AGS Transact Technologies Ltd

The global economy, rebounding from m?ltiple headwinds, maintained its momentum from CY 2023, aided by worldwide synchronised monetary policies and downward inflationary trends. In CY 2024, the global economy showed remarkable resilience, promising further progress.

Dear shareho?ders,

I am delighted to present the FY 2023-24 Annual Report of AGS Transact Technologies Limited. This document encapsulates our vision for shaping the future of India's payment landscape where AGS Transact Technologies Limited stands at the forefront. The reporting period highlights our strategic efforts in capitalising on the transformation of the country's payment ecosystem. Our core focus remains on enhancing customer value through a robust business model, driving sustained growth for our shareholders. Looking ahead, we are committed to reinventing customer interactions, transactional procedures, and business continuity to broaden our impact and strengthen our brand value.

The macroeconomic overview

Macroeconomic vulnerabilities significantly impact our business, requiring strategic adaptations to sustain growth. During the reporting period, both the global and Indian economies performed robustly. The global economy, rebounding from multiple headwinds, maintained its momentum from CY 2023, aided by worldwide synchronised monetary policies and downward inflationary trends. In CY 2024, the global economy showed remarkable resilience, promising further progress.

Meanwhile, the Indian economy solidified its position as the 5^th largest in the world¹. According to NSO data, GDP grew at 8.2% in FY 2023-24, up from 7.0% the previous year, driven by strong domestic demand, increased investment, moderate inflation, and a stable interest rate environment. Despite concerns over volatile food prices, the Reserve Bank of India maintained the repo rate at 6.50%.

With an optimistic forecast of 7.2% GDP growth for FY 2024-25, strong public investment, private capex, and rising private consumption are set to drive India's economic ascent.

Industry Overview

The Indian Payment Industry is undergoing rapid transformation driven by digitalisation. Government-led initiatives have significantly boosted digital payment infrastructure, shifting from traditional cash transactions to mobile wallets and Unified Payments Interface (UPI). The introduction of new use cases and products by payment service providers has increased digital payment adoption. UPI, in particular, has driven this growth, with transactions accounting for T 200 Lakh Crores and 131 Billion transactions in the reporting period¹. The volume of digital payments transactions increased by 44% in a year from 113.9 billion transactions in FY 2022-23 to 164.4 billion in FY 2023-24². National Electronic Toll Collection (NETC) and credit card usage also continue to grow significantly³.

While digital payments surge, cash transactions have also seen steady progress. According to an industry report, average cash withdrawals have increased from T 1.35 Crores in FY 2022-23 to T 1.43 Crores in FY 2023-24. This underscores the ongoing demand for ATMs and Cash Recycling Machines (CRMs), with cash remaining a primary transaction tool¹.

Delivering transactional convenience is key to the payment industry's growth. Digital disruption is reshaping organisational operations and consumer interactions, with financial institutions aligning their strategies to robust

digital transformation. This includes large-scale integration of digital banking infrastructure, such as mobile and internet banking, shifting transactions from a service to a convenience.

Aligned with the Government's commitment to enhancing the payment ecosystem, the Reserve Bank of India's initiatives will bolster security and convenience. Initiatives like enhancing UPI's versatility through linking Prepaid Payment Instruments (PPIs) with third- party UPI applications will increase flexibility for PPI users. Also, UPI platform's growing popularity among the overseas markets underscores its robustness. The "Digital Payments Intelligence Platform" will leverage advanced technologies to mitigate fraud risks, fostering a safer environment for digital transactions. Expanding the e-mandate framework to include automatic replenishment for FASTag, NCMC, and UPI Lite wallets ensures seamless, hassle-free recurring payments¹. The RBI Hackathon HARBINGER 2024, focussing on zero financial frauds and inclusivity, highlights their dedication to innovative solutions that prioritise safety, security, and accessibility. These measures collectively enhance public confidence and trust in digital payments¹.

Business overviews and strategies

Our payment solutions viz. digital and cash payments are the biggest revenue contributor to our business. During the reporting period, we have generated almost 87% of our revenue from these two segments only. As we look ahead, we are very optimistic about our business model and are committed to building on this momentum to drive sustained growth.

A key driver of our growth outlook is the digital payments business which generated 20% to the revenue of the payment solutions business segment. We anticipate a promising FY 2024-25 with several exciting new launches in the pipeline. Our portfolio includes a unique digital payment ecosystem, ‘Ongo', designed to shift payments from a service to a convenience for customers along with providing merchant acquiring and issuance services. Ongo is a non- bank prepaid payment instrument, offering open-loop prepaid solutions for consumers.

Further to enhance the performance of our digital payment solutions, we have aligned ourselves to capitalise on the Government's initiatives like National Common Mobility Cards (NCMCs). In collaboration with RBL Bank, we have issued 50,000+ NCMCs for Bangalore Metro Rail Corporation. Similarly, we have launched instant NCMC ‘Ongo Ride' at Chennai Metro for a seamless commuting

experience. This is an industry-first initiative where ready to use NCMC cards can be purchased through Card dispensers installed across select metro stations. No KYC is required for these Ongo Ride cards for using at NCMC enabled transit services like Metro, buses, water ferries and also toll booth & parking. With more such opportunities being explored, we are looking at a collective target of issuing 25 Lakh NCMC over the next two years. For our open- loop co-branded prepaid cards, rolled out recently for a leading Indian FMCG conglomerate, we are looking to explore similar collaboration opportunities with leading brands. Additionally, we are pilot- testing open-loop contactless fuelling solution on our Ongo platform and set for a nationwide rollout. The seamless integration of voice commands into the Ongo app represents our significant step forward in the evolution of Al-driven solutions. During early 2024, we have onboarded 1,000+ fleet vehicles for this programme and further looking forward to penetrate ? 1.6 Lakh Crores market potential fleet fuelling market. Our asset- light digital business model, strategic collaborations, and PPI infrastructure expansion aim for substantial profit contributions in the coming future.

