CMS Info Systems Limited (CMSINFO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of CMS Info Systems Limited hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aasim Bharde from DAM Capital Advisors. Thank you, and over to you, sir.

Thanks Margaret. Hi everyone. On behalf of DAM Capital Advisors, it gives me a great pleasure to host CMS Info Systems on their maiden quarterly analyst call today. 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. Before we begin, a quick disclaimer that some of the statements made in the call could be forward-looking in nature and should not be taken as a guarantee of future performance as there are risks involved here which are difficult to predict. I now hand the call to Mr. Rajiv Kaul for his opening remarks.

Good afternoon everyone. Welcome to our first call post listing. Thank you all for your support as well as your investment in our company. I guess some of you are going to be listening to us and interacting with us for the first time and therefore I will start with the brief background about the company which may be a repeat for some of our - some others of you. We are India's leading B2B outsourcing services company, focusing on the BFSI sector. We have three broad classes of businesses. Our largest business is our cash management business where we have built an extensive logistics platform across the country and we are helping banks reach the last mile with a high quality services to run cash management. We are a market leader in the sector and we are present across the entire cash cycle. The nature of revenue in this business is mostly annuity. It is linked to routes and density and therefore offers the strong operating leverage as you grow in scale. Our second largest business is around the Managed Services Segment which is predominantly around the ATM network. We started this business about five years ago and we are one of the fastest growing companies in the sector. The revenue in this is a mix of -- it has a variety of revenue sources starting from product automation sales, maintenance services, managed services for the ATM network, multivendor software and Brown label ATM deployment services. The revenue profile in this business is largely again long-term annuity but more recurring in nature. We're contracting for 5 to 7 years and therefore it gives you a fairly predictable and a stable revenue profile. Our third type of business is tech solutions which we incubated during COVID and we have launched AI based remote monitoring solution for banks so that they can digitally monitor the bank branches and ATM sites for better security and to help reduce that cost. In a very short period of time, we are emerging to be a clear leader in this sector and have a very good order book. These three types of businesses which we all offer in-house make us a fairly unique platform which offers end-to-end integrated services to banks. Before we dive into the current performance, I do want to establish the historical trend. In the year before COVID, our revenue had grown by 20%. Our PAT CAGR from FY '19 to FY '21 has been 32%. Our margin and return profiles are in line with some of the best outsourcing especially IT outsourcing companies you may be tracking. If you compare us to business services outsourcing companies in India, our margin profiles are dramatically much higher and different than compared to most of them. Specifically coming to fiscal year 2022, the cash in circulation continues to grow at a very robust pace. It has almost touched 30 lakh crores currency in circulation as of December 2021. The currency handled by CMS in our ATM and retail network has grown by 18% year-on-year from 2.37 lakh crores to 2.8 lakh crores in Q3 FY '22. It sort of indicates underline the robustness of the usage of cash as well as links to the broader recovery in both economic activity and consumption in the country. In the ATM space, we are seeing a very strong ATM RFP pipeline led by the Public Sector banks. Almost 30,000 ATMs, we anticipate will come up for procurement in the next 12 months which are both going to be followed a fresh as well as expansion of the network. For us, one of our key focus area has been employee health and safety. We are relieved that we have been able to contain the impact of the third wave despite a fact that a large part of our workforce which is almost 23,000 strong is on the ground, on the road and potentially in high exposure roles. And therefore, there is a relentless focus on their safety. We have managed to touch almost a 90% second vaccination of our employee base. As a private company itself, we held ourselves to a very high aspiration in terms of governance but I am pleased to inform you that right after we listed in December 31, we have expanded our board and added two more independent directors. We have the pleasure of having Ms. Manju Agarwal, who has retired as an ex-DMD of SBI, a few years ago, has more than 34 years of banking experience and strong operational experience across both ATM channel and the digital channel. She has joined the board. In addition, we have Ms. Sayali Karanjkar, who was the Co-founder of PaySense before it was sold to PayU and she was in PayU as a Chief Business Officer of PayU Credit India, both these esteemed board members have joined our board effective from January 1, 2022. Mr. Tapan Ray and Ms. Shyamala Gopinath and Mr. Krzysztof Jamroz continue as other directors of board and we also have board members from Baring Asia who are our promoter and largest shareholders. Coming to our business, we are seeing very strong growth across all our verticals. There is an ongoing consolidation in the cash management sector and that is helping us not only grow in volumes but also in market share. Our market share and specifically in the ATM cash management has now grown from 41% to almost 44% in the last 6 months to 9 months. In the Managed Services Sector, our focus has been on execution. As some of you know we have won significant order book of almost INR 2,000 crores and I am happy to announce that a large part of the order book which is State Bank of India, Brown Label, ATM deployment for 3,000 machines is fully executed and that is running fairly stable and demonstrating very robust transaction trends. We have also completed in the remote monitoring sector, a soft integration of our acquisition of Hemant Technologies and we are right now undergoing closing procedures with them. To talk about our overall financials for the quarter and also for the 9 months ending December 2022 -- '21, I would like to invite our CFO, Pankaj to share more details.

