Cms Info Systems Ltd (CMSINFO) Q2 FY23 Earnings Concall Transcript

Cms Info Systems Ltd (NSE:CMSINFO) Q2 FY23 Earnings Concall dated Nov. 02, 2022

Corporate Participants:

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Pankaj Khandelwal — President & Chief Financial Officer

Anush Raghavan — President, CMS Cash Business

Manjunath Rao — President, Managed Services

Analysts:

Aasim Bharde — DAM Capital Advisors Limited — Analyst

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

Achal Lohade — JM Financial Services — Analyst

Balaji Subramanian — IIFL Capital Pte. Ltd. — Analyst

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Kuber Chauhan — IDBI Capital Markets & Securities Ltd. — Analyst

Nitin Sharma — MCPro Research — Analyst

Abhay Agarwal — Piper Serica Portfolio Management — Analyst

Abhishek — Narayani Investment Consultancy Private Limited — Analyst

Sanjay — Real Group — Analyst

Bhavin Shah — Sameeksha Capital — Analyst

Mukesh Kothari — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q2 FY ’23 Earnings Conference Call of CMS Info Systems Limited hosted by DAM Capital Advisors 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. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors. Thank you and over to you.

Aasim Bharde — DAM Capital Advisors Limited — Analyst

Thanks, Yeshayshri. Hi everyone. On behalf of DAM Capital Advisors, we are happy to welcome you all today on CMS Info Systems Q2 FY ’23 earnings call. From the management side we have with us Mr. Rajiv Kaul, Executive Vice-Chairman, Whole-Time Director, and CEO; Mr. Pankaj Khandelwal, President and CFO; Mr. Anush Raghavan, President, Cash Management; and Mr. Manjunath Rao, President, Managed Services.

I now hand over the call to Mr. Kaul for his opening remarks.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Good afternoon, everyone. Thank you for taking the time to attend our FY ’23 Q2 earnings call today. We are pleased to inform you that we have been able to continue our growth momentum and have delivered another quarter of strong revenue growth, EBITDA growth, and PAT growth. On a Y-o-Y basis, our revenues in this quarter have grown by 27% to INR472 crores, EBITDA by 43% to INR135 crores, and PAT by 37% to INR73 crores. Both our businesses of Cash Management and Managed Services have seen strong growth and this has helped us deliver our sixth consecutive quarter with an EBITDA growth of more than 20% year-on year. This is a reflection and indicator of our market leadership, our focus on execution, a very methodical expansion strategy, and being able to win large complex end-to-end outsourcing deals in the banking sector. Our order book continues to grow well and we have added INR600 crores of new wins in the first half of FY ’23. While there is a lot of focus on quarterly performance, we did want to reiterate and point out that our H1 growth — our H1 revenue has grown by 25% to INR925 crore level, PAT in the same period has grown by 42% to INR142 crores.

I’m now going to request Pankaj, our CFO, to take us through the high level financial highlights.

Pankaj Khandelwal — President & Chief Financial Officer

Thank you, Rajiv. Our revenue from operation for Q2 stood at INR472 crores, which grew by 27% on year-on year basis and net profit was INR73 crore, which grew by 37% on year-on year basis. PAT margin in the quarter has expanded to INR15.4 crores — 15.4% by I20 basis points between Q2 FY ’22 and Q2 FY ’23. We are pleased to share that ICRA has improved our outlook on rating to positive from stable and reaffirmed our rating at A1+ and AA. At the segment level, both of our major business segment have recorded strong revenue and margin growth. Revenue in our Cash Management business grew by 17% to INR324 crore in quarter and 23% in H1 to INR637 crore. EBIT from the business grew by 23% to INR81 crore in quarter and 32% in first half of the year to INR158 crore. Similarly revenue in our Managed and Technology Services grew by 58% to INR156 crore in the quarter and 34% in H1 to INR302 crore. EBIT for the business grew by 120% to INR32 crore and 82% in the first half of the year to INR61 crore.

With this, I now hand over the call to Anush, President of our Cash Logistics business, for more insight into the business performance.

Anush Raghavan — President, CMS Cash Business

Thank you, Pankaj. And a very good afternoon to everybody on this call today. In the second quarter, the revenues for our Cash Logistics business grew by 17% to INR324 crores. Usually the second quarter is seasonally a weaker quarter for us due to the monsoons and the Shradh period, but we still see our activities grew 6% on a sequential quarterly basis. The total currency handled by us also grew strongly at 12% on a Y-o-Y basis indicating resilience of cash usage. In fact this number has grown even faster in urban areas recording a 23% growth on an annual basis — on a Y-o-Y basis. We continue to invest in upgrading our infrastructure in accordance with the RBI and MHA guidelines and we are on track to achieving our compliance targets that we have set for the year. As we continue to invest in technology and automation for our day-to day operations, it has helped us expand our EBIT margins by 110 basis points despite an inflationary cost environment.

With that, I now request my colleague, Manjunath, to share with you an update on the Managed Services and Tech Solutions business.

Manjunath Rao — President, Managed Services

Thank you, Anush. Good afternoon, everybody. Q2 revenues for our Managed and tech service — Technology Services business grew 58% to INR156 crores. Our business contributed 33% of overall company revenue in last quarter compared to 26% a year back. With this scale-up, our EBIT percentage has improved by 570 bps year-on year. In our AIoT remote monitoring business, we are now live at about 18,500 locations by September ’22. This has been phenomenal execution of our new business, which we incubated just two years ago. We are also expanding the software investments for developing use cases for our new sectors. In our banking automation and MS business, there are key RFPs and bids due in the coming six months and we will share more on this as these contracts are decided and awarded.

With this. I will hand over to Rajiv to do his closing remarks.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Thank you, Manju. At the end of last fiscal year, we had highlighted that our big focus on the current year is going to be on execution given that we had a fairly significant order book to focus on. I’m happy to report that our execution of this order book despite many supply chain issues and an inflationary environment, things are on track. In addition to this execution, we are also doing well on our enterprise sales strategy of deepening our presence with different business lines across large PSU banks. This will enable us to have a more diversified base of business and also increase the share of our recurring revenues. From a growth perspective, our approach has been very pragmatic and value-oriented. Buying growth with a large acquisition or at a high valuation doesn’t fit with our culture.