For our cash payment solutions, we have undertaken route optimisation and cost reduction efforts to improving our overall efficiencies. The cash payment solution business is our core business which entails ATM/CRM outsourcing model and cash

management services. Rapid expansion of the bank branch network and the widespread adoption of cash recycler machines (CRMs) are expected to further drive growth of our core cash payments business. We are also actively working to further strengthen this segment through multiple contract renegotiations at improved rates. This segment particularly runs on the fixed and transaction fees-based model and contributes to our recurring revenues. The cash management business is being delivered by Securevalue India Limited (SVIL), our wholly-owned subsidiary and the second- largest cash management company in India. The ATM outsourcing and Cash management business contributes to nearly 67% of our consolidated revenue. Recently, SVIL has set up a new cash vault facility in Bengaluru which will offer best-in-class cash-in-transit services with higher operational efficiency and security. Its strategic location will enhance our cash management operations across Karnataka and further add up to our competitive advantage.

One of the notable milestones we have achieved, leveraging our leadership position in the integrated omnichannel payment solutions business, is securing significant contracts from leading public and private sector banks in India through various RFPs. We are on track to complete the execution of the State Bank of India order for 1,350 ATMs under banking automation by second quarter of FY 2024-25 and of the 2,500 ATMs under

the outsourcing portfolio, worth ? 1,100 Crores over seven years, by the end of FY 2024-25. This accomplishment is a testament to our market reputation and adds significant brand value to AGS Transact. Furthermore, our digital payment solution subsidiary India Transact Services Limited (ITSL) has strengthened its leadership team through appointment of Mr. Vinayak R Goyal as the Managing Director who brings a unique viewpoint and innovative approach to our digital payment strategy. We are confident that his leadership will be pivotal as we continue to expand our digital payment solutions and enhance our offerings to better serve our customers.

Performance overview

Delving into our financial performance, FY 2023-24 saw our total income stand at ? 15,088 Million, reflecting a 12% decrease. Loss after tax for the period was ? 801 Million as compared to profit after tax of ? 370 Million in FY 2022-23.

During the reporting period, we strategically scaled down low-margin and capital-intensive businesses, focussing on maximising revenue and reducing costs, resulting in an approximate revenue impact of ? 200 Crores. Notably, the share of revenue from services increased to over 90%. Our operating cash flow remained robust, with net cash flows from operating activities rising to ? 3,492 Million compared to ? 2,493 Million in FY 2022-23. We also successfully reduced our debt, improving our cash position and lowering net debt from ? 6,769 Million to ? 5,707 Million.

Turning to our subsidiaries, Securevalue India Limited reported a total income of ? 4,457 Million (including AGS) with an EBITDA margin of 16.5%. Non-AGS business accounted for approximately 48% of its total revenue. India Transact Services Limited (ITSL), our digital payment subsidiary, recorded revenue of ? 1,763 Million with an EBITDA margin of 5.6%. GTSL, our foreign subsidiary, generated revenue of ? 755 Million, achieving an

impressive EBITDA margin of 25.3%. These results underscore our strategic focus on profitability and operational efficiency across our diversified portfolio.

Business outlook

India's payment ecosystem has witnessed remarkable synergy, driven by the government's push towards digitalisation. Key initiatives such as enabling UPI for cash deposits, UPI access for PPIs, offline UPI payments, expanding e-RUPI vouchers, linking RuPay credit cards to UPI, and interoperable card-less cash withdrawals at ATMs are boosting the digital payments industry. In line with these initiatives and industry growth, we are strategically focussing on increasing revenue from the digital payment solutions segment by utilising our core expertise, leveraging our PPI licence, and strengthening our foothold with the large customer base we have built over the years. Further to enhance our operational capabilities, we are going to raise ? 1,600 Million as preferential warrants out of which ? 1,200 Million will be raised by the promoter's group and the rest by the non-promoters. The strategic method will strengthen our capital position and utilise the same to boost our operational efficiency.

CSR focus

Beyond our corporate responsibilities, we acknowledge our commitments to the communities that grant us the privilege to operate. Recognising them as integral stakeholders, we have developed initiatives to foster positive impacts on their lives. Through the AGS Community Foundation, we support efforts like AGS Shiksha, which provides education to underprivileged and special children in underserved areas of Mumbai. By partnering with NGOs and local authorities, we strive to maximise our social impact, driving meaningful change and upliftment in the communities we serve.

Closing remarks

As we move ahead with our vision, we remain mindful of potential challenges. However, with our dedicated team, sound business model & partnerships, resilient work culture, and commitment to excellence, we can thrive against the odds. Our success is also due to the exceptional guidance of our Board of Directors, whose visionary leadership has steered us through both prosperous and challenging times.

Our success is measured not just by financial figures but by the value we create for our customers while assisting in building an organised payment landscape for the future of the country's finance. I extend heartfelt gratitude to our shareholders for their support. Together, we will redefine transactions, transforming from a service to a convenience.