Thank you, Rajiv. Good afternoon to everybody and welcome to this earning call. We had strong growth on all financial parameters both on year-on-year basis and on quarter-on quarter basis. The revenue from operations grew by around 9% on quarter-on-quarter basis and around 21% on year-on-year basis to around INR 403 crores. The adjusted EBITDA was also reported at INR 108 crores, which grew around 43% year-on-year and around 13% on quarter-on-quarter with an adjusted EBITDA margin of 26.83%. The net profit reported was around 60 crores which grew by 48% year-on-year and 14% on quarter-on-quarter with PAT margin of 14.9%. For nine months ended, the revenue from operation stood at around INR 1,145 crores which grew by around 28% year-on-year with adjusted EBITDA growing by around 39% year-on year to INR 289 crores and margins of 25.22%. The net profit stood at INR 160 crores signifying a growth of 42% year-on-year and PAT margin stood at 13.97%. The details of BU financial will be covered by Anush, our Cash Management Head and Manjunath, our Managed Services Head subsequently. Now, I would like to call upon Anush who is our business head for the Cash BU to talk about our cash management business in detail.

Thank you Pankaj. Good afternoon to everybody. I would like to brief you about our cash management segment. As Rajiv mentioned, we are the market leaders in this segment. During this quarter, India continued to witness a healthy growth in currency in circulation with the total currency handled touching INR 30 trillion. CMS witnessed a robust growth in currency handled in third quarter FY '22 to 2.8 trillion which signifies a year-on-year growth 18% and a quarter-on-quarter growth of 9%. Our overall cash management network grew to 112,000 points, which includes ATMs and retail touch points as we continue to expand our network across the country. We witnessed volume and market share growth across all verticals led by a strong economic recovery and market consolidation. We continue to drive automation across various operational processes using technology and this has helped us maintain and grow our margins. I am also happy to announce that we have received the ISO 27001 certification for the cash management business. For the third quarter, we achieved the 19% year-on-year growth in operating revenues to INR 292 crores and then EBIT growth of 23% year-on-year to INR 71 crores. For the nine months ended, we achieved a 22% year-on-year growth in revenues to INR 812 crores and EBIT grew by 27% to INR 189 crores. I would like to now handover to Manju to talk about the managed services and the tech solutions business.

Thanks, Anush, and good afternoon, everyone. As Rajiv mentioned earlier, the focus for Managed Services business for this year has been on execution of the order book, which we had won over the last 12 to 18 months. Total ATM network under managed services grew 1.4x year-on-year to 11,000 as of December 31, 2021. In Tech Solutions business, we are seeing strong traction in recently started AI-based remote monitoring solution with an order book of 20,000-plus sites as of December 31, 2021. We also have an order book of 7,000-plus ATMs for our proprietary ATM security software, CMS ALGO, as of December 31, 2021. Our financial performance in this segment have been very strong with significant growth on both revenue and EBITDA. Revenue for Q3 grew at almost 51% to INR 113 crores and for 9 months ending grew to 67% to INR 337 crores. EBIT for the segment for Q3 was INR 21 crores, which is a growth of 127% and for 9 months FY '22 was INR 55 crores, which is 81% growth. Margin percentage for the segment also expanded considerably from 12.5% in Q3 FY '21 to 18.6% in Q3 FY '22. In conclusion, we are all very excited about the journey ahead with a new chapter as a recently listed company and also with significant addressable market opportunity ahead of us, giving growth levers to all our business segments. With this, we can now open the floor for question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Devansh Nigotia from SiMPL.

Congratulations on great set of numbers. Sir, just a couple of questions. One is in case of -- can you give us the number of ATM points and the number of business points for last 3 quarters and last 3 years so that we can see the revenue trend per business point, how it is shaping up?

