Healthy Financials

• Protean E-Gov is a company that plays a pivotal role in providing digital infrastructure to government services. Over the past two years, the company has witnessed substantial growth in its revenue. However, there was a decline in its net profit in FY23 primarily due to increased employee costs. Despite this setback, the company has managed to consistently generate positive cash flow from its operations in the last three fiscal years. What sets Protean E-Gov apart is its ability to maintain double-digit profit margins, which could be an attractive feature for potential investors.
• Moreover, the company's business is showing promise in terms of expanding its user base. Notably, the National Pension Scheme and the Atal Pension Yojana, two government initiatives, attracted a significant number of new subscribers in FY23. The National Pension Scheme alone saw 1.33 million new subscribers, and the Atal Pension Yojana welcomed a remarkable 9.67 million subscribers during the same fiscal year. This surge in user adoption suggests that Protean E-Gov will need to continuously invest in upgrading its technology to accommodate this growing demand, ultimately leading to increased business opportunities.
• The government's ongoing effort to digitize its services is a driving force behind Protean E-Gov's growth. This digitization makes government services easily accessible to the public and considerably faster. It's worth noting that approximately half of India's population lacks access to the internet, but this is gradually changing as internet penetration expands across the country. As internet access becomes more widespread, Protean E-Gov is well-positioned to benefit from an increasing customer base in the years to come. This positive trend is expected to contribute to further improvements in the company's financial performance.

Fair valuations

• The company is asking for a PE of 30x and a market cap-to-sales of 4x. This doesn’t seem expensive, and with the company having no listed competitors, such valuations would seem attractive to investors. Hence, we recommend subscribing to this IPO.