CMSINFONSEFebruary 11, 2025

CMS Info Systems Limited

9,476words
103turns
12analyst exchanges
3executives
Management on call
Rajiv Kaul
EXECUTIVE VICE CHAIRMAN, WHOLE TIME DIRECTOR AND CHIEF EXECUTIVE OFFICER, CMS INFO SYSTEMS LIMITED
Pankaj Khandelwal
CHIEF FINANCIAL OFFICER, CMS INFO SYSTEMS LIMITED
Anush Raghavan
PRESIDENT, CASH MANAGEMENT, CMS INFO SYSTEMS LIMITED
Key numbers — 40 extracted
10%
gs Call. For the 9 months of FY '25, we have delivered a steady and consistent performance with 10% revenue growth and 7% PAT growth. While navigating the surprises in this year with agility and di
7%
nths of FY '25, we have delivered a steady and consistent performance with 10% revenue growth and 7% PAT growth. While navigating the surprises in this year with agility and disciplined execution, w
40%
h up strong share gains this year. Our revenue share in the Cash Logistics segment has grown from 40% to 42%. Given the scale of our route network, the investments we have been making in technology,
42%
rong share gains this year. Our revenue share in the Cash Logistics segment has grown from 40% to 42%. Given the scale of our route network, the investments we have been making in technology, autom
INR 700 crore
Services and Technology business, we are continuing with a good order wins momentum and have over INR 700 crores of wins this year, majority being recurring services revenue in nature. The broader industry is
rs,
r investments in becoming an end-to-end platform player have delivered great value for our customers, and enabled solid growth over the last 3 years. We have increased our tech spends from 1% to 1.5%
1%
customers, and enabled solid growth over the last 3 years. We have increased our tech spends from 1% to 1.5% of revenue. This is critical to have a superior quality offering, and also to keep buildi
1.5%
ers, and enabled solid growth over the last 3 years. We have increased our tech spends from 1% to 1.5% of revenue. This is critical to have a superior quality offering, and also to keep building a str
INR 581.5 crore
ncial highlights for the quarter. Pankaj Khandelwal: Thanks, Rajiv. Our consolidated revenue is INR 581.5 crore. On year-on-year basis, total revenue is flat. However, service revenue has grown by 3%. Our PAT
3%
581.5 crore. On year-on-year basis, total revenue is flat. However, service revenue has grown by 3%. Our PAT grew by 7% year-on-year to INR 93.2 crores. PAT margin has expanded by 140 basis points
INR 93.2 crore
l revenue is flat. However, service revenue has grown by 3%. Our PAT grew by 7% year-on-year to INR 93.2 crores. PAT margin has expanded by 140 basis points to 16%. Segment-wise, the Cash Logistic business wi
140 basis point
e has grown by 3%. Our PAT grew by 7% year-on-year to INR 93.2 crores. PAT margin has expanded by 140 basis points to 16%. Segment-wise, the Cash Logistic business with INR 404 crores recorded an 8% year-on-year
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Guidance — 20 items
Pankaj Khandelwal
opening
“Our CAPEX spend has been INR 50 crores in 9 months of the year and we expect this to be INR 150 crores to INR 200 crore for the full year.”
Anush Raghavan
opening
“You will be able to see more details on this in Slide #7 of our investor presentation.”
Anush Raghavan
opening
“The next phase will expand the coverage from 30 to 80 cities.”
Anush Raghavan
opening
“We will be able to share more details on this at the end of FY '25.”
Rajiv Kaul
opening
“The medium-term opportunity for our business is looking very solid.”
Rajiv Kaul
opening
“Our MS and Tech business should grow upwards of 15%, and our AIoT RMS business should compound at 15% to 20% growth rates over the medium term.”
Rajiv Kaul
opening
“You combine these 3 on organic basis, our revenue growth opportunity is at 13% to 15% CAGR.”
Balaji Subramanian
qa
“While you have talked about 13% to 15% revenue CAGR going forward, is there any guidance that you would like to provide for the next 4 years, like how you had guided for doubling of revenue between FY '21 and FY '25?”
Balaji Subramanian
qa
“My second question is on with the issues faced by one of your competitors, how do you see the market dynamics changing in the short term as well as the medium term?”
