Protean eGov Tech floats Rs 490.33-cr IPO: Should you buy into the issue?

Protean eGov Technologies' initial public offering (IPO) began on November 6, and the Rs 490.33-crore IPO earned a good grade from most experts due to the company's dominating position in the local e-governance sector and acceptable pricing. The price band for the offer, which is set to close on November 8, is Rs 752-792 per share.

The offering is totally made up of 61.91 lakh shares for sale. The whole profits, excluding IPO fees, will be distributed to selling shareholders, and the firm will get no compensation from the offer.

Anchor Investors

Prior to the IPO, the creator of e-governance solutions received Rs 143.5 crore from anchor investors. Through the anchor book, prominent names such as SBI Life Insurance, Baroda BNP Paribas Mutual Fund, Aditya Birla Sun Life Insurance Company, LIC Mutual Fund, and Societe Generale invested in the company.

Financial Performance

Protean eGov-Tech's net profit declined 25.6 percent to Rs 107 crore in FY23, from Rs 143.9 crore the previous year, owing to a major increase in labor costs and reduced other incomes. PAT margin fell from 20.8 percent to 14.4 percent. Revenue from operations, on the other hand, increased by 7.4 percent to Rs 742.2 crore from Rs 690.9 crore during the same period.

Along with net profit, return ratios dropped in the fiscal year ending March 20, 2023. RoE (return on equity) fell to 12.5% in FY23 from 18.3% in FY22, while RoCE (return on capital employed) fell to 13.6 percent from 20.4 percent in the same time.

Key Concerns

The company's revenue is heavily reliant on e-governance and other contracts awarded by government agencies. The costs it can charge for e-governance services are determined by suggested or mandatory fees stipulated in agreements with national or state governments.

Should you invest in Protean eGov Technologies' initial public offering? Let's have a look at the brokerage perspectives.

Choice: Subscribe

At the highest price band, the company is demanding a TTM P/E multiple of 27.2x, which is lower than the peer average of 42.5x. "Considering the dominant position in the domestic e-governance market, its capabilities to roll out nationally critical and population-scale greenfield technology solutions and attractive demanded valuations, we assign a 'Subscribe' rating for the issue," according to analysts from Choice Equity Broking.

Reliance Securities: Subscribe

Reliance Securities analysts believe Protean eGov is a secure, scalable, and advanced technology platform with horizontal and vertical scalability, consistent profitability, positive cash flows, and limited capital expenditure and working capital required to scale growth in its key areas. As a result, the brokerage suggests a'subscribe' rating for the offering.

Canara Bank Securities: Subscribe

Protean has expanded strategically across the digital and e-governance ecosystems. "Protean has a strong balance sheet and cash flow as a niche player with strong growth potential and market leadership." Canara Bank Securities experts propose subscribing for listing profits and long-term advantages.

Also read :- Top SIP Investment Mistakes You Must Avoid

BP Equities: Subscribe

The higher price band represents a fair valuation of the issue at a P/E of 29.9x on FY23 profits. The issue has been given a 'Subscribe' recommendation by BP Equities' research team.

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