SIS Limited (SIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the SIS Confluence 2023 Event Series. This session is being recorded and will be uploaded on our website as well. The presentation will also be available. I'm Shweta Jain, and I'm the AVP for Investor Relations and M&A. Today is the last session in our series, and we will be discussing our cash business. We will share with you the evolution of our cash business and future growth path of this segment. We aim to share our strategy across our business segments and provide you an opportunity to interact with our leadership team. The first session in the series was on our facility management business, followed by our session on the international -- India Security segment. Last session -- the third session last week was on the International Security business. I urge you to look up the presentation and the recording available on our website. I would like to add some elements of our presentation may be forward-looking in nature and therefore, must be viewed in relation to the risk pertaining to the business. The safe harbor disclaimer applies to this webcast as well. I would now like to introduce the speaker for today, Oscar Esteban, CEO SIS Prosegur JV. He has over 3 decades of experience across Europe, LatAm and Asia and has worked across multiple industries. Oscar has been with Prosegur since 2002 in multiple roles. He has key memberships across various industry associations such as ESTA, ACMA, CLAi and CCA. Oscar is a Spanish National and has 3 master's degrees. We also have with us on the call, Palak Jain, who's the Financial Controller of the cash business. Over to you, Oscar.

Hi. Hello. Good morning to everybody. Good afternoon, indeed. Okay. So it's a pleasure being here with you and presenting our cash business. So let's move on then. First, let's start by this, that is our positioning, and I think they are here 3 main elements. The first one is highly reputed company. I will say the most repeated indeed because of service and because of losses in a risky industry that has made us being a consistent player. Second, the fastest-growing. Nobody has been growing like us from 2013 till date. And third one, innovation. And I hope with examples that we are going to bring for consideration, okay, you could see that. In the end, to make cash payments more efficient for banks, for the economy and maintaining the competition, if there are competition with the rest of payment methods. You know because of the last presentation, SIS Group, SIS Prosegur is a joint venture between SIS Group and Prosegur. And so, let me focus more on this case in Prosegur because it's the part that has been not mentioned before. Prosegur is the second largest cash management company in the world with 11% market share. In Prosegur, work more than 160,000 employees, transport cash with more than 10,000 vehicles, and it has presence in 25 countries. In the case of India, our JV has started in 2012. Today, we are operating 10,000 ATMs. We are working in SIS Prosegur more than 10,000 employees. We operate through 3,000 vehicles and as another magnitude, we are visiting every day 22,000 retail bonds. We have a pan India reach by means of this next slide, 15 regions. We have a split of the country into 15 regions with more than 90 and 60 vaults. Here in the map, you can see our footprint in India. And today, SIS Prosegur is the second largest with this. We are the second largest cash logistics provider in India. Our role is basically the supply and collection of cash in a promptly and safe way to make economy moving as part of the GDP is in cash. So from the currency chests to the demand, that is are the citizens. Citizens implies pick up cash from bank branches, from ATMs, and they spend on retail malls, organized retails or not -- unorganized retails. In the end, our role is key for making -- for being the grease on the Indian economy wheels. So to make the movement of cash to the demand and from the demand, again, to the currency chests to maintain the recirculation of cash. Cash has 2 main components. One is GDP and second one is CPI. This is some -- these 2 components make what are the components for the cash growth. I would say that India is -- theoretically, the perfect market for cash as GDP is the highest between developed and developing economies. Here, we have some data. We have seen the average growth has been 5%, but indeed, this year, it's at 6.9% higher than other economies. And even more important is that, part of that GDP is making India grow in the middle-class, that can be estimated around 300 million to 400 million people. And this 300 million to 400 million people spend their money in discretionary goods. Not only that the GDP is high, okay, but it's going to be higher going forward, which would make the Indian economy being the 4 largest according to -- sorry, it's been today the second -- the fourth largest according to, in this case, Goldman Sachs, some report that is as far as December '22 will make India being the third largest by 2050 and the second largest by 2075. If we consider the CPI of India, that is moderate RBI plans to maintain between 4% to 6%, and we look to the 2 components, the GDP and the CPI, cash in circulation in India has been growing steadily around 11% per year, considering before the monetization deal October 22. So October 16 to October 22, is having one of the highest GDP -- sorry, cash-to-GDP ratio in the world, 13%. And that is the reason why cash, okay, according to the media is still keen in India. SIS Prosegur offers the comprehensive range of cash management solutions, intensive cash pickup and delivery for retail, ATM replenishment, CACP and vaulting, not only that, but as well innovative solutions. Bullion management, that is not