Cms Info Systems Ltd (NSE: CMSINFO) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Rajiv Kaul — Executive Vice Chairman, CEO, and Whole-Time Director
Pankaj Khandelwal — President & CFO
Anush Raghavan — President, Cash Management Solutions
Analysts:
Balaji Subramanian — Analyst
Prithvish Uppal — Analyst
Nitish Rege — Analyst
Baidik Sarkar — Analyst
Unidentified Participant
Aasim Bharde — Analyst
Divyanshu Mahawar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the CMS InfoSystems Q3 FY ’25 Earnings Conference Call hosted by IIFL Capital 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 the call, please signal an operator by pressing star then zero on a touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Bharaji Subramanian of IIFL Capital Services. Thank you, and over to you, sir.
Balaji Subramanian — Analyst
Thank you, Rayo. Ladies and gentlemen, good day and thank you for joining us on the post Q3 and nine months FY ’25 results conference call for CMS Infosystems Limited. It’s my pleasure to introduce the senior management team of CMS who are here with us today to discuss the results. We have Mr Rajeev, Executive Vice-Chairman, Whole-Time Director and Chief Executive Officer; Mr Pankaj Khandelwal, Chief Financial Officer; and Mr Anush, President, Cash Management. We will begin the call with opening remarks by the management team and thereafter, we’ll open the call for a Q&A session. I would like to now hand over the call to Rajiv to take proceedings forward. Thank you, and over to you, Rajiv.
Rajiv Kaul — Executive Vice Chairman, CEO, and Whole-Time Director
Thank you. Apology. Thank you. Good afternoon, everyone, and thank you for joining our Q3 FY ’25 earnings call. For the nine months of FY ’25, we have delivered a steady and consistent performance with 10% revenue growth and 7% PAT growth. While navigating the surprises in this year with agility and disciplined execution, we are happy to report that our focus on quality of services, integrated offerings and aggressive focus on the retail sector have helped us notch up strong share gains this year. Our revenue-share in the cash logistics segment has grown from 40% to 42%. Given the scale of our route network, the investments we have been making in technology, automation and risk management as well as careful selection of contracts has helped us in expanding our margin profile. In our managed Services and Technology business, we are continuing with a good order wins momentum and have over INR700 crores of wins this year, majority being recurring services revenue in nature. The broader industry is seeing consolidation trends. The ATM base for many large banks was disrupted in Q3 due to instability in operations at a key industry player. These banks have been focused on planning and transitioning this base to stronger market players. Our investments in becoming an end-to-end platform player have delivered great value for our customers and enabled solid growth over the last three years. We have increased our tech spends from 1% to 1.5% of revenue. This is critical to have a superior quality offering and also to keep building a strong margin profile. With that, let me now turn this over to Pankaj to share more financial highlights for the quarter
Pankaj Khandelwal — President & CFO
Thanks, Rajiv. Our consolidated revenue is INR581.5 crore. On year-on-year basis, total revenue is flat. However, service revenue has grown by 3%. Our PAT grew by 7% year-over-year to INR93.2 crore rupees. PAT margin has expanded by 140 basis-points to 16%. Segment-wise, the cash logistics business with INR404 crore recorded and 8% year-on-year revenue growth, while the EBIT grew by 6% to INR103 crore delivering a robust 25.6% margin. Our managed Services and Technology solutions business revenue at INR210 crores saw a decline of around 10%, primarily due to lower banking automation revenue. Despite this, the business achieved an EBIT of INR38 crores and a margin of 17.9%. Our MSN tax solution have grown 2.2 tax in three years and today contribute 40% of our revenue. Our capex spend has been INR50 crores in nine months of the year and we expect this to be INR150 crore INR200 crore for the full-year. I’m happy to announce that our Board has declared an interim dividend of INR25 per share. With this, I would like to invite Anush to share his key business highlights.
Anush Raghavan — President, Cash Management Solutions
Thank you,, and good afternoon, everybody. We have recorded our highest-ever cash volume handled in Q3 with a 6% Y-o-Y growth and an overall business point addition of 10% on a year-on-year basis. Further, we also see that the usage of cash on a same-store basis has been very robust across metros, urban and semi-urban locations. You will be able to see more details on this in Slide 7 of our investor presentation. With the budget announcing tax cuts, if there is an uptick in consumption, that would be a further tailwind to us. Our retail business has grown 15% year-to-date on the back of aggressive trust in retail segment to regain our market leadership. In our managed services and tech business, we’ve had two breakthrough wins: a large end-to-end fixed-fee outsourcing contract with a leading private bank. And the second is winning an AIoT remote monitoring deployment at a leading quick commerce customer, marking our entry into non-BFSI remote monitoring solutions. On the regulatory side, the Reserve Bank of India has revised the casset swap guidelines as per which it would now be applicable on all outsourced ATMs and will exclude. We have till-date completed casset swap implementation on about 25% of our base. The next phase will expand the coverage from 30 to 80 cities. The modalities of this rollout, timing, pricing, et-cetera are still being discussed between the Indian Banking Association and the Cash Logistics Association. The last few weeks have seen a heightened operational intensity as banks have been working with us to manage transition from an affected market player. This engagement is also an opportunity for us to grow our MS and tech solutions with large private sector banks. We will be able to share more details on this at the end of FY ’25. And with that, I now hand it back to Rajiv for the closing remarks.
