CMS Info Systems IPO: All You Need To Know
The initial share sale of India's largest cash management service provider to ATMs starts on Dec. 21.
CMS Info Systems Ltd., a company promoted by private equity firm Baring Private Equity Asia, will sell shares at Rs 205-216 apiece in its initial public offering starting Tuesday, Dec. 21.
The initial share sale of India's largest cash management service provider to ATMs comprises an offer for sale of Rs 1,100 crore by its promoter. The company is seeking a market value of Rs 3,196.80 crore at the upper end of the price band.
The promoter is offering 34.4% stake in the IPO; its stake will fall to 65.6% after the share sale.
Issue Details
Issue opens on: Dec. 21.
Issue closes on: Dec. 23.
Issue size: Rs 1,100 crore.
Face value: Rs 10 apiece.
Lot size: 69 equity shares and multiples.
Listing on: BSE and NSE.
Lead managers: Axis Capital, DAM Capital, Jefferies and JM Financial.
Use Of Proceeds
The company won't receive any proceeds as it's an offer for sale by the promoter, Sion Investment Holdings Pte., an affiliate of Baring Private Equity Asia.
Business
The company is India’s largest cash management company based on number of ATM points and number of retail pick-up points as of March 31, 2021.
In FY21, the total currency throughput—or the total value of the currency passing through all its ATM and retail cash management businesses—amounted to Rs 9,15,886 crore. Its business includes installing, maintaining and managing assets and technology solutions on end-to-end outsourced basis for banks under long-term contracts.
It caters to a broad set of outsourcing requirements for banks, financial institutions, organised retail and e-commerce companies in India.
It has three main businesses:
Cash Management Segment: It includes end-to-end ATM replenishment services; cash pick-up and delivery; network cash management and verification services or called retail cash management services; and cash-in-transit services for banks. This formed 66.74% of revenue from operations in the five months through August.
Managed Services: This service includes banking automation product sales, deployment and associated annual maintenance; end-to-end brown label deployment and managed services for banks; common control systems and software solutions, including multi-vendor software solutions and other security and automation software solutions; as well as remote monitoring for ATMs. This accounts for 30.64% of the revenue from operations in the five months through August. The company has an order book of Rs 2,000 crore to be executed over the next 5-7 years.
Others: Includes end-to-end financial cards issuance and management for banks and card personalisation services.
Cash management services are largely route-based and negotiated on a yearly basis. The managed services are annuity based revenue from long-term contracts providing high revenue visibility.
The company has a pan-India fleet of 3,965 cash vans and network of 238 branches and offices as on Aug. 31 that covers all of India’s states and union territories, barring Lakshadweep. It covers 97.04% of India’s districts and 77.46% Indian postal codes.
Customers
For 2021 and the five months ended Aug. 31, revenue contribution of its top three customers in percentage terms was 42.36% and 44.59%, respectively. The corresponding figures for its top five and top ten customers are 55.73% and 57.01%, and 75.13% and 74.97%, respectively.
Its largest customer is a state-run bank that contributed 17.90% and 18.78% of revenue in FY21 and in the five months through August.
Financials
The company earned revenue of Rs 626.29 crore in the first five months of FY22.
Peers
CMS Info Systems competes with SIS Ltd., AGS Transact Technologies Ltd. and Radiant Cash Management Services.
Risk Factors
A decrease in the availability or use of cash as the predominant mode of payment in India could have an adverse effect on business, results of operations, cash flows and financial condition.
Business is highly dependent on the banking sector in India and any adverse development with respect to Indian banks that adversely affects their utilisation and demand for cash management services or their deployment or utilisation of ATMs could adversely affect results of operations, cash flows and financial condition.
Business and operations have been and may continue to be materially and adversely affected by the Covid-19 pandemic.
Business has significant expenses in relation to employee benefits and cash vans and transportation. Any material increase in any of these expenses could affect ability to competitively price its services, maintain or increase profitability and results of operations.
It derives a substantial portion of its revenue from a limited number of customers. If one or more of its key customers were to suffer a deterioration in their business, ceases doing business with it or substantially reduce its dealings, its revenues could decline, which may have an adverse effect on business, results of operations, cash flows and financial condition.
Business is subject to the risk of criminal attacks of various types by third parties, including armed robbery, theft and fraud.
Business has significant expenses in relation to services procured from third parties like security services, etc. Any material increase in any of these expenses could affect our ability to competitively price our services, maintain or increase our profitability and results of operations.