Cms Info Systems Ltd (NSE: CMSINFO) Q1 2026 Earnings Call dated Jul. 24, 2025
Corporate Participants:
Unidentified Speaker
Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer and Whole Time Director
Pankaj Khandelwal — President and Chief Financial Officer
Anush Raghavan — Chief Business Officer
Puneet Bhirani — President of Operations
Analysts:
Unidentified Participant
Balaji Subramanian — Analyst
Prithvish Uppal — Analyst
Presentation:
operator
SA SA. SA.
operator
Foreign Ladies and Gentlemen, good day and welcome to the CMS InfoSystem Limited Q1FY26 earnings conference call hosted by MK Global Finance Services Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on their touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Avinar Singh from MK Global Finance Ltd. Thank you. And over to you sir.
Unidentified Participant
Thank you Sothi Good evening everyone. On behalf of MK Global, I welcome the management and thank them for this opportunity. We have with us today Rajiv Kaul, Executive Vice Chairman, CEO and whole time Director, Pankaj Khandelwal, President and Chief Financial Officer, Anush Raghavan, President and Chief Business Officer and Puneet Virani, President Operations. I shall now hand over the call to the management for their opening remarks. Over to you.
Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer and Whole Time Director
Good afternoon everyone. Thank you for joining our Q1 FY26 analyst call. In a seasonally weak quarter marked by geopolitical issues and muted consumption, we delivered a consolidated revenue of 627 crores up 5% year on year and a PAT of 93.6 crores which is a 3% growth. The above mentioned issues resulted in a 10% dip in India ATM transactions at an aggregate level and also impacted the variable billing in our retail cash management business. Our best estimate is that the revenue and EBIT impact of these would have been to the tune of 8 to 10 crores in Q1.
Additionally, wage increases and long term unit agreements increase our Q1 costs and as you can see from earlier year trends, this gets evened out over the year through productivity gains and through pricing. In the last five months our field operating teams have had to work exceptionally hard to help large banks with handling their ATM channel availability issues at an industry level which we mentioned to in the last call. While we have seen some other services firms delay their wage hikes, we haven’t done so to be fair to our team members for their effort and hard work.
Keeping our teams motivated and engaged in a business which relies on trust each day is very important. On a positive note, we expanded our cash logistics footprint to 153,000 business touch points which is a 9% year on year increase. We also secured new order wins worth 500 crores in the quarter which also includes a landmark multi year multi vendor software contract with a leading bank. We are pleased to announce a binding agreement to acquire Securance Systems Private Limited, a pioneer in the AIOT remote monitoring space with a strong reputation built over years of investment in tech capabilities.
We have known the company for several years and have high regard for what the team has built. We won this deal against other strategics and an enterprise value of approximately 80 crores and this type of deal is a win win and aligns perfectly with our M and A philosophy valued at approximately 10x, FY25 adjusted EBITDA and estimated 4x on a post synergy basis. This will help us scale our vision AI business, expand our client base and enhance our tech stack for intelligent surveillance and predictive analytics across BFSI and retail. I hope some of you have had the chance to look at our revamped brand positioning launched earlier this week Basis extensive research, we decided to retain the CMS name but change our brand positioning from connecting commerce to a brand promise of unified platform limitless possibilities.
We feel this is bold, forward looking and reinforces our platform approach to building a unified business. This shift also underscores the vital role we play for our customers today as well as the significant platform potential of our platform going forward, examples of which are enumerated very well on our new website www.cms.com. i really urge you to go and have a look at our new website before I hand over to Pankaj for the financial details. Our Metrics While our metrics may not reflect all the underlying effort going into running and strengthening our robust platform, however, I’m very proud of the incredible hard work which our teams are bringing to bear to work every day.
Pankaj
Pankaj Khandelwal — President and Chief Financial Officer
thank you. Rajiv, let me walk you through the financial details for Q1. Our consolidated revenue grew to 627 crore, a 5% increase year on year while our PAT reached to 93.6 crore up 3% on year on year basis. In addition to wage hikes which typically Results in softer Q1, this quarter was further impacted by specific factors which Rajiv talked about earlier. Both cash logistic and managed services reported 8 or 8% year on year growth scaling to 417 crore and 258 crore respectively. The total EBITDA grew by 3% year on year to 159 crores while EBIT remained flat at 113 crores.
Because of timing difference between the investment and corresponding revenue accruals, our balance sheet remains robust and we will continue to discipline the approach of capital allocation to support both our organic growth and strategic acquisitions like Securance. Our current Capex guidance for the year stands as 250 to 300 crores versus the initial guidance of 300 to 325 crores. Let me now hand over to Anush to share key business highlights.
Anush Raghavan — Chief Business Officer
Thanks Pankaj. Good afternoon everyone. Let me share with you a more detailed view of the underlying market trends. To the best of our knowledge, as expected, the ATM installed base has been quite impacted due to AGS related ATM shutdowns across banks. We did mention to you last quarter that it would take a while for the dust to settle and the situation right now still remains quite fluid. These contracts are complex with multiple asset ownership issues, unpaid vendor dues which are all unresolved. Most of the banks are taking time to clean up this old legacy network, preferring to shut down the ATMs and later roll out new RFPs for replacement or expansion.
Out of the almost 20,000 round level ATMs of AGs, almost 50% of them have been shut down as we speak. AGS issue has affected liquidity and credit availability in the sector. This has caused an adverse impact on certain small and mid sized MSPs who are taking time to raise capital for fresh ATM deployments even for those orders that they had won last year. Further, the slowdown in consumption is weighing on ATM transactions. BLA deployers are preferring to wait for economic growth to pick up. Case in point, across key public sector banks, out of 24,000 ATMs awarded over the last year, only 6,000 have been deployed so far.
This causes a downstream and consequential delay and impact on our ATM cash revenues. The Chairman and Managing Director of SBI has been quoted in the media recently affirming that the dip in the SBI ATM base is transitory in nature and expected to recover by H2 in a large public sector bank Cash outsourcing RFP for 10,000 ATMs in March, CMS ended up being the only qualified bidder and we were hopeful for this to go live in Q1 itself. The bank has unfortunately decided however to cancel the rfp, refloat it to get more bidders. We hope for this to close in Q2 and go live in H2.
