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

Ladies and gentlemen, good day, and welcome to CMS Info Systems Limited Q4 FY '22 Results Conference Call hosted by JM Financial Institutional Securities. [Operator Instructions] Please note that this conference is being recorded. 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 conference over to Mr. Achal Lohade. Thank you, and over to you, Yes. Thanks, San.

Hello, everyone. On behalf of JM Financial, it gives me a great pleasure to host CMS Info Systems quarterly earnings 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 Business; and Mr. Manjunath Rao, President, Managed Services. I now hand over the call to Mr. Rajiv Kaul for his opening remarks. Over to you, Rajiv.

Thank you, Achal. Good evening, everyone. Thank you for your time to attend our call -- earnings call today. We are here to report on our Q4, but also the end of the year FY '22 status update of the company. We've had a fantastic year. If I think about where we -- when we started the year, we have -- whatever goals we set out for ourselves, both short-term and mid-term, we have met all of that. The company and the team has been firing on all cylinders, and we have made substantial progress in all our key operating and financial metrics. The macro has been very positive and supportive and the investments we have been making -- investments we have made and are making are bearing fruit and giving us strong return metrics. Just as a reminder, we are a large business services company, which focuses on the Indian BFSI sector. We have a large footprint across the country. We have 2 large businesses: Our cash logistics business, which serves all banks and provides high-quality cash logistics services at the last mile in India at either an ATM point or a retail point or even a bank branch. This is 70% of our revenue, close to INR 1,100 crores. And our Tech Solutions and Managed Services business, which is a business we've incubated over the last 5 years, which is achieving very good scale and is close to almost a INR 500 crore revenue this year. As I said, this has been a fantastic year. In our last call, we had given a guidance of our revenue targets for the team in FY '25 to be INR 2,500 crores to INR 2,700 crores revenue, which was in our internal metrics, our goal to double from our FY '21 revenue base, sort of pointing towards an 18% revenue CAGR aspiration. When I think of the macro, whether it's GDP growth, inflation, we think our sectors, both Cash Management and Managed Services, should grow over the next decade at 10% to 12% revenue growth. As a large market share, as a large high-quality company, we aim to grow faster than that. And therefore -- and hence, our aspiration to grow at that 18% CAGR. At the end of the first year in this 4-year period, we have -- we are ahead of plan with a revenue growth of more than about 22%. Our PAT growth is 33%. If you look at our 3-year PAT growth, we are tracking to almost a 32% CAGR of that. We have grown faster than all other market participants in our entire ecosystem. In fact, I would say substantially higher than any one of them. We have gained share in each and every one of our businesses. We have earlier mentioned we had an order book in our Managed Services business of almost INR 2,000 crores at the end of September last year. That order book has grown to now INR 2,200 crores and 70% approximately of this order book is already live and under execution. These are multiyear recurring contracts and the revenues would improve over the next 6 to 7 years. We have invested INR 250 crores of CapEx, which is mostly for growth and M&A. And despite this investment, our return metrics are improving steadily. I do want to -- before I pass on the baton to my colleague, Pankaj, who is our CFO, I do want to sort of remind people that when we started the year, it was quite an awful start in many ways, given what COVID wave 2 did to the country, to all of us, our families, our employees. And that is a massive exercise for us to try and see how do we protect our 22,000 people in the field who are doing customer service on behalf of the clients every day. I'm very grateful to each one of them for what they have done and what they bring to work every day to serve the broader community through our customers and what -- and the fact that we are successful because of all their effort and toil. On this note, I will pass on to the next session by Pankaj who will take us through the financial highlights of the company. Thank you.

Thank you, Rajiv. Good evening, everybody. Let me start by briefing you on the financial performance of the company on a consolidated basis for FY '21, '22. For the full year, the revenue from operations stood at INR 1,590 crores, which grew by around 22% year-on-year. EBITDA grew by around 32% year-on-year to INR 402 crores. We managed to deliver an EBITDA margin of 25.3%, showcasing an increase of around 188 basis points. Our net profit stood at INR 224 crores, signifying a growth of around 33% year-on-year and PAT margin stood at 14.1%, where we saw an improvement of around 119 basis points. Coming to quarterly performance, we managed to deliver growth on all financial parameters, both on a year-on-year basis as well as on quarter-on-quarter basis. For the fourth quarter, the revenue from operations grew by around 10% on a quarter-on-quarter basis and around 8% on a year-on-year basis to around INR 444 crores. EBITDA was INR 117 crores, which grew by around 21% year-on-year and around 8% quarter-on-quarter, with EBITDA margin on 26.1%. The net profit was around INR 64 crores, which grew by 14% on year-on-year and around 6% on quarter-on-quarter with PAT margin of 14.4%. At the end of 31st March '22, our cash and cash equivalent remains at INR 278 crores and we have zero debt. Our ROE has increased by around 170 basis points to over 20%. This year we have declared a dividend of 25.3%, which is around 17% of our PAT. With this, I now hand over the call to Mr. Anush Raghavan, President, Cash Management Wealth for more insight into cash management business performance.

