CMS Info Systems Ltd IPO - Information Note

5paisa Research Team 5paisa Research Team 16th December 2022 - 11:56 am

CMS Info Systems Ltd is 100% owned by Baring Private Equity through its unit Sion Investments Pte Ltd. CMS is one of the largest cash management and ATM management company in India and caters to a slew of major private banks, PSU banks and other financial institutions.

CMS broadly offers cash management services including ATM replenishment; bank automation and maintenance; and end-to-end card issuance and management.

CMS Info Systems Ltd had a total cash throughput of Rs.9.16 trillion in FY21 in terms of value of currency passing through all their ATMs. It has a pan-India fleet of 3,965 vans and a network of 238 offices and branches across India.

The top 10 clients account for 75% of the total revenues of CMS Info Systems. Out of its 100% holding in CMS Info Systems, Sion Investments will offer 34.41% via the OFS, reducing its stake in CMS to 65.59%.

Key terms of the IPO issue of CMS Info Systems Ltd

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	21-Dec-2021
Face value of share	Rs.10 per share	Issue Closes on	23-Dec-2021
IPO Price Band	Rs.205 - Rs.216	Basis of Allotment date	28-Dec-2021
Market Lot	69 shares	Refund Initiation date	29-Dec-2021
Retail Investment limit	13 Lots (897 shares)	Credit to Demat	30-Dec-2021
Retail limit - Value	Rs.193,752	IPO Listing date	31-Dec-2021
Fresh Issue Size	Nil	Pre issue promoter stake	100.00%
Offer for Sale Size	Rs.1,100 crore	Post issue promoters	65.59%
Total IPO Size	Rs.1,100 crore	Indicative valuation	Rs.3,197 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	50%	Retail Quota	35%

_{Data Source: IPO Filings}

Here are some of the key aspects of the CMS Info Systems Ltd business model

1) Strong and deep relationships with leading banks and financial institutions in India, with largest PSU banking customer accounting for over 17% of revenues.

2) Deep understanding and expertise in technology and process controls has helped CMS maintain leadership in the ATM and cash management business.

3) CMS is an existing profit making company with consistently improving levels of EBITDA margins and return on equity.

4) It provides end-to-end support to banks covering cash logistics, automation field support, hardware support, software support, maintenance contracts etc..

5) In terms of business mix, cash management services accounted for 67.8% of revenues while managed services accounted for 27.5% of total revenues in FY21.

How is the CMS Info Systems Ltd IPO structured?

The IPO of CMS Info Systems Ltd is an entire offer for sale with no fresh issue component

A) The entire Rs.1,100 crore IPO of CMS Info Systems will be in the form of an offer for sale and there will be no fresh issue component. Hence there will be no fresh funds coming into the company and no dilution of the equity base.

B) The OFS component will comprise issue of 5,09,25,925 shares and at the upper price band of Rs.216, the OFS is worth Rs.1,100 crore. That will also be the size of the overall IPO issue of CMS Info Systems.

C) CMS is 100% owned by Sion Investments, a unit of Baring Private Equity Asia. Sion holds 1480.00 lakh shares representing 100% of outstanding capital of CMS.

Out of that, Sion will offer 509.26 lakh shares or 34.41% of the total equity to the public. The intent of the OFS is to list the stock and to give partial exit to the promoter group, Baring PE Asia.

D) Post the offer for sale, the promoter (Sion Investments) stake will come down from 100% to 65.59%. Public shareholding overall will go up to 34.41% post IPO.

Key Financial parameters of CMS Info Systems Ltd

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Sales Revenues	Rs.1,306.09 cr	Rs.1,383.24 cr	Rs.1,146.16 cr
EBITDA	Rs.309.44 cr	Rs.258.96 cr	Rs.211.09 cr
Net Profit / (Loss)	Rs.168.52 cr	Rs.134.71 cr	Rs.96.41 cr
EBITDA Margins	23.69%	18.72%	18.42%
Net Profit Margins (NPM)	12.90%	9.74%	8.41%
Return on Equity	17.12%	15.84%	12.89%

_{Data Source: Company RHP}

While revenues were flat over the last 1 year, there has been a 14% growth in sales over FY19 profits have grown 74.8% over FY19. Most of the key profitability ratios like EBITDA margins, net margins and ROE have shown substantial improvement in FY21 compared to FY19 due to much better operational cost management.

CMS Info Systems IPO is expected to have a listing market cap of Rs.3,197 crore assigning a P/E ratio of 18.97 times FY21 earnings. That is reasonable valuation for a company that has a stable revenue model, strong entry barriers and over 30% CAGR in profits over the last 2 years; apart from robust margins compared to the peer group.

Investment Perspective for CMS Info Systems Ltd IPO

Here is what investors must consider before investing in the CMS Info Systems Ltd IPO.

a) The company has very strong financials as is evident from the growth in sales, profits and EBITDA profit margins over FY19.

b) The company is not diluting its equity base and Baring Private Equity will continue to hold over 65% in the company even after the OFS.

c) CMS is likely to benefit from its deep linkages built among the banks and financial institutions. Its leadership position helps sustain these relations over the long run.

d) In cash management, CMS competes with SIS, Brinks and Radiant. In ATM managed services it competes with NCR and Hitachi. CMS has leadership in both segments.

e) At a P/E of 18.97X, the ROE of over 17% will be an advantage. However, this is the approximate valuation that other listed peer group companies are commanding.

The company has a good model but comes with distinct risks to its model as banks shift increasingly to digital model to reduce handling cash. That is an important risk factor.

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