While these industry trends are challenging in the immediate term, we do believe that it will lead to an accelerating consolidation in the MSP segment which over the medium term should prove positive for pricing and fixed price bla opportunities. Our ATM cash market share has increased to 58 to 60% reflecting our stability amidst the volatility and churn that we witness. As you are aware, our approach changed last year itself in pivoting away from transaction priced BLA contracts and since then I focus on mostly fixed price contracts. In Good news, our 500 crore of order win spans 6 price Bleach, Algo software and card payments and has no transaction linked BLA revenues.
We have significantly scaled up our relationship with ICICI bank over the last 12 months and they are now our second largest customer in Algo MBS software. We have secured a landmark deal meaning that now two of the top four Indian banks will be using our software across 85,000 plus ATMs. This is a strong endorsement of our platform capabilities. With that let me now hand over to Rajiv for the closing remarks.
Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer and Whole Time Director
To summarize Anush’s commentary, I think I want to reiterate that we will focus as a team on doing the right things from a long term perspective. We aren’t chasing growth at any cost. We are very careful and we are walking away from low margin RFPs. We retain our pricing discipline and we prioritize contracts which will give us predictability and scale. At the same time we continue to compete vigorously against lower margin players to gain market share across most of our businesses. This quarter itself was about disciplined execution amid a softer environment. We delivered stable financials, signed a strategic acquisition and continued to make the long term investments in our brand, people and automation.
In our last call we had highlighted our strong FCF and our balance sheet strength of 4000 crores. This is a phenomenal strength. Over the past few years many of you have regularly asked about our M and A plans and have been patiently waiting to hear more. On this front, our growth and M and A strategy has been consistently focused around building and scaling cash flow generative businesses. We have a culture of investing in technology to drive operating leverage at a higher scale and thereby creating a virtuous flywheel over the last decade. For those of you who are new to cms, I want to remind you that CMS has a track record of having done eight programmatic M& A deals at all types of sizes and all of them successful.
The last acquisition we did was in 2021 before our IPO. In the last couple of years it has been challenging to transact given a fairly frothy IPO market. In the last year itself we have come close to signing some mid sized deals but had to walk away either due to cultural misalignment or to deal valuation issues. A case in point. We almost entered the bullion logistics sector through an M and A opportunity but chose to walk away as the promoters wanted A JV for perpetuity. While we would be running the business, this did not make sense for us.
There are other companies we are looking at closely and we will update you as and when there is anything to report. The sectors of interest are mentioned in our investor deck. I do want to reiterate that a tough macro presents a very good opportunity for dealmaking. And while we have been patiently waiting for these times, even though IPO macros can continue to surprise us, in closing we are making solid all round progress in executing what we can control, gaining market share, driving alignment and accountability across our various operating teams. We have done an extensive reorg which we mentioned last time.
Our leadership team is fairly simplified. We have Anush Raghman who has helped build our cash logistics business to its market share dominant position today, who’s now the Chief Business Officer for the entire business across all our businesses. Puneet Bharrani, who joined CMS 16 months ago from Byju’s Ola and earlier emphasis has taken on the entire operational gamut of responsibilities as Chief Operations Officer. This will help us phenomenally in customer centricity, alignment and accountability, along with agility to compete in a fairly aggressive marketplace. With that, I’d like to end our commentary and move forward to Q and A.
Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Hitesh Arora from Abacus Asset Manager. Please go ahead.
Unidentified Participant
Hi Rajiv, I just had a query on the margins for both the businesses, the cash and the managed services businesses. The EBIT margins, the margins have fallen quite sharply. I’m just reading the numbers for the cash business from 25.5% to 23.9% so that’s roughly 160bps down. And even in the managed services it’s down from 17% last quarter to 14.1. So it’s almost 290bps down.
Unidentified Participant
Significant reduction.
Unidentified Participant
And despite that, despite the share of the trading revenue actually would have fallen over the last one year. Just a bit surprised at the steep reduction in the margin. Would you mind to comment?
Rajiv Kaul
Sure. So Hitesh, I mean I’ll have Pankaj give you a little more detail but I think in the last call said we would like you to start thinking about the company and our overall composite level. Because CMS managed services business has become now the second largest customer for CMS ATM cash management. So a lot of the revenue and cost attributing it clearly to each business owner gets very difficult. We continue to report the numbers but I think look at it overall Q1 has been softer in the cash business. Specifically if you think of the wage hike impact in Q1 will have a dip in margins.
We also continue even today to support a large Purposera bank in delivering ATM cash services at marginal cost because they needed help in transition from an earlier vendor. While they will decide on RFP and who will win this contract later in terms of the managed services business at a high level, there is straightaway an operating margin impact from the dip in transactions. I think at an aggregate level In India the ATM transactions for ATM in this Q1 have dipped from 12 to 14 transactions. That goes straight. Unfortunately all the revenue goes straight away from the bottom line.
So I think your question is all fair and valid. I think we’ll have to wait for the year to progress to start seeing changes and improvement in the margin profile as contracts will move up. In fact in Ms. From my memory we also had a large contract where the investments have gone in right panklesh and the revenue accrual will start in the later part. So the capex investments have been made therefore that impacts their bit. But the revenue accrual will start later in the year as the project gets live for billing.
Pankaj Khandelwal
If you see that the EBITDA for Ms. Was 60 crore which has gone to 64 crore in this quarter. Whereas the EBITDA dripped from 36 crore to 33 crore. So there is a delta of around 17% and that is largely because of the project execution. The ramp up will take time. However the depreciation other cost is already hitting us.
Unidentified Participant
Okay, thanks. We’ll come back in the quiz.
operator
Thank you. The next question is from the line of Balaji from iifl. A reminder to all participants. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. Please go ahead sir.
Balaji Subramanian
Thanks for taking my question. My first question is on the status of the seven odd thousand ATMs owned by banks for which AGS was doing pure managed services. So have the banks actually bid those out? And if so, you know, have you seen any wins from that portion of the pipe? That is my first question. The second question is on this acquisition that you have done of securance. So in your opening remarks you did mention that this deal happened at 10 times EV, EBITDA, FY25 and going for and on a post synergy basis it will be about four times.