Rajiv Kaul
qa
“Specifically, we will not talk about any particular competitor by name as such, but whenever we have seen any impact to a company, for whatever reasons, it's natural to expect that customers will move business to stronger players and be careful.”
Risks & concerns — 15 flagged
Given the scale of our route network, the investments we have been making in technology, automation and risk management as well as careful selection of contracts, have helped us in expanding our margin profile.
— Rajiv Kaul
Our Managed Services and Technology Solution business revenue at INR 210 crores saw a decline of around 10% primarily due to lower banking automation revenue.
— Pankaj Khandelwal
And thirdly is that you said that the retail cash logistics has grown by about 15 % for the 9 months, which would mean that your ATM cash logistics and maybe CIT are sort of flat or have seen a decline in the first 9 months.
— Prithvish Uppal
We just want to wait and see how does the sector behave in a sign of some consumer stress, because we want to be careful from a reputational perspective as to how the sector behaves in bad times.
— Anush Raghavan
There was obviously the broader CAPEX slowdown.
— Rajiv Kaul
We want to be a little bit cautious right now instead of being extra bullish.
— Rajiv Kaul
We are increasingly more cautious on BLA.
— Rajiv Kaul
So, we'll be very cautious and pick BLA contracts, which meet our IRR hurdle.
— Rajiv Kaul
Like I wanted to know what specific risk assessment profiling with regards to our potential customers, which we are doing, because like there's a significant amount of write-offs and the same has been seen for the last 3, 4 years.
— Shivam Parakh
And it has just been the agreed practice in this industry that any risk which arises out could be cash losses, could be reconciliation differences, could be SLA penalties for instance.
— Anush Raghavan
Over the last 3 to 5 years, the industry has been able to standardize and improve on these risk management protocols.
— Anush Raghavan
And hence, the best way that overall industry, not just CMS, has found it best to adjust for these risk costs has been by way of debit credit adjustments to our revenues.
— Anush Raghavan
And hence, you will see all of our risk costs typically recognized as a bad debt.
— Anush Raghavan
It doesn't really mean that there are credit issues with the customers, but it is risk.
— Anush Raghavan
We have in the past alluded that as our businesses have scaled and matured, as we implement more technology into identifying and managing risk better.
— Anush Raghavan
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Q&A — 12 exchanges
Q
While you have talked about 13% to 15% revenue CAGR going forward, is there any guidance that you would like to provide for the next 4 years, like how you had guided for doubling of revenue between FY '21 and FY '25? My second question is on with the issues faced by one of your competitors, how do you see the market dynamics changing in the short term as well as the medium term? And would you be interested in acquiring parts of their business?
Rajiv Kaul
Thank you, Balaji. So, as you know, Balaji, this is Q3. We are very focused on getting this order book live by Q4. I think the right time to discuss the FY '26-'27 sort of trajectory would be the Investor Day, and we did the last one 2 years ago. I think it's high time we come and update our investors and analysts on the developments in the company, how the market is changing. The market has been very dynamic this year, right, both from an industry perspective and a country perspective. We want to wait a little bit to see how the dust settles down in some of these developments which you are al
Q
So, couple of things from my side. First, just wanted to understand the progress on the order book, as you alluded to earlier, about 15% was executed in H1 and now is about 30%, and you'd highlighted there were certain testing delays. So, any shift that has happened in the last quarter in terms of progress towards faster execution of this order book, and what is giving us the confidence to reach probably a 60% kind of order book execution? So, that would be the first part. And within this order book, what would be the split of the pending order book in terms of the MS and maybe the Product Sal
Anush Raghavan
Hi, Prithvish, Anush here. I will answer the first and third parts of your question, and will come back to the second one. I think as far as the order book is concerned, maybe let me reiterate it in this way. We had solid order wins in FY '24 of about INR 1,800 crores of total wins, which we carried into FY '25. As we updated you in second quarterly call, through the 6 months of the year, we were able to get progress to about 15% of that execution. Most of the delays was on account of the fact that as various OEMs replaced and changed and upgraded the models of their equipments, could be ATMs,
Q
Hi. Thank you for the opportunity. So, we need around 43% growth in the MS segment in Q4 to meet our segment guidance. So, now that Jan has ended, are you seeing momentum as you highlighted, flowing in from Q3? Are you confident of meeting the guidance we have given before?