Rajiv Kaul — Executive Vice Chairman, CEO, and Whole-Time Director
Thanks, Anush. We started this year being very bullish and having a revenue estimate of roughly about INR2,600 crores. However, due to multiple external factors in H1 and unexpected delays in the large INR1,900 crore-plus PSU order book execution has resulted in revenues coming in lower this year. We have completed 15% of this order book at end of H1, have ramped it up to 30% completion at the end of Q3 and our focus remains on getting 60% of this order book live by Q4. The impact from this itself is to the tune of INR150 crores lower revenue in FY ’25. This will though ensure that our — the execution of this order book by March at 60% will ensure that our FY ’26 services revenue growth can ramp back up to 15% plus. The medium-term opportunity for our business is looking very solid. The competitive intensity, as I’ve mentioned before, has reduced significantly and we have detailed out the opportunity on Slide 12 of our investor deck. The cash logistics business can grow between 10% to 13% in the mid-term. Our MS and Tech business should grow upwards of 15% and our AIoT RMS business should compound at 15% to 20% growth rates over the medium-term. If you combine these three, on an organic basis, our revenue growth opportunity is at 13% to 15% CAGR. Let me reiterate the potential mid-term drivers. The banking outsourcing opportunity is poised to grow with a potential increase in ATM interchange rates, which would drive better economics from the entire sector and also lead to an expansion the ATM days. We are likely to see an increase in our cash management TAM as large PSU banks are looking to outsource in-house ATM — ATMs for cash management services. Our thrust on expansion in the retail sector is overall delivering good results and good synergies. And now with our new AIoT win at a leading quick commerce platform, we can see the synergy of having a combined effort towards a new sector in addition to BFSI. We are also making good progress in growing our Boolean logistics business. With a strong balance sheet, a track-record of programmatic, disciplined and value-creating M&A deals, we have built an active pipeline in our sectors of interest, B2B payments, business services, banking software and technology and specialized logistics. We look-forward to discussing FY ’25 performance and the next phase of a growth journey in our Investor Day at the end-of-the fiscal year in Q1 FY ’26. With that, I would like to open the floor for questions and thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles to ask questions please press star and one. The first question is from Balaji Subramanian of PiFL Capital Services. Please go-ahead.
Balaji Subramanian
While you have talked about 13% to 15% revenue CAGR going-forward, is there any guidance that you would like to provide for the next four years like how you had guided for doubling of revenue between FY ’21 and FY ’25? My second question is on, you know, with the issues faced by one of your competitors, how do you see the market dynamics changing in the short-term as well as the medium-term? And would you be interested in acquiring parts of their business thank you.
Rajiv Kaul
Thank you, Balaji. So this is Balaji. This is Q3. We are very focused on getting this order book live by Q4. I think the right time to discuss the FY ’26, ’27 sort of trajectory would be the Investor Day and we did the last one-two years ago. I think it’s high time we come and update our investors and analysts on the developments in the company, how the market is changing. The market has been very dynamic this year, right, both from an industry perspective and a country perspective. We want to see — wait a little bit to see how the dust settles down and some of these developments which you are alluding to and see what benefit and gains we are going to be able to derive from that. Specifically, we will not talk about any particular competitor by name as such, but whenever we’ve seen any impact to a company for whatever reasons. We have seen of — it’s natural to expect that customers will move business to stronger players and be careful. And we are seeing good momentum in some of these conversations. And again, I would defer till the end of Q4 to be able to come and give you a better update. In terms of acquisitions, I think our strategy always has been that in our core businesses, we should be able to grow on our own. However, if there is an acquisition in any of our current business lines, which comes at an accretive basis and is logical for us to be able to buy and maintain our share — to grow our share, we’ll definitely look at it.
Balaji Subramanian
Thanks. That is helpful you.
Operator
Thank you. Next question is from Uppal from Elara Securities. Please go-ahead.
Prithvish Uppal
Yeah, hi. So couple of things from my side. First, just wanted to understand the progress on the order book. As you alluded to earlier, about 15% was executed in H1 and now it’s about 30% and you had highlighted there were certain testing delays. So any — so any shift that has happened in the last you know, quarter in terms of progress towards faster execution of this order book so something you know — and what is giving us the confidence to reach probably a 60% kind of order book execution. So that would be the first part. And within this order book, you know what would be the split of the pending order book in terms of the MS and maybe the product sales segment when which parts have probably seen some bit of delay and you know which segments would probably see which other components are the one within the MS book, which would do well. Second is, we’ve seen uptick in the other services, which is largely your cards business in terms of the margin. So just wanted to get a sense of what has been driving this better EBIT margin and do you see it as — is this a one-time or more of a sustainable kind of basis on the margin? And thirdly is that you said that the retail book, retail cash logistics has grown by about 15% for the nine months, which would mean that your ATM cash logistics and maybe CIT are sort of flat or have you seen a decline in the first-nine months. So any sense on that like you know, what has caused that because we guided to earlier that this segment could probably grow at about 6%, 7% CAGR, at least the ATM and the CIT business. So just you know, some sense on that,
Anush Raghavan
Yeah. Hi,, Anush here. I will answer the first and third parts of your question and we’ll come back to the second one. I think as far as the order book is concerned, maybe let me reiterate it in this way. We had solid order wins in FY ’24 of about INR1,800 crores of total wins, which we carried into FY ’25. As we updated you in our second quarterly call, through the six months of the year, we were able to get progress to about 15% of that execution. Most of the delays was on account of as the overall banking industry and various OEMs replaced and changed and upgraded the models of their equipments could be ATMs, recyclers, kiosks, all of them went into various testing cycles, some with NPCI, Visa, Master, with the banks and the switches and the softwares themselves. So what used to typically take three to four months for one-product to make it through all of the various tests, in certain cases expanded to as much as long as 3/4. That combined with a handover delays on part of the banks in working with the incumbents to exit from some of those sites and hand it over to us has effectively led to an extension of the ability to implement the order book. From the 15% in Q2, we’ve been able to quickly ramp it up to 30% by Q3. And with most of the good momentum in across most of these contracts. We hope to further double that and get to 60% by Q3. With respect to the third question, which is on retail growth, I think that’s a good point, but you also need to sort of keep bear in mind that retail is about 25% plus-minus of our overall cash services. So ex-retail, our ATM and CIT would have still grown by about 7%. Also bear in mind that as we have said, right, through through the year, we’ve had various external factors, consumption issues and so on, and we have been able to grow 15% despite that. Coming towards Q3 and now Q4, we are seeing good momentum in both ATM and CIT. We’ve also been able to notch up revenue-share gains and volume gains across all of our cash businesses, ATM, retail and CIT.