So you know, can you just elaborate a bit on the synergies, you know from where the synergies will come and you know, a bit more color on how you come to these numbers. Thank you.
Anush Raghavan
Balaji Anush here. I’ll just take the first part of the question. As far as the non bla ATMs were concerned, I think as we had updated in our earlier calls as well we’d been extending help along with the broader industry in helping banks at the transition. So we’ve been able to get our market share if not slightly more than that in terms of success in some of these contracts. In fact, when we speak about I ICCI bank and a few other private sector banks where we were not present, this has allowed us an opportunity and entry strategy into those balancing against what was earlier a slightly more PSU bank based portfolio.
Rajiv Kaul
So Balaji, I think I’ll give you a high level answer. At this stage I think it will not be right for me to share intricate details of how the synergy will come out. But at a high level the productivity and scale when you take the two entities together, we will have a business operating at roughly about 45,000 sites live on. Whenever the transaction concludes that productivity will change and improve. We will save significantly on any common overheads, infrastructure cost and even in terms of just time management IT infrastructure there are many costs which we can.
So we have a standalone company running roughly an 80 crore business which will merge into a two and a half thousand crore company running a larger business. Overall I think there are lots of costs which are not essential when we move forward. So I think that’s the high level when we think about it. Also what I wanted to mention is this was a fairly competitive bid process for us. It was about creating a deal which sort of respects a brand, helps the team move forward and creates a win win for customers also and importantly, I think from book value perspective, I think this will be a transaction which will be close to book value.
Balaji Subramanian
Got it. Thanks a lot and all the best.
operator
Thank you sir. The next question is from the line of Khrushi Parekh from Bugle Rock pms. Please go ahead.
Unidentified Participant
Yeah, so the first question is on the margins front that so understand that salary is something that we have checked up now. But moving forward in the, you know, over a period of time, what are the levers that we have to ensure that the Margin starts regaining what it was. So.
Rajiv Kaul
I think if you look at our historical performance over the years, you will notice that there is a certain cyclicality to our quarterly earnings. There is always Q1 is always a little bit of a step change on account of, you know, creating provisions and also paying out what are the fairly large gates of people whom we work with. Some of them unionized, many of them not those agreements are done through the year, but the provisions get created at the beginning of the year and then we have the rest of the year to, you know, as growth comes in, it helps drive operating leverage and productivity.
It also sort of, you know, the creating these provisions at the beginning of the beginning of the year also gives us a healthy way of trying to figure out what are the right ways to approach pricing with our customers. So generally you will tend to see that Q1 starts off a little weak. And through the year we sort of normalize closer to our margin overall margin profiles.
Unidentified Participant
Okay, and my second question is. So we are witnessing this dip in the APM projection. So in your view and how you read the industry, is it purely because of slowdown in the overall consumption and the economy or there are some other factors also at slow.
Rajiv Kaul
I think the way we see it and you know we’ve been studying these macro for a long time, publishing our reports about it. I think this is again a little bit transitory in nature. Generally what we are seeing right now is not unusual in the context of longer term annual cycles for various reasons. Q4 is usually a period of high spends in the economy followed by Q1 which is usually a dip as per certain economists we’ve spoken to offline in the past. Many of them allude this to also semi urban rural India going through its own particular agri seasons of harvest.
And I think right now I would just allude this to a combination of two things which is the cyclical nature of the Indian economy a little bit more so now, especially with broader consumption being more muted and tepid.
Unidentified Participant
Okay, thank you. I joined back in with you.
operator
Thank you. The next question is from the line of Patrice from Alara Capital. Please go ahead.
Prithvish Uppal
Thanks for taking my question. So I’m sorry if I if this is repetitive and you may have covered in your opening remarks. So just wanted to understand the order life cycle. So right from when you win the order to when that flows through to the revenue. So if you could just possibly help us understand the timeline for that and you know, how much is the execution ramp up that has happened here. My second question is that you know, you highlighted that Q1 is usually a seasonally weak quarter. But if I look back last couple of years, the at least the revenue growth has been about, you know, 12, 13% plus.
So is, you know, so how do we read that in context to the Q1 of this year? And this lastly is on the acquisition. So what is that, you know, what is the strategy going forward in terms of, you know, how we plan to work over here? Is it more from a client diversification perspective or you know, just to understand the rationale behind, you know, why you went with these guys in particular. Thanks.
Rajiv Kaul
Let me take the first two questions. Pratvish. So I think as far as the order book and its translation revenue is concerned, we may have spoken about this in the past as well. But just to rephrase it to everybody who’s new to us and on this call today, our order book, by definition we only limit it to the non cash business portions of the revenue simply because these are contracts which are either multi year recurring or annuity in nature. This could be round labor, ATM contracts, remote monitoring for instance, or fixed price BLA as well.
Generally when it comes to executing a BLA type contract, the timelines would be anywhere from 6 to 12 months. One of the key dependencies is really being able to get the hardware and the overall solution tested and approved by various agencies. These could be npci, VISA Master, mostly from a payment systems angle and subsequently there is the whole aspect of getting the site readiness and rollout happening. So roughly about 6 to 12 months on ground level items. Remote monitoring is extremely dependent on the nature of solution and the scale of the implementation. Last year we won this, what we told you, a fairly complex deal with a large public sector bank to set up an on prem command center and roll out branch monitoring for thousands of their branches.
So things like that end up having a much longer gestation period simply because developing the use case of these AI models and getting those approved to a certain satisfaction level of the customer has a certain, you know, just incubation time. But broadly I think for the purpose of averaging it out, I think six to 12 months is what we would think of internally.
Anush Raghavan
But I mean think of the software contract we have with ICICI. This could take six to 12 months. But some of these are not under control because when you’re building software solutions, integration with bank systems approval process could have sometimes delay which are very difficult to fathom when you start the project. And therefore forecasting accurately is not very, is not very easy given the nature of a contract. Has become far more complex and end to end integrating multiple things in the contract and not just one piece that are the first two. You’ve done the second one.
Rajiv Kaul
I think with respect to your question on first quarter, looking at the previous trend line starting look at you look at it both YOY as well as sequential. From a sequential perspective, when I look at FY24, 25 and 26, they’re all sort of fairly in a narrow range of 24 was 2%, FY25 was in fact a slight decline of 4% and 26 was 1%. What you’re alluding to as a YOY metric for last year I think would have been more because FY25 would have had a larger product component share. But I think this gives you a broader sense of how to think of it from a service revenue perspective.