So I think the number which we can share with you today is that our -- and I'm assuming you're talking to the ATM points and our cash management network. Our overall cash management network, which is a combination of number of ATM points and retail points, that has grown to 112,000 points at the end of December [ '21 ]. This is a 15% growth over the corresponding December 2021 number. Sorry, sorry, 2021 versus '20.

Okay. '21 versus '20, okay, okay. So that's okay. And if we compare it against the cash management number that has grown by 19% segment?

Our revenue in the cash management business over the 9-month period is at about 18% to 19% revenue base.

Okay. So bulk of the market share gains is in...

The market share gain number, which you have referred to is in the ATM side.

Thank you. We lost this client. We'll move to the next question, which is from the line of Sanjay Ladha from Perfect Research.

So congratulations on a good set of numbers, sir. I just have a couple of questions. That is over a period of 2, 3 years, how you see your revenue mix change like managed service and cash managed service as a percentage of revenue? And if you can share growth guidance for each of the business and sustainable margin profile for the same?

When we think of our business, we think of this in terms of creating an integrated solution for a bank. We feel over time, banks will procure, many banks will move from piecemeal procurement to integrated contracts. And I think we are seeing that trend already play out. At the end of FY '21, we had looked at our 4-year targets and 4-year growth aspiration. And we think that we will -- so we aspire to be a INR 2,500 crores to INR 2,700 crore revenue business by FY '25. Specifically to your question of the mix of businesses, we have our managed services business obviously started from a smaller base. And now, as you can witness, is growing rapidly on a smaller base. The mix of the businesses was maybe 80-20 a couple of years ago, is closer to 70-30 today. I think just given the type of business and the market opportunity because the managed services sector is a pretty large sector out there, we think this potentially could be a 65%, 35% split, assuming both the businesses continue to grow strongly.

And sir, on the margin front?

I think the margin profile, as we've indicated right now, we saw FY '21 very substantial improvement in our cash management business margins. In FY '22, 9 months, we have seen a substantial increase in our services EBITDA margin profile. I think both of them are almost close to each other right now on the margin profile of the businesses. And we hope that will sustain and improve steadily as we grow in revenue.

Okay. And sir, my next question will be in the managed business, how much percentage of revenue is recurring in nature? And one last question will be, what are the challenges you see due to the online transition and how are you preparing ourselves for the same?

So -- The majority of our managed services business is recurring in nature. It may vary year-to-year depending on how much onetime business we win, but I think 80% of that revenue you can consider as a recurring in nature. And the remaining 20% of the Managed Services business is potentially what we would do by selling of an automation solution, which then in turn leads to maintenance revenues coming in, which are recurring in nature. Your second question was around the digital thing. I think on digital, which is a fairly broader question, we have seen a whole trend post demonetization where UPI picked up significantly. And we have seen again during COVID, a lot of digital payments growing rapidly. Our point of view is that as India grows, there are many parts of India, and we will see both growth in currency as well as digital, which is already witnessed in the statistics you see. Currency in circulation is up by 17%, 18%, and we are almost like a 30% -- INR 30 lakh [ crores ]...

We lost the audio from your side, sir. [Operator Instructions] We have the management reconnected. Over to you, sir.

Yes. So I think on the question on digital, I'll repeat myself. We've seen a trend line to digital through UPI in 2017, '18 and even during COVID, we have seen a growth. Our perspective is that as India grows, there will be significant growth in both digital payments as well as physical currency. Physical currency, as you see, has already grown by 18% year-on-year. And I think that gives us a fairly robust opportunity out there for our business to grow. What are we doing specifically to protect against this? I think we feel there is a significant business in the banks, which will get outsourced, which is done in-house by the banks, which is already in the base number today, which we don't get to work on. I think that gives us 5- to 10-year opportunity for very high growth. We see retail sector as a large sector, which will -- as it moves to organized retail from semi-organized retail, I think that will become a good area for growth for us. And our approach is that when we think of digital, we think tech and we say we look at the whole technology, which goes beyond the -- which goes behind the cash cycle. And our attempt is to get into that through our managed services vertical and also from our remote monitoring vertical.

The next question is from the line of Achal Lohade from JM Financial.

My question was if you could talk about the ATM touch points as of 30th September. You talked about 31st December. So just wanted to see the touch points Q-o-Q. If you could split between ATM and retail?

Achal, I'll have my colleague, Anush, help you through with this.

Hi, Achal. Good Afternoon, Anush here. Just give me one moment while we add the figures. I think as of Q2 ending, our total number of touch points across ATM and retail was about 104,000 to 105,000.