Thank you, Pankaj. Good evening, everybody. On the cash business, on the macro side, the currency in circulation continues to log very strong growth. We are currently at about INR 31 lakh crores, which represents a 10% growth over the previous fiscal year. Bear in mind that this figure was close to about INR 16 lakh crores just post demonetization. Against this, the currency handled by CMS grew by 22% to INR 11 lakh crores in FY '22. Q4 was a great quarter for us. We grew our revenues by 23%. And in that quarter, our cash handled increased by 17% compared to the same quarter last fiscal. Within this quarter, March was actually an exceptional month. We logged the highest ever cash handled in CMS in the history of the cash business, and we crossed INR 1 lakh crores. We continue to make good progress on the RBI and the compliance norms. More than 50% of our network is currently ready, and we will plan to get the remainder of it completed by this year. We've continued to expand on our network reach. And in this year, we have added more than 400 routes. In a year wherein the ATM business saw -- ATM base in India saw robust growth, our ATM cash business grew its market share and currently stands at 46%. This was about 37% 2 years back. So we've logged close to a 9% to 10% gain in market share in these last 2 years. We are seeing good recovery and traction in the retail segment. That subsegment of our business is back to pre-COVID levels. We are continuing to invest, and we are moving into value-added solutions, which we believe will drive a strong growth for this subsector. Our profits in the cash business grew by 30%. We are seeing very strong EBIT margins. Some of you may remember that when we moved from FY '20 to FY '21, we saw an almost 400 basis point expansion in our EBIT margin. We continue to build on that and have further improved our EBIT margin by 150 basis points to 23.9% this year. Thank you. And I will now invite Manjunath Rao to speak about the Managed Services business.

Thank you, Anush. Good evening, everybody. On the Managed Services business, I'm very happy -- pleased to inform you that our ATM base grew by 11,000 units over the 9 months of FY '22, currently about 30,000 units. And we had a very -- as Rajiv mentioned, we had a very transformational year. We hit about INR 490 crores in full year revenue and which is a 34% growth and profit grew by 48%. Our EBIT margin for the year has increased from 15% to 16.6%. In Q4, the revenue declined by 6% because of onetime product revenue that we had prior year, but the segmental profit grew by 7%. The Q4 '21 had large ATM product sale contribution of INR 102 crores, that is in Q4 FY '21. Our order book, like Rajiv mentioned, our order book has expanded to INR 2,200 crores. 70% of that is live and revenue generating now. And we -- I think over the last quarter, we had mentioned about the SBI BLA contract. We have completed the rollout and the bank has awarded an additional bonus order of further 600 ATMs on top of the 3,000 ATMs. Our new business segment, the technology business, the AI-driven remote monitoring is ramping up massively. We started with 0 in the year, and we ended up with 10,000 sites at the end of the year. And our forecast is to double by the end of FY '23. And the pipeline outlook for this year, there are large RFPs pipeline with the major public sector banks. close to 30,000 ATMs are coming under for refresh, expansion and managed services. And these are going to be expected to be bid this year. Thank you very much.

[Operator Instructions] The first question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.

My first question is on the Managed Services piece, you said that there was a decline of 6% because of some one-time product sale. So if you can provide some more detail into it of what that was? The second question is again on the Managed Services, if you can repeat the data of quantum of orders that would be coming out for bidding in the current year? And thirdly, are we also looking actively towards private banks because private banks were quite early in the Managed Services journey, but probably they are all still going for ATM expansion. So are we targeting that market? And fourthly since we are in the PSU bank space, how are the payable days and all in comparison with what we would have for private sector banks?

Yes. This is Manjunath. Just to clarify what I explained about the decline in the revenue of 6%. FY '21 revenue was INR 365 crores. ATM product sale of that was about INR 162 crores. That is 44% of the revenue. The majority of this was about INR 102 crores was in Q4 itself. And that was due to the COVID last year and the pent-up demand we had to deploy over the Q4 of last year. And in FY '22, the revenue -- the total revenue is INR 490 crores and the previous year was INR 365 crores and revenue in FY '22 was INR 490 crores. And the ATM product sale was INR 116 crores, which is 24% of the revenue. And Q4 was INR 38 crores, which was 33% of full year. More streamlined, more services and annuity contribution in FY '22, which enlarged the revenue growth, was 76%. And answering your question around the opportunities and private banks, yes, we are engaged with the private banks. And most of the private banks are now looking at deployment on a BLA model, and we are engaged with them.