And I think the last question was on
Prithvish Uppal
secure it.
Prithvish Uppal
Sure.
Rajiv Kaul
So I think for any acquisition you are trying to do this for a few things from our angle and maybe you are newer to our calls. I think our approach is always to think about looking at majority control or full control of company in a sector which we already understand very well. With Securus particularly was relevant to us simply because it’s, you know, it’s one of the key players. It’s amongst the top five players in the space. It’s one of the first ones to have set up operations. They’ve built a very good technical capabilities while we have our own.
But it sort of helps having client entry. It also is from a, you know, bluntly from a block and tackle perspective, it’s a sector which we want to dominate as we go forward. Right. We were roughly at 25, 30,000 sites. We have a midterm goal to 100,000 sites. We don’t want a good quality player to be bought by somebody else who starts competing with you and destroying the market or whatnot. So as and when you get an opportunity to consolidate at a value which makes sense and the payback period is in our norms, the ROCE on the deal makes sense.
We will go ahead and execute.
Prithvish Uppal
Okay, thanks. I think this is very useful. I’ll join back in the queue and all the best.
operator
Thank you. A reminder to all participants. Anyone who wishes to ask a question may press star and one on their touch tone telephone. The next question is from the line of Divyansh Gupta from latent pms. Please go ahead.
Unidentified Participant
Hey Rajiv and team. So first question was on the camera. So in the last quarter or sometime that whole Chinese camera not being allowed or government expressing concern? Does it affect us any which way US plus Securance.
Rajiv Kaul
I’ll let Puneet, who runs the entire operation handle that.
Puneet Bhirani
Hi Divyansh. So of course this change has caused some stress in the system, but all of us are working with our customers. There are certain cameras that have been SDQC approved. So we are working with all the customers to either get the realignment done and continue the deployment or get some interim relief to manage the situation and then change the cameras as the HDQC approval comes.
Unidentified Participant
So does it also affect any fresh new orders we win which might get delayed because of all of this? Or how should we read going forward?
Puneet Bhirani
The industry understands this, customers are aware of the challenge and now more and more cameras are getting certified and it’s a transitory phase which will get over very soon.
Unidentified Participant
Got it? Understood. And the second question, two part question on the securance transaction. First was from a customer sector perspective, right. My understanding is our Hawkeye was more mostly BFSI with let’s say that QCOM order that we won with some other segments. What securance? Is there a sectoral overlap or it’s a very complementary sector to us. And the second part of the question is that any reason why they were selling at book value or let’s say what was their incentive to exit from the business.
Rajiv Kaul
So I think we should maybe ignore my comments on book value for right now. Just look at the logic for cms. If you’re a CMS investor, we should focus on CMS and not secure and so much. I think there is an overlap of course on bfsi. The BFSI is a large space where there are four to five players competing fairly aggressively and working there. They also, given their history in the industry and a long track record, have been able to penetrate broader set of clients including retail which are of interest to us. They have solution sets, they have teams and we are hoping with the CMS wherewithal we should be able to invest and grow that faster.
On the CMS side we already did mention to you or other investors in the last call that we were able to expand with our capabilities into newer sectors. That includes quick commerce and EV infrastructure charging sectors. So I think overall we are looking at there is a reasonable amount of complementarity. Yes, there is also some overlap. I think that’s, that’s where some of the synergies come in. But each client deal is very specific. Each client is looking for always whenever there is software there is always a little bit more tailoring and tailored solution to a particular client and doing pilots proof of concepts and winning clients and replacing earlier install base of a competitor can be quite an onerous task over time in terms of I think a deal.
I just think that overall one has to take a call on what’s the best way for a company to continue growing and competing. And I think for some of the medium sized players we think they will over time have to merge or sell into some of the larger ones. Our job is to make sure that we can keep growing much faster than the rest of them.
Unidentified Participant
Got it, Got it. I have a couple of more questions. Should I continue or join back the queue?
Rajiv Kaul
You might as well finish it now.
Unidentified Participant
Sure. So the SBI tender, while it’s not upgrade to know that we were the.
Unidentified Participant
Only guys which were qualified and for.
Unidentified Participant
Maybe public sector reasons they rejected and they they are redoing the process. The question that is there is that AGS went away but there are other players, other bigger players that also there.
Unidentified Participant
Right.
Unidentified Participant
So how will the process now work? I’m assuming they will relax some conditions, more qualification comes in. Is that the how dish how we should think? And therefore commercials might also get affected because they are reducing the let’s say specifications.
Puneet Bhirani
I don’t think we of all people can comment on a process run by a large bank in the country. I think we’ll wait for the process to pan out and see how it goes.
Unidentified Participant
Got it, Got it. And the last question is that in our previous calls we always said that our first priority is growth. Margins come second. But at least in the last year, at least we have been struggling because of things which might be under our control or might not be under our control. Are there any green shoots that you are seeing that which gives you a confidence, let’s say a quarter or two down the line things should happen or anything that you can share from your closer view on the business.
Puneet Bhirani
So you know, the comments I remember, which I have made historically and I hope that’s what you’ve heard, is that between growth, margin profile and market share we would as a management team love to get two out of three right every quarter we would prioritize, you know, if there is growth we will focus on first on growth while we maintain market share and then margins. We don’t mind if they go up or down a little bit. I think the last quarter we did a fairly good job on both market share and margin profile. I would say this quarter I think only market share is where we would tick the box and not on growth on margin profile.
But I mean I know we are all in the QSQT zone in life, but I think from an anolea perspective, we hope to be able to bridge and balance this out by the end of the year. Green shoots. You know, I have now just become wary of, you know, thinking hopefully about green shoots. Last year we thought about festive season. I think what is in our control is the order wins and trying to execute them sooner or as soon as we can. I think that’s what we are just focusing on the rest, of course we’ll compete, there will be block and tackle opportunities.
