Cms Info Systems Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Cms Info Systems Ltd (CMSINFO) Q3 FY23 Earnings Concall

Management Update:

• [00:04:30] CMSINFO said it experienced its highest-ever quarterly throughput of currency through its network in the company’s history, which was 11% higher than last year.

• [00:08:50] CMSINFO is seeing good results in the banking sector and has won contracts of INR800 crores across multiple business lines. The company is also expanding its AIoT business and expects to hit a revenue run rate of INR100 crores by the end of March ’23.

Q&A Highlights:

• [00:10:31] Balaji from India Infoline asked about the potential risks from Central Bank Digital Currency (CBDC) in the long term. Anush Raghavan President said the company is interested in the development of CBDC, and it can see how it could supplement UPI payments on the retail side. CMSINFO believes its real impact will be in the wholesale markets by facilitating cross-border payments and remittances and helping with interbank transactions.

• [00:10:46] Balaji with India Infoline enquired about the prospects for AIoT-based remote monitoring business and future outlook once CMSINFO delivers 25,000 ATMs by March 2023. Manjunath Rao President said the company’s remote monitoring and IoT/software businesses are performing well, with the installed base for remote monitoring crossing 20,000 sites and a new win for the Algo software and IT.

• [00:11:22] Balaji at India Infoline queried if the increase in other expenses been driven by inflation or by factors such as bad debt provisions or risk-related costs. Pankaj Khandelwal CFO answered that the other expenses increased because of the new business initiatives that were taken, such as remote monitoring. These expenses were booked in the other expenses category, along with adequate provisions for bad debts and ECL provisioning.

• [00:17:38] Achal Lohade from JM Financial asked about the ATM pipeline and its breakdown between the replaced and newly added ATMs out of the total 40,000 ATMs. Rajiv Kaul CEO answered that the estimate is that 65% of the pipeline will be replacements and two-thirds of the pipeline will be expansions, with one-third being replacements.

• [00:22:27] Vishal at Motilal Oswal asked if the company is seeing any different trends in ATM, RCM and CIT segments. Rajiv Kaul CEO answered that the company has seen secular growth across its business segments, with cash usage in semi-urban and rural areas even going 8-10% above pre-COVID levels. Metros have seen a particularly sharp increase over the last nine months, with a 16% increase year-on-year compared to pre-COVID rates.

• [00:26:44] Aasim Bharde from DAM Capital enquired about the BLA business, if the large orders including the bonus ones are implemented and live. Manjunath Rao President replied that 98% of it has been executed.

• [00:28:35] Aasim Bharde from DAM Capital asked about the estimated amount of capex for FY23 and a rough estimate for FY24. Rajiv Kaul CEO answered that CMSINFO will stick to its guidance of around INR225 crore for FY23. The company has not given guidance for FY24 yet, but it should be lesser than the FY22-23 track record.

• [00:35:34] Dhiral of PhillipCapital asked about the drivers of good improvement in the EBIT margin in Managed Services and its outlook. Pankaj Khandelwal CFO said that the EBIT margin improvement is due to the addition of a new line of business, consisting of IoT based remote monitoring and software services. Additionally, the 40,000 more ATMs being added in the pipeline are expected to lead to increased revenue and margin expansion.

• [00:37:01] Dhiral of PhillipCapital enquired about the reason for a sharp rise in other income on a consolidated basis. Pankaj Khandelwal CFO said the amount was not significant and it was related to investments sold, such as short-term mutual funds.

• [00:40:36] Sahil Shah asked about a breakup of the contribution from private and public banks in CMSINFO’s overall business. Pankaj Khandelwal CFO clarified that the company does not track on a quarterly basis. Currently it is about 50-50 is the private and public sector banks.

• [00:41:22] Aasim Bharde from DAM Capital asked about the plans for RCM business. Rajiv Kaul CEO replied that RCM is experiencing strong growth due to the increasing formalization of the Indian sector, with more bank branches and physical stores being added. Q3 saw more business additions than 1H, driven by growth in organized retail, e-commerce, and financial services.

• [00:43:24] Franklin Moraes of Equentis Wealth asked about the gross and net order book in Managed Services business. Rajiv Kaul CEO said its order book was roughly INR2,000 crores when going public, and it has now grown to INR3,000 crores, with an additional INR800 crores added this year.