Our M&A approach has hence been very programmatic and methodical and we will always prefer to do small acquisitions to enter new business segments and leverage the CMS platform to scale them. If you see over the last five years, we have expanded both horizontally and vertically from being predominantly a cash logistics business into a business services outsourcing platform, which are currently focused on the banking — on the BFSI and the retail segments. Over the last decade we have maintained a robust topline growth of 17% CAGR. For the FY ’21 to ’25 period, we have set our goals of doubling revenue at a CAGR of 18% to a INR2,500 crore to INR2,700 crore range. In the middle of FY ’23, I’m happy to share that we are on track to achieve this target.

Thank you for attending our call and we can now move to questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from the line of Baidik Sarkar from Unifi Capital. Please go ahead.

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

Rajiv and team, good morning and congrats on a very strong financial wind. Couple of questions. Our cash collection business from retail chains per se is a function of how well the banks and NBFCs are growing their own cash management footprint and their own cash…

Operator

I’m sorry to interrupt, Mr. Sarkar. Your volume is very low.

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

Okay, I’m sorry about that. Is this better now? Am I a bit more audible? Lovely. So Rajiv, I was asking that our cash collection business from retail chains per se is a function of how well the banks and our NBFC clients are growing their respective cash collection business and footprints, right, and then we follow suit with them. So if I were to ask you or Anush to kind of paint a notion of how growth in this business would generally look like over the medium to long-term frame, is there a number that you can quantify as things stand today? And secondly on your Managed Services business, right, several moving parts with the Brown Label ATMs and now remote monitoring. What is the pending execution of our order book here in respect to silos and by when do you think we complete that pending execution? And post that, how does the deal — the new deal pipeline look? Thank you.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Baidik, thank you. I’m going to have Anush take your questions on the retail business and then Pankaj can give you an update on the order book status.

Anush Raghavan — President, CMS Cash Business

So, I think with respect to how we’re thinking about the long-term growth and the macro trends of those, we use our annual call to paint a more bigger picture in terms of how those things are trending. But let me try and share with you how we are looking at that sector and what are some of the — given the last two, three years have been fairly volatile, what are some of the emerging trends that we are seeing right now. Broadly when you think about the retail space in India and you compare — sorry, when you look at the cash logistics space in India and you sort of compare that with any other developing/developed economy globally, you would broadly find that there is an even split of revenue between ATM, retail, and then banking services in the form of cash-in transit and currency chest management, and so on.

In India, the growth has — historically has been little bit more lopsided in bias towards the ATM because it was that segment which got a lot more tailwind in terms of banking outsourcing and BLA led growth. When you sort of look at the overall retail space today, we estimate that the total addressable market is about 150,000 and when you sort of try to look at this 150,000 in the context of what should be potential addressable market, we arrive at a number of anywhere between 700 to 1 million outlets from where the service can be offered. And like you rightly said. I think the only constraint or the only issue in terms of achieving this growth is how do banks and NBFCs think of deepening the penetration into this market.

I think given what we see right now both historically and currently, one of the reasons why banks tend to offer this solution in addition to the fact that this acts as a value-added service to their current account customers is that this provides them a very lucrative form of float and liquidity as compared to a fixed deposits or a savings account deposit. And I think when you sort of look at that — use that lens to think of it from a macro perspective of where things are in the country today and how banks are looking at their liquidity position, I think obviously that sort of acts as a tailwind for them to further deepen and focus on their sales efforts in growing that segment.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

But I think just to supplement what Anush was talking about the retail side. This market or this segment did see a lot of churn thanks to COVID unfortunately because a lot of changes have happened in the sector. We want to wait and see how a full year of non-COVID works out and pans out to be able to give you a longer-term trend. Our going-in thesis for the sector is that this sector in the past 10 years has grown at a 10% to 12% CAGR. We think that this sector should grow higher because of higher formalization and a more organized retail and e-commerce pickup in the country, but we would like to wait and see how this full year goes before we can give you a better or a more confident commentary on a mid-term growth opportunity in the sector.

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

And if I can just harp on that question a bit more. Apart from the top few private banks in India and probably SBI, do you see energy levels from any other say the older generation private banks getting into this kind of business? Because I repeat myself here, your growth is kind of dependent on their growth so I’m just trying to see how the ecosystem generally is kind of growing in this segment.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Sure. The elements of change here are the following. One, e-commerce players need this service, which just the private sector banks or multinational banks or public sector banks will have to cater to that need out there. So, I think that’s the big driver out here. Similarly from our side as we built our enterprise sales strategy to focus on public sector banks for the large ATM outsourcing piece, we are also building a sales pipeline of working directly with many large organized retail companies. This could be everything from a petrol bunk to a departmental store and whatnot and I think that will show results over a period of time. Our approach is also to change this from a vanilla cash pickup service to more end-to-end outsourcing using retail CashWorld, offering Cash Burial services, and using former technology to have a longer-term growth story out here.

So, I think we have seen this sector was started primarily by the multinational banks, then the large Indian private banks have led the growth and deepening. And I think finally when the mid-size banks and as you said NBFCs, insurance companies, and also most importantly the public sector banks adopt the outsourcing wave in the sector; I think you will see a very good growth. And that’s why even if I go to our pre-IPO days, we said this is a sector where we think the tailwind or the opportunity of growth is for the next decade or two decades just given the level of outsourcing and how as we rate it on the quality or the type of outsourcing is still at a medium quality level not on a high quality level.

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

Rajiv, thanks. And on the Managed Service?

Pankaj Khandelwal — President & Chief Financial Officer

So on the Managed Services, as you said that we have an order book win in this particular H1 is INR600 crore. By this, our new order book stands around INR2,800 crore. Out of which, around more than 75% of the orders has been executed. I want to clarify that these orders are long term in nature and the revenue will occur over a period of five to seven years.

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

Got it. And what does your new deal pipeline look like, sir, by which I mean the RFPs in the market as far as GLA and positioning [Technical Issues] Any color on that?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So, I think there are significant — so I think that right now what we know for sure is what we have won, right, and that’s my number of INR600 crores in H1. There are significant and important RFPs which we have alluded to and talked about. They are in the deal pipeline, which is quite robust which is linked to the whole bank — public sector bank refresh and expansion cycle. We’ll have to wait and see how many of them are closed out in H2. So, I think we will keep reporting as they happen. The decision-making in banks is not something we can influence and control. But I think our strike rate and win rate has been excellent in H1.

Baidik Sarkar — Unifi Capital Pvt Ltd. — Analyst

Sure. Thanks, Rajiv.