We look at M and A. But we have a fairly significant order book. And if you ask us, are we feeling positive and optimistic? Yes. In the next couple of quarters. Yes, we are. Simply because we have the orders. We just have to get them up and running. And while there will be new orders or new bids which will come up for winning or losing, whatever, we’ll see. But I think we have a healthy pipeline to go focus on executing to regenerate the growth aspiration which is set in our services business of 13, 14% for the next couple of years.
That’s what we are focusing on targeting right now.
Unidentified Participant
Got it. I’ll join back the queue. Thank you.
operator
Thank you. The next question is from the line of Praveen Kumar from Acquitas Capital Advisors. Please go ahead.
Unidentified Participant
Yeah, hi.
Unidentified Participant
Thank you for the opportunity.
Unidentified Participant
I had a couple of questions. The first one was on the consumption slowdown which I’ve been referring to for quite a few quarters now. So just wanted to understand how do you see in terms of your medium term growth target of let’s say 14% or thereabouts that you want to grow at? At what point do you think this consumption slowdown persisting starts affecting your aim to grow in that growth rate and what kind of tactical or strategic action do you see yourself taking to overcome that? Right, that’s the first question.
Unidentified Participant
Second question was on the card services.
Unidentified Participant
Part of the business, which is the smaller part.
Unidentified Participant
But I noticed that Q1 on a.
Unidentified Participant
Yoy basis it declined by 23% the top line. So just wanted to understand any specific reasons for that. Yeah, thanks.
Rajiv Kaul
I mean great questions. Let me take the first one. I will refer to again consistently we talked about that. As a company, our future and growth is linked to three broader trends in India, consumption growth, formalization post GST and whatnot, especially in the retail sector and outsourcing trends in banks. Now I think we’ve had a macro situation FY22, 23, 24 where almost all three played out very well. Maybe it was post Covid, post whatever, but played out very well, including a positive regulatory environment which I think helped us drive very solid growth of almost 20, 20% revenue each year and 30% PAT each year.
The slowdown impact also linked to some outsourcing changes in the last year I think has clearly affected our growth in FY25 itself and right now in FY26 Q1, as you see. So I think we are right now at the receiving end of these factors not playing out. In fact, even in formalization. Now this is maybe too early, but when we look at our retail sector, we have gained good share. We are a market leader there. We continue to gain a lot of new stores for our retail cash business. But we are at the same time seeing a massive churn in store shutdowns.
Now I suspect, and I’m not a retail sector expert, I suspect this would be that post Covid there was a lot of growth amongst organized retail and physical store locations across organized retail and BSCs and whatnot. And then there is churn. When there is some slowdown, people start churning the bottom, the bottom 5%, bottom 10% of stores. So while we continue to have new store editions, we also continue to see a fairly aggressive churn in the number of stores which are maybe sort of shutting down. Now each time this happens there is a ramp up, ramp down cost.
Right when you have to change your routes, you have to involve new routes, you have to move resources. So I think we are, I would say the last five quarters there have been maybe three, four months where we’ve seen positive macro environment, maybe around festive season a little bit in February and March, April, May, June has been quite tepid. I would point you to our India consumption report which we print annually. I think the last one was done in May. It will give you some sectoral trends. So I don’t want to take three months and be able to tell you, I can’t tell you what the next three months will be like and when this will pick up.
We hear like you would on different commentary that rural is starting to pick up and urban is about to pick up. So we’ll keep our fingers crossed and wait for it. And I’m sorry, on your second question, I missed a question but if somebody else heard it on my team, they will answer
Pankaj Khandelwal
for the card business. There is a slight dip in this quarter. There was two banks who had delayed the recarding by one quarter and that has resulted in a slight dip in the revenue.
Unidentified Participant
So this is A delay, not a loss of.
Pankaj Khandelwal
No, no, no. There’s no loss of contract. Contract remains same. There is a deferment by the two banks for the recarding.
Anush Raghavan
Yeah, the projects have got postponed or whatever but I think we in, in the final crore of order wins. We’ve got a good card auto win as part of that itself.
Unidentified Participant
Understood. Rajiv, just to follow up on your response to the earlier question. So from an outside investor, how should we look at, how should we correlate consumption growth as seen by let’s say results of other consumer focusing companies etc. How should we index that to the.
Unidentified Participant
Growth rate you can grow at?
Unidentified Participant
I mean can you give us some color on that?
Rajiv Kaul
I’m unfortunately not a public market investor so I don’t know how others are doing. But what I would say is. So let’s drill down, right? Let’s take our retail sector. Our retail sector is sort of a misnomer. It doesn’t only do retail, it does organized retail, does E Commerce, it does NBFCs, it does hospitals, it does schools. So I think some of those are. It also does public sector. Right. It could do railways, cash pickups and whatnot and processing. So some of it is steady but some of it is variable. Right? Especially discretionary income or discretionary spend is variable.
So I think we see an impact there because 80, 85% of the revenue is on a fixed basis like we need to turn up. And whether we collect 50,000 rupees or 5 lakh rupees we still get paid an X amount. But there is a amount linked to variable, variable, variable, sorry, there is not a variable linked to, to the amount of currency being picked up and processed. So that does get affected and therefore has both an operating leverage or a deleverage in moments when there is variability. So I think we have seen very steady businesses and we’ve seen market share growth.
I feel that our market share and competitiveness we are at the forefront. We would think that with formalization and growth, GDP growth, we would like to target growing at double digits in these businesses. I think we alluded to 10 to 12% and then whether sometimes you get market share gain or you get operating leverage leading to an EPS growth, which is better. That’s where we come up to try to grow the 12 to 14 or 13 to 14% range. Now that’s only retail. I picked that one example. If you take rms, that’s growing obviously faster as a smaller business.
We are having good traction in the last two, three years with our capabilities and our scale and also our competitive positioning out there. So we aim to grow that business at a much larger pace but is dependent on outsourcing. Again there are 100,000 ATMs and let’s say branches which are not yet outsourced for AI based surveillance. We are dependent on the bank coming up with a tender then bidding and winning and executing those. Meanwhile we try to push the growth by looking at other sectors. Hypothetically we could also look at growth outside the country, but I just think that will be too much of a distraction for us and we currently focus only in India, the largest business which is ATM cash.