offered by all the players in the market and in India, it is important as it is the first, second largest market in terms of gold consumption, value cargo, PEGE, that is an innovative solution and end-to-end solution for retail that we are offering to supermarkets, to liquor shops and to tolls, for instance, cash today that we are going to speak further. So we will be describing is a back-office solution for retail and cash processing outsourcing. Today, 42% of the currency chests have outsourced to us, to SIS Prosegur, the cash processing activity, that we will be speaking further the importance of it. With that, here, we are a trusted partner for our clients, banks, 76% of our turnover revenue goes to them. MSPs, that are the customers for ATMs, 21%; and retail and government organization, that is 3%, because most of the retail is within the umbrella of banks are not independent players yet. We will speak about this further going forward. So coming to the positioning that we were telling earlier, the company has been growing 26x since the JV started considering FY '12 of detailed numbers to FY '22 of detailed numbers have been growing 26x. Our journey has been not, I would say, straightforward, like appears in the slide. From FY '13 to FY '15, we have a strong organic and inorganic growth, focused mostly on ATM services or 100 ATMs in FY '12, we arrived to 15,000 ATM service in FY '15. From FY '16 to FY '18, we were doing a complete restructuring because results were not as such as considered. So customers, branches on the organization, on business lines that allow us to arrive to the platform where we are today in -- from FY '29 -- sorry, FY 2019 to FY 2020 -- sorry, 2021, we were the first mover on compliance and the compliance front. We introduced 4 new business lines in that period, even in pandemic. We had a strong growth even through that pandemic. In FY '22, we have been rated A stable long-term and A1 short-term by CRISIL. We increased 15% in revenue with 22% growth in run rate when we compare '22 with 21%. 65% of growth in what we call those new services, new solutions and 57% growth in EBITDA. That -- as a result of that complete restructuring that we were mentioning earlier, has been driven by tariff increase, by improvement on routes productivity, on new contracts at higher margins, decrease on the insurance premium costs, the rationalization of indirect staff and the improvement of repair and maintenance and something that doesn't appear here, that is another variable because of the better service, we have been capable to reduce what in India call deductions from clients, penalties for not fulfilling SLAs and that has been another variable that has influenced the improvement on the margin terms. Some metrics to tackle the -- or to comment what we have mentioned. For instance, the productivity revenue, total revenue divided by the total employee cost has been steadily growing, as you can see in the graph, indirect manpower, [ trained ] manpower. So we have improved from 8.5% to 7% according to the Q3 FY '23. SG&A cost as a percentage of revenue has been decreasing steadily. And if we consider the efficiency of routes, for instance, something that has been growing in our company from March 2018 into March '22, that has been DSB. So has been growing with a healthy growth because we have improved the density, the efficiency of the routes, 84%. And in the case of ATMs that we are operating, less number of ATMs today that we had in 2018 because of rationalization that we commented even having a fewer number of ATMs that we service, we have improved the efficiency of the routes by 3%. Considering the financial -- sorry, the numbers that has to reflect the reality of the company, we see the revenue growth. I mean, we consider the revenue growth in the FY '23 for the last 3 quarters. We have grown in these 3 quarters, 23% -- more than 23%. That means more than the FY '22 full year. In terms of EBITDA, the company placed above 15% EBITDA margin, if you see the last 3 quarters, with a growth from FY '22 to FY '22 that has been more than the revenue growth. And in terms of PAT, the bottom line, you see that the improvement as well in these years from FY '20 to the last quarter of FY '23. In terms of CapEx, you see that the increase on CapEx driven because of the growth of the company and because of the implementation of RBI MOH regulation, we told that we were the first mover. That means that part of those investments have been earlier and other competitors will be doing later or have been doing later. And in terms of net operating cash flow, that is what matters more in this business, in the cash business, we see a steady growth that has been maintained. And as an average net cash flow in the last 3 years, the company has been capable to generate almost INR 92 crores. We have not addressed what is our model or what are our key differentiators. So let me try to present those and spend some time on this slide because it's what differentiate us compared to other components in this segment. First, innovation and technology. For productivity and security enhancement, today, we have more than 15 software packages, systems that work in sync and most of them are proprietary. We have [ 5 apps ] to capture data from the point of service. We are the only company with a full software solution for cassette swap, focused on traceability and productivity. We have -- we are the only company is having a real online solution for cash deposit machines in the market. And we have deployed, we will explain in the next slide, an office on wheel solution for the market. Regarding risk, the risk, please can you come back. Regarding the risk, we have the lowest losses in this market at 0.1% of the revenue, while average industry is around 