We worked with already a couple of the largest private banks in the Managed Services space. Obviously, they have had a large estate which moved to managed services long ago, which is being run by the vendors they chose at that time. But for incremental growth, CMS is a key part of their plans. Your -- you had another question which you asked. About PSU payables, Pankaj, if you can -- I don't know if you have a distinction on PSU versus private, but as such Pankaj is a better person to answer that.

So PSU banks generally the DSO days are around 15% more than the private banks. But fortunately, for us, we work only with the large -- 5 large PSU banks where the payment terms are much better and we get the payment in time. So -- but overall, there is a gap of 10% to 15% from private banks to PSU banks. Did we answer your question?

Yes, that answers except for the -- I just wanted to get the number of how many ATMs are coming up renewal in this current year?

Sorry, I lost your voice in the last bit.

Yes. You gave some data point regarding the number of ATMs which are coming up for refresh or renewal in the current year.

It is 30,000.

My second set of questions is to Mr. Pankaj, and this is slightly technical. So I was looking at the cash flow statement and the balance sheet. And in the cash flow statement, basically, there are 2 big entries in the working capital, the increase in trade receivables and the second one is increase in other assets and pre-payments. Now the increase in trade receivables is about INR 72.4 crores but if I look at the equivalent balance sheet entries on trade receivables that has increased by just INR 1.4 crores. And the second one on other assets is about INR 50 crores -- INR 50.75 crores and I am not able to tally with any of the asset side entries in the balance sheet. So if you can provide some clarification on that, that would be helpful?

Yes. So if you see the cash flow, there is -- we have provided around INR 59 crores for the impairment for the bad and doubtful debts and which is in line with the earlier year, it was around INR 21 crores, INR 22 crores. This year is slightly higher, that is because of the growth of the company as well as some of the banks in COVID period could not able to complete the reconciliation, et cetera, which is passed on to this year. That is the reason the difference is in the AR, but you can able to see in the balance sheet vis-a-vis in the cash flow statement. Coming to your question number 2 about increase in the other current assets and -- assets of around INR 50 crores, of this major amount is related to -- INR 26 crores is IPO-related assets which is sitting in this account as well as in the trade payables account. This is accounting as per the -- as guided by the auditor, which is added both places.

Okay. So one more clarification, so the trade receivables increase of INR 72.4 crores has to be netted out against the impairment allowance that has been created. Is that the way to look at it?

If you have to look only the cash flow perspective, because the impairment allowance or the ECL provision we have made is a non-cash item, as a prudent we have made a provision for it.

But if I were to match this in the balance sheet, as in the trade receivables increase that has been shown in the cash flow statement. If I have to match it in the balance sheet that is not happening. So is that because of that impairment allowance? Or how should I look at that particular number? That was the point.

You can see the cash flow items in the cash flow itself, there is 2 line items, which will match with this number.

Okay. So basically, we have to match the impairment allowance with the trade receivables, that is the way it should be looked at, right?

Yes, yes. For any of the balance sheet you have to match, you have to look into that the same way.

The next question is from the line of Mudita Nahar from Abakkus Asset Manager. Please go ahead.

Sir, could you just give detail about within the Cash Management segment and Managed Services, which are the sub-verticals which have led the margin expansion? And if you can just give some breakup about the revenues in the subsegment? And is it like driven by volume or there is some traction on the realization as well, sir?

We don't detail out revenues by subsegment. But for -- at a high level, our revenue growth of 22% overall in the company is a mix of volume, realization, pricing, on all of those, right? The volume is a mix of both organic -- I mean, it's market share and it is market growth. So I think it's a combination of, as I said initially in my opening remarks, it's been a great year where we have fired on all cylinders and on all key operating metrics. Our Managed Services business, the margin profile of the business will change and improve just as we move more and more into our BLA business as well as our remote monitoring business. Remote monitoring was still a smaller part of the business last year. In fact, Manju may have mentioned it in our remote monitoring business, we completed 10,000 sites by end of March, and we aim to double that by the end of this year. So as we move into more higher value-added services, the margin profile of those business will continue to improve. Cash Management, we had a substantial jump in the prior year. In fact, I think a lot of people had concerns whether that would be sustainable. I think the team has done a splendid job in maintaining and improving those margin profile further.

Okay. And just on the CapEx, can you just give a breakup and largely what the CapEx was like related to BLA, branch or something of that sort?