I think Anush has alluded to fairly in detail about some of the impact. Now I know a lot of people sort of in last call itself and post last call felt that given one industry player going out of action it should automatically result in a big bump up. And we have always said this will take time to play out. We have never seen this situation at that scale before. We have seen smaller players go out and we said we will be careful in waiting to see how this pans out. Having said that, a couple of large banks, one large bank has already moved lock, stock, barrel their intent to move to cms.
One midsize public sector bank has already done the same. Another public sector has floated an RFP which we have won a large PSU bank contract we already talked to you about has gone in for a refresh or a rebate or whatever it is. So these things will take some time to pan out. We can only share with you as these situations get more clearer. But I just think that if you look at the ATM cash business, our market share which is 50% historically moved to 53, 54 currently I’m scared to admit the number but temporarily looks to be in the 58 to 60% number.
Now will that be 58 or will it become. I don’t know but just tells you about the strength of the platform in the current market situation.
Unidentified Participant
Understood. Thank you for the very detailed response.
operator
Thank you. The next question is from the line of. The next follow up question is from the line of Khrushi Pare from Bugle Rock pms. Please go ahead.
Unidentified Participant
Hi. So it currently appears that at least on the BFSSI BFSI side we may have some kind of a slowdown at least for the next six to nine months or maybe even a year. But how is the traction for us on the retail side that we have especially now? I mean for some time we’ve had this, an independent sales team as well to tap into this market.
Anush Raghavan
Khushi. Hi Anushya. No, just on the first part of what you mentioned. I don’t think I wouldn’t take the interpretation as a six to nine months. I think we are seeing this but having said that as Rajiv said, consumption is one part of it. But more importantly so is the bank outsourcing and the order book execution. And I think what we see in terms of the pipeline and our ability to both in terms of what the pipelines upcoming, R plus what we already won which needs to be executed. I think we feel we don’t think it should be as long drawn out as that.
On the retail side, I know we didn’t cover it in as much detail this time as we do. Maybe we’ll take the H1 to give you a lot more color. We continue to keep expanding on new customer wins and brands. Currently we have more than 100 plus brands with whom we are working directly. I think it’s a very solid value proposition and platform that we have going when we today actually look at a lot of opportunities from the inorganic space on the payment side. It’s very heartening to me at least to see what we’ve developed as a direct to retail offering actually very closely parallels what that set of business looks like.
You work directly with brands, you help them in creating an integrated auto tech based approach. You create a lot of automation to help resolve issues around treasury reconciliation. The kind of stickiness and the kind of long term contracts and revenues you get there are phenomenal. I think our ability to what we’ve been doing in terms of widening the set of customers that we work with which used to be just organized retail earlier today we work with schools, broad education institutions, we work with large hospital chains, a lot of NBC’s and microfinance. So I think the quality and the complexity of what we have is going as an industry specific solution set is quite amazing.
We will talk more about it. We are witnessing increased churn at the moment. So our gross growth rates continue to hold fairly steady to what we were doing earlier. I think once the churn settles down you will sort of see that flow down to our performance. Sure.
Rajiv Kaul
Also I want to sort of. We have seven business lines, right? Roughly it’s not 100 crore but the smallest is close to 100 crore revenue and the largest is close to maybe 1000 crore revenue or 950 crores. So we have a diversification which means that even though some of those are interlinked but it also gives us when one of the businesses is suffering Either a macro or an industry level issue, we are able to and have delivered on pivoting very quickly to other businesses to focus on and I think that gives us a little bit more resilience.
It’s not a one trick pony. If that gets affected, then you’re affected. But when there are problems in a particular subsector, we have to understand it’s a combination of things. Could be a client specific issue, could be industry specific issue. I do think that the MSP industry which is widely fragmented, is already consolidating and will consolidate more. Given what happens three, four months ago now, will that cause more pain? Possibly. Is that good for the sector and therefore for a large player like us? Absolutely.
Unidentified Participant
All right, appreciate that. So one thing on this securing system, what I see at least from the information that is available in the public domain about the company, the company had made losses in the last two years. I mean 23, 24, I don’t know, we don’t have the information of 25. But what is your, you know, if you can give some sense, is it more related to the cost or it’s more related to the pricing of the services that they were offering and how do we intend to correct the same over whatever one to two years period?
Rajiv Kaul
Well, I think we obviously studied the company very well over the years. We also have done fairly detailed diligence. I think they have deployed a fair amount of capex to capital for both the technical capabilities which gets apportioned over time and for specific client projects at EBITDA level they have a positive P and L. We think that with our business and merging whenever we are able to conclude this successfully, I think merging this will result in overall metrics which are substantially better for the combined unit and even let’s say securance on a stand if we were continuing to run them on a standalone basis.
So I don’t know, I mean I said there will be depreciation, there will be capital earlier and there will be cost of capital which will impact at a pat level but at the level they’ve always been positive.
Unidentified Participant
All right, thank you.
Rajiv Kaul
Also, sorry, I just want to mention that standalone companies in any sector would generally. I’m not referring to secureness, so don’t take these comments out of context. Many small companies, sub 100 crore companies suffered a lot during COVID because revenue just dried up because sites shut down. Could be retail company, could be RMS company, could be anything and therefore many of those companies have therefore taken a year or two after that to just get back onto a level playing field in life. And therefore once you go through those, you do lose capital, you do lose some customers, it does impact the quality of the platform to many levels and therefore there may be variability than what losses you may see in a particular year which could be accruing for some of the investments made earlier and the revenue not flowing through.
Unidentified Participant
All right, thank you so much.
operator
Thank you. The next question is from the line of Saurabh Dhole from True Beacon Investment Advisors. Please go ahead.
Unidentified Participant
Yeah, hi. Thanks for taking my question. So my questions are with respect to the changing industry structure, basically. Firstly, do you think there is an opportunity to get certain specific assets from this beleaguered company? It could be in terms of client contracts, client wins, it could be hard assets like collection vans. And the second is how quickly do you see this particular event impacting your collection part and how quickly will it start impacting your margins, the EBIT margin specifically.
Rajiv Kaul
So I think on the first part, of course, with respect to what assets are available, several people, other people in the industry have evaluated it. The challenge being, as you could guess, for companies which have had capital issues and liquidity issues and drawn down all sorts of available debt. So in removing the tangled web of which debtor has what rights over what assets, what’s a truly freehold versus what is leased out has been incredibly complex. So for that reason, I think banks decided that the easiest way for them to deal with the issues right now is not to bring in another partner to continue running things because they themselves, just to give you an example, right, there is somebody who owns the ATM in that particular site which could be leased out to someone.
