CMS Info Systems Limited — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

CMS Info Systems reported a steady Q3 FY25 with PAT growing 7% YoY to ₹93.2 crores, driven by strong Cash Logistics performance and margin expansion. Despite flat consolidated revenue and a decline in MS & Tech Solutions, the company saw market share gains and secured new strategic wins. Execution delays in the PSU order book impacted FY25 revenue guidance, but management remains optimistic for FY26 growth and mid-term opportunities.

Highlights

  • PAT grew 7% YoY to ₹93.2 crores, with PAT margin expanding 140 bps to 16%.

  • Cash Logistics segment revenue grew 8% YoY to ₹404 crores, achieving a robust 25.6% EBIT margin.

  • Market share in Cash Logistics segment increased from 40% to 42%.

  • Retail business grew 15% year-to-date, driven by aggressive thrust.

  • Secured breakthrough wins in Managed Services and Tech, including a large end-to-end fixed fee outsourcing contract with a leading private bank and an AIoT remote monitoring deployment for a quick commerce customer.

Concerns

  • Consolidated revenue was flat YoY at ₹581.5 crores.

  • MS & Tech Solutions revenue declined ~10% primarily due to lower banking automation revenue.

  • FY25 revenue estimate revised down by ₹150 crores due to unexpected delays in large PSU order book execution.

  • Order book execution faced delays due to OEM replacements, testing cycles, and incumbent vendor handover issues.

Key financials

2 periods

Headline

  • Consolidated Revenue
    ₹581.5 Cr
    YoY 0%
  • Service Revenue Growth
    —
    YoY +3%
  • PAT
    ₹93.2 Cr
    YoY +7%
  • PAT Margin
    16%
  • PAT Margin Expansion
    140 bps

9M

  • FY25 Revenue Growth
    —
    YoY +10%
  • FY25 PAT Growth
    —
    YoY +7%

What they filed

Q1 FY27: revenue up 1.3%, net profit down 10.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue625 581 619 627 609 −3%618 +6%633 +2%635 +1%
EBITDA153 159 162 158 137 −10%140 −12%161 −1%169 +7%
Net profit91 93 98 94 73 −20%57 −39%79 −19%84 −11%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹614 Cr Total
  • Cash Logistic business ₹404 Cr 65.8%
  • Managed Services and Technology Solution business ₹210 Cr 34.2%

Capital allocation

high confidence
  • Capex ₹150 Cr New plan
    • Order execution for MS segment
    • Growth and maintenance for Cash business
    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. (Pankaj Khandelwal, Page 4); It's mostly for the MS segment, and for the order execution as we are going from 30% to 60%. So, most of these are in work-in-progress, which I think we will be able to conclude by the end of March. Yes, it will be MS, it will be RMS. There are obviously a little bit of maintenance CAPEX every year. There is some CAPEX, obviously, for the Cash business for growth. So, it's a mix, but majority of this would be linked to the MS order book. (Pankaj Khandelwal, Rajiv Kaul, Page 16)
  • Debt Debt disclosed
    We like to have no debt. (Rajiv Kaul, Page 17)
  • Dividend ₹3.25/share (interim)
    I'm happy to announce that our Board has declared an interim dividend of INR 3.25 per share. (Pankaj Khandelwal, Page 4)
  • M&A Deal Acquisition · Pending regulatory

    Opportunity to grow MS and Tech Solutions with large private sector banks.

    This engagement is also an opportunity for us to grow our MS and Tech Solutions with large private sector banks. We will be able to share more details on this at the end of FY '25. (Rajiv Kaul, Page 5)
  • M&A Deal Acquisition · Abandoned

    Debt collection business put on pause due to NBFC loan situation and NPA at personal loans.

    So, I think debt collection, we told you we have ramped down internally and our priority on debt collection will be focused to look at the sector only through an acquisition or a partnership. We have done extensive market work, commercial diligence of players there. We have put it on pause for right now, just given the NBFC loans, the NPA at the personal loans situation. (Anush Raghavan, Page 10)
  • M&A Deal Acquisition · Pending regulatory

    Discussions for partnership/acquisition in gold loan and bullion business.

    On the gold loan and bullion business, organically, we are doing well. We are actively in discussions with a couple of players from a partnership and acquisition perspective. (Anush Raghavan, Page 10)
  • Liquidity Liquidity disclosed Company has adequate cash for any opportunity, preserving cash generation internally.
    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. (Rajiv Kaul, Page 17)

Guidance & targets

Revenue

  • Overall Revenue Growth Revenue · mid-term · High confidence 13% to 15% CAGR
    You combine these 3 on organic basis, our revenue growth opportunity is at 13% to 15% CAGR.

    — Rajiv Kaul

  • Cash Logistics Business Growth Revenue · mid-term · High confidence 10% to 13%
    The Cash Logistics business can grow between 10% to 13% in the midterm.

