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

Ladies and gentlemen, good day, and welcome to the Q4 FY '25 Earnings Conference Call of CMS Info Systems, hosted by Elara Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prithvish Uppal from Elara Capital. Thank you. And over to you, sir.

Yes. Thank you. Good evening, ladies and gentlemen. Thank you to the CMS team for the opportunity to host you for the Q4 and FY '25 earnings con call. From the management team, today, we have Mr. Rajiv Kaul, Executive Vice Chairman, CEO and Whole-Time Director; Mr. Pankaj Khandelwal, President and CFO; Mr. Anush Raghavan, President, Cash Management; and Mr. Puneet Bhirani, President, Operations. We also have a webcast link to today's call where the management will be taking us through the results highlights. So, request everyone to please join the web link. And I now hand over the con call to Rajiv sir. Sir, over to you.

Thank you. Good evening, everyone. I hope you have our earnings presentation visible to you, details of which Prithvish has shared. It's also on our Investor page on our website. I want to talk first about FY '25. We entered FY '25 fairly bullish on the back of 20% revenue growth in the prior 3 years and also record order wins of almost INR 1,950 crores, which we are expecting to execute in FY '25. Unfortunately, we encountered a sequence of unanticipated events, which built into a perfect storm. We guided early in the year towards this and hoping that things would pick up in H2 and worked really hard on project execution, which was at 15% end of H1. This did ramp up to 30% in Q3, and we were hoping to close at 60% order execution by Q4. However, we fell short at 52%. February and March, which are key months to close on projects for large PSU banks, but the large banks had to deal with severe disruption in their ATM operations due to issues at a key competitor, which we are all familiar with by now. Therefore, new projects and execution took a backseat and in fact, our team at CMS also had to jump in and help these banks navigate the situation in getting their ATM networks up and running. This has led to revenue coming in lower at INR 2,425 crores against our guidance of INR 2,450 crores, INR 2,500 crores, which we had shared in the Q3 call. Given this situation, we sort of had to recalibrate our focus several times in the year and we decided to focus first on market consolidation and focus on gaining market share in an overall tepid market. We have gained -- market position has improved all of our business in the last year. We also decided to drive a complex reorganization, which we had deferred in FY '24 as it would have distracted us in a year of high growth. We have more than 27,000 employees and associates, and we have brought all of them into one single operating unit across a unified structure and organization. This is already yielding good results, with both improved customer satisfaction and employee satisfaction trends. We ramped up our tech and automation investments last year, keeping a focus on long-term investments and also in line with changing business mix and higher scale of operations. Both the reorganization and the tech and automation investments have helped us drive operating efficiency and enabled us to maintain a high-margin profile despite an overall modest growth. I'm happy to report that the order win momentum improved significantly in H2, with INR 800 crores of wins, 2x of that in H1. In fact, Q4 had INR 500 crores of order wins. Moving to Slide #4. Our integrated platform approach is delivering very good results in improving the quality and visibility of our revenue streams. From less than half -- from about almost half, today, 2/3 of our revenue is directly from a bank or a retail customer. Our ability to cross-sell solutions have helped us in driving both depth and breadth across key banks. In fact, end of FY '25, we now have top 13 banks in India, with more than INR 50 crores of annual revenue. A more subtle shift, which we want to point out here for you, is in the nature of this revenue. We used to mostly be an annuity revenue business, wherein the contracts are of 1 to 3 years duration with fairly high retention rates. We have been driving a change to a recurring revenue model, which are longer-term contracts in the nature of 7 years to 10 years. In fact, our recurring revenue business is growing at more than 20% CAGR and today accounts for more than 1/3 of our overall services pie. This will help us building a far more predictable revenue streams quarter-on-quarter. If you look at the chart on the right-hand side, which shows you the change in business mix, we want to highlight the fact that our newer businesses are ramping up well, and they now contribute meaningfully to our revenue. In fact, we have been successful in ensuring that we aren't overly dependent on any one line of business. For example, if you look at the ATM cash segment, which used to be more than 50% of revenue 7 years ago, is now 1/3 of our revenue despite growing at a 10% CAGR over the 7 years. At a segment level, when we report our numbers, the split of cash business to MS and tech business, the split used to be 70-30 about 4 years ago. This is now at a 60-40 and could, in fact, hit a 55-45 in the next 4 to 5 quarters. Slide #5. We're quite focused on expansion and looking to identify next future engines of growth. We have shared with you earlier the sectors of our interest across payments, software, valuable logistics and banking services. In last year, we augmented and beefed up our M&A team. We, in fact, screened hundreds of companies and came up with a short list of 65 companies with which we had meetings in these identified areas. We have earlier, as you know, incubated bullion and debt collection business. After extensive work in debt collections, we are dropping that sector from our focus for the current short to midterm. But from these companies, we are identifying and working with a set of founders to look at who can align with CMS when they present us a good growth opportunity and a good ROCE profile for our future business growth. Slide #6. To summarize FY '25, while the growth rates and growth percentages are modest and under our expectations, we have managed to retain the margin profile and the cash flow generation nature of our business to build up a very robust balance sheet. I think in the current environment, this is a great asset for any company. And while the growth numbers don't do justice to the intensity of our effort, we are very certain that this will bear fruit in the coming quarters. With that, I'd like to hand over to Anush to take you through a more detailed business update.

