Protean eGov Technologies IPO: 5 Things to Know

The Indian IPO market is booming, with the country emerging as the global leader in the number of public offers this year.

This trend is anticipated to continue into 2024 as well, driven by investor enthusiasm from substantial listing gains and a thriving economy.

In the third quarter of the calendar year 2023 (July to September), there were 21 IPOs, a remarkable surge compared to a mere four the previous year, representing a staggering 425% increase in deal numbers.

These IPOs collectively raised a substantial US$ 1.8 billion (bn), marking an almost 400% increase from the same period in the previous year.

For the current month, a total of 14 IPOs are on the horizon.

One among them is the IPO of Protean eGov Technologies.

Here are the key details of the IPO.

Issue period: 6 November 2023 to 8 November 2023

Type of issue: Book Built Issue

Price band: Rs 752 to Rs 792 per share

Face value: Rs 10 per equity share

Lot size: 18 shares

Application limit: Maximum fourteen lots for retail investors. Retail investors can make an application for a minimum of Rs 14,256 for one lot (18 shares).

Tentative IPO allotment date: 13 November 2023

Tentative listing date: 17 November 2023.

#1 About the Company

Protean eGov Technologies is an important market player when it comes to IT-enabled business solution market companies in India.

It conceptualises, develops and executes technology solutions for individuals, companies, and governments.

Protean has collaborated with the government of India and has come up with an advanced public digital infrastructure.

The collaboration has resulted in the development of citizen-centric, e-governance solutions.

It had established a nationwide infrastructure to develop the capital market in India. The company has been instrumental in developing some of the most significant technology infrastructure projects in India.

The business solutions offered by Protean have improved transparency and efficiency, reduced costs of service delivery, and redefined the delivery of public services.

Some of the key ministries Protean has worked with include the Ministry of Finance, Ministry of Education, and Ministry of Communications.

#2 A Look at the Financials

The company's revenue has grown at a CAGR of 6.2% in the last three years, while the net profit of the company grew at a CAGR of 6.9%.

This was due to the increase in sales over time.

For the financial year 2023, the company reported 1.2% increase in revenue to Rs 7.8 bn. This is primarily due to increasing demand.

The net profit was reported at Rs 1.1 bn, down 34% from Rs 1.4 bn reported a year back, due to rise in employee retention expenses.

Protean eGov Technologies Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in bn)	6.5	7.7	7.8
Revenue Growth (%)	-	18.4	1.2
Net Profit (Rs in bn)	0.9	1.4	1.1
Net Worth (Rs in bn)	6.7	7.9	8.6

Data Source: Company's Red Herring Prospectus (RHP)

Going forward, the company's goal is to leverage its experience and capabilities in technology infrastructure to be an integral part of the account aggregator ecosystem being set-up in the country.

#3 Objective of Issue

Protean eGov Technologies has been planning to launch an IPO of Rs 4.9 bn. While the company had plans to launch its IPO much earlier, its plans were jeopardised because of a weak macro environment and subdued equity market conditions.

Protean eGov's IPO is entirely an offer for sale (OFS) issued by several shareholders.

The participating shareholders include HDFC Bank, Axis Bank, Union Bank of India, Punjab National Bank and Deutsche Bank. Other shareholders are Unit Trust of India, NSE Investments Limited and IIFL Special Opportunities Fund. The company will not receive any of the IPO proceeds.

#4 Arguments in Favour of the Business

• Protean eGov Technologies is a market leader in IT-enabled e-governance services. Management of TIN (Taxpayer Identification Number), NPS (National Pension Yojana), APY (Atal Pension Yojana) and processing of PAN are some of the e-governance services provided by this platform.
• The company has made substantial investments in financial and e-governance technology. As a result, it boasts of a scalable, secure, and advanced technology infrastructure.
• Protean eGov has a large physical infrastructure, which is a significant advantage. Moreover, the company has its network present all over India. Its scale facilitates inclusion.
• The services offered by Protean are annuity-based, diverse and granular. Its client base across B2B, B2C and B2G segments provides it with revenue on a per-transaction basis, which keeps concentration risks low.

#5 Risk Factors

• Protean eGov derives a substantial portion of its revenue from various governmental organizations and agencies, which exposes the company to inherent risks associated with such relationships. These risks have the potential to adversely impact the overall financial health of the organization.
• The company's reputation may face significant harm in the event of a security breach that leads to the leakage of sensitive and confidential information.
• If Protean eGov's pricing structures fail to accurately anticipate the cost, complexity, and duration of their work, it could result in unprofitable contracts.
• The company is currently facing pending litigations, and any adverse decisions in these proceedings may lead to liabilities and penalties, potentially affecting the business, financial results, cash flows, and reputation.

Conclusion

Going forward, it is anticipated that internet penetration in the total rural population will potentially reach 55-60% by the end of December 2026.

This expected growth is underpinned by the expansion of the rural internet subscriber base, projected to achieve a compound annual growth rate (CAGR) of 9-11% between 2021 and 2026.

As internet penetration increases and various services necessitate a PAN card for identity verification, the demand for PAN card applications in rural India is likely to surge.

Furthermore, the company's relevance in India is significantly enhanced by the government's key initiatives, such as the Direct Benefit Transfer (DBT) and the National Mission on Financial Inclusion.

The continued expansion of these programs is expected to drive the need for the development of authentication infrastructure in India, further strengthening the company's position.

The company intends to explore opportunities with other state governments to establish similar programs, which are anticipated to serve as a potential source of revenue generation.

Like any investment opportunity, Protean eGov Technologies bears its own set of advantages and disadvantages. Therefore, one should conduct thorough research.

For more information on IPOs, check out the list of upcoming IPO's.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...