    — Rajiv Kaul

  • MS and Tech Business Growth Revenue · mid-term · High confidence upwards of 15%
    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

  • AIoT RMS Business Growth Revenue · medium term · High confidence 15% to 20% CAGR

    — Rajiv Kaul

  • FY25 Revenue Estimate Revenue · FY25 · High confidence ~₹2,450 crores

    Previously ~₹2,600 crores → ~₹2,450 crores

    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. The impact from this itself is to the tune of INR 150 crores lower revenue in FY '25.

    — Rajiv Kaul

  • FY26 Services Revenue Growth Revenue · FY26 · High confidence 15% plus
    This will, though ensure that FY '26 services revenue growth can ramp back up to 15% plus.

    — Rajiv Kaul

Order Book

  • PSU Order Book Execution Order Book · Q4 FY25 · High confidence 60% live
    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.

    — Rajiv Kaul

Profitability

  • AIoT Business IRR Profitability · High confidence 18% to 25%
    The margin profile of any of our AloT businesses where we choose to work in is reasonably good, and IRRs will range in the 18% to 25% range.

    — Rajiv Kaul

Revenue Mix

  • BLA Revenue Share Revenue Mix · High confidence less than 10%

    Previously less than 15% → less than 10%

    No. So, we are cautious on BLA. We are increasingly more cautious on BLA. If you remember at IPO, we said we will position size BLA to less than 15% of revenue. In fact, now we are saying that BLA will be less than 10% of our revenue.

    — Rajiv Kaul

  • Software and RMS Business Share of Revenue Revenue Mix · FY27 · High confidence 10%

    From 7% today

    Our overall Software and RMS business is 7 percentage of our overall revenue. So, our goal is to get to the 10% mark by FY '27 on organic basis.

    — Anush Raghavan

  • MS & Tech Recurring Revenue Percentage Revenue Mix · FY26 · High confidence almost 85%
    FY '26, we hope that recurring revenue should be almost 85% of this business segment.

    — Rajiv Kaul

What to watch in Q4 FY25

PSU Order Book Execution Progress

Q4 FY25
Current 30% completed by Q3 FY25
Target 60% live by Q4 FY25

Why it matters

Crucial for meeting revised FY25 revenue expectations and setting the stage for FY26 growth.

Our focus remains on getting 60% of this order book live by Q4.

Risks & concerns

  • ATM base disruption due to instability at a key industry player

    medium

    Disruption in Q3 due to instability at a key industry player led to banks transitioning base to stronger market players.

    Management acknowledged

  • Delays in large PSU order book execution

    medium

    Unexpected delays in the INR 1,900 crore plus PSU order book execution resulted in INR 150 crores lower revenue for FY25.

    Management acknowledged

  • Operational intensity and distraction due to market player transition

    medium

    Heightened operational intensity as banks transition from an affected market player, causing distraction and potentially delaying other projects.

    Management acknowledged

  • Order book execution delays (OEM, testing, handover)

    medium

    Delays caused by OEM replacements, extensive testing cycles (NPCI, Visa, Master), and incumbent vendors delaying handovers.

    Management acknowledged

  • NBFC loan situation impacting debt collection M&A

    medium

    Debt collection business M&A put on pause due to the NBFC loan situation and NPA at personal loans.

    Management acknowledged

Q&A highlights

4 direct
Long-term revenue guidance and market dynamics due to competitor issues Partial
I think the right time to discuss the FY '26-'27 sort of trajectory would be the Investor Day... 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.

Analyst sought clarity on long-term growth and potential M&A from competitor distress, management deferred specific long-term guidance but acknowledged market shifts.

Asked by Balaji Subramanian

Order book execution progress, cards business margin sustainability, and retail vs ATM/CIT growth Direct
From that 15% in Q2, we have been able to quickly ramp it up to 30% by Q3, and with the good momentum in across most of these contracts, we hope to further double that and get to 60% by Q3... historically, our card margins was over 20%... now the margins have improved up to the normal level... ex-retail, our ATM and CIT would have still grown by about 7%.

Provided detailed updates on key operational metrics, confirming progress on order book, sustainability of improved margins, and clarifying segment growth dynamics.

Asked by Prithvish Uppal

Profitability and nature of AIoT dark store win Direct
the win in this customer is a cross-sell win. It is a customer who we have been working with from a cash logistics perspective... our overall AIoT and RMS business is very margin accretive... IRRs will range in the 18% to 25% range.

Clarified the strategic nature of a new win (cross-sell) and provided specific profitability metrics (IRR) for the AIoT business, indicating strong margin potential.

Asked by Prithvish Uppal

MS segment Q4 growth, quick commerce order size, and overall revenue mix Partial
All of that revenue slip is primarily in the MS business. So, the revenue guidance for MS would be lower than the estimated... Split of revenue between cash and MS will largely be in the 60-40 range. That range will remain.

Management revised down MS segment revenue expectations for FY25 and confirmed the strategic revenue mix, but deferred on quantifying the quick commerce order size.