Thank you, Rajiv. Good day to everyone. I'll switch to Slide 8. As Rajiv shared, despite a challenging macro environment which was marked by several headwinds, CMS has emerged stronger across all our core businesses. This year, we won over INR 1,200 crores in new order wins, with a robust 60% coming from private banks, reinforcing our leadership in the financial sector. Execution has picked up in H2, with over half of our order wins from the prior 5 quarters going live. Our pending order book and the INR 500 crores of wins that we have in Q4 gives us a very healthy INR 1,400 crores of orders to be executed this year. Operationally, we grew our ATM and retail touch points by 9%, with our current business split of 73,000 ATMs and 77,000 retail equivalent touch points. Growth has been biased towards retail, as during the year we also saw a significant churn in the ATM network. Our CIT volumes have grown by 20%. Notably, in our cards business, we had solid growth in FY '24 and focus in FY '25 was to drive a contract-level wise profitability, which we have achieved with over 1,400 basis point or a 14 percentage point margin improvement. Overall, we have gained 200 basis points market share in Cash Logistics, further expanding on the 150 bps growth that we had till last quarter. Also with growth in our integrated contracts, we are now among the top 3 Managed Service providers in India, which is a clear validation of our strategy and execution. On to Slide 9. Our integrated contracts approach is helping drive a much deeper enterprise engagement, with a growing share of recurring revenues and an increasing number of customers contributing over INR 50 crores in each annual revenue. With this change in our business mix and having a broader portfolio of revenues, we are no longer just a cash management or an ATM company. We have repositioned ourselves as one of the leading integrated business services platform. And in FY '26, we will invest in recasting our identity and positioning, which speaks to our platform strengths. The focus is on building a trusted end-to-end relationships, which spans Cash Logistics, Managed Services, automation and digital transformation for our clients. FY '25 saw significant disruption in the ATM ecosystem, especially with operational challenges at a large industry player. At CMS, we were quick to respond, supporting major banks with timely cash evacuation and continuity of ATM services, effectively reinforcing our reliability in mission-critical situations. Q4, in particular, saw significant operational intensity comparable with the likes of demonetization or COVID periods. Our agility and scale ensured in winning end-to-end managed solutions for leading private banks. The recent increase in the ATM interchange fees from INR 17 to INR 19 per transaction has renewed focus among banks on expanding their ATM networks. In fact, if you read yesterday's interview with the Chairman of State Bank of India, he says that as the country's largest ATM deployer, they have seen a significant churn in their estate in FY '25 as they are focused on redeploying their network and are now looking at augmenting the channel. In terms of our overall cash usage, amidst the digital payment growth, cash continues to remain deeply relevant. ATM dispensation on CMS managed machines has been steady year-on-year. Our total currency handled has grown by 5% and crossed INR 14 lakh crores, reflecting both our operational scale and the trust our clients place in us. Retail cash is growing on a same-store basis, and the throughput continues to mirror the broader growth in organized retail, e-commerce and quick commerce, all sectors that are increasingly dependent on secure and efficient cash management. The broader story here is that behind robust cash demand, even as digital grows, CMS is at an interesting intersection, serving both traditional banking needs and the evolving requirement of newer retailers. With that, I would now invite Pankaj to share updates on our financial.