Rajiv Kaul
Answer related to the card question.
Pankaj Khandelwal
Yeah. So historically, our card margins was over 20%. Over the last — post COVID because of the cost increase in the cards and the availability of the plastic was very costly, that has resulted in the lower in the margins. However, in last six to nine months or in one year the rates have settled and because of that now the margins have improved up to the normal level.
Prithvish Uppal
Okay. Understood. Thanks for that. Just a follow-up is, with this the dark store, you know AIoT business that we received an order win for. So is — are we doing the retail cash logistics with the same partner and is this a cross-sell or is this just purely going to be only for AIoT? And further to that, if you could just help us understand how view — how we should be assessing the AIoT business in terms of, you know the profitability standpoint, you know, Ash is what could possibly be the margin profile for this or should we look at it more from an IRR or ROCE perspective? And what would those numbers be maybe typically or a ballpark.
Rajiv Kaul
Yeah. So, the win in this customer is a cross-sell win. It is a customer which who we have been working with from a cash logistics perspective. We — if you remember about a year and a half ago, we talked about investing in technology to build solution stacks for across sectors in retail. I think we were doing a POC with the customer for the last four to six months after extensive testing. They have liked the solution and now we will be deploying the solution at their and warehouses. In terms of client-specific profitability, I think it almost guess impossible. I think our overall IoT and RMS business is very accretive as you can see it in the profile of the overall MS business. And we — I don’t think we will be — we share any client-wise profitability metrics, but this will be in-line with our overall — it’s a quasi SaaS business and the margin profile of any of our AIT businesses where we choose to work-in is reasonably good and IRRs will range in the 18% to 25% range.
Prithvish Uppal
Got it. Sir, my question was not client-specific, but generally on the AIOT segment what is — would the margins be higher than the 16% to 1.5% that we have in the managed services book.
Rajiv Kaul
If you look at the slide, if you look at our slide on the investor deck, right, the slide number 11, where we are — where we have given you a broader breakdown into the managed services business, which is overall 40% revenue, but 42% of the business is from managed solutions, 25% is linked to the transaction-linked BLA, 17% as of now is from RMSM software and 15% is from banking automation. Now if the overall EBIT number, which we reported at 17%, right, the product automation business is obviously a lower EBIT business as you know. And the solution and services business is obviously higher and that’s why you get the blend of 17%, which you’ve seen for this quarter. So I think the margin profile of the business is relatively strong. The IRR of any of these projects you look at is in the range of 18% to 25%. And that will apply to the business also.
Prithvish Uppal
Got it. Thank you for that. Further questions, I’ll join back-in the queue and all the best.
Operator
Thank you. Next question is from Reghe from Cris Capital. Please go-ahead.
Nitish Rege
Hi, thank you for the opportunity. So we need around 43% growth in the MS segment in Q4 to meet our segment guidance. So — and now that Jan has ended, are you seeing momentum as you highlighted flowing in from Q3? Are you confident of reaching the — meeting the guidance we’ve given before.
Rajiv Kaul
Sorry, did you — if you could repeat, you said our guidance
Nitish Rege
For the MS segment around INR1,000 crores?
Rajiv Kaul
No, I think — sorry, the — we — if you look at Slide number 8, we — and also I mentioned if I also mentioned in my comments, right, we will have a slip of revenue in the overall revenue for what we had guided to. All of that revenue slip is primarily in the MS business. So the revenue guidance for MS would be lower than the estimated like I think you’re taking 40% of INR2,500 crore INR2,600 crores of roughly INR1,000 crores. So it will be lower than that.
Nitish Rege
Okay, okay. And just on the AI or the quick commerce,
Rajiv Kaul
Split of revenue between cash and MS will largely be in the 60-40 range, that range will remain?
Nitish Rege
Okay. Okay. And just on the quick commerce order win which we’ve got, could you quantify the order size, how large it is?
Rajiv Kaul
No. I mean, I think we will — we can talk about the number of sites at some point, but right now, our focus is on — this is comparative in nature. And again, we don’t talk about a client-wise win side ever. We’ll always give you overall order win book, but let’s get the project executed live and we will share more and maybe show you the technology at our Investor Day.
Nitish Rege
Okay. Okay. That’s all from my side. I’ll fall-back in the queue if I have more questions thank you.