Rajiv Kaul
Sorry, if you can repeat, you said our guidance for? The MS segment, around INR 1,000 crores. If you look at Slide #8, and also I mentioned in my comments, right, we will have a slip in the overall revenue from what we are guided to. All of that revenue slip is primarily in the MS business. So, the revenue guidance for MS would be lower than the estimated, I think you've taken 40% of INR 2,500 crores or INR 2,600 crores, that is roughly INR 1,000 crores. So, it will be lower than that. Okay. Okay. And just on the AIoT, the quick commerce... Split of revenue between cash and MS will largely be
Q
Rajiv, hi. Good morning. Thanks. Couple of questions. In terms of the disruption that you called out, right, is this translating to an active conversation as yet of a vendor churn at the client's end? In other words, is this translating to commercial opportunity, or is this an operational disruption that does really benefit us? That's the first question. And if you could please quantify the opportunity loss that we have suffered here on account of this disruption in Q3? And secondly, in terms of the new initiatives that we have been working on for a couple of quarters across the gold bullion o
Rajiv Kaul
Baidik, hi. Let Anush answer some of it and I will jump it for the rest. Thanks. Hi, Baidik. I think as far as the disruption was concerned, so clearly, right, we have made clear that there are parts of the business in the MS and Tech that we like, and there are parts that we'll be very careful about, more specifically Transaction-Led BLA. So, clearly, that is something that we want to be a little careful and picky. The 1 thing that we are trying to do is in navigating the opportunity around this is to try and see how do we build and scale up our engagement with private sector banks. If you go
Q
Thank you for the opportunity. I have a couple of questions related to the quick commerce win. Firstly, is this for all of their dark stores or is it in a specific geography? Could you maybe quantify number of sites? And the follow-up question to that is that do we have like a special task force or a team within the company to service these quick commerce players, given how fast they are growing?
Rajiv Kaul
So, I think we said we won't be able to share the number of stores because there are very few players. So, I think the name of the player will get automatically obvious. But the solution is meant to be deployed across all of their dark stores and warehouses. So, we have just started the execution of the project. And over the next 3 to 6 months, we will try and complete it. But of course, as they're growing, this project will go on for some more time. The second question is there is an internal war room for this particular sector. Like for any key project, there's a war room where we are workin
Q
Thank you very much for giving me an opportunity to talk to you. I am very young to attend this meeting, but I'm very fortunate for this meeting. Thank you, Rajiv sir. Sir, my question is that, sir, basically, banks are lowering their ATMs to cut their operation cost. So, how will it impact our businesses? And basically, sir, a new business initiative has been discovered by the CMS is that we are providing virtual bodyguards to the bank. We are providing that surveillance to the bank. So, how much it will increase the revenue from the virtual security that we are providing, how much will add u
Anush Raghavan
Okay. Hi, Anush here, let me try and address some of them. I'm not sure I heard the second part of your question well, but I will respond to what I understood. As far as the ATMs are concerned, so I think this goes back to the question saying, where is the real opportunity in our ATM cash management. And I think there are 3 or 4 layers of opportunity 1 needs to think about. First and foremost is the organic need for banks to invest and expand the ATM network. The historical average and even now we are seeing is this should grow at roughly about 3% to 4% on a year-on-year basis. So, if there ar
Q
Yes. Hi. Two questions. First, on your order book execution delay comments. So, is the 9-month odd period where all the testing and talking between stakeholders takes place, is this the new normal? And so, every order win will still take time before it materializes into your revenue?
Rajiv Kaul
What's the second question, Aasim? The other 1 was on CAPEX, but I will have a follow-up question on this depending on how you answer, sir. Okay. So, the order wins are across a multitude of banks. Most of this is public sector banks. I would like to hope that this doesn't become a usual norm, because like when the year started, I didn't think we anticipated the number of issues which could crop up, that it could be supply of technology, it could be testing at the technology team side. It would be about incumbent vendors delaying the handover sometimes. So, therefore, if the older ATM doesn't
Q
Thank you, sir, for the opportunity. So, my question is on the side of AIoT remote monitoring. So, I'm clear that we had a center in Belapur and Navi Mumbai. So, is it the new order that has come in? So, that Belapur site is enough to capture that order? Also , going forward, we need to set up more new sites for maintaining that remote monitoring?
