CMS Info Systems IPO Note

Strengths

•    Leading player in a consolidating market with strong fundamentals
The industry it operates in is consolidating due to changes in regulations to ensure that cash management  companies  meet certain operating standards and trends in customer preference favouring larger cash management companies with more scaled and stable operations. Even then, CMS Info Systems’ wide network allowed it to expand further across the country becoming the one of the top two companies in Cash Management segment. In addition, as the demand for cash and cash-related services in India has increased as banks and other participants in India are outsourcing their cash management needs. The total value of the currency passing through all of the firm’s ATM and retail cash management businesses, amounted to Rs. 9,158.86 billion.

•    Pan-India footprint with deep penetration in growing markets
Pan-India fleet of 3,911 cash vans and network of 224 branches and offices based on the numbers for 2021, cover all of India’s states and union territories, except remote union territory of Lakshwadeep, 96.36% of India’s districts and 78.63% Indian postal codes, including difficult-to-reach and remote rural and semiurban areas, such as the India-Pakistan and India-China border regions, villages in remote regions in the Himalayas, the Andaman and Nicobar islands, border towns in Kutch, and remote towns in North East India. Government's financial inclusion programs, including Pradhan Mantri Jan Dhan Yojana and other direct benefit transfers, provide direct benefits and subsidies to populations in semi-urban and rural areas and are expected to result in an increase in cash withdrawals and a higher demand for ATMs

•    Longstanding customer relationships leading to increased business opportunities
In Fiscal Years 2019, 2020 and 2021, the company generated at least Rs. 20.0 crores in revenues. In addition: 
     o    in ATM cash management business, the firm has six of the 12 largest MSP customers for more than ten years and four additional customers for more than five years. Firm’s contracts with these customers typically range from one to five years
     o    in the retail cash management business, the firm has nine largest customers for more than 10 years. Contracts with these customers typically range from one to five years.

•    Integrated business platform offering a broad range of services and products
The company has a track record of successfully incubating and building multiple new service lines, allowing to offer the customers a broad range of services and products. The company entered a multi-vendor software solutions segment and is now a leading player for multi-vendor software opportunities in India. The company also entered the remote monitoring segment in 2021 and has an order book for 14,920 ATM sites in July 2021 based on two contract wins of 9,520 and 5,400 ATMs, respectively.
•    Systems and processes to manage and scale an operationally complex business
As market share and sales volumes increase, operating resources can often be deployed more efficiently and margins can be improved. India’s largest cash management company based on number of ATM points and number of retail pick-up points. The firm has serviced 52,691, 58,458 and 62,919 ATM points, respectively, through its ATM cash management services, and 41,836, 44,497 and 40,249 retail pick-up points, respectively, through its Pan-India fleet. In order to maximize the scalability of operations, customised systems are leveraged and processes that are designed around internally developed applications tailored to cater to the specific requirements of the Indian banking sector and other customers.
•    Track record of strong productivity and operational excellence
The firm has actively worked to increase its profitability and the efficiency with which they deploy resources by: 
     (i)    increasing the density of stops in the routes of cash vans
     (ii)    leveraging the fixed costs of cash processing infrastructure
     (iii)    introducing other efficiencies, such as by standardizing and automating processes

Strategies

•    CMS platform offers customers a single point of reference across India for their operations. Its integrated offerings and knowledge of the markets and regional requirements in which they operate enable them to provide customers with better quality services that are tailored to customers’ needs and offer them a single-point solution for a variety of their outsourcing needs. 
•    CMS plans to acquire and incubate new relevant businesses and scale them up where they find opportunity for potential growth. In 2017, they acquired the business of a small Brown Label ATM services company. Currently, as the industry is consolidating with increased competition, the firm is looking for opportunities that consolidate their market position in existing businesses.
•    CMS currently provides a wide range of services across each stage of the entire cash cycle in India and assist customers to meet their outsourcing needs and increase the speed with which they handle cash by automating and decreasing duplication in the processing and turnaround of cash. Many banks are outsourcing their ATM servicing requirements on an end-to-end basis, and since they are present across the entire ATM and cash management value chain, they can offer their customers integrated service and product offerings to meet their needs. 
•    The company identified and is in the process of expanding other new business areas:
      o    Remote Monitoring - leverage the remote monitoring technology to differentiate its product offering and target sectors beyond only the ATM and banking sectors,
      o    End-to-end currency management – for banks include cash processing at currency chests for counting, sorting, checking note fitness, packaging, among other services and end-to-end management of currency chest for banks and NBFCs, including providing manpower and transport at various locations;
      o    Payment Solutions – The firm intends to use banking relationships and technology capabilities to develop and commercialize a wide-array of differentiated payments solutions, including bill payments, POS networks, digital payments and other merchant payment solutions, and micro-ATM offerings
      o    Financial services distribution – A key focus of business strategy is financial services distribution, which includes corporate business correspondent ("CBC") services, such as cash withdrawals and deposits, payments, KYC, account opening, retail payments, among other things. Fulfilment of financial services on behalf of banks and NBFCs by leveraging existing infrastructure in order to fulfil financial services being offered by banks and NBFCs, such as on demand pickup and doorstep banking services, NBFC soft loan collections and disbursements.

Competition
 
The cash management industry has been consolidating globally, driven primarily by the need for scalability and operational efficiencies. Specifically, in India, the cash management industry is undergoing a maturing process, resulting in consolidation among existing industry participants. Another driver for consolidation was customers’ migration towards more established and well-capitalized service providers who focus on risk and operational management and regulatory compliance in the industry.
Competition in the industry is based on a number of factors, including quality of service, price, ATM uptime, scale of distribution and service networks, scope of services, geographic locations, reliability, customer reporting and relationships and contract length.

Competitors in different Segments