Thank you, Anush. Good afternoon, everyone. Moving to Slide 13, financial summary of the year. After 3 years of a strong growth of 20% between FY '21 to '24, FY '25 was a consolidation year with a moderate revenue growth of 7%. However, we continue to maintain our strong margin profile with a PAT margin of 15.4%. On Slide 14, it is Q4 financial summary. In Q4, we picked up momentum on our order book execution, with execution inching up to 52%. However, it is lower than our target of 60%, given that most of the large banks' bandwidth was occupied, dealing with the disruptions of one of the industry players. The execution inch up, helped us to deliver sequential revenue and PAT growth of 6% and 5%, respectively. In Q4 and FY '25, results were impacted on account of full provisioning for the service provided to one of the industry competitors. Moving to Slide 15. Talking about our yearly segment financials, both cash and Managed Services business reported revenue growth of 8%. EBIT of cash business grew at 4% to INR 401 crores, whereas the EBIT of the Managed Services business remained flat at INR 157 crores. Slide 16. Talking about our quarterly segmental financials. Cash business revenue grew at 2% on a quarter-on-quarter basis and 7% on a year-on-year basis. Managed Services reported strong quarter-on-quarter growth of 16%. However, on a year-on-year basis, there is a decline of 8%, given that in Q4 FY '24 was an exceptional quarter, with 56% year-on-year in growth. The segmental margin impact of the provisioning, which I spoke about earlier as well as the costs incurred for helping banks streamlining their operations are disturbed due to issue at one of the industry competitors. Slide 17. Coming to balance sheet and cash flow. We continue to maintain strong financial discipline, focusing on the cash flow and strong ROCE. Despite overall liquidity crunch, our OCF to EBITDA improved to 76%, resulting in OCF generation of INR 482 crores. We continue to operate at a high ROCE at 25% plus. High OCF and ROCE helped us to expand our cash and cash equivalent to INR 1,000 crores plus from INR 784 crores last year. This year, in addition to interim dividend, which we have declared in Q2 -- I'm sorry, Q3, we also declared a special interim dividend of INR 3 and proposed to final dividend of INR 3.25, taking a total payout ratio to 42% of the PAT. With this, now I would like to hand over to Anush to talk about the future outlook.

Thank you, Pankaj. Switching to Slide 19. There are 2 areas, which we see as very interesting areas of opportunity for us. The first being retail opportunity. I had covered this briefly in our last call, but I would like to take this opportunity to reiterate some of the key points. The India's organized retail sector is at a very key inflection point. Of the roughly 3 million retail touch points, only about 550,000 are organized and roughly 1/3 of these have outsourced their Cash Logistics. This signals a massive untapped potential for CMS. We see strong demand for payment automation, secure Cash Logistics and a real-time store level reconciliation as retailers look to drive efficiency and transparency. Our 360-degree retail solution is designed for this environment, which integrates Cash Logistics with AIoT-based remote monitoring and unified settlement processes, serving not just retail, but also adjacent sectors like fuel, automotive, government, e-com logistics and health care. This segment will be a key growth driver for us over the next few years, both in terms of the cash business as well as remote monitoring as we become the platform of choice for modern retail in India. Moving to Slide 20. Coming to remote monitoring, our remote monitoring business, which we now refer to as Vision AI platform, has rapidly scaled to becoming the #1 platform in India's ATM space. This year, one of the key milestones was that we completed our in-house proprietary tech stack. This enables us to roll out multiple new AI modules, which are key to winning mandates with leading banks for their branch network and large new economy clients. Less than 20% of India's 140,000 branch network is outsourced for monitoring, and our marquee solution win with one of the leading banks to build and operate a large and very complex monitoring solution, which will go live soon, will be a key tech demonstrator to win similar such mandates. Last call, we shared our breakthrough win on the retail side with a quick commerce client. Our implementation is underway, and the dark store count has increased from the initial estimate to now. We are also running further pilots with them on using our solution for the delivery vans, ambulances and also in-store AIoT integration. We have an aggressive goal of growing our business from the current 30,000 sites to 50,000 in the near future. With that, I would request Rajiv for his closing comments.

