Cms Info Systems Ltd (CMSINFO) Q3 FY23 Earnings Concall Transcript

Cms Info Systems Ltd (NSE:CMSINFO) Q3 FY23 Earnings Concall dated Jan. 30, 2023.

Corporate Participants:

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

Pankaj Khandelwal — President and Chief Financial Officer

Anush Raghavan — President, Cash Logistics

Manjunath Rao — President, Managed Services

Analysts:

Shalin Choksey — Axis Capital Limited — Analyst

Balaji — India Infoline — Analyst

Achal Lohade — JM Financial — Analyst

Vishal — Motilal Oswal — Analyst

Shakthi — Individual Inestor — Analyst

Aasim Bharde — DAM Capital Advisors — Analyst

Dhiral Shah — PhillipCapital — Analyst

Sahil Shah — Individual Investor — Analyst

Unidentified Participant — — Analyst

Franklin — Equentis Wealth — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to CMS Info Systems Limited Q3 FY’23 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shalin Choksey from Axis Capital. Thank you, and over to you, Mr. Choksey.

Shalin Choksey — Axis Capital Limited — Analyst

Yeah. Thanks Neerav. Hi, everyone. On behalf of Axis Capital, we are happy to welcome you all today on CMS Info Systems Q3 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 to Mr. Rajiv Kaul for his opening remarks. Thanks, and over to you, Mr. Kaul.

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

Thank you. Good afternoon, everyone. Thank you for taking the time to attend our Q3 earnings call. This is our first — fifth quarterly earnings call since our listing on December 31, 2021. We are happy to report that we are continuing our growth momentum with another quarter of strong 20% plus year-on-year growth across revenue, EBITDA and PAT metrics. In fact, this is our seventh consecutive quarter with an EBITDA growth of more than 20% year-on-year.

Given we are close to the end of the fiscal year, I wanted to highlight our nine-month results. Our revenue has grown by 23% to INR1,413 crores, our EBITDA has grown 39% and our EBITDA margin profile is at 27.9%. Our PAT has grown by 36% to INR217 crores, which is almost equal to our full-year PAT of FY’22. All of this is a reflection of our market leadership, our execution capability, a methodical expansion strategy and a right to win for large complex end-to-end outsourcing deals in the banking sector.

I’ll now request our CFO, Pankaj, to take you through the Q3 financial highlights.

Pankaj Khandelwal — President and Chief Financial Officer

Thanks, Rajiv. Good afternoon, everyone. In Q3, our revenue has grown by 21% on a year-on-year basis to INR488 crores. EBITDA in the same period has grown by 29% to INR135 crores. And net profit grew to INR76 crores, 26% over year-on-year basis. PAT margin expanded by 50 basis points to 15.4% on a year-on-year basis. All our business segments have seen strong growth.

Coming to the business, cash management business revenue has grown 16% to INR338 crores in Q3, with EBIT growth of 21% to INR85 crores. Managed Services segment, revenue has grown by 39% to INR156 crore in Q3, with EBIT growing by 29% to INR31 crores.

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

Anush Raghavan — President, Cash Logistics

Thank you, Pankaj, and good afternoon, everyone. For the cash business, on a nine-month basis, our YTD FY’23 revenues have grown by 20% to INR975 crores. And the EBIT by 28% to INR243 crores. Further, our EBIT margins have expanded by 110 basis points year-on-year despite an inflationary cost environment.

To reinforce the usage of cash in everyday commerce, I want to share some interesting insights from our CMS Cash Index. At INR3.3 lakh crores, we had the highest-ever quarterly throughput of currency through our network in the company’s history. This represents an 11% growth on a year-on-year basis. Further, in FY’23 or for the last nine months, we have seen a trend reversal with currency usage growing in metros by 15% year-on-year, outpacing the growth of semi-urban and rural. Our business network has expanded and we currently service 120,000 active business points.

As the largest company in this sector, we remain committed to investing in our network and infrastructure to comply with RBI and MHA guidelines. As shared in prior calls, two-third of our estate will be compliant by the end of this year — end of this fiscal year. This we feel is going to be a key differentiator in keeping our quality and reliability of service offerings to the banking sector. With that, I will now request my colleague, Manju — Manjunath Rao, to share with you an update on the managed services and tech solutions group.

