IPO Analysis: CMS Info Systems Ltd
IPO rating: Invest for listing gains
About the issue:
CMS Info Systems Ltd works as an outsourcer for banks for cash logistics, automation, end-to-end services play, etc. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises an offer for the sale of shares worth Rs 1,100 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 205 to Rs 216 per equity share. The IPO opening date is December 21, 2021, while it will be closing on December 23, 2021. The issue will be listed on the exchange on December 31, 2021. The IPO market lot size is 69 shares. A retail-individual investor can apply up to a maximum of 13 lots (897 shares or Rs 193,752).
The objects of the offer are:
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To carry out an offer for sale of equity shares by promotors aggregating up to Rs 11,000 million.
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To achieve the benefits of listing the equity shares on the stock exchanges.
CMS Info Systems IPO Details:
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IPO Opening Date
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Dec 21, 2021
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IPO Closing Date
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Dec 23, 2021
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Issue Type
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Book Built Issue IPO
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Face Value
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₹10 per equity share
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IPO Price
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₹205 to ₹216 per equity share
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Market Lot
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69 Shares
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Min Order Quantity
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69 Shares
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Listing At
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BSE, NSE
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Issue Size
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[.] Eq Shares of ₹10
(aggregating up to ₹1,100.00 Cr)
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Offer for Sale
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[.] Eq Shares of ₹10
(aggregating up to ₹1,100.00 Cr)
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QIB Shares Offered
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Not more than 50% of the offer
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Retail Shares Offered
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Not less than 35% of the offer
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NII (HNI) Shares Offered
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Not less than 15% of the offer
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About the company:
CMS Info Systems Limited is India's largest cash management company in terms of the number of ATM points and retail pick-up points as of March 31, 2021. The company is engaged in installing, maintaining, and managing assets and technology solutions on an end-to-end outsourced basis for banks, financial institutions, organized retail and e-commerce companies in India.
The business operates in three segments; 1) Cash management services, 2) Managed services i.e. banking automation product sales, common control systems, and software solutions, etc., and 3) Others i.e. financial cards issuance for banks and card personalization services. As of August 31, 2021, it has a network of 3,965 cash vans and 238 branches and offices to cover all of India's states and union territories.
Competitive strengths:
Leading market player with strong fundamentals.
Strong Pan-India network of 3,965 cash vans and 238 branches and offices.
Longstanding customer relationships with increased business opportunities.
Integrated business platform offering a range of products and services.
Experienced and highly qualified management team.
Company Financials:
The total revenues for FY21 have grown with just a CAGR of 6.8 per cent since FY19. However, the net profit for FY21 has grown with a CAGR of 32.4 per cent since FY19. For FY21, the cash management services business contributed about 68.6 per cent to the revenues, followed by 27.8 per cent by managed services and remaining by other services.
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Particulars
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For the year/period ended (₹ in million)
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31-Aug-21
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31-Mar-21
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31-Mar-20
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31-Mar-19
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Total Assets
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15,780.86
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16,118.10
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13,327.38
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10,927.04
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Total Revenue
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6,297.23
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13,219.21
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13,882.94
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11,593.19
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Profit After Tax
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844.70
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1,685.23
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1,347.09
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961.41
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Recommendation:
Because of a strong informal economy, low ATM penetrations and cash's role as a store of value in India, a significant part of the cash in India does not flow in the ATM/banking system. Further, cash velocity in India in 2020, measured by ATM withdrawals is approximately 17 per cent of GDP or 1.5 times of currency in circulation (CIC), which is much lower compared to other countries like Brazil (5.5x), China (8.0x). This indicates that there is significant headroom for growth in India for the volume of cash circulated through the ATM/banking system. India has traditionally been a cash economy and transactions are predominantly cash-based although, in recent years, the percentage of transactions settled in cash has been declining steadily due to the increase in transactions settled by digital payments. However, despite an increase in digital transactions in India, about 90 per cent of payment transactions are still cash payments.
Even after the demonetization, the cash was back in circulation almost at the previous levels. The digitalization move was not enough to bring about a significant change in the cash-based economy. Although people in metro cities have adopted digital means, tier-II and below cities and rural areas prefer cash due to various reasons.
Talking about the company-specific factors, the financials of the company appear good. It is a profit-making firm. Even during the covid times, the company has performed resiliently. However, the current offer does not include fresh issues, the promoters alone are going to sell their stake. We recommend our readers to invest in the IPO for listing gains.