Operator

Thank you. Ladies and gentlemen, in order to ensure the management is able to answer all queries, kindly restrict your questions to two at a time. We have our next question from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial Services — Analyst

Good afternoon. Congratulations for the great earnings performance. My question is you have talked about 70,000 ATMs in the recent presentation. Just wanted to understand is this as of 30th September, as of October; if you can highlight that?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Achal, I think our — the number of business points is something we also said at the end of FY ’22, that’s a metric which we would like to report annually and not quarterly. I’m not sure which presentation specifically are we referring to. But from — updating from a competitive intelligence perspective, I think we’ll be comfortable sharing an update on our business points. At the end of September, our total business points would have been 115,000 and we will report to you the number end of March with a little more breakup at that time.

Achal Lohade — JM Financial Services — Analyst

Okay. Actually I’m looking at the Slide 6 of the presentation, which we just uploaded last night, I’m looking at in the timelines basically.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Sure. Let me just ask our team. Just give me a minute. No. I think, Achal, that number of 70,000 of ATMs which you looked at is the number we had end of March. That’s the number we have reported.

Achal Lohade — JM Financial Services — Analyst

Okay. Understood. The second question I had. Can you help us understand the absolute cash handled by us for the quarter and for the previous quarter? Is that possible?

Anush Raghavan — President, CMS Cash Business

Hi. This is Anush here. So, I think that is about INR3.1 trillion for the quarter.

Achal Lohade — JM Financial Services — Analyst

This is for second quarter FY ’23. And how was that for second quarter last year and also 1Q of this year, sir?

Anush Raghavan — President, CMS Cash Business

Last year would have been about INR2.75 trillion so that’s 12% growth.

Achal Lohade — JM Financial Services — Analyst

Okay. And for the first quarter?

Anush Raghavan — President, CMS Cash Business

Yeah. I think it should be around INR3.05 trillion.

Achal Lohade — JM Financial Services — Analyst

INR3.05 trillion. Okay, understood. And just one more question. You have talked about the order wins. Is it possible to get some colors? Like Rajiv, you mentioned that you had a significant strike rate. Can you help us understand the number of BLA ATMs we have won or RM sites we have won in the last six months? Is that possible to quantify as well?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So Achal, these are competitively sensitive information. I think as a management team, we will be — we would prefer to share this on an annual basis because that’s the metric we set for ourselves to track ourselves on. I think that even the names of customers I think is linked to our agreement with the customers and they say depending on what we can share when. So, I think you’ll have to be a little patient with us and right now the only thing we can tell you is that our order wins have been of INR600 crores in H1.

Achal Lohade — JM Financial Services — Analyst

Understood. And just last question if I may. With respect to capex guidance, how do we work with that for FY ’23, ’24, and ’25? A ballpark capex range given first half there is hardly any free cash generation, but I understand it’s the Managed Services obviously entails capex. But if you can still give some color as to how you look at the capex for current year and next two years?

Pankaj Khandelwal — President & Chief Financial Officer

So, in the last earning call we have given a guidance that we are expecting the capex of around INR200 crore to INR225 crore. This in H1 we have done a capex of around INR135 crore and our estimate is that we will able to do the year-end between INR200 crore to INR225 crore depending upon the execution of a number of orders we win. We expect that depending upon the new orders we win and we are not very much focused on the BLA unless it gives — returns to our threshold, we don’t foresee that our capex will be significantly higher than this number rather it will be much lower than these numbers.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Basis what we know today, Achal, and life can change; I think FY ’22 and ’23 are years we think are of peak capex. It should reduce after that. But again middle of the year is not the right time for us to be able to give you a long-term plan and a direction. We will give you an FY ’24 sort of visibility at the end of the fiscal year.

Achal Lohade — JM Financial Services — Analyst

Understood. Thanks so much for the clarifications. I’ll come back in the queue.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Balaji from IIFL. Please go ahead.

Balaji Subramanian — IIFL Capital Pte. Ltd. — Analyst

Am I audible?

Operator

Yes. Please go ahead.

Balaji Subramanian — IIFL Capital Pte. Ltd. — Analyst

Good afternoon. Congrats on the great set of results and thanks for giving me an opportunity. So, I have a couple of questions. The first one would be are you on track to achieve the INR100 crore revenue mark from AIoT remote monitoring in FY ’23? And now that you are almost 75% through your remote monitoring order book, how should one look at the visibility beyond FY ’23? And the second question would be on your costs. Your cost control has been fairly remarkable despite inflationary pressures. Could you elaborate a bit on the cost control initiatives that you are taking and what more levers you have going forward? Thank you.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Thanks, Balaji. Let me quickly answer the first question. Anush can help you with the second question. On our AIoT business, we are on track to hit the INR100 crore annual run rate. It was always the annual run target this year. It would not be INR100 crore revenue this year. It would be INR100 crore annual run rate, which means we will have a monthly revenue run rate of INR8 crores, INR8.5 crores. So, we are on track to achieve that in the fiscal year. We are working as we — as Manju mentioned, we are working on new use cases. There are RFPs which are — which hopefully should get closed in the second half of the year, which will give us an indication of the FY ’24, FY ’25 pipeline. As of now, we have an order book of 25,000 sites. Out of which about 18,000, 18,500 sites are live and we hope to get the remaining live by — before the end of this fiscal year. On the cost side, I’ll just let Anush give you a little bit of a peak into our approach on how we think about costs and cost management.

Anush Raghavan — President, CMS Cash Business

So Balaji, I think we have shared a little bit of this in our last quarterly update as well and obviously we’re sort of living in unique and interesting times from an inflation perspective. Usually the first quarter is the one which base typically the wage increase cycle when you sort of look at it in that context. The first quarter is usually where we sort of provide for all this and make those cost increases. And cost management for us is a function of trying to balance and focus on our margins from multiple perspectives. There is a lot of investment and effort that goes into tech and automation and consistently using that as a lever over a long-term time-frame not just quarterly or annual basis to sort of always keep trying to get better efficiencies and better synergies.

And along with that, trying to make sure from a productivity and SG&A cost perspective what is the optimization that we can get. And then there is also sort of trying to use pricing in an intelligent manner to balance the needs of the market share as well as margin. So, this is sort of we don’t think of this in terms of step increments in terms of doing it as a one-time effort. There’s a lot of consistent effort that goes into it. What you’re seeing as sort of our consistent improvement in terms of our EBIT margins over several quarters sort of really stand testament to that. And we’ll continue sort of evaluating the external costs and the macro picture in terms of how inflation trends and we’ll — like I said it’s just a continuous process and effort.