Yes. And sorry, just one more point. I think given our cash logistics business is a route logistics business in which you are doing multiple activities, it's almost impossible to carve out profitability or margin profile by subverticals. So it's not that we don't want to give it. It's just very difficult to do it. We look at overall density as it improves, margin profile gets better for us. CapEx, I think Pankaj, 90% of our CapEx was basically for growth CapEx and a small M&A we have done, right?

Yes. So both CapEx for both business units, like RBI/MHA compliance related, we have -- out of the total CapEx, around 25% of CapEx has gone for that purpose. And rest of the things are for the Managed Services business, wherein we have partly executed that INR 2,000 crores to INR 2,300 crores order book so far, 60%, 70% is already executed and remaining is to be executed.

The next question is from the line of Aasim Bharde from DAM Capital Advisors. please go ahead.

Good set of results for the quarter and the year. Congratulations for that. I had a question on the compliance bit. So you mentioned that CMS is at 50% odd levels right now and you would want to go close to 100% in FY '23. So, a, would you have a comparable compliance number for the industry as a whole currently and b, going to 100% compliance in FY '23 itself would that mean your blended realization would immediately take a jump or would these costs be passed on only over a period of time, say over FY '23, or may be '25, '26?

Thank you, Aasim. I will just add a little bit of color to that. I think when we spoke that -- spoke about the 50% compliance, that's more from a perspective of how ready our network is in terms of being able to meet the compliance requirements. From a perspective of the businesses which have migrated to this compliance regime, that number on a consolidated basis across the ATM and retail portfolio stands at about 35%. ATM obviously being a little ahead, having started earlier and the retail sort of lagging by a couple of quarters. That's number one. And second, I'm not sure about the industry, but what I can tell you is even in the last call that we had, we told you that as a market leader, we have always sort of been ahead of the curve in wanting to implement this compliance, having access to the scale, the network and invested -- starting our investments from FY '20 and continuing through '21 and '22, we would like to think that we are ahead of the market and the curve. What is happening in the external market is the self-regulatory organization has sort of prescribed that all cash management activities in 30 cities across the country needs to be compliant as of Q4, which is March end, which is where I would like to think is the industry level of compliance. We are obviously a little bit ahead of that. The RBI has indicated that they would like to see the cassette swap implementation to be completed by the banks by the end of March 2023. So we would sort of have to see how the banks and other stakeholders respond to this time line. We are also getting our network ready to be able to deliver the compliance.

Just to clarify, the 35% number that you talked about, that has, if I understood you correctly, 50% of the network is ready in terms of compliance, but 35% is actually passed on to the bank in terms of the costs, so we still have some way to just go in terms to catch up on the realization, just to reach 50%, is that understanding correct?

Yes, I think it's correct. These never exactly overlap, right? You need to invest ahead of time and get this ready and then the business comes in. So there will never be 100% match on the way we will roll it out and the way compliance will finally work through. I think that from a goal perspective trend, we think compliance is very important for the overall health of the industry. We had -- if you remember, we have started investing in compliance in FY '20 itself, but we took a pause in FY '21 during COVID. We have now accelerated our efforts because we can see the demand is very strong from the banking customers to have these services available.

Sure. So any trend this 35% number when does that touch 100%, will that be done by FY '25, FY '26?

We think it would be -- it should get done by FY '24. But in our internal planning, we're assuming FY '25. But FY '24, we hope to see most of it done. If you also refer to the one of the recent guidelines from RBI the reminder to the banks on cassette swap, they want it done by March '23, 100%.

Yes, right, right. The second question is basically on the payout ratio, so this time like you said they have done about 17% by FY '22. It is still lower than what you guys did in the previous period and prior to that. Going forward, is there a potential band or range within which you would like to keep the payout ratio, assuming no large one-off orders to execute?

So we are a newly listed company. These are things we'll learn over time, and the Board will consider what the dividend policy will get streamlined into. But I think you have to think about the fact that 2, 3 years ago, we didn't have large investments we made. We've had a fairly peak capital investment last year. There is also a strong capital cycle required this year. And given we are still not out of the woods from a COVID risk perspective or a macro perspective, we want to make sure the company is well equipped with liquidity and option to make sure that our growth trajectory continues to the FY '25 destination we are seeking for ourselves. We also feel that in the current macro, there may be more stress in the ecosystem. And hopefully, there would be interesting opportunities for acquisition. But of course, at this stage, we can't comment on what exactly will come up.

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

My question is on the capital expenditure for the current year, if you can give that number. And if it is possible to break it up between what would be required for RBI compliance and what would be required for the 30% ATMs that are not live at present on the Managed Services side?

Are you saying for Fy '23?

Yes, for FY '23.

