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CMS Info System Ltd – Future of Cash Management ?

CMS Info System

CMS Info System secures 30% ATM's Across India through its proprietary security application Algo.

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(A) About

CMS Info System - logo

Incorporated in 2008 with name Subhisha Realty Pvt. Ltd and later in 2015 it was acquired by Sion Investment Holding a subsidiary of Bearing Private Equity Asia. Meanwhile, Company is India's largest cash management company in terms of the number of ATM points and retail pick-up points.

Further, it helps money move through the economy more easily. At the same time, the company works on setting up, taking care of, and handling assets and technology solutions for banks, financial institutions, retail stores, and online businesses in India.

(B) Industry Segmentation

CMS Info System - Industry segmentation

(C) Journey

CMS Info System - Journey

(D) Shareholding Pattern of CMS Info System

CMS Info System - Shareholding Pattern
CMS Info System - Shareholding

(E) Board Members

  • CMS Info System - Board members
  • CMS Info System - Board members

(F) Key Businesses of CMS Info System

CMS Info System - Key businesses

(i) Cash Management Services

The company has a cash management business that involves managing money in different ways. They handle ATM cash management, retail cash management, cash-in-transit services, and also other cash management activities. Moreover, these services are provided under two brand names, CMS and Securitrans.

(a) ATM Cash Management Services- It primarily includes cash withdrawal from Banks, ATM replenishment, cash evacuation & deposition for cash deposit machines & cash recyclers, end of day reporting, reconciliation & settlement and also first line maintenance services.

(b) Retail Cash Management Services- It includes outsourced retail cash pick-up, retail currency processing, retail cash vaults, automated cash vaults solutions and also smart safe solution for over 2000 customers either directly or through banks.

(c) Cash in Transit Services- It includes inter city and intra-city transport of cash. Meanwhile, the pricing model for cash-in transit business is for fixed fee per month plus additional fees, depending on what extra operations, based on time and distance.

(ii) Managed Services

CMS is a special company in India that can take care of everything involved in managing an ATM network, both from an operation and management point of view. They do it all through one central place of responsibility. Moreover, the company mainly deals with long-term contracts that provide steady income for their managed services business.

(a) Banking automation product sales and service (AMC)- It includes ATM sales where the company offers customers a variety of bank automation product through cooperation with various OEMs as well as product deployment services and AMC support through the product life cycle.

(b) Brown label ATM and pure services- It includes brown label ATM services, where the company deploys, maintain and also manages ATMs on end-to-end basis under a bank brand name.

(c) Software Solution- It includes ATM multi-vendor software solutions, ATM software upgrade services and also proprietary software solutions for risk management and transaction reconciliation.

(d) Remote monitoring for ATMs and Bank branches- Through centralized monitoring centers by deploying cameras and also placing advanced sensors on site with a provision for quick response function upon detecting any threats or adverse events.

(e) Other Services- It includes end to end financial card solutions for banks. Moreover, primarily involves sourcing plastic cards and chips and personalizing the cards with embossing & printing, uploading variable encrypted data on the chip or magnet stripe. It is also involved in data generation for card personalization, card & chip personalization programs.

CMS Info System - Market Share

(G) Revenue Break-up

CMS Info System - Revenue Breakup

(H) Peers Competitors

CMS Info System - Peers

(I) Cost Structure

CMS Info System - Cost Structure

(J) Financials of CMS Info System

CMS Info System - Financials

Company has grown its revenue at 13.84% in past 6 years, while PAT grew at a CAGR of 24.18%. Moreover, company’s operating and Profit margins increase from 17.10% in FY17 to 28.30% in FY23.

CMS Info System - Du Pont Analysis

Company sales to total assets remained between 0.8 and 1.1 over the past 6 years. While its assets to equity decreased from 1.6 to 1.3 in the past 2 years.

(K) Business Outlook

Growth Triggers & Competitive advantage

  • Leading player in the consolidating cash management market - India is the 3rd largest ATM market in the world based on no. of installed ATMs, After China & US and is expected to grow at a CAGR of 6.16% from 255k as of Mar'2021 to 365k till Mar,2027.
  • Pan-India footprint - India has one of the lowest ATM penetration rates in the worlds with only 22 ATMs per 100K adults compared to world average of 47 ATMs.
  • Remote monitoring opportunity in BFSI to quadruple by FY27 - CMS offers remote monitoring for ATMs and bank branches through centralized monitoring centers by deploying cameras, advanced sensors and other value added services such as video analytics, customer behavior information remote camera health monitoring, IoT etc.
  • Remote monitoring (outside the ATM and banking sector) - CMS intends to leverage its remote monitoring technology to differentiate its product offering and target sectors beyond only the ATM and banking sectors, where it expects demand for remote monitoring will continue to grow.

Key Risk in the Business

  • Decrease in the availability/use of cash - Use of payment options other than cash including, credit cards, debit cards, POS terminals, stored value cards, mobile payments, etc. could result in the significant reduction in the use of cash.
  • Regulated by RBI and Government of India - Business is highly dependent on the banking sector in India which is regulated by RBI and Government of India and any adverse development with respect to India Banks that could adversely affect the demand for cash management services or their deployment or utilization of ATMs could adverse effect the business.
  • Neo Bank - Neo Bank is a bank that operates entirely online, providing services to its customers through digital channels. Unlike traditional banks, Neo Banks do not have physical branches and all transactions are conducted via digital or mobile platforms.

What Could drive Re-rating?

  • Large ATM pipeline to help maintain momentum as there are 40,000 ATMs are expected to be added in next 1-2 years.
  • Entry into ATM manufacturing. CMS has set up a facility in Chennai to manufacturing ATMs and Kiosk in FY23.
  • Higher branch addition by private sector banks would require ATM & micro ATMs.
  • Industry is growing at double digit, which could add tailwind to growth as existing relationship enables cross sale.

(L) Management Outlook

- Currently cash management is also about 70% of the company's revenue which will be down to ~60% in the next 3-4 years.

- Meanwhile managed services and IoT business will get to 30-40% in revenue by FY25.

- Moreover, company is expecting its revenue to grow at 18% CAGR till FY25.

- Private sector banks have also made announcement that they intend to expand its branch network to almost 10,000-12,000 branches.

- In the last 2 years company has seen addition of almost 20,000 ATM, and also have the future pipeline of about 40,000 ATMs.

(M) SWOT Analysis

CMS Info System - SWOT Analysis

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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