Chittorgarh.com Logo
FREE Account Opening + No Clearing Fees + Rs 999 API Access
Loading...

CMS Info IPO review (Apply)

Review By Dilip Davda on Dec 17, 2021

•    CMS is India's largest cash management company as of March 31, 2021.
•    As investors friendly gesture, it has reduced the size and the price of the IPO.
•    The company has posted consistent growth in bottom lines.
•    The issue is reasonably priced based on its financial data.
•    Investment may be considered for short to long term rewards.

PREFACE:
Despite demonetization and post-pandemic, ATM business flourished many folds increasing cash circulation in the Indian Economy. With the digital India movement, this sector is set for fast forward mode with more and more tier-II, tier-III, as well as rural areas, demand for ATMs. This is one of the leaders in this space for cash management and automation of processes and is well set for increasing its niche play. The company that originally planned for an IPO of Rs. 2000 cr. (DRHP of August 14, 2021) is now entering the capital market with the reduced quantum of Rs. 1100 cr. (RHP of December 14, 2021). According to management, it has reduced the OFS size and the proposed IPO price as investors friendly gesture. India is the third-largest ATM market in the world based on the number of installed ATMs. India has one of the lowest ATM penetration rates in the world, with only 22 ATMs per 100,000 adults, compared to a global average of 47 ATMs per 100,000 adults as of December 31, 2020,

ABOUT COMPANY:
CMS Info Systems Ltd. (CMS) is India's largest cash management company based on the number of ATM points and the number of retail pick-up points as of March 31, 2021, as well as one of the largest ATM cash management companies worldwide based on the number of ATM points as of March 31, 2021. (Source: Frost & Sullivan) 

For Fiscal Year 2021, its total currency throughput, or the total value of the currency passing through all of its ATM and retail cash management businesses, amounted to Rs. 9,158.86 billion. CMS's business includes installing, maintaining and managing assets and technology solutions on an end-to-end outsourced basis for banks under long term contracts.

Its integrated business platform is supported by customized technology and process controls, which enables the company to offer customers a wide range of tailored cash management and managed services solutions while generating cross-selling opportunities and driving synergies and efficiencies across the business. It caters to a broad set of outsourcing requirements for banks, financial institutions, organized retail and e-commerce companies in India. It is operating on an asset-light model and is a virtually debt-free company. 

CMS's cash management business is largely route-based in nature with 78.11% and 78.70% of revenue, respectively, in Fiscal 2021 and the five months ended August 31, 2021, being generated from activities where route density drives profitability and enables operating leverage. Its managed services business on the other hand is largely recurring in nature with 52.45% and 65.80% of revenue from managed services business, respectively, in Fiscal 2021 and the five months ended August 31, 2021, being generated from long-term contracts, which provides high revenue visibility for its managed services business. As of August 31, 2021, CMS served 141977 business points across its ATM cash management and other related services. 

ISSUE DETAILS/CAPITAL HISTORY:
To provide an exit to some of its stakeholders and avail listing benefits, CMS is coming out with a maiden IPO of a secondary issue. The company will be issuing approx. 50925926 shares of Rs. 10 each (at the upper cap) with a price band of Rs. 205.00 to Rs. 216.00 per share of Rs. 10 each to mobilize Rs. 1100.00 cr. Minimum application is to be made for 69 shares and in multiples thereon, thereafter. The issue opens for subscription on December 21, 2021, and will close on December 23, 2021. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 34.41% of the post issue paid-up capital of the company. CMS has allocated 50% for QIBs, 15% for HNIs and 35% for the Retail investors. 

The joint Book Running Lead Managers (BRLMs) to this issue are Axis Capital Ltd., DAM Capital Advisors Ltd., Jefferies India Pvt. Ltd., and JM Financial Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, CMS raised further equity in the price range of Rs. 31.00 to Rs. 46.51 between December 2011 and August 2015. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 122.04 per share. 

Since this is a pure secondary offer, CMS's current paid-up equity capital of Rs. 148.00 cr. will remain the same. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 3196.80 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, on a consolidated basis, CMS has posted turnover/net profits of Rs. 1159.32 cr. / Rs. 96.14 cr. (FY19), Rs. 1388.29 cr. / Rs. 134.71 cr. (FY20) and Rs. 1321.92 cr. / Rs. 168.52 cr. (FY21). It suffered a minor setback in the top line for FY21 on account of the pandemic. For the first five months of FY22 ended on August 31, 2021, it has earned a net profit of Rs. 84.47 cr. on a turnover of Rs. 629.72 cr. 

For the last three fiscals, CMS has (on a consolidated basis) posted an average EPS of Rs.9.56 and an average RoNW of 15.99%. The issue is priced at a P/BV of 3.02 based on its NAV of Rs. 71.58. 

If we annualize FY22 earnings and attribute it to post IPO equity capital, then the asking price is at a P/E of 15.77 and on the basis of FY21 earnings, it stands at 18.96.  

DIVIDEND POLICY:
CMS is a dividend-paying company. It distributed a dividend of 16% (FY19), 18% (FY20), 24.5% (FY21) and 15.3% (FY22 till filing of RHP). It will continue to follow a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, CMS has shown SIS Ltd. as its listed peer. It is currently trading at a P/E of 60.69 (as of December 17, 2021). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKERS' TRACK RECORDS:
The four BRLMs associated with this offer have handled 59 public issues in the past three years, out of which 22 issues closed below the offer price on the listing dates.


Conclusion / Investment Strategy

CMS is well-known cash management and automation solution providing companies in the financial markets. It has posted consistent growth in its business except for the pandemic year. In this critical year too it earned good margins on a static top line. It has priced the issue reasonably leaving something on table across the board. Investors may consider investment for short to long term rewards.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Dec 17, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

CMS Info Systems IPO FAQs

  1. 1. Why CMS Info Systems IPO?

    The initial public offer (IPO) of CMS Info Systems Limited offers an early investment opportunity in CMS Info Systems Limited. A stock market investor can buy CMS Info Systems IPO shares by applying in IPO before CMS Info Systems Limited shares get listed at the stock exchanges. An investor could invest in CMS Info Systems IPO for short term listing gain or a long term.

  2. 2. How is CMS Info Systems IPO?

    Read the CMS Info Systems IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. CMS Info Systems IPO what should investors do?

    CMS Info Systems IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the CMS Info Systems IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is CMS Info Systems IPO good?

    Our recommendation for CMS Info Systems IPO is to subscribe.

  5. 5. Is CMS Info Systems IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the CMS Info Systems IPO.

  6. 6. When will CMS Info Systems IPO allotment status?

    The CMS Info Systems IPO allotment status will be available on or around Dec 28, 2021. The allotted shares will be credited in demat account by Dec 30, 2021. Visit CMS Info Systems IPO allotment status to check.

  7. 7. When will CMS Info Systems IPO list?

    The CMS Info Systems IPO will list on Friday, December 31, 2021, at BSE, NSE.

Comments

Add a public comment...