Would you guys be splitting it in terms of the number of ATMs and the retail on a quarterly basis?

I think, Achal, I think fundamentally, we look at the cash business as a Route Logistics business, which has a certain platform effect. And for us, which is why we try to measure this in terms of our business points. So we would like to report a consolidated number of ATM and retail touch points.

Understood. My second question was in terms of the compliance. If you could talk a little bit about that aspect in terms of for the industry and for CMS, what these compliances are and how does it impact the financials for us?

I think our whole efforts to drive compliance across is progressing very well. You would also see that in addition to the capital spend that we had incurred in FY 2021, we continue to invest in upgrading our infrastructure across the cash business. We are currently compliant for about 30% of our overall ATM network, which we think by end of March should increase to about 40%, 45%. There is a strong push on part of the banks driven by the Central Bank requirement for them to complete this as soon as possible. Basis this, we are also seeing a significant increase in the momentum and pipeline of RFPs, which are being allotted by. So that's as far as the compliance is concerned. With respect to the industry, we would prefer not to comment about that right now.

And when you say 30% for our ATM network, I presume you are talking about the route compliance. What about the cassette swap?

The cassette swap, I think also would be a better time to talk would be post the year-end. And there are many banks which are piloting this on their network today. Some banks have started deploying it. I think the end of the year would be a better and appropriate time to look at it and take stock of it.

Understood. Understood. And you talked about in an answer just before my question, you talked about certain activities which our banks are doing in-house, increasingly, we are looking at those opportunities. So just wanted to get some more color if you could talk a little bit on that front.

Sure. I think when you think from a 5- to 10-year perspective, right, there are different opportunities for growth. One part of the growth comes when the base increases, right? The base is of the activity a bank does, the number of touch points they set up, the number of branches they have, the number of ATMs, the number of retail points, which get outsourced. The second is the fact that the banks still do a large part of the work in-house. And that over time is going to increase in outsourcing, which presents ourselves as a strong growth opportunity. Today, almost 1/3 of the ATM network is done in-house with the banks. And we think this will reduce over time given the cost and the compliance levels, it will become difficult and expensive to banks to do it in-house. It will be far more cheaper for them to outsource this to larger players who can do this for them more effectively and at a cheaper cost. So I think that's the opportunity which I talked about when it comes to cash management. There is an overall base of cash usage, which is growing in the country still. And then there's a large part of the value chain, which is still done in-house by banks, especially public sector banks, cooperative banks, rural banks. And we think that over the next decade will present a very significant opportunity for outsourcing.

Understood. Any growth guidance that we would kind of talk about over the medium term in terms of both the segments, what...

Yes. I think that the company, which I stated in my opening remarks as a company, we have -- we are looking at becoming -- we are looking at a revenue range of INR 2,500 crores to INR 2,700 crores by FY '25 levels.

And the margin?

I mean we are a network business, right? Margins should systematically expand as we have seen in the preceding years. And therefore, to maintain, we feel confident that we should be able to maintain our current margin levels and hopefully improve steadily from here.

The next question is from the line of Nirmal Bari from Sameeksha Capital.

My first question is on the order book that we have at present. So how much of the brown label ATMs order book outstanding is to be executed in the next few months?

So at the end of Q3, we had finished the order -- the brown label order from SBI that is successfully executed. We have another public sector bank brown label opportunity, which we are in the midst of executing, and we will complete that by the end of Q4, which will -- so the SBI contract was for roughly 3,000 ATMs and the other public sector bank is roughly 900 ATMs, which we will complete by Q4.

Okay. And then what is the CapEx for the current year, considering this almost entire execution would happen in the current year. So if you can guide for this and the same for next year, if there's any estimate? So...

Apart from this BLA ATMs, the order book also contains large AI-based remote monitoring deployment of around 20,000 sites and a lot of software-related orders, which we are in the process of implementing. The order -- the BLA ATMs might be deployed, it is -- the revenue will occur over a period of 7 years. And right now, the orders we have executed for BLA sites which we have executed so far have 1 to 7 months for this 9 months ended.

No, I was talking about the capital expenditure for the current year?