Manjunath Rao — President, Managed Services

Thanks, Anush. Good afternoon, everyone. Pankaj has already shared with you the Q3 financial details. I’m happy to share that we are now 35% of the total revenue of the company. In the last three years, we have grown our share from 29% to 35% of the overall revenue. FY’23 continues to be a strong growth. In nine months of FY’23, we have seen revenue growth of 36% to INR458 crores with EBIT growing by 69% to INR93 crores. In the banking automation sector with the RBI push on ATM network compliance, most banks are focused on this as a top priority. This is leading to some delays in key RFPs for ATM refresh and expansion. We are hopeful that these will be completed in the months — coming months between March and June 2023 timeframe.

In our AIoT remote monitoring business, we are happy to announce that we have crossed 20,000 live installations, making this one of the large IoT implementations in India. In our software business, CMS won a prestigious order for our Algo software, AIoT ATM based — AIoT based ATM security application for a large bank. This will be implemented over 15,000 ATMs.

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

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

Thank you, Manju. So I think what I want to highlight is a couple of things here. First, as we look at the whole banking sector, and some of you would have reviewed articles in the last week, we feel very happy to see a renewed focus the banks have on expanding their branch network. It was quite obvious to us for the past few years that there was a dire need to increase banking access, but at the same time, I think due to COVID and also disproportionate investments going towards digital and other banking areas, this area did not get the requisite focus. But today, we feel fairly vindicated that banks are recognizing the need for balancing their investments in both physical and digital infrastructure and there is plans to increase the number of branches, in fact, prior setup banks are poised to add maybe 12,000 branches in the coming year across the country. There is severe under-penetration in tier four, five, six towns in India and these will need branches, ATMs, microATMs, DBUs and whatnot. This along with the formalization, which we are seeing in the economy on the back of the reform efforts like GST, should present to us good growth avenues over the medium-term.

When we started FY’23, we have set our big focus in this year and thrust from the team at CMS is going to be on execution of a large order book. I’m very happy to report that all our key projects are well on tracks, our enterprise sales execution is also showing good results. We today have expanded and we have several large banks in India, where we are winning contracts across multiple business lines. Our track record of bidding and winning for these large complex contracts continues and we have added more than INR800 crores of new wins in the first nine month of FY’23. And as Manju already mentioned to you about our AIoT business, when we have started this business with a focus at the end of FY’21, we went and acquired a small company which had maybe 2,000 sites, which has now grown to over 20,000 sites. And as reiterated, we will hit annual revenue run rate in this business of INR100 crores by the end of March ’23.

Thank you for attending the call. And now we can move to the Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Balaji from India Infoline. Please go ahead.

Balaji — India Infoline — Analyst

Hello. Good afternoon, and congrats on a great set of results. So I just had three questions, if I may. So the first is on the Central Bank digital currency that was recently launched, so in the long run, what are the potential risks that you see from CBDC?

And the second question would be on the AIoT based remote monitoring business. So once you achieve the targeted delivery of 25,000 ATMs by March 2023, what is the future visibility we have?

And the final would be more on housekeeping basis. So we have seen a pretty sharp increase in other expenses. I believe that — I understand that inflationary pressures are there, but is some of this attributable to anything like an increase in bad debt provisions or any risk-related costs? That would be my last question. Thank you.

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

Balaji, sure, we’ll take these questions one by one. Let Anush give you a view on CBDC and then I’ll tell you quickly about AIoT and Pankaj can help you on the other expenses part.

Anush Raghavan — President, Cash Logistics

So, Balaji, we’ve obviously been following the CBDC and the developments as well as the white papers published by the regulator with quite a bit of interest to understand how you’re thinking about it, because each Central Bank in each country is looking at things somewhat differently. From what we understand of the two types of CBDC that are being looked at, the wholesale and retail, let me — on the retail side, the implementation and the use case seems to be very similar to the UPI right now in terms of scanning a QR code and how the payments would be realized. So to that extent, we feel that this sort of falls more into — this could supplement complement the UPI led growth, we will have to see in what way and what sort of momentum is achieved in terms of being able to scale up. That’s what we’re seeing on the retail side.

Where we feel and in some of our discussions with some of these people is that the real impact of this would be more in the wholesale markets either in terms of facilitating and enabling a more friction less cross-border payments and remittances or also, more importantly, to help in the settlement of interbank transactions. So that’s sort of where we feel the wholesale CBDC could make an impact. We’ll obviously keep watching as this stabilizes and evolves and we’ll update you in some of the future calls.

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

Manjunath will help you with answer of RMS files.

Manjunath Rao — President, Managed Services

Hi Balaji. On the remote monitoring, we have launched very well, as I explained — I just spoke a little earlier and we have — and ramping up very well too. As I said, we have — our installed base has grown — crosses 20,000 sites. But we have also expanded our solution capability to new areas like the branches, vaults, and have won contracts with leading private banks and gold loan companies and that’s where the expansion we would — we feel would come across.