There would be somebody else who owns the ACS and the VSATs and so on. So for banks it was much easier to just work with companies like us, help in sort of getting the risk management sorted out in terms of cash in those ATMs and then shut down those sites while they figure out all of these issues and separately come out with new RFPs for replacing these ATMs and consequential expansion.
Pankaj Khandelwal
And to be fair, we did analyze this a lot in the February, March and even preceding time periods. This is way too complex. It’s not about going and settling with 2,000 employees. This is about settling with 10,000, 12,000, 15,000 landlords. That’s not really up our alley. That’s not something you want to distract ourselves with. Also with many MSPs, there is predominantly a transaction linked PLA business model. We have gone bearish on that segment for the last 15 months. Unless we see green shoots in that either through competitive pricing moving up or the way banks are willing to share the interchange with you or overall ATM transaction levels, we do not think it’s worthwhile for us to invest capital and take the risk.
And therefore a large part of the business was in those segments. We are generally bearish on those. Some customers will move to CMS and have moved to CMS on a fixed price model, which is fine by us because then I think the risk return makes totally sense for us.
Unidentified Participant
And just your response on the second one which is on the pricing part.
Rajiv Kaul
I think for us, any such situation you want to. Again, I’ll go back to one of our maxims. We’ll focus on share and revenue growth and maintain our margin profiles. Our margin profiles, if you compare it to anyone listed unlisted, are substantially higher and better. I think maintaining those margin profiles is very important and these situations help us in continuing to maintain a healthy margin profile. I don’t think these are situations where you should be looking at will pricing change? For sure maybe it will, but it will change from what the other company is charging.
Right. I think we are only willing to do work in which the risk return makes sense for us and therefore we would like to continue operating in our margin profile where we are right now. I think that’s a very healthy and a balanced margin profile.
Unidentified Participant
So if I got you correctly, this particular event doesn’t change the margin profile of this vertical drastically.
Rajiv Kaul
We will see will we get operating leverage with more business coming and let the business come. I think let’s not jump the gun and try to see it. I mean, obviously if we are able to drive extra margin through automation or other things, we’ll be very happy. But right now let’s focus on getting the business and improving our market share in the businesses we like to work in.
Unidentified Participant
Sure, sure. Rajiv, thank you so much.
operator
Thank you. The next question is from the line of Raj Gopal Ramanathan from an individual investor. Please go ahead.
Unidentified Participant
Thank you for the opportunity.
Unidentified Participant
Actually.
Unidentified Participant
I think you partly answered my.
Unidentified Participant
Question which related to fixed price contracts versus transaction based pricing. Because I believe during my days as a banker one of the reasons why the banks wanted to outsource was that they were not very sure with respect to the amount of transactions that would happen on the atm. And that’s the reason they were quite happy entering into those contracts. So what has made them go back against it? Is it because they’ve been sort of negatively surprised in terms of the amount of usage of ATMs that they wanted to sort of fall back on fixed price contracts.
Unidentified Participant
That’s the first question.
Unidentified Participant
The second question is it’s not necessarily philosophical, but given that you have already built up competence and again you partly articulated this, why not look at other countries as well, Maybe not the cash management business, but the other businesses definitely can make a lot of sense in other countries as well. So why not look at that, maybe seed that particular business, build it out over the next five, ten years or so. So why refrain from doing that? And the last question that I have is actually it’s related to.
Rajiv Kaul
Just a minute. I had made my notes. One minute please.
Unidentified Participant
The AGS shutdown. What has been your learning out of the AGS shutdown? Because partly, if I were to look at that particular example, I believe they got into trouble because the banks were not necessarily paying on time and that essentially meant that the working capital squeeze was becoming very difficult for them to manage because they had already sort of taken a significant amount of financial leverage. You obviously don’t have that, but are you seeing a situation where getting your money from the banking system etc is becoming a little more challenging than what.
Unidentified Participant
It may have been?
Unidentified Participant
Thanks.
Rajiv Kaul
Okay, so as you are a former banker yourself, I think the views on what we always really had a simple view, which is that in a room I think the smartest people always are bankers, right? So when you’re sort of working with them, a counterparty you can never second guess on trying to outsmart on pricing and thinking that there is any sort of contractual arbitrage available. We’ve always tried to keep things simple, right? Focus, put our head down, execute, do the right thing and not try to sort of create an upside or an arbitrage led pricing model.
On the transaction side, I think the main thing has changed in the industry is the entry of ground level ATM was sort of driven on the fact that, listen, there is an opportunity between what the interchange is versus what the cost of doing the service is. And hence if there were private parties willing to come in and deploy capital and it did that in a sensible place with the right location and cost structures, you could sort of profiteer out of that delta over a period of time. As with anything else, the interchange increase has been far slower than the cost increases associated with long term businesses such as this, as a result of which most people who sort of punted purely on that model have gotten squeezed on both sides in the last two to three years as sort of the capital to the industry has sort of dried up.
You can’t, you can’t have private people coming in with capital which is more competitive than what the banks themselves can do. Banks have realized that ATM is still an extremely important channel of customer service both for their cardholders as well as for outreach, branding and hence I’ve realized that it’s always better to then invest in a fixed price outcome which helps them hold the parties accountable for a certain quality of service and hygiene and ensure that their customers don’t get shortchanged and hence to sort of switch over to fixed price model and acceptance of that ags I think wasn’t just an issue of customers not paying right.
I think it was a classic issue of liquidity impacting, creating a sort of a downward spiral. It’s a public call. I would want to try and remain diplomatic in alluding to some of the more serious issues there. But fundamentally when you have a very leveraged business at a fairly high cost of capital and depending on a variable transaction, linked model and liquidity issues are impacting your ability to pay salaries, vendors, partners which affect the downtime and the quality of service that you’re able to give to the banks and that quality of service then further impacts the transaction.
It’s sort of extremely difficult to come out of that spiral. I don’t think it is necessarily related to purely banking behavior alone.
