Protean eGov Technologies Files For IPO
Protean eGov Technologies Ltd., filed its draft red herring prospectus with the market regulator for an initial public offering, joining dozens of companies in the country that have tapped the capital markets this year.
The company, formerly known as NSDL e-Governance Infrastructure Ltd., was incorporated as a depositary in 1995 and has in the past two decades partnered with governments, regulators and institutions to build digital public infrastructure -- including India's Tax Information Network, National Judicial Reference System, issue of PAN, central record-keeper for the National Pension System and Atal Pension Yojana projects.
The IPO involves no fund raise for the company and is only an offer for sale of 1.20 crore shares by its existing shareholders, according to the draft prospectus.
Protean eGov is a professionally managed company with no identifiable promoter. Among its top shareholders are NSE with a close to 25% stake, IIFL Funds with 29.7%, SUUTI with 6.78%, State Bank of India, HDFC Bank Ltd.. Axis Bank Ltd., Deutsche Bank A.G each holding 4.9% and a clutch of other banks
The selling shareholders in the IPO are:
IIFL Special Opportunities Fund: 10,95,288 shares
IIFL Special Opportunities Fund Series 2: 7,62,998 shares
IIFL Special Opportunities Fund Series 3: 3,53,160 shares
IIFL Special Opportunities Fund Series 4: 9,45,694 shares
IIFL Special Opportunities Fund Series 5: 7,36,899 shares
SUUTI: 4,30,748 shares
NSE Investments Ltd.: 31,59,027 shares
HDFC Bank: 7,88,338 shares
Axis Bank: 12,61,341 shares
Union Bank of India: 7,09,504 shares
Deutsche Bank A.G.: 12,61,341 shares
Punjab National Bank: 5,75,802 shares
The selling shareholders will be entitled to the entire proceeds of the offer and the company will not receive any proceeds, it said in its draft filing.
ICICI Securities Ltd., Equirus Capital Pvt., IIFL Securities Ltd., Nomura Financial Advisory and Securities India Pvt. are the book running lead managers to the issue.
What Does Protean eGOV Do?
As of June 2021, Protean has implemented 18 projects spread across seven ministries and autonomous bodies involving public delivery of services. According to its draft offer, the firm has issued over 35 crore PAN cards since commencement and has over 46.8% market share as of June 2021.
Around 18.5 lakh deductors filed TDS returns electronically via TIN systems in FY21, in which the company has a 60% market share.
It also has 97% market share in NPS and 100% in APS, showed its prospectus.
In fiscal year 2020-21 it enabled over 17.9 crore Aadhaar authentications and over 9.1 crore e-KYC transactions, giving it a market share of 7% and 4.2% in each of the respective segments.
The company prospectus emphasises on scale with 36,176 service centres across India, as of June 30, 2021. It has a PAN network in over 9,300 PIN codes spread across over 1,400 districts in India, covering around 35% of total PIN codes in the country. It also operates 6,139 TIN facilitation centers across 1,638 locations accepting various statements from taxpayers including tax deducted at source, tax collected at source, annual information returns and statement of specified financial transactions through its network.
It had 448 employees as on June 30, 2021.
Protean eGOV has been profitable since FY99, funded entirely by internal accruals and hence has no debt and has paid dividend since FY01.
The Covid-19 pandemic has impacted Protean's business marginally as clients sought discounts or price cuts, the prospectus said.
Revenue from operations was down close to 15.78% and net profit lower by 24.35% in FY21 over the previous year. Provision for doubtful debts increased from Rs 10.63 crore in FY20 to Rs 29.20 crore in FY21
For June-ended quarter in this fiscal, Protean eGOV's revenue from stood at Rs 134.51 crore, up 39.53% year-on-year. Net profit at Rs 10.18 crore was down 12.8%.
In fiscal 2019, 2020 and 2021 and in the three months ended June 30, 2020 and June 30, 2021, our debtor cycle based on closing balances was approximately 88 days, 107 days, 120 days, 221 days and 142 days, respectively. In fiscal 2019, 2020 and 2021 and in the three months ended June 30, 2020 and June 30, 2021, our trade receivables were Rs 182 crore, Rs 210 crore, Rs 197 crore, Rs 237 crore and Rs 212 crore, respectively, representing 24.08%, 29.42%, 32.79%, 245.62% and 157.57%, respectively, of our revenue from operations in such periods.Protean eGOV Draft Prospectus
Other business/operational/financial highlights and risks include;
Government and government agencies are the only clients and hence all revenue is dependent on government projects.
Intend to invest "significant resources" in marketing and brand building.
Higher exposure to cyber security and data privacy breach incidents as large number of employees work remotely.
New data privacy laws and regulations will result in greater compliance risk and cost.
Pending litigation against the company, mostly related to tax, amounts to close to Rs 100 crore in potential liabilities.