In our IoT and software business, we have also won a new win, which I mentioned, which is for our Algo software and IT is an IoT based security software used at the ATMs.

Pankaj Khandelwal — President and Chief Financial Officer

So Balaji, I think from a — when we think about business classification. Increasingly, you’ll hear us talking about both our IoT business, which is RMS and also our software, which is again ML-driven software business as a category. To your question on what is the visibility. I think there are a couple of key RFPs, which should get decided in the coming months Snd hopefully at our analyst meetings in the first quarter of FY’24, we will have — we will be able to give you a better direction of the short-term growth opportunity, the midterm, we have already talked about. I’ll pass on the baton to Pankaj to answer your question on other expenses. Yeah. So the other expenses were increased because of the business mix. So like take the example of the IoT this remote monitoring, which we started recently. Majority of the expenses of the remote monitoring has gone to the other expenses. I think it’s basically because of the initiative we have taken in recent past for the new businesses, all the expenses are booked in other expenses. Of course, we have to make an adequate provision for our bad debts and ECL provisioning, that is also going in this particular bucket. So all this put together, the other expenses slightly increased.

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

So given, financials, the way we have shared them with the — in the past, we have different businesses, now we have incubating new businesses including the AIoT business and a couple of businesses we alluded to in our earlier calls, some of the startup costs and the incubation costs are being categorized in other expenses and as these business units become by themselves independent, we will then characterize them separately.

Balaji — India Infoline — Analyst

Okay. One quick follow-up if I may. So is it fair to assume that there is no significant increase in the bad debt provisions beyond what is par for the course?

Pankaj Khandelwal — President and Chief Financial Officer

No. All the provisions we have to make adequate provision for the impairment and which is in line with whatever the four, five quarters you’ve seen, this is in line with those numbers. There is no significant increase in any of these numbers.

Balaji — India Infoline — Analyst

Okay. Thank you. That is quite helpful. Thanks a lot and all the best.

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

Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial — Analyst

Yeah, good afternoon, gentlemen, thank you for the opportunity. My first question was, is it possible to give some market share in terms of the CMS CIT RMS business as we speak? A ballpark number would be of great help.

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

We’ll give the market share of CIT or RMS, I didn’t understand.

Achal Lohade — JM Financial — Analyst

All three sub-segments of cash management business,

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

Achal, I think we mentioned this last call, given the competitive dynamics and given that now we have more companies in the sector, which are listed also, I think we will feel comfortable talking about market share on an annual basis at our Annual Meeting, that will be wiser and better for all of us, but there isn’t any significant up or down trend just for your comfort in the last three months since we’ve talked last, and we will qualify — classify our market shares annually as we had said even at the end of September.

Achal Lohade — JM Financial — Analyst

Got it. With respect to the slide on the pipeline for ATMs, you’ve mentioned that there is a 40,000 ATMs pipeline what you’ve talked about. Is it possible to get some color in terms of how much of that would be replacement and how much is actually the net addition?

Operator

Sir, can you hear us?

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

One second. Hold on. We’re just checking. Our estimate at this stage, because these are — this pipeline which you’re referring to is mostly what we know from the RFPs of some key public sector banks. They don’t classify this at the RFP time. We will know this only once the implementation — they awarded –implementation is done. But our estimate is that, from just looking at the track record of some of these banks, we think it will be closer to 65% will be replacement and about two-thirds, one-third, one-third of this is possibly going to be expansion and two-thirds is going to be replacement.

Achal Lohade — JM Financial — Analyst

And just an additional question on that, how much of that will go under the BLA, and how much would banks be managing on their own and you would just be doing the cash management part of it?

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

We’ll have to wait for the RFPs to get concluded. I think only then we’ll be — till these RFPs don’t get closed out, we will not know the final mix and what decisions bank take. As of today, from again our knowledge, I think it is going to be — on the overall 40,000 number, it’s 50-50 — i’s a 50-50 bank-owned versus industry owned or third-party owned assets.

Achal Lohade — JM Financial — Analyst

Got it. And with respect to the compliance, if you could talk also about the industry, you’ve talked about you’ll be 65% compliant, two-third compliance by end of March ’23. Can you give us some sense about the industry as well, where the industry is and how do you see it in FY’24 for the industry and us?

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

Anush?