Operator
Thank you. Next question is from Vedik Sarkar from Unifi Capital. Please go-ahead.
Baidik Sarkar
Rajeev, hi, good morning. Thanks for the gate. Couple of questions. In terms of the disruption that you called out, right, is this translating to an active conversation as yet of a vendor churn at a client’s end? In other words, is this translating to commercial opportunity or is this an operational disruption that does really benefit us? That’s the first question. And if you could please quantify even the opportunity loss that we’ve suffered here on account of this disruption in Q3? And secondly, in terms of the new initiatives that we’ve been working on for the couple of quarters across a gold or the loan collection business, right? I understand the base might be small as things stand today, but could you perhaps call-out the run-rate we’re looking at today and how you’re perceiving the momentum in these businesses to shape up?
Rajiv Kaul
Thank you, hi. Let Anush answer some of it and I’ll jump-in for the rest.
Anush Raghavan
Thanks. Hi, Radik. I think as far as the discussion was concerned, so clearly, right, I mean we’ve made clear that there are parts of the business in the MSN tech that we like and there are parts that we’ll be very careful about, more specifically transaction led BLA. So clearly that is something that we want to be a little careful and picky. The one thing that we’re trying to do is in navigating the opportunity around this is to try and see how do we build and scale-up our engagement with private sector banks. If you go back to some of our earlier calls, we did say that the private sector banks had pretty much done their end-to-end integrated outsourcing around 2012 to 2014. And when we started building scale in our MS business around 2017 to ’18, our — the only way for us to go about that was to work with large public sector banks on the RFP-led business. So this actually presents itself as an interesting way for us to get into many of these accounts. What we are trying to do is to sort of actively engage with them and try and see how do we switch contracts in from lumpiness into long-term fixed-free nature and from transaction fee to a fixed-fee nature. So yes, there are commercial opportunities and I think we would, as Rajiv said, be able to share more once we execute and once we meet in our Investor Day.
Baidik Sarkar
So, very quickly — very, very quickly, Kamuj, is that disruption still extending in the industry or are we — or is it behind us? I’m just trying to understand how things will shape on-going.
Anush Raghavan
We are in the — we are in the middle of it still. I think this has started a couple of months ago and there’s still ongoing process. I think it will take time given the base of business involved in banks needing time it has — it does affect us, I would say, in some ways negatively because the clients are expecting a lot more for the current remaining players to help. There is time taken to take-over businesses handing over from current vendors, not easy. It’s a little tricky process without getting into operational complexities. I think this is — I mean, the short-term, this is positive. But in the immediate term, obviously, this does cause distraction of — on our client side, which also means that current projects which could have gone live will take maybe a little bit longer because the first priority is to fix things, which may not be working well right now. But from an investor perspective, I think this is a — I would say that this is a decent opportunity for the — for us as a company. This is a life situation. We will have a far better sense to explain this really in May, June. Right now, I think we should not talk more about this. I — the Boolean business — so I think debt collection, we told you, we have ramped down internally and our priority on debt collection will be focused to look at the sector only through an acquisition or a partnership. We have done extensive market work, commercial diligence of players there. And we have put it on pause for right now just given the NBFC loans, the NPA at the personal level, the situation. We just want to wait-and-see how does the sector behave in a sign of some of some consumer stress because we want to be careful from a reputational perspective as to how the sector behaves in bad times. But our work is done. I think at the end of this quarter, we will take a call on whether we will pursue an acquisition and play in this sector or not. On the gold loan and Boolean business, organically, we’re doing well. We are actively — we are actively in discussions with a couple of players from a partnership and acquisition perspective. Please allow us some time so that we don’t have to share internal numbers, this can impact our discussions in the market.
Baidik Sarkar
Okay. And lastly, on the quick commerce foray, is this a pilot commercialization or do you reckon once the scale-up, I mean, this will be a material impact on the base? I’m just trying to gauge how large the TAM for this specific foray is as far as common is concerned. I think — so again, we are new to the sector, right? Third year running, we primarily focused on ATMs. In Q1, we talked about a significantly large order contract, which we are working to execute from a bank demand perspective. Now each client is different, technology needs are different. We have been building a stack for broader hospitality restaurants and retail. Many pilots are going on, including in, let’s say, EV charging, in-restaurant spaces, quick commerce, we have been able to get a — you get this customer on-board. Let’s get some momentum more and we can talk about, I think the broader retail opportunity, I’m not saying mom-and-pop stores, but broader large chains, I think there is an opportunity for us to be able to synergize across the cash logistics, our managed solution offerings and RMS businesses. This will be a decent size win. Our overall software and RMS business is 7% of our overall revenue. And so you know, our goal is to get to the 10% mark by FY ’27 on an organic basis. I’ll be in catch.
Operator
Thank you. The next question is from Harsh D from Kuba Investments. Please go-ahead.
Unidentified Participant
Thank you for the opportunity. I have a couple of questions related to the quick commerce win. Firstly, is this for all of their dark stores or is it in a specific geography? Could you maybe quantify a number of sites? And the follow-up question to that is that, do we have like a special task force or a team within the company to service these quick commerce players given how fast they are growing.