Balaji Subramanian — IIFL Capital Pte. Ltd. — Analyst

Okay. That was quite helpful. Thank you.

Operator

Thank you. We have our next question from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Yes, hello.

Operator

I’m sorry, your voice is cracking.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Is this better now?

Operator

Yes, please go ahead.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Congrats on the very good set of numbers. My first question was on this, a clarification on the capex part. Despite winning the INR600 crores of additional orders in the current quarter — in the first half, we don’t anticipate that the full-year capex will move up, right?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

These order wins, Nirmal, have — don’t have any capital requirements. These are wins in a very — in a capex light model not as capex businesses.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Okay. And secondly, for the first half our capex was about INR132 crores. So, is it possible to give a rough breakup between capex on the Cash Management side and on the Managed Services or the BLA side?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So I think from our side, we can tell you by the two businesses not by specific business unit. But not by specific BLA. But I think from a Managed Services business and a Cash Management business, we think our estimate would be that INRI32 crores would be split on a 50-50 basis.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Okay. And secondly, on the receivables part. In Q4 last year that is for the full year last year we had some write-offs and then at that point of time, it was said that it was because of some invoices mismatching or something. But even in the current first half we have about INR43 crores or INR44 odd crores of receivables write-off. So, should we consider this as a part of the business and this 4%, 5% kind of revenue as a percentage of revenue would be written-off every year or why is this happening? If you can comment on that part.

Pankaj Khandelwal — President & Chief Financial Officer

Sorry. I don’t remember that and there is no reason that we believe to have that invoice mismatching etc.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

I think there’s some confusion, maybe your understanding on that on the reason for a write-off. I think the write-off would have been linked to more reconciliation issues which are normal in our course of business.

Pankaj Khandelwal — President & Chief Financial Officer

So, we handle around INR1 lakh crore of the cash every month and there is some reconciliation in that. That result in some losses, which is basically we have to write-off for the same. As of now if we see last three years or five years, it is ranging from 3% to 5% and even this particular quarter is around 4%. So as of now it is — based on the past track record and the current trend, it is ranging from 3% to 5%. Going forward after we implement sort of MHA or RBI or cash etc., we believe that this percentage will reduce.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Okay. That is quite helpful to know. My last question is on the margin improvement in the Managed Services business. So generally if we do some product sales over there — this is my understanding that if we do some product sales, then typically in those quarters the margins tend to come down. So is this 20% kind of margin that we are seeing in the last two quarters, does it have some play on the mix is more oriented towards services and so the margins are higher? But in the next two quarters if there is product sales, it may come down?

Pankaj Khandelwal — President & Chief Financial Officer

So, generally product margins are comparatively lower and we end up to the project only where we foresee that there is a lot of other services revenue associated with that. However, our total product revenue is in the range of around 2% to 5% of our total revenue so it’s not that significant. And on the MS side also if I will talk about only MS, it is ranging from 6% to 11%, 12% so far.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So, the way you think of our product business or rather I would call it our banking automation business is that yes, if we have a quarter or a year where there is a significant revenue from that line coming in, it will have a lesser margin profile, but it’s fairly accretive to us and most importantly it gives us a very long-term services revenue stream attached to that banking automation line of business we have. So I think it’s important for us to keep building sustainable long-term revenue sources and also leveraging our investments of our engineers and our people on the field. And the other way to think about it is that when we think of giving you all these forecasts and the longer-term forecast, we don’t estimate our product and banking automation revenues to be a significant part. We like to think of that capped at 5% to 10% of our revenue and not a large contribution to our revenue profile. So, what you should look at is how the services revenue tracking because — and in fact this is a good half to look at. When the product revenues are lesser, you get to see what is the base of services revenue, what is the EBIT profile of that business, and that you should track at how that is trending over time.

Nirmal Bari — Sameeksha Capital Private Limited — Analyst

Okay. Thanks. This is helpful. Thank you.

Operator

Thank you. We have our next question from the line of Kuber Chauhan from IDBI Capital. Please go ahead.

Kuber Chauhan — IDBI Capital Markets & Securities Ltd. — Analyst

Thank you for taking my question. Just wanted to know that by any chance are we facing any kind of a threat from UPI transaction or online transaction, which is currently booming around. And second question is on capex. So the capex which you mentioned, is it from internal accruals or are we planning for any additional loan? So, these are the two questions.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So on the capex, let me have Pankaj address that question first.

Pankaj Khandelwal — President & Chief Financial Officer

So as on — all these capex is done on an internal accrual basis. We have — as on 30th September also, we have a cash balance of around INR248 crore — cash and cash equivalent of around INR248 crore available in our books. So, all our capex is done on an internal accrual basis.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

And from your broader question of UPI versus cash, I mean this is a question we’ve been answering since pre-IPO days in every call. But UPI has had a phenomenal trend in the country for citizens, for everybody. Our answer, I’ll keep it very brief, is that prevalence of digital transactions is helping the country in many ways including financial inclusion, which is a very important part of our culture and how we transact in the country. It has affected obviously the growth rates of cash over the last four to five years. However, we also feel that as India’s GDP grows, consumption grows, the rural markets grow; we see that cash will continue to grow well though digital may grow faster or slower at times we’ll have to see. And they are also coming from a smaller base rather than cash which has been here for a century.

Kuber Chauhan — IDBI Capital Markets & Securities Ltd. — Analyst

Okay. So any kind of — I mean what are the growth plans just to move ahead from — for our Cash Management division? So, any kind of a guidance over that perspective?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So I think our — I’ll right now use this quarterly call to stick to the goal of sharing our information in sort of very broad strategy. Our Cash Management business, which was let’s say 100% of our revenue in FY ’14-’15 is right now at the end of FY ’22 was about 70% of our revenue. We estimate that this revenue contribution of our Cash Management business will be around 60% of our revenue by FY ’25. And our Managed Services and Technology Solutions business will move up from zero in FY ’14-’15 to 30% last year and around 40% in FY ’25. This is assuming we are not expanding into any other new sector in the next two years and which we have to wait and see how those expansion plans will do. With this, we are still looking at a growth rate of 18% CAGR in revenue from FY ’21 to FY ’25.