Basically, if you see that we have partly executed the large order book, which is 60% to 70% we have already executed. And a lot of CapEx will go to 100% execute that. Like 10,000 of the AI-based remote monitoring sites are up and live. We have order -- total order of around 23,000 sites. So large part will go there. We got a bonus order from SBI and other public sector bank where the CapEx will go. For the compliance side, as we are poised to do 100% by FY '24, so remaining CapEx will go for that purposes. And we are well -- we have sufficient funds available to do all this CapEx.

I think just to give you a sense, I think I understand where you're coming from. I would think that our capital outlay in FY '23 will be lesser than what we had last year. We feel last year was a peak capital cycle for us for the foreseeable future, unless there is a substantial acquisition which comes our way. But other than that, from a growth perspective, we -- the current year capital invest -- deployment would be lesser than last year. It would be sort of difficult to give you a breakup of how much will get spent between compliance and between the projects for the order book. But because it all depends on supply chain, very difficult to foresee -- to forecast what all we'll be able to get in time. We've had some delays already last year. So we will give you a report on it maybe later in the year, but tough to forecast the number right now.

But the total number, sir, if you would have projected some numbers, right?

Yes. So I think last year, we spent about INR 250 crores. This year, I think we'll be in the range of INR 200 crores to INR 225 crores.

So RBI has come out with...

Sorry to interrupt you. I request you to please repeat your question. Your audio is breaking.

So RBI started trials for interoperability of cash recycling machines. So I wanted to understand if this becomes mainstream, how does it affect our Cash Management business?

I think is a positive, right? If the interoperability on recyclers is fully initiated, it will lead to far more usage of our current recycler network in the country, which is right now bank dedicated and will drive more currency being accepted and also, therefore, the need for evacuation and management of those machines will go up. As we've seen already for the recyclers we handled for the last 5 or 6 years, that they need a lot more work because the intensity of cash just dramatically goes up.

But it change that, because in some of those orders we get paid for the number of trips that we make to an ATM and in fact cash recycler would by default have deposits as well as withdrawals. It won't impact the number of trips and so the revenue that we would be generating there?

So this is something, Nirmal, which was -- which was -- which is what the industry thought when cash recyclers were reduced in 2014, '15. And in fact, we don't know how this will play. So we, in fact, were the first -- one of the largest contracts to deploy recyclers was run by CMS on behalf of SBI. What we have noticed is that these machines become so much more focused on cash collections because the queues from the teller machines move to these machines and the volume of currency becomes very, very large. Almost 70% to 75% of the work this machine does is in accepting cash and only 25% is in giving out cash. So now unless every machine in the country moves to this model, which life may change, who knows, and we'll still be able to get opportunity in that from managed services, BLA, product sale and whatnot. We have not seen this as any -- we haven't seen this as a threat. We actually have seen this as a positive for our combined company and entity.

[Operator Instructions] The next question is from the line of Nitin Sharma from MC Pro Research. Please go ahead.

Am I audible?

Yes.

Congrats on a good set of numbers. I have 2 questions. First one on the other expenses. So it jumped around 34% Y-o-Y, 18% Q-on-Q. What is included there? And is it a one-off?

So other expenses is -- basically, if you see over a period, we are diversifying our business, like remote monitoring, AI-based remote monitoring services we started in last year. The majority of the expenses related to that business is going in the other expenses. So it is not qualifying for more than 10% of expenses, whether it is the communication expenses or related to any stationary expenses, whatever is required for this particular kind of business. Likewise, the MS, managed services business, wherein a lot of expenditure related to like whether it is AMC-related expenditure or spares-related expenditure, which is also part of the other expenses. So because of the change mix of our revenue, these expenses is increasing.

Understood. Very well. Second question, I just want to understand where do you see the operating cost for the FY '23, some guidance on that?

We don't have sort of -- we don't give any annual guidance on revenue and cost. I think we've set a tone for our midterm plan and target. We hope to maintain margins. I understand your question may come in from the inflation concerns. And our goal will be to make sure that we can maintain and manage the margins and move up steadily. We have as a team to -- there are multiple things we have to balance over a 3- to 4-year cycle, right, revenue growth, market share, profit margins, return metrics. And I think we want to have the flexibility to do what is right for the company and the platform in the midterm instead of worrying overtly on just a shortern term.

Right. So does that mean -- my understanding is, correct me if I'm wrong, that there is some escalation clause with regards to the inflation with your clients. So has it kicked in? Or talks are going on? Any update on that?