Rajiv Kaul
So you know, I think we said we won’t be able to share the number of stores because that will — there are very few players. I think the name of the pair will get automatically obvious. But the solution is meant to be deployed across all of their dark stores and warehouses. So we have just started the execution of the project and over the next three to six months, we will try and complete it. But of course, as they are growing, this may — this may be a project will go on for some more time. The second question is, there is an internal — there is an internal wardroom for this particular sector, like for any key project, there is a warroom where we are working on to work with these clients. There is — I don’t think the issue is about their growth. I think the issue is about just a new sector for us, getting the technology proven and working, making changes quickly so that we are able to address customer quality and needs and then be able to replicate this across the remainder stores where you have to go-live.
Unidentified Participant
Got it. Thank you.
Operator
Thank you. Next question is from Jatin Parashar from Estates. Please go-ahead.
Unidentified Participant
Thank you very much for giving me an opportunity to talk to you. I am very young to attend this meeting, but I’m very fortunate for this meeting. Thank you, Rajiv, sir. Sir, my question is that, sir, basically banks are banks are lowering their ATMs to cut their operation costs cost. So how will it impact our businesses? And basically, sir, a new business initiative has been discovered by the CMS is that we are providing virtual bodyguard to the bank. We are providing the — that is surveillance to the banker. So how much capacity, how much it will increase the revenue from the virtual — the virtual security that we are providing, how much will add-up to the revenue, sir? And basically on the bullion side, sir, we have basically are the — we like precious metal. So how much the bullion will add-up to the revenue, sir and at what margins we will enjoy, sir.
Anush Raghavan
Okay. Hi, Anush here, let me address some of them. I’m not sure I heard the second part of your question well, but I’ll respond to what I understood. As far as the ATMs are concerned, so I think this goes back to the question saying, where-is the real opportunity in our ATM cash management? And I think there are three or four types layers of opportunity one needs to think about. First and foremost is the organic need for banks to invest and expand the ATM network. The historical average and even now we are seeing is this should grow at roughly about 3% to 4% on a year-on-year basis. So is there about 250,000 ATMs. The annual need is for about 10,000 ATMs in terms of incremental growth to this network. Now this may not typically happen in a smooth fashion month-on-month, quarter-on-quarter. It is a little lumpy based on how banks are bundling in and expanding it. Sometimes it happens in terms of banks investing their capex to do it. More often than not banks prefer to do this through an integrated route. And when they do the integrated route, one of the challenges is always-on the unit economics or the model of outsourcing, which is where I think revision in the interchange fee plays an important role as a catalyst because it helps improve the revenue pool for the overall industry and serves as a strong upward trigger to help drive this expansion. What you may be seeing as a short-term blip in the numbers and shutdowns is mostly because in the course of execution both of what we have as the order book and as the overall industry replacement cycle, there’s always a timing effect of some sites being shut-down while new ones get installed. And I think we should be able to see return to expansion on that. The second is within the cash management sphere, overall ATMs is one aspect. What we also do care about is what is the outsourced market. That opportunity is anywhere between 80,000 to 100,000 today. We have seen a significant shift over the last decade and last five years, especially as banks seek to outsource more of their captive ATMs to third-party companies such as CMS. In fact, as we speak, there is one large RFP by one of the largest public sector banks to outsource as many as 10,000 ATMs to cash management directly, which I think will provide a very interesting case for how other public sector banks could follow in the coming short to mid-term. And the third, of course, is to think about how a large market-leader like CMS could drive incremental revenue gains on the back of price income. So all of this put together is what gives us a guiding path to tell you how the overall cash business could grow at a 10% to 13% CAGR in the mid-term.
Rajiv Kaul
And to your question on bullion and logistics, I think what I’d like to highlight is, we are operating at fairly good-quality, world-class margins. So any business line and any new business contract we look at, we look at making sure that we can maintain our strong margin profile and return ratios. So also given the route network, which we have across ATM and retail, a large part of the route network can be used for our Boolean business. Therefore, we should be able to maintain a strong margin profile in that business also.
Unidentified Participant
Okay. Thank you, sir. And sir, I want to say one thing to you, sir, if you allow me, sir.
Rajiv Kaul
Please go-ahead.
Unidentified Participant
Yeah, yeah. Sir, basically, sir, whenever I go — whenever I see the van of CMS sir, we must add that, sir, apart from the CMS sir logo, sir, Vima said we are managing businesses, business sir. So it will — it will attract the customer sir. It will not — because the first point of basically, sir, our when is very attractive, sir. So if we add that this we are helping businesses connect businesses, sir. We help in connecting the business there. So it will — the perception will develop and sir, the CMS will gain the market-share as well, it will help the increase the revenue, sir.
Rajiv Kaul
Thank you so much. I think we are looking at enhancing our branding and communication. We’ll take this feedback and I look at it seriously.
Unidentified Participant
And thank you very much, sir, Rajiv, sir, for enabling me — for basically giving him talks that I’m very young and basically to talk to you, it’s a very big honor for me, sir, because every institution is talking to you and I am given opportunity as a single shareholder very less than 25 year-old. So it’s a very big up it’s honor to talk to you, sir. Thank you, sir.
Rajiv Kaul
All the best for your investing journey and thank you for your passion and interest in CMS.
Unidentified Participant
Thank you, sir. Thank you very much, sir. Thank you very much.
Operator
Thank you. Next question is from Asim from DAM Capital. Please go-ahead.
Aasim Bharde
Yeah, hi, sir. Two questions. First on your order book execution delay comment, sir. So is the nine month-odd period where all the testing and talking between stakeholders takes place? Is this the new normal? And so every order win will still take time before it materializes into your revenue?
