CMS Info Systems: Multiple legs for growth

14 Feb 2024 , 02:24 PM

Analysts of IIFL Capital Services hosted the management of CMS Info Systems at IIFL’s Enterprising Bharat Conference. CMS reiterated its revenue target of Rs25-27bn for FY25 vs. Rs13bn/Rs19bn in FY21/23. CMS expects cash management revenue to grow at 11-14%, with retail cash management growing faster. CMS’ integrated business model enables it to extract 300-400bps cost advantage, offer better quality of services and higher uptime. CMS endeavours to balance revenue growth, market share and margins amid rising competitive intensity. 

Cash management should see higher growth in FY25: FY25 should see cash management business growing higher than 11% seen in 9MFY24 (a slowdown from 17-18% in prior years). CMS let go of a few contracts (especially a large cash-in-transit) in FY24 where a non-compliant managed services provider was involved. The key growth drivers for the cash management business are outsourcing by banks, and rising penetration of organised retail. 100k ATMs are yet to be outsourced for cash management. Upside to cash management revenue can come from favourable regulation (action against non-compliance), higher ATM rollouts, higher outsourcing. For retailers, CMS offers Cash-X solutions (treasury solutions, reconciliation, etc.), which are off to a promising start. 

Growth drivers for MS and AIoT: 

For ATM managed services, there is an 80k+ ATM refresh cycle, and 20k+ ATMs led by private bank branch expansion. 100k ATMs will shift from bank capex to BLA. AIoT remote monitoring is yet to be implemented in 60%+ of ATMs and bank branches. Over time, the solution can be expanded into NBFCs, warehousing, etc. 

Industry remains competitive: The competitive intensity is lower in cash management vs. managed services since compliance creates entry barriers. There are 3-4 players in remote monitoring. CMS’ objective is to balance revenue growth, market share and margins. Globally, there are no known players offering an integrated model. Risk cost as % of revenue was 4.3% in 1HFY24 vs. 5%+ in FY22 and FY23. Even global players like Brinks are at ~4%.