Protean eGOV Technologies is aninformation technology enabledsolutions company conceptualizing, developing, and executing nationally critical and population scale greenfield technology solutions. The company collaborates with the government and has extensive experience in creating digital public infrastructure and developing innovative citizen-centric e-governance solutions.

Protean eGOV Technologies was originally setup as a depository in 1995 and created a systemically important national infrastructure for capital market development in India. The company has been the chief architect and implementer for some of the most critical and large-scale technology infrastructure projects in India. Its solutions have led to identification of bottlenecks in government services, increased transparency and efficiency, redefined delivery of public services and led to a reduction in service delivery costs.

Since inception and as of June 30, 2023, the company has implemented and managed 19 projects spread across seven ministries and autonomous bodies ushering change in public delivery of services. The company‘s primary engagement has been with ministries including the Ministry of Finance, Ministry of Information and Broadcasting, Ministry of Skill Development and Entrepreneurship, Ministry of Education, Ministry of Electronics and Information Technology, Ministry of Communication, and Ministry of Commerce and industry.

Protean eGOVTechnologies is a key player in building public digital infrastructure and providing e-governance services impacting multiple sectors of the Indian economy, such as Tax Information Network, Pan card issuance, Central Pension system record keeping, and Aadhaar authentication and e-KYC services.

The company has over the years adapted technology through continuous investments in new technologies and capabilities and by developing sophisticated technology architecture. The company has domain knowledge for various industries that allows it to develop functionalities that address specific requirements of end-users, businesses, and public entities. While executing large and complex projects, the company leverages its comprehensive program management expertise. The company‘s clients benefit from its delivery model, significant experience across various technologies, industry knowledge, project management expertise and proprietary software engineering tools developed in-house.

Object of the offer

The offer comprises only an offer for sale by the selling shareholders of which up to 4.60 lakh shares by 360 One Special Opportunities Fund series 1, up to 3.21 lakh shares by 360 One Special Opportunities Fund Series 2, up to 1.48 lakh shares by 360 One Special Opportunities Fund Series 3, up to 3.97 lakh shares by 360 One Special Opportunities Fund Series 4, up to 3.09 lakh shares by 360 One Special Opportunities Fund Series 5. Meanwhile, NSE Investments will offload 17.8 lakh shares, HDFC Bank will sell 7.06 lakh shares, whereas Axis Bank and Deutsche Bank AG will also offload 7.12 lakh shares each in the offer for sale. Furthermore, UTI and Union Bank of India will sell around 2.43 lakh shares and 4 lakh shares, respectively.

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.

Strengths

The company is the pioneer and market leader in universal, citizen centric and population scale e-governance solutions.

The company has made investments in technology platforms that in its experience has strengthened its competitive advantage, increased its operating leverage, ensured scalability, and improved functionality while driving innovation. These investments have also helped the company to provide its clients and other stakeholders with bespoke services.

The company has large physical infrastructure with pan-India network. As of June 30,2023,the company had 79,374 service centres. Its Pan and Tin facilitation centers network is in over 12,000 Pin codes spread across over 700 districts in India. In addition, as of June 30, 2023, the company has over 26,000 nodal offices of the central government, over 263,000 nodal offices of state governments and over 87,000 points of presence across India for the administration of the NPS. As on June 30, 2023, the company had 7,121 Tin facilitation centers spanning 1,652 locations, where taxpayers could submit various statements. Further, to reach more areas, the company has partnered with distribution networks like Nearby Technologies Private Limited, Fino Payments Bank, Vakrangee, and Payworld Digital Services Private Limited.

The company‘s technology driven operations and low operational costs have resulted in comparatively higher operating margins. The company has been able to scale its technology platforms with limited capital expenditure and working capital to offer additional service offerings. Adjusted EBITDA margin was 14.07%, 17.92%, 15.89%, 13.83% and 15.47% in Fiscals 2021, 2022 and 2023 and in the three months ended June 30, 2022 and June 30, 2023, respectively.

The company has an experienced senior management team backed by strong corporate governance standards and supported by marquee Investors.

Weaknesses

The company is substantially dependent on projects awarded by government entities and agencies and its relationship with Government of India entities exposes the company to risks inherent in doing business with them, which may adversely affect its business.

The company may not be able to provide business solutions that meet its clients‘ requirements, which could lead to clients discontinuing their work with the company.

The company relies on telecommunications and information technology systems, networks, and third-party infrastructure to operate its business and any interruption or breakdown in such systems, networks, or infrastructure of the third parties which the company relies on or its technical systems could impair its ability to effectively deliver its products and services.

The company‘s business will suffer if it fails to anticipate and develop new services and enhance existing services to keep pace with rapid changes in technology and in the industries on which it focuses.

The company is engaged in conceptualizing, developing, and executing nationally critical large scale greenfield technology projects and any inability to undertake these projects or satisfactorily deliver such projects could have an adverse impact on the company‘s business.

If the company‘s pricing structures do not accurately anticipate the cost, complexity, and duration of its work, then its contracts could be unprofitable.

The company‘s clients‘ contracts can typically be terminated without cause, which could negatively impact its revenues and profitability.

The company may become liable to its clients and lose clients if the company has defects or disruptions in its service or if it provides poor service.

There are pending litigation‘s against the company amounting to Rs 179.3 crore

Contingent liabilities of the company stood at Rs 25 crore as on June 30, 2023.

The company had negative cash from operations for the three months ended June 30, 2023, of Rs 7.9 crore.

Valuation

For the three months ended June 2023, consolidated sales were up 40.6% to Rs 220.4 crore. OPM rose 164 bps to 15.47%, which led to a 57.3% increase in operating profit to Rs 34.09 crore.Other income increased 28.7% to 12.76 crore, while interest cost declined 18.1% to Rs 0.22 crore and depreciation inclined 17.9% to Rs 4.91 crore. PBT increased by 53.6% to Rs 41.72 crore. Tax expenses increased by 61.5% to Rs 9.51 crore. Net profit stood at 32.21 crore as against net profit of Rs 21.27 crore.

For FY 2023, consolidated sales were up by 7.4% to Rs 742.21 crore. OPM declined 203bps to 15.89%, which led to a 4.7% decline in operating profit to Rs 117.96 crore. Other income decreased 47.4% to Rs 41.67 crore, while interest cost increased91.9% to Rs 0.93 crore and depreciation increased 7.6% to Rs 18.29 crore. Eventually, net profit declined by 25.6% to Rs 107.05 crore.

At the higher price band of Rs 792, the offer is made at around 27.15 times TTM EPS of Rs 29.17 and 3.15 times the June 2023 EV/TTM sales.There are no listed peers for the company in India.