Should you be Investing in CMS Info Systems Limited IPO?

In this article

• IPO details
• Offer break-up
• IPO Object
• IPO Strengths
• Key Risks
• CMS Info Systems Financials

Incorporated in 2008, Mumbai-based CMS Info Systems Limited is one of the largest ATM cash management companies worldwide going by the number of ATM points as of March 31, 2021. For the financial year 2020-21, the total value of the currency passing through all of their ATM and retail cash management businesses amounted to ₹9.2 lakh crores. The company is engaged in installing, maintaining, and managing assets and technology solutions for banks, financial institutions, organized retail and e-commerce companies in India under long-term contracts.

IPO Brief

• IPO open from: Dec 21^th – Dec 23^th 2021
• Face value: ₹10
• Price Band: ₹205-216
• Market Lot: 69 shares
• Minimum Investment: ₹14,904
• Listing on: BSE and NSE
• Total issue size: up to ₹1,100 crores
• Fresh Equity Issue: up to ₹0 crores
• Offer for sale: up to ₹1,100 crores
• Promoters: Sion Investment Holdings Pte. Limited is the promoter of the company which holds 100% of pre-issue paid-up capital.
• Book running lead managers: Axis Capital Limited, DAM Capital Advisors Ltd (Formerly IDFC Securities Ltd), Jefferies India Private Limited, JM Financial Consultants Private Limited.

What is an IPO and should you invest in them?

Offer Break-up

The offer is broken up into the following investor classes:

• Leading player: CMS Info Systems is India’s largest cash management company based on the number of ATM points. It has a market share of 24.7%, based on the total number of ATMs, as well as a market share of 41.1%, based on the total number of outsourced ATMs.
• Pan-India footprint: With a fleet of 3,965 cash vans and 238 branches,CMS covers97.04% of India’s districts and 77.46% Indian postal codes, including difficult-to-reach and remote rural areas.
• Longstanding relationships with the customer: The company has good relationship with 6 out of the 12 largest MSP customers for more than 10 years and in the retail cash management business, the company’s 9 largest customers have stayed for more than 10 years.
• The broad range of services and products: CMS has successfully built multiple new service lines. In the year 2017 the company acquired small Brown Label ATM services to increase the capacity to provide Brown Label ATM services to mid-sized banks and other customers.

Key Risks

• Digital India movement: Indian government prominently promotes “Digital India” and due to this any decrease in the availability or use of cash or change in the mode of payment could harm the business.
• Dependency on the banking sector: The company’s cash management service contributes 66.74% of its revenue, which is ultimately utilized by the bank and any reduction in demand could have an adverse effect on the company’s business.
• Limited customer base: The company depends on a limited number of customers for a significant portion of its revenues. Its top three customers contribute 44.59% of revenue in the year 2021 and the top 10 customers contribute 74.97% of revenue.

COMPANY’S FINANCIALS

CMS recorded revenues of ₹1,306 crores for the financial year 2020-21, which were down 5.6% from the previous year. But profit for FY21 was higher at ₹168.5 crores compared with ₹134.7 crores for the previous financial year.

Net margins have been improving consistently from 9.7% in 2019-20 to 12.9% in 2020-21. Net margins for the first five months of this financial year came in at 13.5%.