1% to 3%, which means 10 to 13x higher. We have a system-driven in terms of risk or decision-making. They don't need to take any decision. They are not allowed to take any decision. System is taken according to the -- what has happened in terms of risk. We are the only company in India with a high-risk cash van technology, which means that we can interact with the vehicles from the national operating center. That is the next point, and we can stop the vehicle. We can see what is happening in the vehicle on real-time. Concept, we will -- we are going to see a picture later. And we have an independent audit team of 42 employees for cash and process audit that report directly to the CEO. In terms of regulation and compliance, we have promoted since the JV started a more professional and level-playing field according to international standards, has concluded in the regulation by RBI and MOH in 2018. We have steadily progresses on compliance in the last 3 years. Today, 65% of the points of service are fully compliant. And we are the first player in the Indian market prepared for the Phase 1 cassette swap, that is going to happen in 2023, pretty much ahead of the rest of the industry. Regarding divisional leadership, we set up cash flow [indiscernible] association, and we have been maintaining the presidency or secretary position since 2012, since the inception. We set up Currency Cycle Association. That is the SRO that according to RBI regulation in 2018 was -- companies had to set up. As I mentioned earlier, 42% of the currency chests in the country have been outsourced to us. We have started 4 new business lines in the last few years, even in pandemic times. And we are the first cash management company that have got the ISO 14000 certification of environment. Regarding people, we are a service company. We cannot forget staff, people. We give 24-hour -- 25 hours training, annual training per employee, direct and indirect. 90% of the staff is accredited by Currency Cycle Association. SIS Prosegur because it's part of SIS Group has been among the best employers in India, but great place to work. We have an online to university, that indirect staff can access to do a number of different courses. And as part of social benefits, we have a health and death insurance for all employees. Trying to present some of these innovative ideas. For instance, here in the first part, okay, we have some screens of the apps that we have, our custodian have from where we capture data from the point of service is seamlessly [ still filling ]. The one that is at the bottom, the bank on wheels is a new concept that we have developed for banks. It's a fully equipped mobile bank branch that is moving mostly in rural parts of the country. And everything that is inside is from SIS Prosegur. NOC, National Operation Center, is an international concept for risk mitigation from where we can manage high-risk cash bank vehicles. And we have direct access to all premises, all branches where we can -- we operate basically 2 things. One are the ball doors. Ball doors have to be opened by the password that is given from this National Operation Center, all ball doors are equipped with Randal locks. And second, the security cameras of every branch are managed from here. The last one is cash today is a concept for -- it's a new business online and a concept for back -- it's a back-office solution for retail. It's a bundled service where we have a machine where the retail can deposit the sale since the moment that the sale is inside it's insured by SIS Prosegur. The client and SIS Prosegur have direct access to the amounts that have been deposited, and we do the collection according to the cash that is in the machine. Cash has always the threat of what is going to happen. And we have, in some other parts of the world, more than in India is, I would say, sort of war on cash. But if we consider the Indian reality, we have big potential in front of us. First, we have to consider that basically the cash industry in India is, cash logistics, 90% of our all revenues come from the logistics part, where in other parts of the world, the split between cash logistics and cash processing is 60-40. That would mean something around INR 1,300 crores per year opportunity for the cash management companies. Indeed, 25% of the operations are still enhanced by banks when in mature markets, 100% of the operations are outsourced to the cash management. Second, the reality in India, organized retail is coming slowly, but organized retail in mature markets is separated of banks with different needs, being a natural customer for cash management companies. About regulation, the third part regulation has come to India, has made -- it has some industry access conditions, creation sort of entry barriers in this market. And apart from that, there is the need of high CapEx requirements to be capable as we have seen before with the CapEx that SIS Prosegur has been doing with an increasing regulation. And finally, 7% of the cash management industry today in India is with noncompliant players, noncompliant players with the regulation and with the conditions. And this has been steadily going on since 2018. That would mean a further opportunity of INR 224 crores per year. So as a summary, we are the second largest player in the industry. We have a pan India presence. We are a leader in global practices and new solutions and innovation. We have reputation in the market, the best-in-class in terms of service and the lowest losses. We have a balanced service portfolio between the classic services and new innovative solutions that we have started in the market, and we have been the first mover on compliance. So thank you very much for your time. And now prepare for your questions if you have then, please.