Asked by Nitish Rege

Ongoing industry disruption, opportunity loss in Q3, and momentum in new businesses (gold/loan collection) Partial
We are in the middle of it still... this does cause distraction on our client side... from an investor perspective, I would say that this is a decent opportunity for us as a company... We have put it on pause for right now, just given the NBFC loans, the NPA at the personal loans situation.

Addressed the complex impact of industry disruption (both opportunity and distraction) and provided an update on the status of new business initiatives, including a pause on debt collection M&A.

Asked by Baidik Sarkar

Impact of banks lowering ATMs, virtual bodyguard and bullion business revenue/margin Direct
The second is within the cash management here, overall ATMs is one aspect. What we also do care about is what is the outsourced market. That opportunity is anywhere between 80,000 to 100,000 today... we are operating at fairly good quality, world-class margins. So, any business line and any new business contract we look at, we look at making sure that we can maintain our strong margin profile and return ratios.

Explained the multi-layered ATM opportunity beyond just new installations, emphasizing outsourcing, and confirmed the company's focus on maintaining strong margins in new businesses like bullion.

Asked by Jatin Parashar

Order book execution delays becoming a 'new normal' and impact on FY26 growth Partial
I would like to hope that this doesn't become a usual norm... I'm hoping with the Q4 and March end pressures, we should see much faster ramp-up... I think at each client, it's been a different factor. So, I really can't tell you if it's a 6- to 9-month process.

Analyst probed a critical operational concern, and management expressed hope for faster execution while acknowledging the complexity and varied reasons for delays, suggesting FY26 growth could look better.

Asked by Aasim Bharde

CAPEX allocation (MS vs Cash) and strategy for BLA business Direct
It's mostly for the MS segment... No. So, we are cautious on BLA. We are increasingly more cautious on BLA... we started segmenting that to fixed price and transaction price. We hardly do much on transaction pricing. We prioritize picking up contracts where there's a fixed price with some inflation-linked pricing built into it.

Clarified the primary allocation of CAPEX towards the MS segment and detailed the strategic shift in the BLA business towards more cautious selection and fixed-price contracts to ensure margin quality.

Asked by Aasim Bharde

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

CMS Info Systems reported a flat year-on-year consolidated revenue of ₹581.5 crores for Q3 FY25, though service revenue grew by 3%. Despite this, the company achieved a 7% YoY growth in PAT, reaching ₹93.2 crores, with the PAT margin expanding by 140 basis points to 16%. For the nine months of FY25, the company delivered 10% revenue growth and 7% PAT growth, demonstrating consistent performance amidst market challenges.

Segmental Performance: Cash Logistics and Managed Services & Technology

The Cash Logistics business recorded a strong Q3 FY25, with revenue growing 8% YoY to ₹404 crores and EBIT increasing 6% to ₹103 crores, yielding a robust 25.6% margin. The company's market share in this segment expanded from 40% to 42%. Conversely, the Managed Services and Technology Solution business saw a revenue decline of approximately 10% to ₹210 crores, primarily due to lower banking automation revenue. Despite the decline, this segment maintained an EBIT of ₹38 crores and a margin of 17.9%, and has grown 2.2 times in the last three years, now contributing 40% of total revenue.

Order Book Execution and FY25 Revenue Impact

The company's large PSU order book, initially estimated at over ₹1,900 crores, faced significant execution delays. While 15% was completed by H1 FY25, progress ramped up to 30% by Q3. Management aims to achieve 60% live execution by Q4 FY25. These delays, attributed to OEM replacements, extensive testing cycles, and incumbent vendor handover issues, are expected to result in a ₹150 crore reduction from the initial FY25 revenue estimate of ₹2,600 crores.

Strategic Initiatives and Growth Drivers

CMS Info Systems is aggressively focusing on the retail sector, which has seen 15% year-to-date growth. The company secured breakthrough wins in Managed Services and Tech, including a large end-to-end fixed fee outsourcing contract with a leading private bank and an AIoT remote monitoring deployment for a quick commerce customer. Investments in technology, automation, and risk management have expanded margin profiles, with AIoT and RMS businesses showing an IRR of 18-25%. The company aims for its Software and RMS business to grow from 7% to 10% of overall revenue by FY27.

Capital Allocation and Shareholder Returns

The company's CAPEX for the first nine months of FY25 was ₹50 crores, with an expectation to reach ₹150-200 crores for the full year, primarily directed towards the MS segment for order execution. Management reiterated its preference for a debt-free balance sheet and a strategy of organic growth in core businesses, while remaining open to accretive acquisitions. An interim dividend of ₹3.25 per share was declared, reflecting the company's commitment to shareholder returns.

Market Dynamics and Competitive Landscape

The ATM base experienced disruption in Q3 due to instability at a key industry player, leading to banks transitioning business to stronger players. This situation presents both an opportunity for CMS to gain market share and grow its MS and Tech Solutions with private sector banks, but also causes operational intensity and distraction. The company is cautious on the BLA business, shifting focus to fixed-price contracts with inflation-linked pricing, and aims to reduce BLA's revenue share to less than 10% from the previous target of less than 15%.

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