AGC Networks hits new high; stock zooms 269% in six months

Shares of AGC Networks, a part of Essar Group, continued their northward move, and were locked in 5 per cent upper circuit at a record high of Rs 1,282.25 on the BSE on Wednesday in an otherwise weak market. In comparison, the S&P BSE Sensex was down 0.83 per cent at 49,721 points, at 10:02 am.

In the past two weeks, the stock of the IT consulting & software company has rallied 26 per cent, after the company on March 22 said it has raised Rs 225 crore through issuance of convertible warrants to promoters and promoter group of the company.

The company issued 3.33 million convertible warrants each convertible into equity share of face value Rs 10, to the promoters and promoter group of the company at a price of Rs 675 per warrant, aggregating to Rs 225 crore, AGC Networks Ltd said in a regulatory filing. The company said the funds raised would be used to meet growth requirements of the company, reduction in liabilities and general corporate purposes.

The management said this infusion of equity by the promoters and promoter group, reiterates their commitment to the long-term goals of the company. The funds would also help the company increase its net worth and reduce liabilities, which will further strengthen the balance sheet of the company.

Post conversations of warrants, the promoters' holding in AGC Networks, increased to 71.18 per cent from 70.30 per cent earlier.

In the past six months, the stock has zoomed 269 per cent, as compared to 31 per cent rise in the S&P BSE Sensex. In the last one year, it has soared 446 per cent, against 69 per cent rally in the benchmark index.

On March 24, AGC Networks said the rating agency CARE has reaffirmed and withdrawn the outstanding ratings assigned to the bank facilities of the company with immediate effect.

The rating factors in the comfort from progress in terms of equity infusion by promoter entity, with Rs 73 crore out of the total Rs 225 crore already received by AGC on January 08, 2021 in the form of allotment of warrants and improved performance during 9MFY21 resulting in positive net-worth as on December 31, 2020.

The rating continues to derive strength from experienced promoters (viz. Essar group) and management, the company’s sound technical knowhow and domain expertise translating in to significant improvement in performance of AGC’s subsidiary viz. Black Box Corporation Limited during FY20 and 9MFY21.The rating also continue to factor in strong and diversified client base, diversified capabilities in Information and Communication Technology solutions, improved collection period in FY20 marked by securitization of receivables, and significant decrease in corporate guarantee extended to subsidiary. The ratings are however tempered by competitive nature of the IT/ITeS industry and foreign exchange risk faced by the company, CARE Ratings said.