Thank you, Anush. I think for summary and to close out our presentation today, I will focus on the mid-term FY '25 to FY '27 opportunity. If I look out for these 2 years, we are, as a team, aiming for robust growth in line with our historical growth rate. The drivers for this will be, first and foremost, we aim to and we hope to finish our order book execution in H1. This will be a key pillar for our growth in the near term. The market for us is consolidating. If you look at cash management, there are really 2 scale companies and a couple of smaller ones. From an end-to-end integrated players, instead of 3, there are only 2 companies now. It will be very difficult for any third player to build this set of services now. This will lead to naturally market share gains for leading companies in the coming years. The retail section, Anush already mentioned the opportunity and took you through it. We have been executing very strongly in this sector for the last 2 years. We have regained our market leadership, and we have momentum in the sector. In our Vision AI business, we crossed 30,000 sites and it's poised for rapid growth. In fact, our overall software business, which is 7% of our revenue, should cross 10% of revenue by FY '27 as we have guided to earlier. The ATM interchange increase is going to lead to an increase in the ATM network. In fact, the Chairman of SBI has already alluded to the fact that SBI is looking to expand its ATM base in the coming year. The ATM base does see a lot of churn based on usage, but I think the sites are set to grow. On an overall segment basis, we feel that the cash-related businesses should grow at a 10% to 13% CAGR and the MS and Tech BU should get back to a strong 25% to 30% growth rate. Blended, this should lead to a services revenue CAGR of 14% to 17% in the coming 2 years. We also last call had alluded -- mentioned to the fact that we would like to do an analyst event and investor meeting at the end of the full-year results. However, when we are planning for this, given the whole geopolitical scenario a couple of weeks ago, we decided it's best to wait and do this when things are calmer. In fact, also that will -- the dust would have also settled by then in terms of the ATM operations, which banks are trying to take over from a competitor, and we'll see how that business pans out. And hopefully, by then, we also have to -- we have other interesting updates to report you on. So, we'll keep you posted. We aim to do this meeting in the next 3 months to 4 months. Thank you for your patience, and thank you for your support.

Sir, should we open the floor for the Q&A session now?

Sure, please.

[Operator Instructions] The first question is from the line of Praveen Kumar from Equitas Capital Advisors.

I had a couple of questions. First one was on your cards part of the business. If I look at FY '24 numbers, right, the size of the cards business is fairly modest. Maybe looks like sub INR 100 crores kind of a top line, right? When I refer to one of the recent large competitors in this space who filed for a prospectus a few months back, their numbers seem to be much higher in this space. So, just wanted to get an understanding how do you approach this space? And especially given the strong relationships that you have with banks across the public and private side, one would expect that you would be able to make larger forays into this space. So, I wanted to understand how do we approach this space? How do we see ourselves in this space? Yes.

Is that the only question? You said there are 2.

The second question was on the Vision AI part of your business. Just wanted to get an understanding of what is the differentiation that we offer in this space to the clients?

Okay. So great questions, especially on the card side. It's not a business, which people normally ask too much about. And so I think if you go back to what we have said earlier, our goal as a company is to operate in sectors where we can be a clear market leader unless we -- I mean, there are some sectors we can't be a market leader, but then we make it a very profitable niche. In the card business, we are focused on a niche. In fact, if you think of the business last year and this year has maybe degrown in revenue by 20%, but the EBITDA margins have -- EBIT margins have grown significantly. We're clearly focused on working with fewer clients, high quality, good pricing and good margins. The company you are referring to has more of an integrated play where they do everything from card manufacture to stationery to card supply to personalization, which has a very different level of capital intensity and ROCE metrics, which we clearly didn't take that approach to compete in that business on that basis. We continue to focus on this being a high ROCE business, working with clients for decades in areas where they feel very competent to work with us. So, a very different strategy out here. And therefore, the scale of the business is more modest compared to the companies you may be referring to. On the Vision AI business, I think it's a few things. We've sort of come in almost in the end of the sector last. We launched this in '21, '22, and we sort of scaled this to 25,000, 30,000 sites. I think what we bring to the table is, first and foremost, any large enterprise, let's take a bank. That's where we're working with, especially ATM. This is a very distributed network in remote parts of the country. So, there are different types of Vision AI Solutions, which could be from bare minimum to more high-end using AI and ML. I think our approach has been to use more machine learning-based approach to manage this and also our field force and our engineering teams on the ground is able to address any local issues when they do always come up in the remote parts of the country. So being able to manage scale, along with a technology platform, which is eye trading and learning and being invested into to learn by itself rather than having lots of thousands of eyeballs looking at each site, I think, has been an approach we have taken. It's not an approach which cannot be copied easily, but I think what we are trying to do is with our resources, keep investing in customizing and creating new use cases so that we are ahead of the competitors by just able to offer customers more bang for the money they spend on this. And finally, I think you can measure in terms of uptime and how many incidents you prevent. And I think that's the holy grail and the gold standard for this. So, I think really making sure that the estate of places we are managing with the remote AI solution, with a machine learning solution has almost 0 incidents per month remains the goal for our operating teams.

