss of data makes company vulnerable.

Management -

  1. Ravi Goyal - Chairman and Managing Director - He is responsible for the management of the overall operations of our Company and our Subsidiaries. He holds a Bachelor of Engineering degree from Mumbai University. He has approximately 26 years of experience in the field of technology. He has previously worked with DCM Limited and Byte Systems Private Limited. Prior to establishing our Company, he established Advanced Graphic Systems, a proprietary concern, to market computer-aided textile designing software.

Peer review

CMS infosystems -

CMS Info Systems Limited is India’s largest cash management company in terms of the number of ATM points and retail pick-up points as of March 31, 2021. The company is engaged in installing, maintaining, and managing assets and technology solutions on an end-to-end outsourced basis for banks, financial institutions, organized retail, and e-commerce companies in India.

Revenue split

  1. Cash management (69% of revenue) - End-to-end ATM replenishment, Cash pick up and delivery & Currency movement inter/intra city for Banks
  2. Others (31% of revenue) - Sales, deployment, and maintenance of ATMs, Brown label ATM Deployment, Managed Services for bank-owned ATM networks, Management and personalization of cards, Software solution & AI based Remote Monitoring.

CMS infosystem highlights -

  • Current order book (as on Q2 FY23) - at 2800 cr (to be implemented over period of time)
  • More public banks outsourcing ATM operations
  • Company to grow 18% yearly basis to reach 2500-2700 cr revenue target by FY2025 along with maintaining current PAT margin
  • Cassette swap implementation to increase realization per ATM
  • AI based remote monitoring has a strong order book of 10,000 ATM.
  • 80% of revenue recurring & 20% from services business

Key ratio comparison -

What future holds for AGS Transact?

The company reduced debt from the IPO proceeds (indirectly) which will lead to reduction in interest cost saving of 100-150 cr on a annual basis but at a cost of diluted equity capital.

Given the recurring revenue nature of business with consolidated industry seems good for future growth visbility. What acts on ice on the cake is - increasing PoS machine deployment (majorly at petrol pumps), increasing outsourcing by banks of ATM & increasing automation in banking to put a lid on costs. Company is targeting 10-15% revenue growth & 25% EBITDA margins for FY23.


Soruce - Screener,

As both CMS & AGS have listed in past 1 year the valuation comparison isn’t meaningful. But if one considers management guidance of 10-15% revenue growth with 25% margins there seems to be decent upside from recent levels but a miss on EBITDA margins would be key to watch out for.
Disclosure - invested as tracking position.


Kudos for such good analysis and comparison of peer company. In the last table the figure of sales growth does not agree with the percentage provided for different scenarios. If I am missing something, kindly acknowledge.

The long-term view of the ATM sector isn’t encouraging. Digitization is overpowering the ATM transactions.

Have worked for 2 major non-listed ecom players and seen a growing trend → “newer generations (<20) in T1 cities do not know how to withdraw money and have only used UPI in their life. They do not prefer a cash transaction and would even switch platforms if UPI was down instead of going for COD”.

This doesn’t mean that ATM business will die. It will be there in the future.
However, the growth rate could be slow/stagnant and majorly in places where the internet doesn’t reach.

Here’s an excerpt from old article I found on the internet

Demonetisation has been a turning point for ATM growth in India. From more than 8-10 per cent growth year on year in the number of ATMs prior to 2016, the growth has slowed down to 2-3 per cent per annum. But the country still needs a lot more ATMs. As compared to the world average of 50 ATMs per one lakh population, India is way below, at an average of 28 ATMs per one lakh population, even much lower than China, which is at 98 ATMs per one lakh population and Brazil, which is at 105 ATMs per one lakh population.

I do not agree that India will ever need to reach those numbers - as benchmarked in the article.

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With launch of eRupee which will provide anonymity like cash, case for ATM becomes even weaker.

Also, this company can only pivot to a automation company as pure fintech is bastion of players with big pockets Paytm, Walmart-PhonePe, GooglePay and banks.

But BoD and senior management composition does not give any confidence that they have technology/automation background to pivot this company in that direction.

Thanks for pointing out. I erronously enterend wrong values. I have updated it.

Yes do agree with your point of comparison of number ATM globally with India is wrong thing. But cash transaction do occur in the economy. Also remember AGS trasnact is deploying machine which accept cash which would reduce costs for bank (although few people currently use them).

My major investment thesis is company’s 80-90% revenues have 4-5 year tenure which provides visibility of revenue remaining stable & PSU outsourcing ATM business would benefit both AGS & CMS. Key point is you get business at 4X EV EBITDA. So upside seems more compared to downside

(Disclosure - not an buy/sell recommendation)

  1. E rupee - seems to be in pilot phase currently. So for 1 year it doesn’t look major threat.
  2. Yes company doesn’t have presence in UPI market in online space, but has indirect presence through point-of-sale machines where payments are received through UPI
  3. Please elaborate more on senior management if you more data.

Please check their profile. Not best of breed and non are technocrats. It is subjective topic. Can not put data points.

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I was reading CMS infosystems concall. There was a Q on impact of digital - response was that their fees are not based on volume of cash but on the number of points and trips. So even if cash volume is reduced because of digital (assuming digital can never make cash extinct), it would not impact their fees. With the increase in no. Of ATMs and organized retail, they expect buoyancy. Looking at RBI data for no of ATMs and cash withdrawal, yoy seems to be more or less same. Segmental revenue nos show increase for cash business. Thoughts?

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RBI released new norms which require - cassettes to be swapped at ATM, more secure vans & certified staff. So, this has been a reason for increase in ATM majorly.
Also,Companies have started installing recycling machines at ATM which increases revenue.

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AGS wins order worth Rs 1100 cr from SBI, contract for seven year period

Again loss. When it will become profitable? Any thoughts?