Rajiv Kaul
What’s the second question,?
Aasim Bharde
The other one was on capex, but I will have a follow-up question on this depending on how you answers it.
Rajiv Kaul
Okay. So no, I don’t think it’s a — so the order wins are across a multitude of banks. Most of this is public sector banks. I would like to hope that this doesn’t become a usual norm because like when the year started, I didn’t think we anticipated the number of issues which could crop up, that it could be supply of technology, it could be testing at the technology team side. It would be about incumbent vendors delaying the handover sometimes. Therefore, if the older ATM doesn’t go out, the next ATM or recycler or software doesn’t get implemented. I also think that this year, the first-six months, we all seem to forget, were fairly as a country did get consumed a lot in an extended election cycle. There was obviously the broader — there was a broader CapEx slowdown. I am hoping with the Q4 and March-end pressures, we should see a much faster ramp-up. We are seeing momentum build-up in the last four to six-weeks. So that’s why we’re feeling aggressive that this 30% can get to 60%. And but I — also I wish there was a general theme. I think at each client there have been — it’s been a different factor. So I really can’t tell you for the six to Nine-Month process. But banks seem to be in a hurry to conclude RFPs and award contracts. I think execution-wise overall there has been — there have been hiccups across the value chain.
Aasim Bharde
And the 60% order book live that you’re talking about targeting for Q4, that is still for FY ’24 orders, right?
Rajiv Kaul
No, it’s for current order books, it includes, right, we can’t do it on a — you know, we look at basically last 12 months, whatever the order book is still alive and therefore how much of that has been done?
Aasim Bharde
Okay. So it includes the order wins of this fiscal as well, basically?
Rajiv Kaul
Yeah. Yeah.
Aasim Bharde
Okay. And one more thing, the industry disruption currently, is that also possibly a reason why the timelines might still get extended? Okay. Because that’s relatively new.
Rajiv Kaul
That does — sorry, it’s a good question. That has led to a extra focus on something the banks weren’t planning to spend time and effort on. So that does create a reprioritization in banks as to which area and which think they need to work more on. There are limited resources always. So I think that has led to some of the impact we’ve seen in September, October, November, December. Hopefully that will start evening out and getting passed behind us in the coming months.
Aasim Bharde
Yeah. Okay. So is there a chance that FY ’26 would be far better in terms of growth for the MS segment simply because the timelines might come off and the order execution. Basically, you will be ordering a lot — a lot more orders than you did in FY ’25. So optically, the growth should look better, right, in FY ’26.
Rajiv Kaul
Yes. I think we have — we have mentioned that in the — on the Slide 12 also, right, the MS business in the mid-term should grow at 15% plus. Given the slip from this year, it should be better, but we are — we hope that the remainder new orders will come in, they also get progressed faster. So we’ll see how that — how that develops. We want to last question. Cautious right now, I’m sure I’m extra bullish.
Aasim Bharde
Yeah. Fair enough, sir. Okay. And just last question on the capex bit, INR50 crores done in nine months, another 100 to INR150 crore to be done in Q4 to reach that FY ’25 figure. So basically is much of it towards the MS segment or is it also for the — for the cash business as well?
Pankaj Khandelwal
It’s mostly for the MS segment and for the order execution as we are going from 30% to 60% to most of these are in the — in work-in progress, which I think we will able to conclude by the end of March.
Rajiv Kaul
Yeah, it will be MS, it will be RMS, it will be — there are obviously a little bit of maintenance capex every year there is some capex obviously for the cash business for growth. So it’s a mix, but majority of this would be linked to the MSR book.
Aasim Bharde
But not BLA, right, it would be more the IoT remote monitoring side on the front.
Rajiv Kaul
Why would we say not BLA? What’s wrong with BLA?
Aasim Bharde
No, I thought BLA is where the traction — I mean, you guys are being much more picky on that front. So my sense was we already executed most of that book.
Rajiv Kaul
No, no. So we are cautious on BLA. We are increasingly more cautious on BLA. If you remember at IPO, we said we will position size BLA to less than 15% revenue. In fact, now we are saying that BLA will be less than 10% of our revenue. So we’ll be very cautious and pick BLA contracts which meet our IRR hurdle, otherwise we won’t do it. But I mean that’s nature also some of the wins we have in MS every year and we have increasingly moved the BLA business. We started segmenting that to fixed-price and transaction price. We hardly do much on transaction pricing. We prioritize picking-up contracts where there is a fixed-price with some inflation-linked pricing built into it. But there will be some element to that. There will be some element to RMS. So it will be a mix of contracts across the business. Also, keep in mind, the contracts come integrated, right? It would — it would be a recycler along with — along with AIT, RMS on-top and maybe an MBS solutions stack on-top. On-top.
Aasim Bharde
Sure, sir. Okay, great. Thanks a lot for answering my questions. Thank you.
Operator
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. Next question is from Divyanshu Mahawar from Dalaland Stock Broking. Please go-ahead.
Divyanshu Mahawar
Thank you, sir, for the opportunity. So my question is on the side of AOIT ringboard monitoring. So I’m clear that we had a center in Belarpur and any. So how — so for is it the new order that are coming? So that’s — that Vilapur site is enough to capture that order or so going-forward, we need to set-up more new sites for maintaining that remote monitoring.