Thank you, Oscar. That was a great presentation. I'm sure the participants also founded equally engaging. We will now open the floor for a Q&A session. Participants can either message on chat or raise their hand, and we'll unmute line, and you can go ahead and ask a question. We'll take the first question from with Vidit Shah.

My first question was on these initiatives that you've taken over the last couple of years to sort of improve the company performance and margins. Can you dwell a little bit on these? How has been the tariff increase taken? And can we expect any more tariff increases going forward across various routes? Or is this the max we can take?

Yes, I was presenting, to be honest, we made a holistic exercise. It's not a simple variable or a single variable on it. Rate increase has been something that has happened and is happening in India and will happen going forward. Indeed, in mature markets happens. There is a correlation, between the wages increase that normally not in India are associated with CPI and the rate increase. So it's a natural and normal factor. So this -- that has happened in the last years and was a push is expected to continue going forward, yes, of course.

So the contracts that we have with banks who I presume are our primary customers. These are for how long? And is it easy to pass on the wage increase in negotiations? Or do we get a lot of pushback?

To be honest, it's not easy. First is, more sitting down with customer per customer, presenting the numbers of basically 2 things: wage increase and fuel increase. And then starting the negotiation. But to be honest, we have been capable to do so. And we have always have in the last 4 years, a positive gap between rate increase and wages increase, but it's not an easy task at all. Like it's not in any marketplace. I don't want to present an [indiscernible] only presenting the reality.

Okay. Got it. And then how long are these customer contracts?

Good. In terms of -- okay, you have seen that 79% of our contracts are our clients are banks. So let me focus on that maybe, please? There are 2 sort of contracts, with private banks, normally, these contracts are for the 15 last years, okay? So they are -- they automatically renew. And with public banks that they are between 3 to 5 years.

Okay. Got it. And my second question was just along -- just on the lines of industry and industry potential. With the impetus that the government is putting on digital payments, do we see this cash in circulation growth to continue going forward? And what's the end game in the sense at some point, digital payments will catch up, right?

It's undeniable that digital payments, not only in India, everywhere -- sorry, has appeared. First thing that I will say is that, digital -- sorry, this is the same, if I may, please, when debit and credit cards appeared many years ago. There are where many people telling cash is going to disappear. To be honest, every new premium method affects to the whole ecosystem. That is clear. And indeed, some of these new payment solutions are more competing with existing payment solutions that are not cash, more than with cash. If you ask me, I see more UPI competing with other sort of transactions done with cash, though, for sure, a part of that competition is with cash. According to, I would say, a global vision, a global experience that is what I can bring as well, okay, because of what Shweta was telling initially, the participation in other forums and working in some other parts of the world, cash even is still growing in mature markets. In India, it is expected to continue growing cash in circulation around 10% year-on-year because what I mentioned is a derivative of 2 parts, GDP and CPI. And this is a basic simple rule that happens everywhere. So according to that, if we consider the GDP expectations and the CPI between 4% to 6%, we'll be continue growing around 10% to 12% per year. And we have seen even with the monetization of what has happened as we're growing steadily CAGR 11% as I was presenting earlier. So what we defend on cash -- the cash industry globally are 2 things. First, having a level playground for all payment methods, so including virtual ones. In India, we know that UPI is subsidized. So it's not presenting the real cost that it has, for instance, is an example. And second, we have to promote cash efficiency in order to compete in equal terms with the rest of payment methods.

Okay. Understood. Just one last question, if I may squeeze in one was, just some guidance on these margins that we've seen improve in FY '22. Are these now sustainable? Or can we see further improvement going forward?

We see our company maintaining or being above this 15% EBITDA that we have presented, okay, and has been maintained if we see in FY '23. So looking forward, we expect that, given a figure, of course, is something that we cannot give at this point of time, but we see those margins being there and being maintained.

Thanks, Vidit, for your question. I think Divyesh Mehta, he had a question. He posted on the Q&A section.

Hello, am I audible?

Yes, please go ahead.

Just one thing, in one of the previous slides you had highlighted the EBITDA part and also the PAT, the numbers. Can you share like what is the below items like after what is the D&A and because there was a sharp drop off from the EBITDA to the PAT? So where is this going?

Palak, would you want to address this?

Yes. So we -- like what Oscar had mentioned, that we are having a fleet size of 3,000 cash vans, plus we also have for the cash processing outsourcing, we also have the machines on what we need to procure. So around 10% of the margin, it goes into depreciation also. And then we also have the financing cost for procurement of this CapEx. So the difference between that margin from EBITDA to PBT is basically depreciation and finance cost.

As we have seeing -- and sorry for -- okay, but to complement that, Palak that we have seen that CapEx in the last 1 year, FY '22 was quite high.