Anush Raghavan — President, Cash Logistics

So I think when I look at the industry overall, Achal, the industry number is more representative in terms of the cities that the SRO or the cash — Currency Cycle Association has picked and chosen to implement 100% compliance on. I think as we speak that number is somewhere between 80 to 100 cities depending on ATM or retail, which I think is a number which should be a little bit more than 50%, closer to 60% ATMs, perhaps 50% for the RCM business. We are little ahead of it, given that we decided to expand in a couple of more cities in the initial period. But I think now that — it’s not very different, like I said, we are at — we will be at about 65%, industry number should be about 55-odd.

Achal Lohade — JM Financial — Analyst

Understood. And how about for FY’24, Anush?

Anush Raghavan — President, Cash Logistics

So I think as we have guided earlier, we sense that those — and we told you I think at the beginning of this fiscal year, we estimate that the rollout of compliance will take — should be mostly complete for ATMs by end of FY’24, and I think we are sort of on track to delivering to that. The RCM business was — it’s sort of lagging by one or two quarters and again I think one of the commitments we’ve made or indications that we’ve given in terms of the rollout of compliance, as things stand, we are pretty much on track to achieving those. So middle of — through the middle of FY’25 is I think where we will have a significant portion of RCM covered and ATM should get completed by FY’24.

Achal Lohade — JM Financial — Analyst

Got it. I have more questions, but I’ll come back in the queue. Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Vishal from Motilal Oswal. Please go ahead.

Vishal — Motilal Oswal — Analyst

Yea, hi. Am I audible?

Operator

Yes sir, you are.

Vishal — Motilal Oswal — Analyst

Yeah, thank you. Just quickly, of the three sub-segments of cash management being ATM, RCM and CIT, can you just break down the growth for the current quarter and nine months respectively?

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

So I think you know we’ve expressed this also earlier, just given the sheer competitive dynamics of certain listed companies as well as the ones which have listed recently, we would prefer to share certain more in terms of data on our performance on an annual basis than breaking this out on a quarterly basis.

Vishal — Motilal Oswal — Analyst

But I mean, I think the question another way to think about is, are we seeing any different trends in the three segments, are we seeing them all growing reasonably?

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

So I think we — again to go back and reaffirm the same, I think our growth in the cash business has been fairly secular, whichever way you cut it. We are seeing fairly secular growth across the different business segments. The only thing that we called out, which is sort of a departure from the earlier norm, was more in terms of where we are seeing the intensity of cash usage changing and in some of our earlier calls, we had alluded to the fact that the semi-urban and rural India has seen a much faster recovery from COVID and in fact over the end of last fiscal, they were at about 8% to 10% ahead of the pre-COVID usage and metros were closer to 90%, 95%. What we’ve seen as a very interesting development in the last nine months on a more specific basis in this quarter has been that the use of cash in the metros has actually increased quite sharply, which as I said earlier, it corresponds to almost a 16% increase on a year-on-year basis. I think with that sort of compared to pre-COVID, they’re all sort of within the ballpark of each other, metros being slightly ahead followed by semi-urban and rural.

Vishal — Motilal Oswal — Analyst

Got it, thank you. Thank you, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Shakthi, individual investor. Please go ahead.

Shakthi — Individual Inestor — Analyst

Hello. Am I audible.

Operator

Yes sir, you are.

Shakthi — Individual Inestor — Analyst

So I wanted to ask question regarding the growth drivers. So we are seeing total installed ATMs in the country. So we are seeing the trends I think in semi-urban and rural areas are contributing to a significant growth. So can I assume that going forward like the management said that the addition of close to 12,000 bank branches, so can I assume that going forward it will be the HURU areas that is going to be contributing to some significant growth for the company?

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

So I think from a — if I — your line was audible but not completely clear, but if I understood your question was more about saying, do we see ATM growth to be dominated in the semi-urban and rural areas, is my understanding correct of your question?

Shakthi — Individual Inestor — Analyst

Yes, yes, yes.

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

So. I don’t — so let’s talk about the specific pipeline right now, we can talk the last — the last nine months has seen almost 8,000 ATM additions in the country. And I don’t have the exact breakup, but I would assume that a significant part of that would be in semi-urban and rural areas. The 40,000 ATM pipeline, to, which we think one-third of that is going to be expansion, we’ll have to wait and see where the banks are planning to install it. However, when we anecdotally look at our interactions with the private sector banks, the branch infrastructure expansion is mostly in Tier four, five and six. And usually different banks have different strategies, some banks will add one ATM for each branch, some will add two, it would be fair to assume that a large part of the expansion should come in the Tier four, five, and six cities.