Rajiv Kaul
So our central command room for the AIoT business is based in new Bombay, not in in new Bombay. I think we have built it to a good capacity. Our business is Quasai SaaS so while we have increased from — we have gone from almost 2,000 sites to 25,000 sites in the last three years in the same-center is operating from which we are managing it. Using technology, using machine-learning, I think our model has been very different. I think we are not focused on a business which needs too many people at the command center is more linked to machine-learning being able to control any mishaps. The news growth, I think our center is good enough for our growth plans for the next couple of years. And we also — in my opening remarks, talked about the fact that we have bumped up our tech spends from almost 1% of revenue, which was average for the last three years to 1.5% this year. A significant part of that is going into investing in the RMS software stack and our machine-learning algorithms.
Divyanshu Mahawar
And secondly, sir, if you look at us command center, so on in a broad range, so what can — what size of order and a command center can capture it on a broad range that foreign small command center can have and files or can have an order book that can execute a site, say 5,000 sites. So what’s in broad range for any command center that you operate or your competitor operate? A broad range
Rajiv Kaul
So our — I don’t know-how to give us answer to that question, but our command center — sorry, this will first depend on the business model you have. Our business model is lot more linked to machine-learning and therefore computing either at the site or computing at the cloud rather than people in the command center controlling this. So that’s the first difference. I’m not saying others may or may not have it. I just — I naturally don’t know-how everybody else is operating in this sector. Our current site and command center is handling 25,000 plus sites. I do feel that this can go up. We haven’t done a sizing. But again, this is a very small investment for us to create. We have meanwhile in a new operational back-office, which we are creating in Belapur, we have created a backup site for any eventuality or even for expansion if required for the coming three to four years.
Divyanshu Mahawar
Okay, sir. And sir, one last question. So if you look at on the — we have — we got an order from any of the e-commerce platform. So how could be this opportunity big for us? And secondly, what was the thought process for entering into a non-BHSI space because we already present in the BFSI space. So what was our thought process for entering into non-BFSI space?
Rajiv Kaul
So it’s a great question. I think for us, we have identified three or four sectors which are of interest for us, which we think will do well in India and they will present as an opportunity to grow and compound at a sensible rate with a good-quality margin. Our banks, NBFCs, retail and retail includes e-commerce and quick commerce are the areas of our interest. We have built sales teams over the last three years and our focus on cross-selling. In fact, if you go to our slide deck in the appendix on Slide number 16, you will see our approach, which we are saying how we are looking at launching more service lines and deepening our presence in a client by selling them different parts of services from CMS. So our — I don’t think I can quantify the opportunity in broad retail. There can be a very large opportunity, but the opportunity of interest for us at a reasonable margin and where our solutions will do well, I think that we’ll see over-time how that grows. For us, the idea is that a client of CMS should be able to get the benefit of our quality from multiple service lines. They will start from a retail cash management solution possibly and go on to AIoT RMS stack where there is large-volume and scale. I don’t think we are a company which can do a very good job with clients of five, 10, 15, 20 stores. Given the nature of banks where you can get hundreds of sites to work on, we like to focus on clients with a large presence in India. Therefore, they are able to get the best of CMS, both from a software stack and also from our engineers and field presence because many times you need local access for any unforeseen circumstances.
Divyanshu Mahawar
Okay, sorry, it was nice to hear you. Thank you so much sir for the opportunity.
Rajiv Kaul
Thank you.
Divyanshu Mahawar
Thank you. Next question is from Tanish from PS Capital. Please go-ahead.
Unidentified Participant
What kind of capital allocation strategy are you guys looking at? One of your biggest competitor is facing some financial difficulties. Are you guys open to any M&A opportunities in this space or any particular segments are you looking for to deploy your cash?
Rajiv Kaul
Yeah. Good question. I mean, I think we have we have explained our capital allocation track-record. I think our fundamentally conservative team. We like to have — we like to have no debt, we like to make sure we have adequate cash for any opportunity which may come up. We are — we have been carefully preserving our cash generation, which is all internal and no money raised for the right opportunity at the right price. Historically, we have said that if in a business where we are market-leader, we are not really looking to do M&A, we don’t want to go and buy growth, which a client may not be willing to give to you, unless it comes at a very accretive price and synergy for us. We would like to use the cash idly to expand our offering lines. We did that with RMS. We made a small investment and then backed it up with significant capex in the last three years to grow this into a meaningful and exciting opportunity for us. That will be our playbook. We look for — but as we grow in size, I think we are also now looking in M&A to partner with people and not necessarily acquire the whole company. And compared — specifically to a particular deal in sector, I think it will be wrong for me to comment anything. I think it’s a live situation. We don’t know-how this will pan-out for whom. We are not in any active discussion with a particular company at this stage in our sector right now. I think our focus currently is on companies in our areas of interest and I think the areas of interest doesn’t have managed services and cash management in them.
Unidentified Participant
Okay. Thank you.
Unidentified Participant
Thank you. Next question is from Shivam from ValueWise Wealth Management. Please go-ahead.
Unidentified Participant
Yeah. Hi, sir. Thanks for the opportunity. Like seeing the financials from the last three or four years, like our bad debt profile write-off, which we have done in our books is a similar as far as the absolute amount is concerned. As a percentage of revenue, it has decreased. Like I wanted to know what specific risk assessment profiling with regards to our potential customers, which we are doing because like there’s a significant amount of write-offs and the same has been seen for the last three, four years. So what are we doing to reduce on that front?