I think we won't be sort of comfortable sharing that data. As of now, I think what we have seen is from the order book, we have -- as I said, the SBI order is fully executed and the revenue is part of our Q3 revenue, and that will continue going forward. There will be incremental orders that they get executed, we will see the trend line. It's also -- we are a little uncomfortable right now given COVID wave 3, sometimes decisions at banks can get delayed, and we just want to make sure that we are careful before we commit to any number here. I think our broader trend line of revenues, what you should think about is that we were end of FY '21 INR 1,300 crores revenue. We feel confident that we should become a INR 2,500 crores to INR 2,700 crore company by FY '25.

Okay. And on the compliance ratio, a participant before me also asked about it, and you said that about 30% to 45% compliance at present. So now overall, when ATM moves from normal refilling to cassette -- refilling, how does our revenue and margin profile change over there? Any qualitative guidance on that would be helpful.

So I think Nirmal, if you see our commentary during the -- in the DRHP and RHP as well, I think the commonly agreed commercials with across the cash industry and the banks is that once an ATM -- there are 2 levels of compliance here, right? There's a base compliance and then there is a cassette swap. The base compliance should lead to a revenue uplift of about INR 2,800 to INR 3,000 per ATM and the cassette swap should be another INR 800,000 from there.

Okay. And just one clarification. When we talk about this 7,000 ATMs order book for CMS always, this would be a part of the 20,000 ATMs remote monitoring order book, right?

This is a separate order. This AI-based remote monitoring, there are 2 different orders -- but this is a part of around INR 2,000 crore order book.

The next question is from the line of Deepak Poddar from Sapphire Capital.

Sir, just wanted to understand 2 things. Number one, on the depreciation part, how do you see your depreciation over the next 2 to 3 years? And secondly, you did speak about EBITDA margin and moving steadily from here. So at a scale of maybe INR 2,500 crores to INR 2,700 crores in maybe next 3 to 4 years, EBITDA margin of 30%, is that what one can envisage given the operating leverage advantage that we might get?

So Deepak, let me answer the EBITDA margin quickly and Pankaj can help you with the depreciation question. I think what we are right now, our EBITDA margins are at 25%, 26%. I think we will see that steadily increasing. It will be very premature to sort of comment on what -- whether they hit the 30% number or what. I think we aim to maintain it and steadily improve it, hopefully. I think the broader opportunity here is to get significant revenue growth as we have witnessed in FY '20 and as we are witnessing in FY '22. There's been a quick bounce back post COVID. And I think maintaining a strong, healthy revenue growth is important. And we think that will accrue to the bottom line and will be accretive.

As regard depreciation and amortization is concerned, in FY '21, our depreciation was around INR 63 crores. And for 9 months ended, it is INR 64 crores. That is because that in last 1 year, we had done a CapEx of around INR 250 crores. And we expect that this will further increase to around 15% to 20% level based on the current order book level and the current execution.

So your depreciation will increase by 15% to 20%?

Yes.

Year-on-year?

Yes. For next -- whatever right now, we have the order book and the CapEx right now, we are forecasting based on that. This is the estimate.

The next question is from the line of Dhiral Shah from PhillipCapital.

Congratulations for the good set of numbers. Sir, as you talked about that in the coming decade, there will be a huge opportunity, which is going to increase for you as large part of banking activity will get outsourced. So my question is, in last 5 to 10 years, how the industry has progressed?

So this is a -- it's a fairly broad question. Let me try and give you some specific answers on it. If I look at the fact that -- if I just look at CMS, CMS in 2010 was maybe handling 9,000 ATMs under cash management. Today, we are close to a number which is 8x bigger, right? In about -- so in 10 years, we have gone from handling 9,000 ATMs to roughly 70,000 ATMs. The ATM base in the country was maybe 50,000 ATMs then, which is now 2.5 lakh ATMs. So the number of ATMs has gone up by 5x. The outsourcing, I think, which is your question specifically, I don't remember the number of ATMs which are being outsourced in FY '10, but I would guess that CMS was roughly -- I think maybe 50% outsourcing was going on then, and now that outsourcing level will be at 65% or something. So I think that's one element. The second element comes into play when you think of the retail sector. I think the broader -- if you compare the cash management industry in a country like India and you look at it and you compare it to some of the larger countries in the world, a substantial part of the revenue comes from the retail segments ATM side because India is the world's third largest ATM market. But when you think of retail, and all of you will be looking at the broader retail opportunity in India, which is a lot to do with formalization of the economy, I think there is a multi-decade opportunity as retail gets more formalized, whether it's the Reliance Retail or a DMart or an IKEA, you will see substantial use of cash as well as digital in these stores, and that cash will need to be managed for these stores using technology and our out network. I think that will give us a decadal growth opportunity in our retail business. The last part which I wanted to mention here is when you think of things like -- even things like a currency chests and the currency vault, many banks today in India will run this in-house. But again, when you think from a 10-year perspective, 5-year perspective, it will be subscale to do it in-house, and it will make far more sense for banks to outsource this to third-party companies, which can do the technology part of it, the physical logistics part of it, and that opportunity can become a significant opportunity again. Our overall cash management market is INR 2,700 crores, INR 2,800 crore market opportunity as of FY '21. That, as per Frost & Sullivan is expected to grow to close to INR 8,000 crores in FY '27. The managed services market in India is roughly a INR 7,000 crore market opportunity expected to grow to INR 17,000 crores market. So if you combine these 2, our overall market opportunity goes from INR 7,000 crores, INR 8,000 crores to INR 21,000 crores market opportunity for the business lines we are in over the next 5 to 6 years.