Rajiv Kaul
So, our central command room for the AIoT business is based in New Bombay, not in Belapur, in New Bombay. I think we have built it to a good capacity. Our business is quasi-SaaS. So, while we have increased, we have gone from almost 2,000 sites to 25,000 sites in the last 3 years in the same center as operating for which we are managing it. Using technology, using machine learning, I think our model has been very different. I think we are not focused on a business which needs too many people at the command center. It's more linked to machine learning being able to control any mishaps. The new
Q
What kind of capital allocation strategy are you guys looking at? One of your biggest competitor is facing some financial difficulties. Are you guys open to any M&A opportunities in this space? Or any particular segments are you looking for to deploy your cash?
Rajiv Kaul
Good question. I think we have explained our capital allocation track record. I think, we are a fundamentally conservative team. We like to have no debt. We like to make sure we have adequate cash for any opportunity, which may come up. We have been carefully preserving our cash generation, which is all internal. Historically, we have said that in a business where we are market leader, we are not really looking to do M&A. We don't want to go and buy growth, which a client may not be willing to give to you, unless it comes at a very accretive price and synergy for us. We would like to use the c
Q
Hi, sir. Thanks for the opportunity. Like seeing the financials from the last 3 or 4 years, like our bad debt profile write-off, which we have done in our books is similar as far as the absolute amount is concerned. As a percentage of revenue, it has decreased. Like I wanted to know what specific risk assessment profiling with regards to our potential customers, which we are doing, because like there's a significant amount of write-offs and the same has been seen for the last 3, 4 years. So, what are we doing to reduce on that front?
Anush Raghavan
Hi. So, Anush here, I will handle 1 part of it, which is to give you the business context to what these, are and pass them to Pankaj to explain the accounting of it. So, you have to see that in the nature of business we are in, whether it's a Cash Management business or Managed Services. Risk is very intrinsic to what we do. And it has just been the agreed practice in this industry that any risk which arises out could be cash losses, could be reconciliation differences, could be SLA penalties for instance. All of them are typically tallied up with our customers on a daily basis, but only final
Q
Hi. Thank you for the opportunity. Sir, I'm fairly new to this company. So, just as per my understanding, the Cash Management Services is an annuity kind of a business, and the Managed Service is based on the order execution. So, as you said in the opening remarks that in the H1, 15% of the order book was executed, while in Q3, it is 30%. So, we have grown that order book execution significantly. So, just trying to understand why is there a dip in the revenue of the MS quarter-on-quarter?
Rajiv Kaul
I think just let me sort of give you an overall context, and then specifically explain this particular quarter. Yes, I think cash was annuity, and we explained this in the past that we like to keep it annuity for the simple reason that it allows us to handle inflation cost pressures a lot more if we have access to adjusting for pricing on an annual basis. In our MS business, when we started this business, 2014-2015, it started off as being revenues which had a greater component of banking automation or product-led revenues, simply because that was the only way to get into this business and pen
Q
Thank you so much. Thank you for attending our call, and thank you for your questions. We started the year with very high bullishness I think in the middle of the year, we were dealing with some headwinds, which we alluded to and we talked about openly at that time. I think moving to Q3, we are smelling a lot more stronger momentum, and building a base of business and both for market share and volume and pricing, which should help us in our mid- term growth aspirations. We will talk about FY '26 and FY '27 at the end of Q4 results and look forward to seeing and engaging with you then. Thank yo
Management
Speaking time
Rajiv Kaul
34
Moderator
14
Aasim Bharde
10
Anush Raghavan
8
Nitish Rege
5
Jatin Parashar
5
Prithvish Uppal
4
Divyanshu Mahawar
4
Balaji Subramanian
3
Pankaj Khandelwal
3
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Opening remarks
Balaji Subramanian
Thank you, Rayo. Ladies and gentlemen, good day, and thank you for joining us on the post Q3 and 9 months FY '25 Results Conference Call for CMS Info Systems Limited. It's my pleasure to introduce the Senior Management Team of CMS who are here with us today to discuss the results. We have Mr. Rajiv Kaul – Executive Vice Chairman, Whole Time Director and Chief Executive Officer; Mr. Pankaj Khandelwal – Chief Financial Officer; and Mr. Anush Raghavan – President, Cash Management. We'll begin the call with “Opening Remarks” by the Management Team, and thereafter, we'll open the call for a Q&A session. I would like to now hand over the call to Rajiv to take proceedings forward. Thank you, and over to you, Rajiv.
