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CMS Info System is India’s largest cash management company based on number of ATM points and number of retail pick-up points as of March 31, 2021. Its’ business includes installing, maintaining and managing assets and technology solutions on end-to-end outsourced basis for banks under long-term contracts. Company caters to broad set of outsourcing requirements for banks, financial institutions, and organized retail and e-commerce companies in India.

Positives: (a) Leading market player with strong fundamentals. (b) Strong Pan-India network of 3,965 cash vans and 238 branches and offices. (c) Longstanding customer relationships with increased business opportunities. (d) Integrated business platform offering a range of products and services.

Investment concerns: (a) A decrease in the use of cash as the predominant mode of payment in India. (b) Highly dependent on the banking sector in India. (c) Adversely affected by the COVID-19 type pandemic. (d) Significant expenses in relation to employee benefits and cash vans and transportation. (e) Derive a substantial portion of revenue from a limited number of customers.

Outlook & Valuation: CMS Infosystems derives majority of its revenues by providing various services to the banking sector. There is no comparable company in the listed space which is exclusively engaged in the portfolio of business similar to the company. However, SIS Ltd. provides cash management services, among other services, through its joint ventures. At the higher end of the price band CMS would be trading at P/E multiple of 19x FY21 EPS of `11.4 which would be at a slight premium to SIS. Moreover CMS is primarily dependent upon the banking sector for most of its revenues and has high client concentration with top three customers accounting for 44.6% of revenues for the first five months of FY2022. Moreover the company’s business would be impacted in case we witness a third Covid wave in India. Given the dependence on a single sector, high client concentration and possible impact on business due to a third Covid wave we have a NEUTRAL recommendation on the IPO.

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