Pankaj Khandelwal
Also be respectful. I think it’s a good company. They tried to do many things. I got into an unfortunate situation. I would go to your question Raj. Great questions. Let me think about the Geo1. We have articulated the geographic expansion before but let me if I look at the history of large Ms. Players in India who are pioneers in the field much before our time, I think some of them have tried to expand into Southeast Asia and different markets and failed. I think from our side we think of it differently. We are not a cash management company.
We are not a managed services company. We are a business services company. We don’t want to get into geopolitical risk. We don’t want to get into understanding regulators in each market. We don’t want to be. We don’t have the client relationships. We rather focus on what we know well, which is how to work In India we have the scale, we have the reach, we have a brand recognition recall with large banks where we are doing multiple types of services and able to win and scale, we will do the harder job of trying to figure out which are the next set of services for us to do well with the Indian banking system or retail rather than take the risk of going out.
I mean we have analyzed it we have done some work but I just think that going and doing JVs and dealing with of the risk return isn’t the right approach for the knowledge this management team has. Can we go higher? People do it? Sure, but it’s not in the order of priority. I just don’t think us being able to execute very well on this and I don’t want to do something which will distract us. We have in fact on the opposite side have had a lot of interest in people wanting us to do cash management and even the US and Australia and again for us we are like, you know this is such a people intensive business while we have a lot of technology automation software which we can take from here to those markets.
But I just think we want to be humble and saying let’s just get this one market right and focus here rather than right now. Do this at some point I’m sure there’ll be opportunities. Our M and A team keeps getting in bounds and if there is something interesting we’ll look at it. But till now whenever we analyze it we have shied away from the risk return. Did not make any sense. I think we have a large market in front of us, we have a large opportunity in front of us. We hope to be able to stay focused on that and grow in a steady manner in doing what we know how to do well.
Unidentified Participant
Thanks. All the best.
Pankaj Khandelwal
Thank you.
operator
Thank you. Our next question is from the line of Divyansh Gupta from Layton pms. Please go ahead.
Unidentified Participant
Hey Rajiv and team, just a couple of more questions. So what is the order book in hand right now and how much is expected to go live this year assuming things goes as planned?
Rajiv Kaul
Okay. Do you have some other question while we calculate and come back to that?
Unidentified Participant
Sure.
Unidentified Participant
The other one was that in respect to the BLA business, earlier calls we used to mention that we are very selective in choosing our bla. That we would operate where it gives us decent irr and preference I think was always to get fixed contracts. In our presentation we have mentioned only the transaction link BLA revenue contribution. What would be the revenue contribution of fixed BLA and is there a transition happening right now of current transaction linked blas moving to fixed price blas?
Rajiv Kaul
So in fact thank you for these questions. I think the earlier question also which Ram had asked, I just want to. There was a question on why are banks looking at moving to fixed price contracts and I think Anush alluded to it also. But frankly, I mean bluntly the answer is that there are certain banks who understand that at the transaction volume at their atmosphere channels, given the profile of customers is more upwardly mobile and therefore using a lot more digital UPI and other means, they will not be able to find good quality partners who would either set up or run or maintain the ATM channel.
The economics will just not make sense on a transaction model and for them the access to an ATM in lieu of a branch to a customer for their own customers, customer satisfaction is very important and the quality of the service and the quality of the site is very critical. And therefore they will move to, they move to a fixed price model with the higher quality players which could be us or somebody else to make sure they’re able to deliver very important vital service to the consumers. I mean fundamentally, I think many times people and banks forget the fact that access to cash is a fundamental right of an Indian consumer of a bank.
But then when banks start thinking of an ATM channel, the profit making enterprise, I think something goes wrong in my head. I don’t know why that mentality has come in the country over the last eight, ten years in certain banks. But some banks are very clear saying the quality and the brand of the bank is very important and therefore they are. And they know the only way to work with a high quality player or players would be to go on a fixed price model. So I think just that it’s not a big trend, but it’s a trend in some good banks and hopefully this will perpetuate over time.
Coming to your question, in terms of order book, I think there’s roughly about 1400 crores of order book which is pending to be executed in the last five quarters. Order book we have roughly gone live with 2/3 of the business. And your last question was on total bla. So I think the fixed price BLA is covered in our managed solutions part because that’s where it comes. I don’t know the specifics of it right now, but the transaction link bla is now less than 10%. It must be 8 to 9% of revenue. Yeah, 8% roughly. Again, if we see transactions improving, if we see a contract coming at a price which makes sense, where we think we can take the risk return, we’d be happy to go deploy at that time.
But right now this lever of growth we have slowed down on. Three years ago when we were going public we talked about position sizing this business at 15%. We have then revised it downwards to 10%. Right. So as things change we will pivot and we will be more conservative where we think capital is better to hold on to the cash rather than deploy it.
Unidentified Participant
Got it. And how much of the order book that is on hand expected to go live within this year?
Rajiv Kaul
Well, let’s just come and tell you as we go live right now. I think this I really can’t tell you right now.
Unidentified Participant
No worries. And just if you can give an update on the Boolean logistics. Any client wins, big client wins.
Rajiv Kaul
Or wait for.
Rajiv Kaul
Wait for H1. I mean we wait for H1. We’ll come and tell, give you a little. I think we’re taking feedback. We haven’t really covered retail and bullion today. I don’t want my team to be caught off guard. We’ll come and tell you at the end of each one.
Unidentified Participant
Sure.
Unidentified Participant
Thank you. Thank you.
operator
Thank you, ladies and gentlemen. This was the last question for today and I now hand the conference over to the management for closing comments. Over to you, sir.
Rajiv Kaul
Well, thank you so much for the detailed questions. Thank you for your patience. Thank you for being investors in cms. I do want to call out my team for having worked insanely hard over the last five to six months, months in helping the broader industry navigate the issues they’ve faced. I think we have had a very solid Q1 in terms of the effort which is going into the business. I think on most key metrics we are doing well. I know the financial numbers may not fully reflect it, but I do hope in Q2, Q3 we start seeing improvement which will reflect the quality of effort and quality of the institution in which you are all shareholders.
Thank you and talk to you in October.
operator
On behalf of MK Global Financial Services limited That concludes this conference. Thank you for joining us. And you may now disconnect your lines.