Kuber Chauhan — IDBI Capital Markets & Securities Ltd. — Analyst

Okay. So, no threat from UPI transaction and online transaction, right, for particularly this division.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

I think our business model is very different and I think we have shown the resilience of the business model and the way we approach by our consistent growth of revenue and profits in the last so many years.

Kuber Chauhan — IDBI Capital Markets & Securities Ltd. — Analyst

Thank you, sir. Thank you for taking my question.

Operator

Thank you. [Operator Instructions] We have our next question from the line of Nitin Sharma from MCPro Research. Please go ahead.

Nitin Sharma — MCPro Research — Analyst

Congratulations on a great set of numbers. Two questions if I may. Would like to understand more that what is driving the Management Services performance in the first half? That is one. Then I have a follow-up.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So, this is [Technical Issues] I think if we go back to last year and obviously we got listed at that time in September, we had won a significant order book at the end of COVID and walking into FY ’22. The execution of the order book has started in H2 of last year and you’re seeing a quick ramp-up of that in FY ’23. Therefore when you look at the large bump-up in Managed Services revenue from a half to half basis, part of it is also the base did not have the luxury of having a lot of the order book under execution at that time and that has given us a significant jump-up in this half.

Nitin Sharma — MCPro Research — Analyst

Understood. And basically would want to understand that is it fair to assume that the security and service charges will continue to grow nearly revenue growth rate Y-o-Y and some update on the RBI compliance status? Thank you.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So, let me have Anush take you through the compliance status and will come back to your services and security question.

Anush Raghavan — President, CMS Cash Business

Sure. On the compliance front, as we have updated, we sort of set ourselves a goal of achieving about 65% compliance by end of fiscal ’23. As things stand, we are we are on track to achieving that number. We have also shared that from a longer-term perspective, we estimate that the compliance — most of the compliance should be rolled out by FY ’24 depending on ATM or retail segment. So from that three-year perspective, we are sort of on track with our compliance execution.

Nitin Sharma — MCPro Research — Analyst

So on the last call, you mentioned that the cassette swap compliance was lagging behind. Is it still the case or is at par with your year-end goal?

Anush Raghavan — President, CMS Cash Business

No. Cassette swap to be fair, I should call that out. When I talk about compliance, I’m talking more about the base RBI MHA compliance and achieving those 65% and close to completion by FY ’24. I’m not talking cassette swap. Cassette swap still continues to be a laggard from an overall industry perspective though as the market leader, we are reasonably well-positioned to implement that in terms of the investments into our infrastructure and overall capability. But having said that, the RBI is continuing to urge the banks to ensure that they can meet the deadlines imposed, which as of now is March 2024. So, we will have to see how that evolves. But as we sort of near that goal, there is a greater degree of pressure and urgency shown by the banks who are wanting to start ramping-up their network towards cassette swap compliance.

Nitin Sharma — MCPro Research — Analyst

Understood. And on the maintenance question on services and the security segments.

Pankaj Khandelwal — President & Chief Financial Officer

So, the service and security cost are basically the outsourced employee and the security we take for the cash — specifically for Cash Management business and which is increasing in line with the increase in the revenue of the Cash business.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

It’s not a straight-line correlation but — and we hope it’s not because we hope to get more productivity benefits over time. But it’s mostly linked to our outsourcing any staff which we need for our business and especially the security infrastructure we need to put in place for both RBI MHA compliance and for our Cash Management network.

Nitin Sharma — MCPro Research — Analyst

Understood, Very helpful. Thank you.

Operator

Thank you. We have our next question from the line of Abhay Agarwal from Piper Serica Portfolio Management. Please go ahead with your question, sir.

Abhay Agarwal — Piper Serica Portfolio Management — Analyst

Yeah, hi. Good afternoon. I hope I’m audible. Thank you the management team of CMS for taking my question. I have — my question is that I heard you use the phrase banking automation because now to me it sounds like going beyond this Cash Management and almost a convergence of your Cash Management business with Managed Services business. And also we recently saw the government launch 75 digital banks. So, my first question is are you considering that digital bank branches to be an initiative that CMS can benefit from which goes beyond just Cash Management literally running these branches? And secondly, the way the Managed Services business is growing and the fact that it probably doesn’t require as much cash to grow as the Cash Management business plus you have international clients so the growth can be much bigger. So, how much bigger can the management — Managed Services business be over next three to five years as compared to the Cash Management business? These are my two questions. Thank you.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So, let me try and take them one-by-one. On the banking automation side, banking automation side of course is a fairly vast field. We are — we were helping both public sector and private sector banks automate their branches so that the load at the front desk and the tellers can be much reduced. This is from ATMs, self-service kiosks, cash recyclers, and other solutions and even going up to automation. We have provided solutions to banks for that. The question — I think your remark on capital needs, I would like to correct you here is that our Cash Management business is not actually very cash intensive or not capex intensive. Some parts of our business in Managed Services like the Brown Label ATM business are capital intensive and therefore we don’t have a big thrust in those sectors. We have been very clear that it’s an area we will look at very judiciously if it meets our return metrics and that way we will — we have been very — capital allocation wise we’ve been very stringent.

If you think of the company over the last decade, not more than INR200 crores of equity capital had come into the company. Most of it — the growth has been done by internal accruals only. From a perspective of the Cash Management versus Managed Services, if you — what I would like to refer to is what we shared during the IPO time and later, the market size or the TAM at the end of FY ’21 for our combined businesses was roughly about INR8,500 crores. That is expected to grow by 2.5 times to INR22,000 crores by FY ’27. Now the growth CAGR opportunity is almost similar to the Managed Services and the Cash Management. However, the Cash Management market in FY ’27 is forecasted to be an INR8,000 crore market and the remaining INR14,000 crore is from both the Managed Services as well as AIoT remote monitoring business. So, it’s a larger market opportunity for sure. However, our goal is to focus on the businesses where we can deploy — where we don’t need to deploy too much capital and we can continue our growth rate at healthy return metrics.

Abhay Agarwal — Piper Serica Portfolio Management — Analyst

Okay. Thank you.

Operator

Thank you. We have our next question from the line of Abhishek from Narayani Investment. Please go ahead.