That's very useful to know. Just wanted to expand that second question a little bit and understand. You have addressed Vision AI as applied to bank ATMs and branches, et cetera. But I just wanted to get a flavor of what is our offering? For example, you won a recent big deal with a quick commerce player, right, which you had alluded to in the last quarter. I just wanted to understand what do we offer there in terms of what's the differentiation we offer because this -- and what kind of relationship are we building there?

So, I think Anush is going to tell you more on the quick commerce, but I just want to clarify, the Vision AI platform in the business for us is mostly in the ATM business today. In fact, the bank branches, the solution is far more complex, right? Securing an entire branch and branch operations has a lot more nitty-gritty than just a small ATM site could have. And therefore, that is still -- if you look at it in our slide, less than 20% of ATM bank branches today have an AIoT-like solution. So, that's the solution in progress. I think we've made tremendous progress in building a good platform there. I think there is significant opportunity as that business comes up for -- hopefully, for bids and coverage in the coming years. But let me now pass the mantle on to Anush to give you the quick commerce detail.

Sure. I think if you look at the curve of how -- what started as remote monitoring and why we're calling it Vision AI, it's really sort of about 8 years back when banks decided to eliminate manned guarding at ATMs and move in the direction of cameras, using the footage on the cloud. The idea was to sort of create a replica of manned surveillance to e-surveillance. But as the technology has progressed and as Rajiv said, we've been investing in creating further use cases and becoming a lot more tightly integrated with our customers using machine learning and AI. It's sort of taking the form of being able to craft more and more AI-based use cases to detect alerts and almost act as a way -- as sort of a business insights and partner the key business and operations team. And as we have moved from ATMs to bank branches and now last year, during several calls, we'd have shared with you a lot of the type of use cases and pilots that we are doing with different broader set of retail customers. In quick commerce, it really started off as saying, how does a brand, for example, have access to even knowing what is typically happening in a dark store? Other than having 2, 3 or 4 people working in the store, how do you really know what is truly happening with this? How do you create a single command and control monitoring platform, which gives them an insight into the SOPs being followed, the hygiene? And in order to do all that, the first thing is to just have them onboarded onto our monitoring network. The incremental pilots that we have been doing all sort of have indicated that once we achieve the rollout to the entire dark store network, at that point to start work -- at that point to roll out additional AI use cases. Now, these could be around achieving greater operational efficiency wherein we do an AIoT integration with several other operational processes of this and other sensors which are already there in dark store. It could be towards helping them with loss prevention, for instance, or for example, creating a tightly integrated solution between the fleet as well as the dark store network. I think the possibilities are quite tremendous. And it's only after creating some of these use cases, they decided to work with us.

[Operator Instructions] We'll take the next question from the line of Krushi Parekh from BugleRock PMS.

So, my first question is related to some of the new businesses that you have incubated. So, I recollect that in Q1 FY '23 call, you are looking to spend more time, more management bandwidth to incubate some of these businesses so that we can generate some new revenue streams between FY '25 and FY '30. So, I understand that the collection business is shelved as of now, but can you just touch upon where we are when it comes to these businesses that can help us expand our TAM or expand our revenue stream?