Anush Raghavan — President, Cash Logistics

So the only thing I would like to add to that is you may have heard this so much earlier or also seen this in the presentation, but of existing network and reach. two-thirds of the business that we do is already in semi-urban and rural India. So there is only sort of that inherent distribution of where we do business. In the past, it has been our experience that as and when we have incremental business coming up in these buckets, it works well in terms of fitting into some of the infrastructure that we already created. And we help — we open up expand than basis the requirement.

Shakthi — Individual Inestor — Analyst

Yes, thank you, sir.

Operator

Thank you. [Operator Instructions] Next question is from the line of Aasim Bharde from DAM Capital Advisors. Please go ahead.

Aasim Bharde — DAM Capital Advisors — Analyst

Hi, everyone. I had a few questions. Firstly, on your BLA business, the large orders you had including the bonus one, is all of it now implemented and live?

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

Manju?

Manjunath Rao — President, Managed Services

Yeah. 98% of it has been executed. And that’s the question you asked, right?

Aasim Bharde — DAM Capital Advisors — Analyst

Yeah, so you had from two large banks and plus you had bonus orders as well. All of it is now into the system, 98% of it, right?

Manjunath Rao — President, Managed Services

98% of it is in the system.

Aasim Bharde — DAM Capital Advisors — Analyst

So going forward, are there any materially decent size orders you are working on or rather is in the — on the radar or will the run rate fall back to around 1,000 ATM additions per year on the BLA side?

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

Aasim, here I think Manju and we’ve said our strategy will remain — we will really be very selective and picky about where to bid. We will share as and when we have any development of the space. What we talked about also the INR800 crores order wins, I do want to reiterate that this year the order wins most of them are not capital in nature at all, they are — so I think that’s another good highlight of the order wins this year. So today, although we are roughly 5,500 BLA sites, there is very little left to be executed. There is no order book pending on the BLA side and if there is significant bid or deal we win, we will come and share that.

Aasim Bharde — DAM Capital Advisors — Analyst

Is the commentary similar on the remote monitoring sites as well? Is most of the sites live and up and running?

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

Remote monitoring, I think we are a little lesser, because this business was started much later. I think we will be close to 85% completed. And we hope to finish at all as per our commitment by March of this year.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay, okay. So sir, just in terms of capex number, for FY’23. I guess it will be more heavier vis-a-vis FY’24. But can you just talk about how much you would end-up incurring on capex in FY’23 and any rough estimate for FY’24?

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

FY’23, we’ll stick to our guidance which we said, we will be roughly around the INR225 crore range. I don’t see that changing. FY’24, I don’t know if we have already given — we haven’t given the guidance really, let’s just wait for the year to finish and then I think we can give you an idea on that.

Aasim Bharde — DAM Capital Advisors — Analyst

Well, it should still be much lesser compared to FY’23, right?

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

It should be lesser than our FY’22-’23 track record, yes.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay. Second question is basically on what is happening on the cassette swaps thing in terms of compliance, deadline was March-end, how many ATMs are already on the system and in your estimate or in your talks with the industry would FY’24 would be the year where things ramp-up quickly on this front?

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

Anush will give you more color on this.

Anush Raghavan — President, Cash Logistics

Sure. Hi Aasim. I think you’re absolutely right on that one. FY’24 would be when I look at it in terms of the overall length of compliance given that the base RBI MHAs implementation is well underway and on track as we spoke. So ’24 would be the year of cassette swap. So the most recent update is, with most banks and ATM OEMs coming out of the supply chain related issues, which were causing a challenge in terms of the availability of cassettes and shipments, I think that there is a renewed thrust into focus on cassette swaps — regulator had a meeting a few weeks back where they have reiterated very strongly that in fiscal FY’24, they would like to see a significant coverage for cassette swap across Tier-one and Tier two cities. The most immediate plan that I can share with you is that there are four large cities, which have been planned for implementation — four large metros, Delhi, Bangalore, Calcutta and Chennai, all of which have been scheduled for an industry-wide rollout over the next 90 to 120 days. I think that for the overall industry should add about 25,000 ATMs for cassette swaps which I think is a significant number. And once we are able to sort of get such large numbers done in 90 to 120 days, I think that will just create its own momentum and make sure that we will be able to sort of meet the regulatory goals in FY’24.

Aasim Bharde — DAM Capital Advisors — Analyst

The newer ATMs that are coming in, the pipeline that you talked about to an earlier question, that would all be on cassette swap, right, regardless of which market they are coming in, Metro or the smaller ones?