Abhishek — Narayani Investment Consultancy Private Limited — Analyst

Good afternoon, sir. Thanks for taking my question. First question, are you thinking starting a new service line or are there any plans for inorganic acquisition? Would you like to say something about it? And second question, what kind of EBITDA and PAT margin are you expecting in H2 and next two year?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Abhishek, thank you for your questions. I think in line with the way we have done our last three quarter calls and this quarter call, we don’t let the management team give any guidance on EBITDA or PAT. Our only guidance is on revenue for FY ’25, which is to reiterate again we have an 18% CAGR goal of growing our revenue from FY ’21 to FY ’25, which is to take our revenue of INR1,300 crores to a roughly INR2,500 crore, INR2,700 crore range by FY ’25. In terms of service lines and inorganic acquisition, as a team we are always focused on looking for adding on business lines and services with which we can scale and be a market leader and do well. We will share with you — I mean if you would refer to our Annual Report letter or our earlier calls, I think we have alluded to the areas in which we are examining our expansion strategy. As of now, there is nothing definitive. We are — the last acquisition we made was in remote monitoring about 12 to 15 months ago and we continue to look at markets adjacent to us or new sectors. Our approach is to focus on our capital to enter new lines of sectors instead of investing in our current sectors where we think we should be able to grow our market share and business organically unless we get something very cheap.

Abhishek — Narayani Investment Consultancy Private Limited — Analyst

Okay. Thank you.

Operator

Thank you. We have our next question from the line of Sanjay from Real Group. Please go ahead, sir.

Sanjay — Real Group — Analyst

Hello. Am I audible? So, my first question is like what’s the management take on RBI’s decision to come up with the CBDC? And as you already provided the revenue guidance so are you keeping in mind that if it goes well with the CBDC, how it affects your revenue and what will be your outlook on that?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So from a — I think if you look at our revenue model, it’s a function of the number of business points we handle in the country. I don’t think CBDC or increase — sudden increase in that will have any impact to our current business lines and the way we have structured our company. But from a CBDC perspective, our views are you and I know the same what we read in the public domain. The Central Bank is like some of the countries trying to pilot it. The pilot has been launched for wholesale. It looks interesting. I think it’s a fairly interesting idea to try this in wholesale especially for inter-country remittances in rupees. From a retail perspective, we as of now haven’t really understood what use case will it serve and how will it help a consumer or an Indian citizen yet given the fact that we’ve had a remarkable adoption of UPI in the country. So, CBDC retail is to be seen to see what it helps deliver in the country and what problem does it really solve. The wholesale one especially from a inter-country remittance in rupee trade and all, I think that looks like a promising opportunity for the country to explore like some other large developing countries like China are already doing.

Sanjay — Real Group — Analyst

So, are you expecting any threat if does well down the line?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Not as of now. From what we understand of CBDC pilots and early papers, we don’t perceive this to be a threat to our current business model.

Sanjay — Real Group — Analyst

Okay. Thank you. Thank you very much.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer all queries, kindly restrict your questions to two. We have our next question from the line of Bhavin Shah from Sameeksha Capital. Please go ahead.

Bhavin Shah — Sameeksha Capital — Analyst

Yes, sir. Thanks for giving me the chance. So first of all, we own the stock so we are believers in your story. But I actually want to go back to the question of the cash in circulation. When I look at how everything is happening, the only use of cash I can see is for black money and corruption and that’s — because I think every smallest even at the very bottom of the pyramid, people are doing UPI based transactions. So if you can comment on that? And then you have given a very interesting data on CIC, cash in circulation as a ratio of basically trying to show that India’s velocity is low. So is that velocity number decreasing, increasing, or stable? How is that? And then on the remote monitoring, I think last presentation you had shown a pretty large TAM including the one in the non-banking area. So, how much is right now the revenues from remote monitoring and IT solutions and like are you looking at the non-banking area?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

So, let me take the last part of your question first and then Anush can talk to you about the cash in circulation or velocity questions. I will avoid any reference to cash we use for black money and all because that is not a business model which works to our advantage anyway so I hope if that is happening, it comes down. We only work in the organized channel and that’s the money — currency we handle because we work with the banks. From a perspective of remote monitoring, we have talked about large TAM and that’s our understanding of the market opportunity across many sectors of the country. We have started focusing on the banking sector actually because that’s where our strength of enterprise relationships and our know-how lies. I think we’ve done well in that. We are expanding now to other elements of BFSI, which is insurance, NBFCs, and that sector. I think we want to play to our strengths to build our base as quickly as we can and become a market leader in the area we are. However, over time we do want to — we do aspire to expand into the broader opportunities there.

You have to keep in mind that this is a business, which started 18 months ago and then you have seen from a long-term perspective, we have already started building the software use cases for new sectors. There will be pilots, we’ll have to see what we win and lose. We’ll have to learn and see how we are able to do well in other sectors. But from a BFSI sector, I think we feel good and happy about our software and what we have most importantly delivered. The number of robberies and incidents which we have prevented, or fires, and everything. In a very short period of time, we feel very happy about the value we’re adding to our clients. I think over time as the quality keeps improving and our footprint increases, we should continue this again to build this into a good cash cow, into a high quality business, into a Number 1 market player in India. We will be focused on the B2B side. We are not focused or intelligent enough to focus on the B2C side. I think again for this, we would be — end of year would be a good time to report on broader direction of these businesses instead of at the midpoint where I think the focus is on a lot on the current year execution. Anush, you want to touch on the cash velocity?

Anush Raghavan — President, CMS Cash Business

I think with respect to cash, everybody — this is an interesting topic where everybody tends to have a certain rhetoric or an anecdotal view mostly based on what we’re seeing in the world around us. We sort of try to look at it as objectively as possible and the only guidance that we can sort of give is basis the data and numbers that we are seeing now and obviously as a cash company, we’ve been tracking a lot of these numbers for a long period of time. We’ve also evolved the cash index in a way that sort of seeks to demonstrate what is the actual intensity and usage of cash in terms of whether ATM withdrawals or the retail cash usage. And maybe what we can try and do is at the end of the third quarter, we will try and share with you — given that the festival period is just got over, by the end of third quarter we’ll try and share with you some snippets from our cash index which will hopefully give you a sense of what is — what are some of those longer-term trends.

But right now I’ll just limit myself to two or three specific data points. Generally the perception is that with the increasing penetration of digital and UPI, most of urban India is sort of migrating into that usage. We have sort of repeatedly reiterated the point that two-thirds of the work that we do is in semi-urban and rural India where there is in fact a lot of work still to be done in terms of financial inclusion, in terms of improving people’s access to banking, and in terms of the need for the per capita incomes in those segments to increase if India has to sort of meet its broader macro aspirations. But having said that, when I look at how cash is trending in metros and this is just the Top 6 cities. We’ve actually seen a 23% change in terms of overall increase of cash withdrawals through the ATM network on year-on year basis so Q2 of FY ’22 versus ’23 is 23%.