So there are many, many contracts, right? We have multiple subsectors we operate in, and there are different types of contracts with different entities. What you may be referring to is what we may have guided to on our earlier call saying increasingly now and lately, newer contracts, including from public sector banks, have a provision of inflation-linked pricing changes because when you enter into a 4-year, 5-year, 6-year, 7-year contract, it's very difficult to forecast what will happen over the period. And it's good that some of the larger banks are now putting this mechanism in place so that there is some balance in this. Those -- whatever the contract will determine those contracts will start having that implication whenever that contract allows you to change that. There are other contracts where you may not have actual clause like that. But again, you have to think of the fact that as a market leader, we have -- sorry, forget the market leader. We've been in this business for more than 12 years, right, as a team. And we have seen high inflation environments when you think back from 2012 to 2016 pre-demonetization. So I think we have the experience to handling whether it's fuel price and whatnot. And also the ability with our strength of our market share, we are able to have a very sensible discussion with clients, very mature discussions on balancing a price increase where it is necessitated by market conditions.

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

Sir, just I have a couple of queries. Now in your opening remarks, you did mention that for the next decade, you expect the industry to grow at about 10% to 12%. Now given the push towards digital economy, so what gives us confidence that this kind of growth can continue for the next decade? And my second query is regarding your operating leverage. Now you did say that margin profile of the company will continue to improve. And looking at 18% to 20% CAGR of revenue, I presume your costs will not grow at the same rate as your revenue CAGR you're projecting. So ideally your EBITDA margin should grow 30% in this year, so any comment on that. These were -- these are my 2 questions.

So on your first question on where do we -- why do we feel confident about a 10% to 12% growth rate for the sector? I think it comes from a couple of points. Number one, India is -- India broadly, especially usage of cash is still largely informal and unorganized. And as India formalizes and you see whether that is from a small store to an organized retail or whatever else goes on there, you will see a lot more of the cash volumes getting formally outsourced to the banking channel and therefore, to us. Right now, a lot of currency gets withdrawn and used in smaller cycles without coming back into the banking ecosystem. And we think that will change over the next decade. The second is when you think about -- if you look at any industry forecast by any third party, it points to a number, which I've alluded to. But from our perspective, we think there will be more outsourcing, almost 30% to 35% of even ATM work is still done in-house with the bank. Over time, banks will find it very cumbersome and expensive to manage cash logistics, which they do currently in-house. And I think that brings a very significant outsourcing market opportunity, which we don't really cater to today. Thirdly, a lot of refresh cycles in banks, especially public sector banks will move to a brown label market where -- brown label model where the capital will move from bank balance sheet to a third party. And we feel that will be a big shift, which will create an opportunity for large-scale integrated players to be able to invest capital and get very good returns in a model where you can earn revenues over a long period of time. And finally, when you think about, when I refer to, right, when people say digital and digital is not unique, we've seen that in India for the last 6 years now. It's growing rapidly. I think with -- but when I look outside India and I look at large companies, let's say, in cash management space, I look at large companies which are in the banking automation space. So you look at Brinks, you look at Loomis, you look at NCR, you look at Euronet. And you see them operating in large developed countries in Europe, in Sweden, in U.S. and Canada, they are still growing at 6%, 7% revenue, right, whether it is 2%, 3% or 3%, 4% organic growth, 2%, 3% would be inflation and then maybe some inorganic growth could get them to 10% to 12%. So large evolved markets are growing at that rate today. It is difficult for me to believe that India will not -- will grow, which could grow maybe even higher. But our goal is that we should be growing at faster than the market, right? Our goal is to do that. So that's my first question. The second question was about margins. I think from a margin perspective, we are delivering today world-class margins, right? I think our margin profile is best in the -- amongst the best in the world. And as I said, we see fundamentally a very good opportunity to have a larger piece of the entire ecosystem in revenue terms. Our ambition is to grow revenue at a good CAGR. The 18% growth CAGR for 4 years we have set ourselves to is a pretty aggressive target. We want to get that there, and we will do it. Obviously, if we achieve that number, our market share should grow. And then pricing and margins will be a function of how do we continue to improve on our return metrics. I don't want to get stuck onto a particular percentage number right now. I think we want to make sure that we get the -- we build our size and scale to be a much larger company. Automatically, it should accrue to our return metrics and margin profile.

The next question is a text question from the line of Milan Mondal. Why pledge showing 100%?

So this -- the pledge is not done by our promoter. It is -- the promoter is Sion Investment Holding. Sion Investment Holdings holding company has pledged the shares. And by virtue of that, it is showing as a pledge.

The next question is an audio-only question from the line of Pranay Jhaveri from JNJ Holdings. Please go ahead.

I just want to clarify that, I hope the answer was clear, to the last question.

Am I audible?

Yes, go ahead.