I think at some point, I think one of our earlier calls, we would have shared that one of our goals -- one of our constant goals is always to keep expanding our portfolio of solutions-based offerings. And last year, we -- or 2 years back, we shared with you that we are planning to incubate 2 new businesses, collections and bullion. I think Rajiv covered the detail on collections, which is we did extensive efforts to incubate the business and also did a fairly detailed diligence of one of the companies that we have shortlisted. Currently -- and post that, we decided to drop it. Several concerns with respect to the fact -- I mean, which basically indicate that relative to the effort that goes into running the business, the returns aren't really proportionate yet. It's still a relatively unorganized market. We will keep a wait-and-watch approach. There is a change in the broader economy's credit cycles. We'll sort of wait in the short-to-midterm to see how things change before we exercise a point of view on that. But the collections are something that we are dropping for now. On the bullion side, our in-house business is doing fairly well. We are scaling up quite rapidly. But relative to overall contribution to some of the other businesses, it's still very small at about 1% of our overall revenues. But we'll keep coming back and constantly updating you on how that is faring out. The other exercise that we had or the other initiative that we had was also to sort of broaden our retail efforts and retail outreach. So 2 years back, we had almost 100% of our retail cash business coming to us from banks. Today, we have onboarded more than 100 customers with whom we are working directly, with whom we have achieved a very high degree of tech integration, wherein it is our cash ERP solution and mobile app, which is fully integrated into their sales cycle and their settlement cycles. And today, that represents anywhere between 20% to 25% of our overall retail cash business. So, I think doing that was extremely important for us to be able to tap into the broader addressable market of retail in India.

Okay. And so my second question is that we have generally refrained from giving margin guidance in the history thus far. But given that the long term...

Mr. Parekh, I'm sorry to interrupt you. Your voice is breaking, sir.

Is it better now?

Yes, please continue.

Okay. So, my another question is that we have generally refrained from assigning any margin-related compositions. But given the annuity type businesses that we enjoy, the long-term nature of the contracts that we have, is there a kind of a range that the management is comfortable with having internally? Or is it something that -- how do we approach when it comes to margins across businesses? I understand there is a complexity involved in, but it's coming more from the annuity type business, the long-term nature of the contracts that we have where we are in a position to plan out our expenditure as well. So, can I have some thoughts on this?

So if we had a choice, we would not even give a revenue guidance. But given at IPO, nobody thought this sector and this company could grow, I think we are forced to come up with a revenue guidance to give people some belief in what we can do and what the opportunity is. I think margins, we will refrain from, simply because, one, I think we're operating at fairly good healthy margins. You have the results of our margins in the last 3 years post listing in both high growth and modest growth environments. Our aim will always be to focus on ROCE. I think we said that our goal will be to focus on ROCE. We are maintaining consistently a 25% plus ROCE profile. So going back to some of the earlier calls, our first priority as a team is to focus on market share, revenue growth and margin profile in that sort of order. We ideally like to get all of them right, but maybe not possible every quarter. I think we -- and that's the reason we don't give margin profile guidance, very difficult to estimate impact of anything from oil price to people cost and whatever may happen out there. But we keep constantly driving a lot of automation and efficiency to make sure that we can keep growing our productivity in line with our expansion and our market growth.

And yes, definitely, we can see the productivity gains over there.

[Operator Instructions] We'll take the next text question from Sonal Gandhi from Asian Markets Securities. And the questions are what led to margin decline in Managed Services business? And the second one is CapEx guidance for FY '26.

So, I think from a CapEx -- I think first, we'll talk about the margin guidance. We have been reporting segmental EBIT. But as our business is changing, I think it's important to share this nuance. Almost -- I think you should look at the overall EBIT for the company as a trend line. Almost 20% of our Managed Services' service revenue is captured as a revenue in a cash view. And that may be eliminated through a [ intra-view ] recognition out there. Very -- it's difficult to capture the cost of the contract by BU. It's actually a merged and fungible cost. So therefore, if you look at our EBIT margin overall at 19% to 20%, I think that's the range of business you should think about. Having said that, I think the last 1 to 2 years, there was a mix change with more sales of product automation, which comes in at a lower EBIT percentage, which may have an impact on the EBIT margin perspective. From a CapEx perspective, I'll have Pankaj answer your question.

CapEx for FY '25 was approximately INR 130 crores. It was significantly lower than the guidance we have given of INR 300 crores, considering the large order book we have got in FY '24 and '25. Our CapEx will remain as we have guided earlier that INR 200 crores per year, and we are expecting that FY '26, the CapEx will be INR 300 crores to INR 325 crores. That includes around INR 163 crores, which is lying in the [ savings ] in the FY '25.

We'll take the next question from the line of Amish Kanani from Knowise Investment Managers.

Am I audible?