Anush Raghavan
Hi, so Manush, I’ll handle one part of it, which is to give you the business context to what these are and pass them to to explain the accounting of it. So you have to see that in the nature of business we are in, whether it’s a cash management business or managed services, risk is very intrinsic to what we do. And it has just been the agreed practice in this industry that any risk which arises out could be cash losses, could be reconciliation differences, could be SLS LLTs, for instance. All of them are typically tallied up with our customers on a daily basis, but only finally accounted and adjusted against service invoices. Could happen in the subsequent month and sometimes it could take longer. One of the issues in the cash business in the past used to be that banks would take an undue amount of time to recognize chargebacks or reconciliation differences because the RBI effectively allows customers and when I say customers, car holding customers anytime up to seven years to raise a particular distributor to the bank. Over the last three to five years, the industry has been able to standardize and improve on these risk management protocols. So for example, we will have almost a real-time basis wherein if a bank receives a claim from a customer, it comes to us almost Real-time. We have to agree and settle it from the time we receive a claim typically within three days. But there is no bar to when a customer can raise a claim on the bank. And hence, the best way that overall industry, not just CMS has found it best to adjust for these risk cost has been by way of debit credit adjustments to our revenues. And hence, you will see all of our risk costs typically recognized as a bad debt doesn’t really mean that there are credit issues with the customers, but it is risk. We have in the past alluded that as our businesses have scaled and matured, as we implement more technology into identifying and managing risk better. And as some of these public sector contracts ramp-up and then settle into a more streamlined way of delivering services, we expect the risk cost to reduce. So what used to be about 5% to 5.1% of revenues FY ’25, ’24 has reduced to about 4% in H1 of this year.
Unidentified Participant
And okay. Okay. Yeah. Yes, sir, another follow-up question like the bad debts which we are seeing, is this in a specific segment like PSU banks for the private banks or if you could provide some light on that?
Anush Raghavan
No, not really. I think I think you should think of it as across the business, right? So if I take cash management, for example, a lot of our risk would be in the ATM cash management business because that is where we have a far higher exposure to cash. One-way of improving on that has been through implementation of casset, but that’s just one aspect of the type of risk. We have risk in terms of cash and transit. We have risk, we have cash and wall for example. Many of these would also be insured. It’s deductible portions that get adjusted against some of these costs. But, if I would tell you in terms of our overall risk exposure, there is the risk of pill fridges, there is a risk of large cash losses and the deductible coming out of it. There’s also the cost of the insurance premium, there are penalties, SLA penalties which get adjusted here. So I — other than the fact that the ATM cash business has slightly higher intrinsic risk, which is of course price adjusted to what we do. I don’t think it has a customer-specific angle to it.
Unidentified Participant
Sure. That was very helpful.
Anush Raghavan
Thank you.
Operator
Thank you. Next question is from Akshad Verati from RSP Adventures. Please go-ahead.
Unidentified Participant
Hi, thank you for the opportunity, sir. I’m fairly new to this company. So just as per my understanding, the cash management services is an annuity kind of a business and the managed services-based on the order execution. So as you said in the opening remarks that in the H1, 15% of the order book was executed, while in Q3, it is 30%. So we have grown that order book execution significantly. So just trying to understand why is there a dip in the revenue of the MS quarter-on-quarter.
Rajiv Kaul
I think just let me sort of give you an overall context and then specifically explain this particular quarter. Yes, I think cash is annuity and we’ve explained this in the past that we like to keep it annuity for the simple reason that it allows us to handle inflation cost pressures a lot more if we have access to adjusting for pricing on an annual basis. In our MS business, when we started this business, 2014, ’15, it started-off as being revenues which had a greater component of banking automation with our product-led revenues, simply because that was the only way to get into this business and penetrate accounts and over a period upsell into various solution-based offerings. As on-date, our effort is to try and consistently increase the percentage of recurring revenues as part of our overall MSN tech offering. FY
’26, we hope that recurring revenue should be almost 85% of this business segment. When I say recurring, depending on whether it is AIoT-based remote monitoring or longer-term medium contracts, these would all be in nature of about five to seven years. So that’s one-way to think about in terms of the implication of order book to revenues. In a — on a sequential basis, our revenues for MS have dipped only because of the certain lumpiness of product. On the services base would have grown on a quarter-on-quarter basis.
Unidentified Participant
Got it, sir. Sir, just one follow-up. So what is the services for — so what are you excluding from these? Like as you said, services portions have grown. So what are the businesses that we exclude from the services portion of revenue?
Rajiv Kaul
So if you look at Slide 11 of our investor presentation. On the right-hand side, we have given you a revenue split of our overall managed services and technology. The banking automation, that’s 16% at the very top, that is the only portion that we exclude from our services. The rest of them are all services.
Unidentified Participant
Yeah. Got it. Got it. Thank you so much.
Rajiv Kaul
Thank you.
Operator
Thank you very much. That was the last question in queue. I would now like to hand the conference back to the management team for closing comments. Thank you.
Rajiv Kaul
Thank you so much. Thank you for attending our call and thank you for your questions. We started the year, I think in the middle of the year, we were dealing with some headwinds, which we alluded to and we talked about openly at that time. I think moving to Q3, we are smelling a lot more stronger momentum and building a base of business and both for market-share and volume and pricing, which should help us in our mid-term growth aspirations. We will talk about FY ’26 and FY ’27 at the end of Q4 results and look-forward to seeing and engaging with you then. Thank you so much.
Operator
Thank very much. On behalf of IIFL Capital Services Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.