Investing in the stock market can offer lucrative returns when done wisely, but it can also be brutal when investments are made in the wrong stocks. AGS Transact Technologies was one such stock, where investors experienced a substantial decline in their wealth.
The company is one of the largest integrated omni-channel payment solutions providers in India in terms of providing digital and cash-based solutions to banks and corporate clients.
It 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.
As of December 31, 2022, the company had installed, maintained, or managed a network of approximately 73,719 ATMs and CRMs, providing cash management services to about 43,200 ATMs, its website shows.
AGS Transact was listed on the bourses on January 31, 2022. The company had mopped up ₹680 crore through its IPO. It was a complete offer for sale. The public offer received a healthy response from investors, as it was subscribed by 7.80 times.
Domestic brokerages advised investors to subscribe to the company's initial public offering, citing strong financial performance and continued growth.
The stock, however, made a weak debut with a 7.8% discount at ₹161 apiece as against the issue price of ₹175. Within a month after its listing, the stock dropped to ₹100, losing 43% of its value.
By the end of December 2022, the stock plummeted to ₹63.65 levels, losing a steep 63% of its value from its issue price. This downturn positioned it as one of the worst-performing IPOs in 2022.
Over the past 16 months (Including May), the stock has experienced a notable trend of losses, with a total of nine months ending in negative returns. Particularly from November 2022 to March 2023, the stock recorded a consecutive five-month decline, indicating a sustained period of poor performance.
During March, the stock touched an all-time low of ₹44.75 apiece, but since then it inched upward steadily and is currently trading at ₹58.60.
Investors who bought shares in the IPO for ₹175 each and stayed invested up to this point have seen their wealth dwindle by 66.5%. On average, the stock has eroded investors' wealth by 4.15% every month since its listing.
In its research report dated February 09, 2023, domestic brokerage firm HDFC Securities reiterated its 'buy' recommendation on the stock with a target price of ₹105 apiece. The brokerage continued with its bullish outlook even though the company's Q3 numbers missed their estimates.
“AGS Transact (AGS) reported a lower-than-expected revenue across segments in the December quarter, however, new deal wins improve growth visibility for FY24E. The company had announced two new managed services deal wins for managing 8K ATMs (30% of the current base), revenues from which will flow over the next 12 months with no additional capex,” said the brokerage firm.
The brokerage firm anticipates a revival in the payment solution business based on several factors. Firstly, it expects new deal acquisitions to drive growth. Secondly, the implementation of CRM machines is projected to contribute to the upward trend. Thirdly, compliance-related tailwinds are expected to fuel the expansion of cash management services.
Lastly, the brokerage foresees a boost in the digital payment business, driven by the increasing digital adoption by oil marketing companies (OMCs).
02 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
