CMS Info Systems

CMS Info Systems reported consolidated revenue of ₹618 crores for Q3 FY26, achieving a sequential growth of 1.6%. Despite this modest growth, the quality of revenue improved, with service revenue increasing by 4% quarter-on-quarter. Business EBITDA grew 9% QoQ to ₹158 crores, leading to a significant 160 basis points expansion in EBITDA margins, from 23.9% in Q2 to 25.5% in Q3. This margin improvement was primarily driven by strong performance in both Cash Logistics and Managed Services & Technology segments.

The Managed Services & Technology segment demonstrated robust growth, with revenue increasing 18% QoQ from ₹216 crores to ₹254 crores, and EBITDA growing 12% to ₹78.5 crores. The tech and payments business, including the Hawka platform, is on a strong growth trajectory, aiming to reach ₹400 crores in revenue by FY27, representing a 30% CAGR. The Hawka business specifically is projected to double its ARR from ₹100 crores to ₹200 crores level, indicating successful productization and market penetration.

Reported PBT for Q3 FY26 saw a decline from ₹95.6 crores in Q2 to ₹88.1 crores, primarily due to specific one-off^📎 items. These included a ₹11.1 crores provision for a new labor code in Q3, and the absence of a one-time^📎 gain of ₹12 crores from provision reversal in Q2. The company also faced challenges from higher DSOs with midsized MSPs due to credit tightening, which had a negative impact on revenue, though DSOs are expected to normalize by March end.

Management expressed strong confidence in the company's future trajectory, forecasting overall revenue for FY27 in the range of ₹2,800-2,900 crores, with services revenue contributing ₹2,700-2,800 crores. This growth is expected to be accompanied by a recovery in EBITDA margins to the 25-26% range for FY27. Key growth drivers include the full rollout of the SBI cash RFP, an anticipated increase in ATM count to 74,000-75,000 by March/April, and continued robust growth across all three restructured business platforms.

CMS Info Systems maintains a clear capital allocation strategy, prioritizing organic growth, followed by accretive M&A, and then shareholder returns. This quarter saw the acquisition of Securens for ₹70 crores, enhancing its Vision AI platform. Additionally, a term sheet was signed for an ATM management solutions business from a leading MSP, valued at ₹100-125 crores, with closure aimed for March end. The Board is also evaluating buybacks closer to year-end, considering the company's capital needs for ongoing growth and M&A opportunities.

The company is actively diversifying its revenue mix, with the contribution from its largest customer reducing from 22% to 18%, while private sector banks and direct-to-retail segments are increasing their share from 24% to 30%. Operational optimization efforts include pruning unprofitable retail points and scaling the gig operating model to over 2,000 partners, covering 20% of retail points. These initiatives are aimed at ensuring a healthier revenue base and improved profitability, moving towards a more agile and flexible network.