Sir, regarding in the cash flow statement, there are at least 2 items, debt and impairment, which has year-on-year gone up from INR 42 crores to around INR 80 crores. So as I think you had pointed out in the earlier comment that this was a part of last year, which was adjusted here. So if you can just throw some light in terms of what is this line item? And how much is this recurring in nature or one-off in nature?

If you see that some part is because of the growth in the revenue of the company, which is around 22% in this year. Second is, as I explained to you that last year, because of the COVID, large part of the bank and other customers are working from home. So a couple of reconciliations could not take place. And a matter of prudence, we have made a higher provision this year to take care of that when we got the surprise in the Q1, Q2, et cetera, we have slightly made the provision. However, discussions are on. Going forward, because of the lot of initiatives taken by the RBI like MHA/RBI compliances as well as the cassette swap, which will reduce this type of cost significantly.

INR 1,300 crores last year and INR 1,600 crores probably this year. And if I just take both the figures, basically, it is about 6%, 7% of the top line.

No, I think on a blended basis, it's about 4%.

So this is fair to say that 3%, 4% would be a recurring thing?

It is impossible to forecast the future, frankly, because we don't know. It should -- logically, it should go back, go down. But even if it stays at, let's say, current levels, we've seen 3-year average about 4%. We will have to see how this current year goes and things get streamlined. As Pankaj explained, there was a bunching up potentially because a lot of things banks couldn't complete in FY '21. So we look at FY '21 and '22 as a blended basis, and it's still in line with FY '19. We will wait and see how FY '23 goes before we could give you a time line saying, is this going to reduce systematically, or do we think it will maintain itself at the current levels.

Fair enough. Sir, another question from my side is basically there is an interest cost, which is about INR 14 crores, INR 15 crores. If you can just throw some light on that since we have net cash on balance sheet. So is this some bank charges or guarantees or something?

So this interest cost is related to only the Ind-AS related lease accounting. So we have not utilized any of the -- any of the fund-based banking facility in this year. So this is largely related to the Ind-AS lease accounting.

Okay. Sir, these other current assets of INR 98 crores that would consist of what?

See, all of the other INR 98 crores is around INR 26 crores is basically -- INR 26 crores is the funds we are having on account of IPO for the expenditure. The similar amount is sitting in the payable. So that is to be netted out and after the change in this year is not significant.

Okay. And sir, last question from my side. Correct me if I'm wrong. So basically, we are -- our capital employed is going more towards the managed services. And if I see the managed services EBITDA and the ROCEs, which are probably lower than the CMS, so is it fair to say that the ROCEs will get effected to that tune maybe in FY '23, FY '24?

ROEs have expanded and so have ROCEs, so I'm not sure. I think that's fair. The MS business, the return metrics will improve because the large peak cycle of CapEx was last year and this year. These contracts are for a period of 6 to 7 years and may get even extended. So you will see the return metrics improve as the returns from these projects start coming through. And even if you see our segment results, last year, if you see the net profit of the Managed Services, it was 15%. And this year, it was 16.6%. So there is a significant improvement in the profit of that, the margin profile of the business.

But if I compare that line of business with your cash managed business, which is lower than that, right, then we are employing -- more capital is getting employed into this line of business, so below the EBITDA, there will be depreciation for this brown label ATM. So I'm just trying to understand the ROCE of this business, Managed Services.

I'm sorry, this -- whatever number you are seeing is the segment result, which is after putting all the expenditure, including depreciation. So after putting all the depreciation and all the expenditure, this is the margin basically.

Which is lower than your Cash Management business.

Yes, yes, of course. It's different nature of business, different...

I understand that. So basically, if we are investing more into the Managed Services...

Yes. So I think when you think about our Nanaged Services business, they will -- their ROCEs will be lower than Cash Management, of course, that's the nature of the business. It will expand over time as the CapEx starts accruing and we start getting the returns on that over the coming years. Also, you're putting in place -- you're putting in place an infrastructure which can give a multiyear assured revenue for a longer period of time, comes with lower risk, right? Comes with lower risk, if you want to think about it that way. If -- so to your question, yes, the Managed Services business will have lower ROCEs to start with. But it will improve. Will it cross cash in the future? Tough to forecast right now. But these are -- when you think of them from a combined perspective, right, when you win a managed services contract in BLA, it is integrated into your cash management business. You're also securing a cash management contract for a longer period of time. So you have to think of blended margins increasingly, maybe not today, but increasingly, you think of blended margins for these businesses.