Anush Raghavan — President, Cash Logistics

So there are two parts to that. The ATMs, which are being procured by the banks, those — the banks are now procuring ATMs with an additional set of cassettes. So in those RFPs orders, the availability of cassettes are not the constraint. Banks also undertake in many cases significant back-end tech upgrade to change the way of reporting, reconciling information In their accounting system and risk management software to implement cassette swap. So most of that is fully done.

In terms of the cash company, so you know CMS readiness. We have upgraded quite a few vaults. We have planned upgrades for the further valuts. So I think with that most of the work that needs to be done is well underway.

Aasim Bharde — DAM Capital Advisors — Analyst

But in that case, I think even FY’24 sees ambitious, right, maybe the top four cities might be more proactive, maybe the 25,000 ATMs you talked about would probably be the only thing that happens in FY’24, right, given the back-end headaches that need to be targeted.

Anush Raghavan — President, Cash Logistics

I think the approach that the regulators urging Aasim is one-of — it’s both, top-down, bottom-up. When I say that what I mean is bottom-up they are saying you pick the largest cities and implement it because typically implementation of the feature is more challenging in the large cities given that you need large infrastructure and space and vaulting capacity to deal with the sheer number of ATMs. In the Tier two, Tier three cities, it’s typically a little bit more easier, especially from an operational standpoint. So the top-down approach that they are recommending is that in addition to these large cities, wherever as a cash company you have incremental vaulting infrastructure available, they are urging the banks to make full use of those and implement those. And in addition to these 25,000 ATMs in large cities, the Cash Association has indicated that they will be able to rollout another 10,000 — 8,000 to 10,000 ATMs in the next two to three months in the smaller cities. So I think — I think the regulatory push is there, I think there’s also a standing committee which has been created under the IBA, which includes participation from OEMs, MSPs and cash companies. Again, like I’m saying — like a lot of time in the last eight to 12 quarters has been about creating that infrastructure and ensuring that we are fully in compliance with the mentioned RBI regulation. I think those investments having been done and having now created infrastructure which is both world-class and as per regulatory needs, and with — the whole different industry stakeholders focusing on cassette swap, we are fairly optimistic that we should be able to pick up the pace on the swap.

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

I think, Aasim, the one number I would look — will reiterate and maybe Anush mentioned it already, some of the larger banks have already gone and bought almost 150,000 to 175,000 cassettes of the country, which have now landed in India, their supply chain has worked, because you can’t do cassette swap, there’s many things in the infrastructure. But first of all, you need the product. And so we were surprised when we were tabulating of this data. This data adds up to almost 175,000 cassettes, which are now in the country for the purpose of cassette swap. So that gives you a good base of ATMs, let’s take 40,000, 50,000 ATMs could move on to cassette swap sooner than what you and I may be able to forecast right now. But let’s wait and see. We would always like to be conservative and see. I think the Central Bank’s push is very clear. They have recently very strongly reiterated the drive and focus on this and taking — and they are taking an active role in monitoring this.

Operator

Thank you. Aasim, we’ll request you to come back in the question queue for a follow-up question. [Operator Instructions] The next question is from the line of Dhiral from PhillipCapital. Please go ahead.

Dhiral Shah — PhillipCapital — Analyst

Yeah, good afternoon, sir. Thanks for the opportunity. Sir, we have registered a very strong growth, if I look at your Managed Service revenue on a nine-month basis, and even if I look at your EBIT margin, there has been a very sharp improvement on a Y-o-Y basis. Sir, just wanted to know sir, what has led to this good improvement in the EBIT margin, and you know how — what kind of improvement we see going ahead?

Pankaj Khandelwal — President and Chief Financial Officer

See, this EBIT margin improvement in this Managed Services is because of the new line of business we have added. So the IoT based remote monitoring as well as the more service revenue we have added like software services we have added, so that has resulted in higher revenue as well as higher margin in this business. Manjunath has given you the 40,000 more ATMs, which are in pipeline over a period and banks focus on the higher remote monitoring, be it banks, ATMs or other gold loan companies or retails, so there is a lot of revenues related to that, which will lead to the expansion in our revenue as well as the margin.

Dhiral Shah — PhillipCapital — Analyst

So we expect this trajectory to even improve going ahead, right?

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

Yeah, that’s what it looks like, that’s what it is showing the trend because with these additional lines and adding into those points, I think that’s what is going to be — increasingly being seen right now.

