Protean eGov Technologies IPO: 10 key risk factors you should know before investing

The price band for the offer has been fixed at ₹752–792 per equity share, with a face value of ₹10 each. The net offer is reserved for qualified institutional buyers at 50% of the total offer size, non-institutional investors at 15%, and retail investors at 35%.

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Retail investors have the opportunity to submit bids for up to 14 lots, with each lot containing 18 shares. At the upper end of the IPO price band, at ₹792, retail investors are required to make a minimum investment of ₹14,256 per lot.

Protean eGov Technologies is engaged in conceptualising, developing, and executing nationally critical and population-scale greenfield technology solutions. It collaborates with the government and has extensive experience in creating digital public infrastructure and developing innovative citizen-centric e-governance solutions.

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The company was originally set up as a depository in 1995 and created a systemically important national infrastructure for capital market development in India. It has been the chief architect and implementer for some of the most critical and large-scale technology infrastructure projects in India, according to the company’s DRHP report.

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Many domestic brokerage firms have recommended a ‘Subscribe’ rating to the IPO. However, the following are some of the key risks outlined by the company in its DRHP report:

Dependent on Government Entities: The company’s business and revenues are substantially dependent on e-governance and other projects awarded by government establishments, including central, state, and local authorities, agencies, and public sector undertakings.

As the company grows its operations, it may continue to be reliant on revenues generated from contracts entered into with such government agencies. Any adverse changes in government policies and budgetary allocation resulting from a change in government policies or priorities could materially and adversely affect the company’s financing, capital expenditure, revenues, or operations relating to its existing and proposed projects, as well as its ability to participate in competitive bidding or negotiations for its future projects.

Diversification Risks: The company may face challenges in successfully diversifying and developing its services in response to evolving trends and demands, which may adversely affect its growth and negatively impact its profitability.

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Its service offerings may fail to accurately address its clients’ or users’ requirements and may not generate the returns anticipated. The company may be required to discontinue such offerings, and it may not be able to recover the expenses incurred in developing and launching such offerings.

Reliance On A Third Party: 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 that the company relies on or its technical systems could impair its ability to effectively deliver its products and services.

Global Competition: The company may experience competition from global and Indian enterprise solution companies, and any increase in global competition or access to advanced technical know-how or processes by its competitors may adversely affect its business.

Risks Associated With Technology Investments: The company’s investments in technology, especially in its research and development activities, may not yield the intended results in a timely manner or at all, which may adversely affect its financial condition and results of operations.

Account Aggregation Uncertainty: The account aggregation business of its subsidiary, NSDL e-Governance Account Aggregator Limited, may not be viable as there is currently no certainty of revenue from account aggregation operations.

Cash Flow Concerns: The company had negative cash flows from operating activities in the past and may, in the future, experience similar negative cash flows.

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Wage Pressures: Wage pressures and increases in operating costs in India may prevent the company from sustaining its competitive advantage and may reduce its profit margins.

Capital Needs: The company business may require additional capital, and failure to obtain such capital in a timely manner or at all could adversely affect its business plans and growth. If the company issue fresh shares, it may result in a shareholding dilution for an investor.

Client Contracts and Termination: The company’s client contracts can typically be terminated without cause, which could negatively impact the company’s revenues and profitability.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 07 Nov 2023, 06:02 PM IST