Rajiv Kaul
Balaji, thank you. Good afternoon, everyone, and thank you for joining our Q3 FY '25 Earnings Call. For the 9 months of FY '25, we have delivered a steady and consistent performance with 10% revenue growth and 7% PAT growth. While navigating the surprises in this year with agility and disciplined execution, we are happy to report that our focus on quality of services, integrated offerings, and aggressive focus on the retail sector have helped us notch up strong share gains this year. Our revenue share in the Cash Logistics segment has grown from 40% to 42%. Given the scale of our route network, the investments we have been making in technology, automation and risk management as well as careful selection of contracts, have helped us in expanding our margin profile. In our Managed Services and Technology business, we are continuing with a good order wins momentum and have over INR 700 crores of wins this year, majority being recurring services revenue in nature. The broader industry is s
Pankaj Khandelwal
Thanks, Rajiv. Our consolidated revenue is INR 581.5 crore. On year-on-year basis, total revenue is flat. However, service revenue has grown by 3%. Our PAT grew by 7% year-on-year to INR 93.2 crores. PAT margin has expanded by 140 basis points to 16%. Segment-wise, the Cash Logistic business with INR 404 crores recorded an 8% year-on-year revenue growth, while the EBIT grew by 6% to INR 103 crores, delivering a robust 25.6% margin. Our Managed Services and Technology Solution business revenue at INR 210 crores saw a decline of around 10% primarily due to lower banking automation revenue. Despite this, the business achieved an EBIT of INR 38 crores and the margin of 17.9%. Our MS & Tech Solution have grown 2.2 times in 3 years and today contribute 40% of our revenue. Our CAPEX spend has been INR 50 crores in 9 months of the year and we expect this to be INR 150 crores to INR 200 crore for the full year. I'm happy to announce that our Board has declared an interim dividend of INR 3.25 pe
Anush Raghavan
Thank you, Pankaj, and good afternoon, everybody. We have recorded our highest ever cash volume handled in Q3 with a 6% Y-o-Y growth and an overall business point addition of 10% on a year-on-year basis. Further, we also see that the usage of cash on a same-store basis has been very robust across metros, urban and semi-urban locations. You will be able to see more details on this in Slide #7 of our investor presentation. With the budget announcing tax cuts, if there is an uptick in consumption, that would be a further tailwind to us. Our Retail business has grown 15% year-to-date on the back of aggressive thrust in Retail segment to regain our market leadership. In our Managed Services and Tech business, we have had two breakthrough wins, a large end- to-end fixed fee outsourcing contract with a leading private bank, and the second is winning an AIoT remote monitoring deployment at a leading quick commerce customer, marking our entry into non-BFSI remote monitoring solutions. On the re
Rajiv Kaul
Thanks, Anush. We started this year being very bullish and having a revenue estimate of roughly about INR 2,600 crores. However, due to multiple external factors in H1 and unexpected delays in the large INR 1,900 crore plus PSU order book execution has resulted in revenues coming in lower this year. We had completed 15% of this order book at end of H1, have ramped it up with 30% completion at the end of Q3 and our focus remains on getting 60% of this order book live by Q4. The impact from this itself is to the tune of INR 150 crores lower revenue in FY '25. This will, though ensure that FY '26 services revenue growth can ramp back up to 15% plus. The medium-term opportunity for our business is looking very solid. The competitive intensity, as I've mentioned before, has reduced significantly, and we have detailed out opportunity on Slide 12 of our investor deck. The Cash Logistics business can grow between 10% to 13% in the midterm. Our MS and Tech business should grow upwards of 15%, a
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