Amish, your audio is not that clear. I would request you to use your handset.

Is it better?

Yes, much better.

Yes. Sir, if you can give us some sense on the ground about the disruption that has happened because of one of our peers going default. I understand you say that a few months after, the situation will be much better. But just to understand whether -- you mentioned banks are taking over those operations and maybe it will come up for bidding in future and something like that? Is there a possibility that the competitors' business will be up for sale and something like that? If you can give us some flavor, that will be helpful to understand whether there is an increase in market share at play or it is -- how are banks dealing with this problem? Because you also mentioned that we have had some costs related to managing banks to see through this transaction.

Sure. Let me give you some broader points in terms of what's happening and how we end up piecing it all together, I think, as Rajiv said, we'll wait for a quarter or so once the dust settles. But as we sort of alluded in the backdrop of our last call, we had sort of been seeing an increasing disruption to the ATM networks on the back of liquidity issues, but eventually resulting in employees not being paid. I think by the time we are working with the banks to help them out, the mandate is really for 2 things, right, which is how do you ensure that there's an evacuation of all the currency in ATM. Because the first and foremost thing for everyone is how do you handle the risks associated with all this. So, cash is lying in ATM and cash is lying in the vault. All of this needs to be evacuated. Extremely operationally complex simply because there are way too many stakeholders and too many moving pieces. Given that a large majority of this network was actually transaction-oriented and had assets, which did not belong to the bank were, in fact, mortgaged to various other leaseholders, it made the ownership and identification of the assets. Landlords haven't been paid for rental use for many months now. Electricity bills weren't paid. So, ATM wasn't even up and running. We had to sort of figure out a way to get them live to be able to access them and open them in the first place. So it was -- it has been a crazy task so far in just being able to help banks with reconciling what are their effective use. So, I think that we've sort of had the lion's share of the responsibility just by being the largest partner to them. The second and the more onerous task, which falls on to them is to figure out how do you ensure a resumption of activities on these networks and ensure that customer service gets back to -- limbs back to normal. That is where I think banks are taking a little bit of time. A significant chunk of ATMs in this network was, well, not just transaction oriented, but also were quite old. So for banks to think about transitioning this to someone else and for someone to pay the respective values, it doesn't really make sense. So, most of them are looking at options around what is the best way to refresh this estate. As we shared with you on the slide, at least the 2 of the largest private sector banks, we've been able to make a -- win the contract to do that. And yes, I think that's primarily that.

Sure, sir. And in that context, as the order book, we have mentioned that the rate of winning of order book is increasing in the second half as well as in the fourth quarter. Again, the execution of the old order book was not up to the desired extent is what was mentioned. The question is, one, between the 2 -- sorry for my ignorance of the business, but which business is this order book? How is it kind of getting executed? And whether this disruption, is there any way to kind of -- can correlate to the disruption that is happening at the competition? Is the market share win already reflected in the order book is the question then?

I think, just to sort of summarize for everyone's benefit, what exactly happened with order book in FY '25. If you go back and look at our earlier conversations, we had won about INR 1,900 crores to INR 1,950 crores of order wins in FY '24. The bulk of these wins were RFP-led around public sector banks. Given the longest election cycle and just the sort of execution delays in being able to get testing approvals and go ahead from the bank to implement order book, it led to a significant time delay in just being able to roll out these contracts and recognize the revenue for it. So, what was about 15% of execution in H1 has increased to 52% right now. Why do we feel FY '26 should be different? For 2 reasons. One, as Pankaj alluded, we have -- first of all, we've got 52% execution done. Second, there is a large increase in our CWIP in our end of FY '25 financials and the balance sheet, if you look at it, which basically reflects orders, which are in stage of being rolled out and delivered to the banks. Third, the order wins that we had in FY '25 have been more biased towards private sector banks, wherein we hope we should be able to work with them to get a faster execution done. And the other part of the question with respect to our order book, order book, historically, we always referred to the growth potential around our Managed Services and technology business. That's a business where we are building out longer-term recurring revenues. It's not in the context of the cash business. But given the fact that most of our wins are integrated contracts, it will have a bearing on the cash business as well as the -- as far as the ATM growth is concerned.

Sure, sir. One last question on this extended part. Is there an execution timeline of this order book, which we can understand?