And sir, you believe you will grow faster than the industry growth rate?

We -- as a market leader, our aspiration always is to grow at higher than the industry growth rate. I mean that will be a testimony to our quality, our range of services and also to gain our market share, whether it's organic or inorganic, we do aspire to grow and we have. We have grown at always higher than the industry in the preceding years, and that remains our aspiration.

Okay. And sir, if you can bifurcate your order book breakup between how much is, let's say, AI-based remote monetary project, how much is software-related orders, how much is, let's say, brown label ATM kind of a thing?

Sure. Pankaj will help you with the data.

So this order book, what we are talking about is mainly related to the MS business, which is a recurring in nature, and these contracts are generally for 5 to 7 years. The cash is an annuity-based business, which the number of touch point increases quarter-on-quarter basis. For the INR 2,000 crore order book that we talk about the managed services business, largely it is BLA-related sites, which is around 65% of our total order book, around 20%, 25% is related to the AI-based remote monitoring sites where we have around 20,000 types to be implemented. And the remaining is the software-related pieces where we have around INR 70 crores to INR 80 crores of the order book right now in hand.

And sir, how much of this we are going to execute in the next 2 years?

As of now, as we explained that we have majority of our BLA-related sites we have already executed or we are in process of executing that. We recently got bonus orders from State Bank of India, which we are in process of executing that. The AI-based remote monitoring, the process has already started, and we are hopeful based on the bank clearance, et cetera, we are hopeful that in next -- in 6 to 1 years' time, we will execute the maximum portion of that.

Okay. And sir, we also hold a good amount of cash in our balance sheet, right? So what is the utilization plan for the same?

So if you will see that in last 3 years, we had done a CapEx of around INR 300 crores. And this year also to execute these orders, we have so far done a CapEx of around INR 175 crores. So based on the availability of new orders and the growth what we can able to see in the outsourced market, which is around INR 18,000 crores of business, basically, which is going to the overall market size is going to increase by 2 to 3x. We expect that this cash will help us to achieve better growth.

We also will have inorganic growth opportunities clearly in some of our sectors. So therefore, having -- we've always been a conservative team keeping sufficient capital for both organic and inorganic growth. And if a good opportunity for consolidation appears, we would want to make sure that we have the cash to be able to make an acquisition.

The next question is from the line of Nitin Khandkarr, Proprietary Investor.

Slide 30 in your investor material mentions that the size of TAM for your 3 verticals. As per those data points, remote monitoring tech has the second highest TAM and cash management will be a distant third. Now cash management and ATM managed services, if I'm not mistaken, features the best margins currently, but are nevertheless highly competitive segments. So in this backdrop, would your marketing strategy also evolve in such a way that the revenue share of remote monitoring rises significantly by FY '27? And do you expect the competitive landscape to also be less stringent in the remote monitoring segment?