Fair enough. And last question, if I may squeeze in. We are tracking this company from quite a short period of time. I'm just trying to understand, is there a history where the regulator would have had any -- basically an adverse remark or basically a penalty that could be leveled. And if so, I'm just trying to understand what would go wrong because it seems like a cash minting machine from a company's viewpoint. So from a risk viewpoint, I'm just trying to understand any historical data which you would like to share or any risk that you see that a regulator would come upon us in the past would have had and what would be the effect of that?

So I think we -- the risk factors, of course, our DRHP discloses all the risk factors in quite a lot of detail. So I would still urge you to have a quick look at it so that you are more -- you have a more balanced view of both the future opportunity and the risk. From our perspective, from -- to your answer, has the regulator had an adverse remark or an adverse, let's say, penalty or whatever, no. I think -- but having said that, when you think of the regulator, the regulator reduced the interchange on ATM transactions about 7, 8 years ago and has recently actually gone and increased it. Now you can say when they reduced it, it was a negative macro for the industry, but they've increased it as a positive macro for the industry. From a company specifically, there hasn't been anything adverse or negative. In fact, the association for cash logistics, the SRO works very closely with the central bank concerned officers to work on how do we maintain the standards of the operating guidelines at a global world-class level, best-in-class level.

The next question is a text question from the line of Viral Shah from PhillipCapital. What is revenue booked during FY '22 from Managed Services order book? What is revenue from remote monitoring BI in FY '22?

So again, Viral, we don't sort of disclose subsegment revenues at that level. I think Managed Services revenues booked, I mean, is the revenue we reported, right? I don't think we have a booked versus booking or the order book. Okay. So out of the INR 2,000 crore order book, almost we would think about 10% or so would be -- roughly 9% to 10% would have been booked in FY '22, if I've got your question accurately. And your second part of the question was on remote monitoring. On remote monitoring, we have ended the year at March with 10,000 remote monitoring sites live and operational. It was almost 0 at the beginning of the year. And we are aiming to double it in this year from -- to go from 10,000 to 20,000, provided again, the big caveat here really all depends on the supply chain because technology items getting it all in place and working can be a little bit difficult in current circumstances. But we are fairly confident we should be able to double that. When it gets to that number of 20,000 sites, just to give you a size of -- I understand you're trying to measure what this contribution would be, the annual revenue run rate of the remote monitoring business would then be at about INR 100 crores a year. So we would go from -- we would basically take a new business, started virtually almost from scratch, take a small acquisition we made last year and build it -- we aim to build it to INR 100 crore revenue run rate by the end of this fiscal year.

Second question, what is the outlook of Cash Management business for next few years? And what is the sustainable growth rate of that segment?

So when you sort of broadly look at the key macros which are influencing the Cash Management business, the currency in circulation is one such key indicator. We've been sort of looking at this for a better part of a decade, 1.5 decades. And in most countries, including India, it closely parallels with nominal GPDP. Internally, we always said goalpost for ourselves saying if the currency in circulation is growing at 10%, 12%, the market to which it corresponds should grow at about 14%, 15% market, whether that's an expansion of the ATMs deployed in the country, whether it is the retail cash points and spends that are happening and the whole consumption economy that sort of goes along with that. And if that's sort of the pace of market expansion, that is sort of what leads us to set our benchmark for growth at 18%, 20% level, assuming we will sort of always aspire to grow a little ahead of the market. Looking at where we stand right now, and I sort of look at some of the data-driven indicators that are available to us, the currency in circulation continues to grow at 10%. And cash handled by CMS has grown by 22% year-on-year. And every quarter, we are seeing gains on that front. The total ATMs in the country have had the best year of growth this year compared to the previous 2 fiscals. From April through December, we've added about 11,000 ATMs in the country. There is a very large RFP pipeline, which is a combination of the refresh cycle by the public sector banks and expansion, which is -- and these RFPs are on the annual and should get awarded over the next 9 to 15 months. So based on the indicators that are available to us in the short to midterm, I think we are seeing that sort of basis which we are guiding to a consolidated revenue growth aspiration of 18% to 20%.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Rajiv Kaul for closing comments. Thank you and over to you, sir.

Thank you for all your questions. That was very insightful to know how you think about our business. Thank you for your feedback and comments. As we -- as I said in the beginning that we are a newly listed company, but I have the privilege of working with the team, which has been together and the management team for more than a decade. That experience comes in very handy during both good and bad times. Last year was a fairly interesting year because we ended it very strongly despite whatever was going on outside of the world. We feel fairly positive and very confident about our midterm and long-term trajectory. Our aim is to deliver on a steady basis -- on a systematic and steady basis to all our shareholders, and we hope to have your support in the future. Look forward to talking to you soon at the end of the next quarter. Thank you so much.

Thank you. Ladies and gentlemen, on behalf of JM Financial Institutional Securities, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.