Protean eGov Technologies Ltd. (Subscribe)

Highlights

Protean eGov Technologies Limited (PEGTL) was incorporated in 1995, formerly known as NSDL e-Governance Infrastructure Limited. The company originally setup as a depository in 1995 and created a systemically important national infrastructure for capital market development in India but now It is one of the key IT-enabled solutions companies in India that engaged in conceptualizing, developing and executing nationally critical and population scale greenfield technology solutions.

As of June 30, 2023, the company had implemented and managed 19 projects spread across 7 ministries and autonomous bodies ushering change in public delivery of services. The company primary engagement is with (i) Ministry of Finance (ii) Ministry of Information and Broadcasting (iii) Ministry of Education (iv) Ministry of Electronics and Information Technology (v) Ministry of Communication (vi) Ministry of Development and Entrepreneurship (vii) Ministry of commerce and Industry. 

PEGTL has approx. 45 pct market share in Pan Card allotment. 98 pct market share in NPS subscribers and 99 pct market share in terms of NPS AUM and 100 pct market share in APY subscribers.

Currently company has Pan Iadia Distribution infrastructure that has 166,000 phygital touchpoints covering 65 pct pin codes in India. Currently the company has 446mn+ Pan cards, 64M+ NPS & APY subscribers, 800mn+ Aadhar authentication, 6bn+ Online pan verifications.

The company has domain knowledge for a variety of industries, allowing them to design capabilities that answer unique needs of end-users, enterprises, and government entities. The organization uses its extensive program management knowledge while executing large and complicated projects.

Out of the total proceeds of Rs. 4,903 mn, the company will not receive any proceeds from the Offer and all the Offer Proceeds will be received by the Selling Shareholders, in proportion to the Offered Shares sold by the respective Selling Shareholders as part of the Offer.

Key Highlights

• The pan card allotment is expected to reach 880-890 mn by FY27P from 612 mn in FY22. 50-60 mn Pan cards estimated to be allotted annually till FY27. Also, the NPS – APY subscribers expected to grow at CGAR of 16-17 pct (FY22-FY27P). The taxpayers are estimated to grow at CAGR of 9-10 pct to 170 mn till FY27 from 82.3 mn taxpayers in FY19. The company market share and above segments and growth of the segments can significantly help business to grow in the coming future. 
• Currently company engaged in the exiting business of Tax services (PAN, TIN, eTDS), Social Security and welfare (CRA for NPS & APY), Data stack. Apart from the existing business company aims for business expansion in Open Digital Ecosystem, Cloud Services and Information security consulting.
• The company is one of the few in India, focused on the development of open digital ecosystems. For example, they are early and significant contributor to the open-source community and protocols that fuel ONDC. The company is continuing to be a market leader in provision of e-governance services such as management of the TIN, PAN processing, NPS and Atal Pension Yojana.
• The company are amongst the few private players in India in e-governance space working towards the achievement of Digital India initiative and creation of open digital ecosystems by leveraging open-source technologies, across variety of sectors such as e-commerce, mobility, healthcare, agriculture and education amongst others.
• PEGTL has been involved at multiple nodes of the Aadhaar value chain starting from enrolments to digital transactions creating digital public infrastructure and providing enabling solution to the Aadhaar ecosystem. It intends to extend its experience in implementing large scale time critical and data intensive project like Aadhaar to diverse sectors with the specific focus on health, education and agriculture.
• Sales of the company has grown by 10.9 pct CAGR during the period FY21-23 while adjusted EBITDA and Profit increased by 17.9 pct CAGR and 7.7 pct CAGR over the same period. During FY23, company reported revenues of Rs. 7,422 mn which increased by 7.42 pct YoY while adjusted EBITDA declined by 4.76 pct YoY to Rs. 1,179 mn as adjusted EBITDA margin declined slightly from 17.9 pct in FY22 to 15.8 pct in FY23. Profit in the FY23 stood at Rs. 1,070 mn, which declined by 25.6 pct YoY. During Q1FY24 company sales, EBITDA, Profit increased YoY. 

Key Risk

• The company’s sales cycle is lengthy and depends upon many factors outside its control and could cause them to spend significant time and resources prior to earning associated revenues. 
• The Company do not have a diverse base of clients from whom they are awarded contracts, and the loss of any client could have an adverse impact on its business.

Valuation

PEGTL is in the unique eGovernance business and working with various departments of Government of India. Based on Fy24 annualized earnings, the issue appears fully priced. At the upper end of the price band, the issue is quoting at PE of 24.86x its annualized FY24E earnings. With the rising importance of eGovernance globally, this company is set for bright prospects ahead. One can Subscribe from a long-term perspective.

Disclaimer:The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.