Dhiral Shah — PhillipCapital — Analyst

Okay. And sir, If. I look at your other income, there has been a sharp rise in the other income on a consol basis. So what is the reason for that?

Pankaj Khandelwal — President and Chief Financial Officer

Amount was not significant, it is approximately INR1.5 crores, and that is largely related to any of the investment we have sold, we are doing the short-term — short-term mutual fund etc, so another mutual fund we have sold, related to that.

Dhiral Shah — PhillipCapital — Analyst

This INR32 crores versus INR6 crores if I look at on a Y-o-Y basis.

Pankaj Khandelwal — President and Chief Financial Officer

You are talking about nine months?

Dhiral Shah — PhillipCapital — Analyst

Yeah, yeah, no, if I look at INR3 crores versus INR60 lakhs on a Y-o-Y basis.

Pankaj Khandelwal — President and Chief Financial Officer

That is basically as at — as on 31st — on 30th September, we have INR248 crores of cash available with us. So higher the cash limit, higher the investment and resulted in higher other income as well.

Dhiral Shah — PhillipCapital — Analyst

Okay and sir, last one question, sir. Sir, how many percentage of our routes are compliant and are the banks slow or quick to get it compliant?

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

Sorry, I didn’t get the second part of your question, if you could just repeat that — about the banks.

Dhiral Shah — PhillipCapital — Analyst

Sir, are banks are quick enough to get it compliant or they are very slow to — from their end to be compliant?

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

So let me answer the second part first. The way we’ve rolled out compliance now, where especially over the last year-and-a-half has been, we demonstrated pilots in some of the large cities to the banks and almost all of industry stakeholders are fully on board. The onus of rolling out compliance has been more on part SRO, which is the regulatory organization for the cash industry [Technical Issue] regulatory organization for cash industry which is the CCA, Currency Cycle Association, what that body does is on a quarterly basis, it publishes an incremental list of cities in which all cash companies regardless should be able to deliver compliance. So — and when that happens, it means that any type of services which are provided in that city, whether it’s ATM or RCM will switch over to compliant. So banks are very comfortable with this model of product. With respect to our coverage, obviously the route compliance or infrastructure compliance will for us a little bit ahead of the business compliance. We try and manage those as efficiently as we can. So when we finish the fiscal at 65% compliance for business points, the actual routes maybe on the order of 70%, 75%.

Operator

Thank you. We move on to the next participant. The next question is from the line of Sahil Shah, Individual Investor. Please go ahead.

Sahil Shah — Individual Investor — Analyst

Hello. Yeah, I’m sorry I removed myself from the queue. My questions have been answered. Thank you.

Operator

Thank you. The next question is from the line of [indecipherable] from Concept Investment [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Yeah, hi, am I audible?

Operator

Yes sir, you are.

Unidentified Participant — — Analyst

Yes, thank you. So sir, can you give a breakup of the contribution from private and public banks in your overall business?

Pankaj Khandelwal — President and Chief Financial Officer

So we don’t track on a quarterly basis, right now it is approximately 50-50 is the private and public sector banks.

Unidentified Participant — — Analyst

Okay, so it’s 50-50. Okay, thank you. That’s it.

Operator

Thank you. [Operator Instructions] The next follow-up question is from the line of Aasim Bharde from DAM Capital Advisors. Please go ahead.

Aasim Bharde — DAM Capital Advisors — Analyst

Yeah, just one question on the cassette swap bit again, what would that do to our ATM realization?

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

So, Aasim, I think there were some figures that had been broadly discussed giving the industry negotiation stage. And what I recollect from those discussions were the implementation of base compliance will — is an incremental realization of about INR3,000, INR3,500 –about INR3,000, and cassette swap should add another INR1,000 on top of it. So that’s sort of the broad split.

Aasim Bharde — DAM Capital Advisors — Analyst

Oka, okay and just lastly, any comment on the way forward for your RCM business, market opportunity is there, you have the vans running on most of the routes nice with improved productivity. What are your plans on this side?

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

So — no, so in fact if I look at — if you look at our business point additions and we look at our performance, I think quite pleased with how the growth trajectory in RCM is shaping out. We’ve always sort of alluded to this business in the mid to long-term having fairly strong tailwinds, especially driven by formalization of the Indian sector, increase in the organized retail. So while on one side, we are seeing the financial sector having very strong growth aspirations for incremental bank branches, the private sector by itself wants to add close to 12,000 bank branches in the next year, year and a half, two years, likewise the counterparts on the retail I think have very solid aspirations in terms of just increasing their physical stores and presence across the country. We’ve added more business in Q3 of the year than we had for H1 of RCM. I think we are seeing pretty robust growth coming in from expansion of organized retail, e-commerce, as well as financial services.