And if I sort of look at it on a sequential basis, that is 5%. For a long period during this COVID, we had sort of seen that the semi-urban rural India and semi-metros has more or less achieved their pre-COVID cash usage levels and slightly exceeded that. Metros were lagging at 90%, 95%. But in the last six to nine months, we’ve sort of seen a dramatic shift in that usage. Second, when you look at the overall cash volumes which is beyond ATMs and we look at how those are trending. Now Q4 usually cyclically is the strongest quarter in terms of because typically that leads to a spurt either due to tax payments or insurance payments and whatnot. But we shared with you on the last call as well that this first quarter was a period of highest cash usage that we had seen across our network ever even surpassing Q4.

Q2 continues to build on the Q1 stead and as it stands that we are seeing a 5% increase in the overall cash usage in Q2 even as compared to the fourth quarter. Retail sector continues to show fairly strong degree of resilience. Sectors which were impacted for the last two years due to either a function of lockdown, mobility issues, or COVID have also seen a strong resurgence. If I just look at media and entertainment for example, that’s up by 150% on a year-on year basis. Aviation is for example up by 20% while also — while the other sectors are sort of trending to hold to their long-term trends.

Bhavin Shah — Sameeksha Capital — Analyst

So this cash velocity ATM withdrawal as a percentage of CIC, is that increasing or decreasing for India since you have this data from the past as well?

Anush Raghavan — President, CMS Cash Business

I think it’s — in terms of cash velocity, see the CIC has sort of undergone a significant increase in the last two years. I think that was a step change and that CIC is sort of obviously holding steady. I think it’s just a 2% increase. But the usage of cash is a more smoother and that’s sort of continuing to increase slightly. So, the base of that I think is a longer-term trend. I think that should be reasonably steady. I don’t think — we will have a look at the number, in case there’s a change we’ll come back to you. But I don’t think that number is changing much.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Bhavin, I may want to just join into this question a little bit and give a different perspective for the sake of not only you, but our other call participants because this may not be understood very well by some people here. Our business model even though the metric which an investor will look at is currency in circulation and velocity, we have a contrarian view. We actually think that if this goes down, the need for our services and efficiency will even go up. Our business model is linked to what? It’s linked to the number of trips, it’s linked to the number of business points we cover, it’s not linked to the amount of currency we carry or we manage rightly or wrongly, whichever way. That’s the business model in the country. Now if organized retail goes up in the country, whether it is a Reliance retail store or it is a Dmart store or it’s e-commerce, there will be a cash transaction in that. The percentage of cash transaction may be 10%, 20%, 30% doesn’t matter.

But that means that business point will need to be covered on the cash logistics network. That is where we get the revenue from. Now there may be a small amount of revenue linked to the amount of currency, but the majority is linked to the stock and that we think is a long-term opportunity for decent growth in our industry on the retail side. You come to ATM, the ATM management business in cash is linked to the number of ATMs obviously we handle and there we have more than 35% of ATMs which are still insourced by the banks and not outsourced. The second element is how many trips do we need to make to that ATM in a month. That’s where our pricing is linked to and that over the last five years has not declined much. It has declined by max 10% after demonetization because again our linkage here is to going and doing a just in time fill so that banks can optimize on the currency, which is outside the network and on which they have to pay an interest.

And we have seen pre-GST, post-GST, pre-COVID, post-COVID; the number of trips being fairly strong and robust out there. Now the amount of money which we booked, it may go up or go down depending on seasonality. So again if you go to our Managed Services business, our linkage to the currency in circulation or the currency volume we handle isn’t so much to our revenue. It’s just to demonstrate to you the robustness of cash usage because perception like you said, cash is used mostly for black money is untrue, right? There is a lot of cash being used in the formal channels, which is traceable and trackable by the banks, which you and I sitting in a larger city may not be so aware of and we may perceptionally be thinking differently.

Bhavin Shah — Sameeksha Capital — Analyst

See, what I meant is the need for incremental cash is primarily for corruption and then that…

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

I mean that’s your viewpoint, right. My point is I don’t think we as a management team to comment on that and neither are we qualified. My point of view is simple. If India will grow at 5%, 6%, 7%; some part of that consumption growth at the rural sector will be taken care of by DPT, will be taken care of by UPI, some of it will be done by cash. For us the deepening presence of financial service in the country, the deepening presence of organized retail in the country is our opportunity for growth because they will — our view is that all boats will rise, at what rate we’ll see. But all boats will rise as the country does well.

Bhavin Shah — Sameeksha Capital — Analyst

Okay. I think I’d like to take this offline. I think that will be better if that’s okay. Thanks.

Operator

Thank you. We have our next question from the line of Mukesh Kothari, an Individual Investor. Please go ahead, sir.

Mukesh Kothari — Individual Investor — Analyst

Hello. Am I audible? Thanks for the opportunity. I mean just to take forward the last caller’s query on velocity of cash. I think if I read the trends in UPI and the current CBDC that RBI proposing, then low cash velocity in India is actually a feature, it’s not a bug compared to other country because other countries don’t have stimulus systems except probably Brazil. So low cash velocity in fact is not an opportunity, I think it’s more of a design. What do you think about that?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Sorry. Your question wasn’t fully clear. Was the question that the low cash velocity in India is not an opportunity or..?

Mukesh Kothari — Individual Investor — Analyst

Yeah, it’s not an opportunity because other countries don’t have stimulus system the way India has, right, UPI and I mean the latest one which RBI has come out with it?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

No, not really. I mean you go to even a developed country like America, there are many interpersonal payment solutions available. They may not be done by the national regulator like MPCI. But there are many applications bank to bank which people have — Venmo, which everybody in America is using to transfer money to each other. Digital wallets was not an invention of India. Digital wallets were invented 25 years ago. Whether you go to Japan or you go to China or you go to Europe, everybody has their own system or different systems either by private sector or public sector prevalent out there. The comment on cash velocity and opportunity is, let me try and explain this one more time, is that if the currency in circulation goes down — let’s assume this is a hypothetical scenario, right? If it goes down, we feel that the banks will need to drive more efficiency of cash usage through velocity.