No, I think for the order book, which we are talking about where we have done 52% end of March, we expect to finish it all by September this year.

[Operator Instructions] We'll take the next text question from Sheel Shah from Sameeksha Capital. And the questions are; the first one, EBITDA drag FY '25 because of our debt collection pilot. And the second one is balance sheet. What is the capital WIP of INR 152 crores? And within current liabilities, other financial liabilities increased from INR 60 crores in FY '24 to INR 193 crores in FY '25. What is driving that?

So, I will take the second question first. About the CWIP, CWIP is related to the projects that we are executing. We have executed around 52% of our new contracts we won, and we expect that everything will go live by end of September. So, CWIP is related to those execution of those contracts. The current liabilities, which has gone up from INR 60 crores to INR 193 crores is related to capital creditors, which are mostly related to this CWIP. So if it is netted off, the amount is not significant.

If you could repeat the first question, I think that was about the debt collection business?

Sir, EBITDA drag on FY '25 because of our debt collection pilot.

FY '24, '25.

Yes, I think this is more relevant in FY '24, wherein we were investing to incubate the business, not so much in FY '25.

FY '25 is really a function of just investing in -- for the recurring contracts, we have to ramp up for project execution. You don't necessarily control when the projects will go live because that's still dependent on the banks, but you have to ramp up your internal resources and also there's always a catch-up on revenue to cost given the nature of these large complex integrated contracts. But they make up in the -- after the first year of fully operational, they start making up and paying for itself.

We'll take the next text question from Sumangal Pugalia from SNAP Securities LLP. And the question is, what is the amount of provisioning done for competitors receivables in current quarter?

Single digits.

So, we have made the adequate provision in FY '25 and this quarter. However, we have made whatever the legal recourse available with us to recover that money. And we have fully provided for whatever is receivable from that competitor.

[Operator Instructions] The next text question is from Govindarajan Chellappa from CSIM. And the question is, do the challenges faced by your competitor change the nature of the ATM business transaction versus fixed price BLA, or the pricing is renegotiation possible? How are you changing your business model, own business model, if at all? And the third one is how much provision was made due to the problems with your competitor?

So, I want to be both respectful and careful in answering this question in terms of just making sure that we are sharing just the right amount of information as to our playbook here. But our overall approach in BLA irrespective of what happens to any competitor remains as of now to focus on fixed price contracts. We are bearish on transaction-based contracts historically. We had guided earlier -- much earlier that we will keep this as less than 15% of revenue. Now, we dropped that to less than 10% of revenue, saying, we will position size BLA based on transactions to a smaller percentage of our overall business. And therefore, our focus will remain on clients and banks, which are focused on uptime and are willing to work on a fixed price model. On the transaction side, we will generally stay away unless there is enough buffer to take care of any drop in transactions in the coming years. From the perspective of any orders or projects which may get [ re-RFP-ed ] or bid out, I think the same strategy will flow. We will prioritize working with clients that are willing to work on a fixed price model and be very competitive given we have the best cost structure in the industry. And any clients -- some clients, some banks will prefer to continue working on a per-transaction basis. We'll mostly give it a pass unless there is a very good margin of safety. And the third question, I think we've already answered about the impact in our financials.

We'll take the next question from the line of Pratham Kankariya from Quantum AMC Private Limited. [Operator Instructions] The next question is from the line of Savi Kumar Jain from 2Point2 Capital.

Can you hear me?

Yes, sir.

Any update on the bullion business? Where are we at? What is the scale? How is that growing?

So Savi, bullion, Anush has referred to it, right? We have -- currently, it's an internal incubation. We have built a team. We have it up and running. It's contributing to about 1% of overall revenue. Our strategy to scale this will finally be through M&A ideally, but we have to wait for the right opportunity and the right company to look at it. But meanwhile, we'll -- I mean, it's a small base. It's going to grow rapidly. But right now, contribution to overall total company revenues is less than 1%, almost 1%. I think 1%. Roughly yes, 1%.

[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I would now like to hand the conference over to Mr. Rajiv Kaul for closing comments. Thank you. And over to you, sir.

Thank you so much for your time today. Look forward to connecting in the next 3 months at the end of Q1 to update you on our progress on our FY '26, FY '27 goals. Good evening.

Thank you very much, sir. Thank you, members of the management. On behalf of Elara Capital, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.