Aasim Bharde — DAM Capital Advisors — Analyst

Okay, okay, thanks a lot, great results as usual. Congratulations to the team.

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

Thank you.

Operator

Thank you. Next question is from the line of Franklin, Equentis Wealth. Please go ahead.

Franklin — Equentis Wealth — Analyst

Yeah, thanks for taking my question and congratulations on a good set of numbers. What is the gross and net order book in your Managed Services business?

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

I think the way we allude to — refer to our order book, it cuts across all our businesses, of course, a large part of it you may — It will be — a large part of it is an [indecipherable] business. Our order book we had shared was roughly INR2,000 crores when we were going public. That order book is now at a size of INR3,000 crores. About INR800 crores was added this —

Franklin — Equentis Wealth — Analyst

So would this entirely be unexecuted?

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

The INR3,000 crores —

Pankaj Khandelwal — President and Chief Financial Officer

INR2,000 crores is almost executed and INR1,000 crores is around 75%.

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

So I think out of the — so the order book we had last year is all under execution. It’s already been executed, not obviously, revenue has been approved. The new order book of INR1,000 crores addition of that, I think about how much?

Pankaj Khandelwal — President and Chief Financial Officer

75%.

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

Has gone in or not yet?

Pankaj Khandelwal — President and Chief Financial Officer

No.

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

I think it will be roughly 50% would have gone live. The revenue is more complex calculation because order book contract periods vary from four, five, six, seven years. We taken approximate part of five to six years as the order — contract duration.

Franklin — Equentis Wealth — Analyst

Correct. So I was trying to understand what part of the order book has not been converted into revenues?

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

Yeah. I know. I think this is a number which we — I don’t have top of the mind because we sort of take stock of this end of fiscal year. And I think it would be a better time for us to share this update with you. We’ll have a more accurate number at that time.

Franklin — Equentis Wealth — Analyst

Okay, fair enough, fair enough. And also. I wanted to know what is the — how many ATM and RCM touch points, do you have as of nine months?

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

Sorry, same answer, this is annual number reporting, we will break this down, total orders we can tell you–

Pankaj Khandelwal — President and Chief Financial Officer

Combined number would be about 120,000 right now.

Franklin — Equentis Wealth — Analyst

120,000. Okay. And lastly, in terms of the cassette swap compliance, you did allude to the fact that 40000, 50,000 ATMs are likely to move, but for our number of ATMs, how much — what percentage of it is already compliant in terms of the cassette swap?

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

Yeah so the cassette swap for both for CMS and industry are both closely similar at about 7% or 8%, which based on the plan which is under discussion with the banks as well as the regulator, we think in the next four to six months, we should be able to move from the 7%, 8%, closer to 20%.

Franklin — Equentis Wealth — Analyst

Okay, so is it fair to understand — assume that as and when this is getting more compliant, then we’ll incrementally get higher revenues, which is proportionate to the cassette swap?

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

Yes, of course, there will be the impact on the revenue for sure, which is positive. I think overall cassette swap, you have to think it’s more from a broad term industry trend, not our industry, just banking sector. I think it just brings in global best practice and how routes are managed, how currency is managed in the country, it leads to a lot of benefit to the Central Bank, to the banking sector — to the banks themselves and to our industry in terms of the efficiency, productivity and the probability reduces [indecipherable] of something going wrong with the cash while in transit.

Franklin — Equentis Wealth — Analyst

Yeah, and for whatever reason, in case, RBI announces any penalty in case of non-compliance by March ’23, does the bank share this penalty entirely or would it be equally distributed?

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

No I think RBI — it will be improper for me to tell you what RBI could do or would do, but having seen the — just being as a normal [indecipherable] in the country reading the papers, I think any penalty Central Bank would pass would be on to the banks, which it regulates and not anybody else. That’s what I think. Now what banks may want to do in turn, I don’t know, but I’m just saying from the Central Bank perspective, I think the purview would be focused on the banking sector itself.

Franklin — Equentis Wealth — Analyst

Fair enough, fair enough. Thanks a lot.

Operator

Thank you very much. I now hand the conference over to the management for closing comments.

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

Thank you so much. Thank you for your questions. We look forward to talking to you in three months’ time and hopefully we and you’re on the same track. We have done the remaining three quarters and hope you — and talk to you soon in more detail at that time.

Operator

[Operator Closing Remarks]