Right now we think the system isn’t that efficient. I think there are many hops which a company like us needs to make. RBI has the money, the money needs to go to a bank chest, from a bank chest goes to a bank branch, from there it goes to a bank ATM, then you and I withdraw the money, we spend it at a retail shop, then a company like CMS goes and picks up the money, then we bring it back to our world, we process it, then we go to a bank chest, the bank chest will keep it or take it back to RBI. This can be far more efficient is something we have been trying to advocate for a long time as a leader in the sector. It hasn’t been yet been streamlined for whatever reasons there may be. We think that will streamline over a period of time and I think as that happens, you should also keep in mind that in India the cost of cash or the cost of currency has been at mid-single-digit levels always. It’s never been 2% or 0%. It’s been 5%, 6%, 7%, 8%.

When you have such cost of cash whether you hold it in your chest or your ATM or branch, it is in the bank’s interest to therefore have a higher efficiency of how frequently can the money come back to the vault rather than it be floating outside. Part of it also is that as country we — a lot of us continue to hold a lot of cash at home or in our wallets instead of depositing it frequently back into a bank account and then withdrawing it when you need it either it’s due to access or it’s due to whatever reasons out there. So our contrarian viewpoint for the long term, this is not something I foresee happening in the short term, is that then when the velocity will improve, the need for a cash logistics company will be far more robust that even what you see today. Again it’s our viewpoint, you and me can defer on it, but that’s something we feel having been in the sector of the business for the last 15 years.

Mukesh Kothari — Individual Investor — Analyst

Fine, sir, and I take your point. My next question was on basically the market share. Currently Top 2 players have around 72% market share, right, and I understand that it’s a growing market and this whole market will grow, but banks will also have their own constraints in terms of dependency risk that they have. So, don’t you think the Top 2 players might not grow from here on despite the growth in market?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Sure. I mean it’s a valid point. When you think of — when you’re referring to the 72%, let me clarify for the sake of everybody else in the call, that’s a number which is for the Top 2 players in the ATM cash management space. The retail cash management has a different dynamic, the cash in transit has a different dynamic, the managed cells have different market shares. Now again India can be different or India can be similar to other countries. But when we have examined this landscape across tens of countries over the last decade in our experience, whether you take a large country like America or you take a smallish country, we have seen that for a company to be successful in this sector is this is a cash logistics business, but this is also a risk management business, which people somehow don’t realize at times. Scale is very important because that scale gives you the network, the network, and the ability to drive technology to manage your risk and also manage your operations at a reasonable cost.

And therefore, these industries have veered towards the two-player, three-player, maybe a four-player market around the world because others cannot survive. India we saw I think when we were in the sector in 2009 and ’10, there were four players which quickly grew to almost eight or nine players in 2013, ’14, ’15; which then shrank to a five player market, which may shrink to three or two or may again expand. We don’t know, right? Competitive dynamics and what companies want to do is not something which we can forecast so well. We think looking at the global trends there is — only larger scale players can survive otherwise it’s very difficult to sustain this business for more than four, five years. And as we’ve seen in India; some companies had to shutdown, some had either losses, or they couldn’t manage to invest to grow the business. So, that’s our view. Will the Top 2 go from 72% to 90% or will it go to 60%? We don’t know.

Mukesh Kothari — Individual Investor — Analyst

Understood. One final question. How do you look at non-BFSI opportunities in terms of cash management say targeting petrol stations, company-owned company-operated petrol stations or say railways? Have you explored any such area in non-BFSI? I know there are no guidelines by RBI as such regulating this, but have you looked at this? That could be a potentially big opportunity, right?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Sure. I think when we talk about BFSI, the reason we say that from a retail perspective is that while we offer our Cash Management solution to a wide variety of retail source, we generally prefer to work through the banks because it helps address concerns around compliance, source of money, reporting, and AML and so on. But having said that, even if you look at our current split of retail business, it’s quite diversified. We work with e-commerce companies, we work with petrol outlets, we work with organized retail, NBFCs, hospitality, education. So from that perspective, we do not sort of set ourselves a bar in terms of the sectors that we work with. The only bar we set or the only standard we set for ourselves is preferring to operate through a banking channel.

Mukesh Kothari — Individual Investor — Analyst

What would be the ratio between BFSI and non-BFSI business and do you think non-BFSI could grow?

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Obviously. I think when you look at the next decade or two decades, there is a lot of potential for retail to grow especially with the entry of large scale players in the organized retail. We’ve sort — just to sort of name some names. We’ve seen Reliance Retail, we’ve seen similar such companies having aspirations of significantly increasing their retail footprint. So, I think that is going to be a large growth driver. We already operate — work and provide our services to many of them. So, I don’t think our — I think there will be a large degree of overlap or a similarity of our wallet market share of different types of retail sectors similar to the broader industry. I don’t think will be very different from that. And when we talk about the growth opportunity, I think it will be good to just distract all of you also to think about other things which don’t get attention in this call. If you think of something as basic currency transportation, we think that’s a sector which has grown quietly over the last 10 years at least a 10% clip every year.

We think this will continue to grow well at a 10% to 15% clip because — at least just because every bank which you and I know of or we track or we invest into the stock is looking to expand the number of branches in the country. That expansion of branches brings in its own currency logistics opportunity to carry cash back and forth, to process it, to manage it. So again my point is that there is a need at least in the foreseeable future for deeper financial inclusion and access. The DBU is one form of way of trying to get a branch or many branch out there in a more automated manner without too many people involved out there. And I think all of them — again DBU, you will have an ATM, you may have a currency recycler; they will consume cash. They will also have ways to open a bank account digitally without using too much human intervention. So our point remains that when you see financial inclusion drives in this country, you will see all boats will rise at a reasonable pace.

Mukesh Kothari — Individual Investor — Analyst

Fine. Thanks for inputs.

Operator

Thank you. I would now like to hand the conference over to management for closing comments. Over to you, sir.

Rajiv Kaul — Executive Vice Chairman, Chief Executive Officer & Whole Time Director

Thank you again for your time and your patience. I hope our commentary and our question-and-answer session has helped you understand our business better. We — just to summarize. We are very focused this year on execution of our order book and making sure we build a good sustainable and more predictable revenue base for all our investors in the coming years. I think we are well on track to meet all of our strategic objectives. It’s been — the first half of the year has continued to be a good half on the back of a good FY ’22. Thank you for your support and look forward to talking to you at the end of our Q3.

Operator

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.