CMS Info Systems Limited

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.