So Nitin, good questions. I appreciate for you raising this. I think the cash management sector is something which we have a PhD in, right? We've sort of been in that business for a long time. We understand it very well. We see the sector having gone through multiple cycles over the last 12 years of growth, consolidation, churn. We feel that sector is ripe for consolidation in the coming 2 to 3 years. And we have already seen that -- we witnessed that playing out in the last 3 years. So we feel the competitive intensity in that sector should reduce just given the fact that these are scale operating leverage businesses, very difficult to manage this unless you have built phenomenal scale out there. Coming to the remote monitoring side, if you look at the slide, there is a broader INR 10,000 crore opportunity by FY '27. However, when you think of it the BFSI sector, which is where we today have our sales and our sales expertise, that's roughly INR 800 crore size going to about potentially a INR 3,000 crore size in the next 5 to 6 years. Our immediate playbook is to first focus on the BFSI side, which is what we have started doing. Our order book of 20,000 sites is all BFSI. We will, over the coming years, build both the technology use cases and also the feet on street and sales effort in the non-BFSI side. But we'll have to see and deliver it before we kind of come and talk about it. I think for the -- from your perspective, you should think that our immediate addressable opportunity is the INR 800 crores going to INR 3,000 crore opportunity out there. Will the competitive intensity there be lesser or more difficult to sort of predict because we -- this is a sector we have entered in the last 12 months, and we would be little careful before we start opining and being experts on this. Our approach there remains -- our playbook remains standard same as playbook, which is try and create the best solution possible, gain operating leverage and scale by high growth in the base of business we cover, reduce our price points and make reasonable margins through scale to become competitive compared to anybody else. Given it is a technology sector, I would actually argue that many people could enter this business, right, because the barrier to entry may be lower, but the barrier to scale would be there. So I think our goal is to have the best technology possible to be able to scale this and then bring down the cost of that through our network and also integrating it along with our other offerings to our client.

All right. One follow-up question, Rajiv. Some of the global peers are also into the PoS segment. So they set up these kiosks at their client sites. So we already have a McDonald's, which are those automated kiosks where you can place the orders. So is that a segment that excites us in any way?

So we do a kiosk business today, which is not the one you talked about, but at bank branches, right? Bank branches still many bank branches need kiosks for faster printing. So the automation and maintenance and all of that is something CMS is actually a pretty large market share player in. In the retail side, we are seeing a need and demand for retail cash vaults. So if you go to -- I give an example of an IKEA store, you will see still very long lines at the cash counter. And then there will be a retail cash vault, which will be implemented by CMS, where the cashier will come and deposit the cash in that vault where it gets automatically sorted, counted, accounted for. So we see interesting automation in the retail cash wall sector. It's still a very small sector, but we think that is potentially something which could be of interest to note and see going forward.

I have a couple of quick questions for Pankaj. How has our working capital cycle moved during the last 4 months? Is the collection period of, say, 4-odd months in an industry norm of sort? And what are the receivables as of December 31, if you could share the number, please?

Yes. Our working capital ranges from 60 to 90 days because our normal business, basically, whatever is our recurring business or our cash management business, the working capital cycle remains stable. Only in case of the product automation, where the AR level has increased based on the order book, order we execute. However, we generally have a back-to-back arrangement with the supplier, which help us to maintain the working capital in the range bound level. So even if the DSO level increased, but our working capital levels are maintained between 60 to 90 days. And during this quarter also, our end of December, our working capital days was close to 75 days.

All right. This is my last question. I'm curious, so your investor presentation discusses 3 verticals, namely cash management, ATM managed services and remote monitoring tech. How is the segments identified in your company's financial statements are cash management services, managed services and cards. So my question is, is the segment data in these 2 documents the same and comparable or what?

Actually, the card business is relatively very small. And the AI-based remote monitoring business, which we are starting, the revenue for that business is yet to commence. There is a small revenue in this quarter. And going forward, we will revisit this segment. And mostly this will -- either this managed services will be part the same. AI-based remote monitoring will be part of the managed services. Our auditor will review it, and we will come back on that thing. Card personalization services, the revenue is very small. It is in others category. And earlier we are showing others, now it is showing in the card because only that is only one particular business.

The next question is from the line of Prakhar Sharma from Jefferies.

Just 2 things from my side. Is it -- first question is, is it possible to share some volume trends in terms of value transactions you would have managed for the revenue? And second, kind of connected question to the previous one, is it possible to share some either a balance sheet or a cash flow information for the quarter versus the previous year?

So I think on the volume, Prakhar, what we indicated is at this stage in the middle of the year, we've said that our currency handled in our cash management network around ATM and retail has grown by about 18% year-on-year, right? It's almost INR 2.8 lakh crores versus INR 2.37 lakh crores at the same period last year. In our -- I think that's one volume trend we can give you. I'm not sure what other volume trend would you specifically asking about?

No, I think this is a good start. But if it's -- I think if it's possible to split this between ATM and retail, that will help even more, but maybe this is a good starting point.

Okay.

As regards the cash flow is concerned, I explained to you that like working capital days remains range bound between 60 to 90 days and on 31st December, it was 75 days. During this period, we have generated net profit after tax of INR 160 crores, and we have done a CapEx of INR 175 crores. So we have a strong cash position as on 31st December. Further details, you can reach out to our IR team, which will give you the further details on this.

Got it. And just at the next 2, 3-year perspective for all of you that when you envisage the level of order book that is coming up for yourself, do you think the extent of CapEx will be more or less in line with the cash profits or it could be significantly higher as you invest towards opportunities? So if you can give some context of CapEx for the next 2 or 3 years vis-a-vis whatever the cash flow from operations pans out to be?

See, CMS, if you will see in the -- historically, we are more focused on the service-related revenue. And we have a threshold for the IRR and the payback period and the confidence we have the quality of the new CapEx-related business we take. So based on that, our CapEx spend will be dependent on that. As you see that the company has a strong cash flow as well as a strong cash on the books. So we will -- as Rajiv explained to you that we will do the CapEx or the acquisition based on our threshold of IRR is met, the quality of the customer and the payback period based on that. So we will continue that. We see a lot of opportunity in this business that the business stand is increasing threefold or the new refresh cycle by the banks and the new ATM deployed by the banks and the new outsourcing by the banks. So based on that, our CapEx will depend on that. And we have 0 debt. We have a cash surplus in our books. So depending upon that, the CapEx depends on that.

The next question is from the line of Devansh Nigotia from SiMPL.

Yes. All my questions have been answered.

[Operator Instructions] The next question is from the line of Aasim Bharde from DAM Capital Advisors.

Sir, just a couple of questions from my end. On the software business that you talked about, security software, can you just talk more on that front? What kind of business opportunity is there? What are our broad targets over here? And any rough economics that you want to share on this?

So we have a different type of software solutions basically, right? See, this software business, we started in around 3 years back, where we deployed multi-vendor software for the largest bank of India. The entire ATM base of that bank is working on our multi-vendor software. And as per the estimate, this can go up to 1 lakh ATMs, if I will go by the broader target given by the bank. Apart from that, we have developed one ATM security solution, which we got a couple of orders from the ATM security solutions that is ALGO. Recently, we got a large order from the large public sector bank for the 7,000 such data points -- such ATMs basically. I can't share the exact numbers and the value for that being it is a confidential information.

That's fine. Just a follow-up on this. Is this -- this would be limited to your ATMs only? Or can it be extended to other equipment within bank branches or the network behind it?

This would be -- this has got nothing to do with our ATM. This is the software which we are helping banks use internally for their use and could be -- it could run on any ATM, which belongs to the bank. This as a revenue line is not a substantially large revenue line or projection really. But I think what is important is to understand the diversity of our solution offering and the way we are trying to offer an end-to-end offering to the banks to solve the problems. I think that's the real key here. As you know, that we had won a large contract with SBI a few years ago for multi-vendor software, which is running on top of their 40,000 ATMs. The Central Bank has mandated and asked the banks to have a security software when -- to control the access to the ATM, especially when the banks are managing the ATMs in-house. And that's where we have created the software, which we were actually using for our own cash management purposes. And now we've been successfully able to get this piloted, tested, approved. And now 2 banks have placed an order to use this ALGO software from CMS for their ATM access, what we call the -- for the onetime OTC access for their ATMs, one-time combination.

Okay. Sure. Got that. And just one final question. Assuming no new order wins in the quarter or, say, no new business point added in the cash business, is this -- is this like a seasonal business where the particular quarters would be stronger? Is Q3 a stronger quarter versus Q4? Just wanted a sense on that.

So our business is annuity, and therefore, it should steadily accrue over a period of time as we grow. But as your question qualified by saying if there is no new business, then obviously, the revenue will remain static. Q4 tends to have a little bit of seasonality, especially in March for a couple of reasons. One, the cash volumes in March can be high as they are usually during the Diwali period and then March. So I think these are 2 times when we see cash volumes being substantially larger than normal. The second is, in terms of procurement trends, especially public sector, we can tend to see some years where order placement and execution time lines and pressures will see things getting more bunched up in Q4. But then it's very difficult to predict that whether that will remain an ongoing basis or not, but that's a trend line we have seen. So there is a little bit of seasonality towards Q4 sometimes.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

This is Anush here. Thank you all for participating in the earnings call. I hope we were able to answer your questions satisfactorily and at the same time, offer insights into the business. If you have any further questions or would like to know more about the company, please reach out to our IR Managers at Valorem Advisors. Thank you. Stay safe and stay healthy.

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.