Precisely, yes. And that is -- that comes with the revenue growth with the new orders and everything what we are getting in the last couple of years.

Thanks, Divyesh, for your question. I hope we've addressed truly. If there are any more questions, please raise your hand or you can type in the chat on the Q&A session as well? [ Siraj ], please go ahead with your question.

Yes. Sir, 2 questions. One, who would be your key competitors who you consider your competition today?

Okay. So the main competitors, of course, are -- sorry, if I may the organized cash management companies in the market. So if I may, CMS, Securevalue, Radiant, Writer, that these are the main players into this organized market.

And so, the differential between you and them -- what I'm asking is because given our specialized industry, profitability pressures are there in general. So how do you address that? Ultimately, a banker, if we can easily switch between 4, 5 of you, there's always going to be pressure on profitability beyond a point. So how would you address that? I was coming my question is from that perspective.

Yes. That is the reason may be why I started telling we are the mostly reputed player in the industry. And in terms of -- sorry, something that you have seen banks. But for banks, of course, cost is very important, don't want to deny, and we are a relevant cost to banks, okay? So that is clearly, I think, in the same line that you were presenting. But there are some other things, service. Service is very important for banks and losses because losses have 2 effects apart from the financial loss that in the end, it is paid after some time by the cash management companies, but as a point of reputation to the bank because the bank appears on the media. So having told that in terms of losses, I was presenting the numbers, and I'm sure you have listened to that as part of the conversation, where we have the lowest. And in terms of service, we are appreciated by banks by the sort of service in terms of, I would say, time to market, being capable to deploy and satisfy their needs earlier than others. And second, in terms of service in terms of SLA fulfillment.

Okay. Sir, and if I can ask -- squeeze in. So between you and your peer set, what would be your market share difference? Because I presume if you are able to offer better service and your market share over a period should be going up, right? You mentioned that you were at around 11%, right?

No, no. I mentioned that the cash in circulation has been growing at 11%, please, was mentioned in that, okay? No, no. So we are the second largest company in the market. Indeed, in 2012, when the JV has started, we were the 6th player, the 6th. Today, we are the second largest. Our market share today is around 17% in the market because, as I mentioned, there is a number of players, not only the organized, but the unorganized that represent that 7% that I was commenting earlier.

And where would be a leader like he would be in the -- like very close to you in that sense, in touching distance?

The main -- the leader only talking about the cash management, only talking about cash management to compare apple-to-apple will be something around 37%, that is CMS.

Okay. So this is why I was trying to come that, how do you bridge -- you have been bridging the gap over there and which is done. It appears for you, the focus is more on market share until you achieve a reasonable number. Is that the right way of understanding your approach to your business? And if yes, what would be a reasonable number, if not absolute the differential between you and leader, that is what you would first aspire to achieve?

Of course, every company wants to grow, but there are different way of growth. And I think, okay, one is trying to capture market share. That is not our goal, to be honest. Of course, growth is there, but you can grow in many ways. You can grow with new opportunities, new solutions, new niches where there is no -- so that sort of competition and you bring more efficiency and value addition to the customers. That is a way of growth. Second can be growing into -- I was mentioning something that maybe -- and maybe I would like to address. SIS Prosegur has a dual reality by means of SIS Indian presence, the Indian experience, we don't need to introduce SIS Group in this conversation. But in terms of Prosegur, Prosegur is the second largest cash management company in the world that is operating in developed and developing markets. So some of those experiences that we are bringing up from Prosegur from markets where cash is having some slowdown or is not growing so much. And in some developing markets like Brazil, for instance, where cash continue growing. So what we pretend, of course, is to grow, but growing maybe not operating in the same way that others do, but trying to do things differently, trying to increase the bar of competition and trying to increase the bar of professionality and trying to make up cash more efficient. So it's not a war of market share. It's more of healthy growth considering profitability. That is something that we have addressed. We don't want to grow at the spend of profitability. We want to grow and if possible, increasing more profitability than the revenue going forward and entering into new solutions that offer higher margins.

Thanks, Siraj, for your question. I hope you've addressed them well. We also have another question on chat from [ Satish ].

I could not see, Shweta, so maybe you can present.

Sure. So the question that Satish just asked is, where do you expect future growth to come from? Is it ATMs or retail?

No, no. I think, if I may, I'm considering the global experience and considering the evolution of the Indian market, growth is going to be more driven by -- if I may, 4 parts. One is compliance is a natural trend. It's a global trend and it's an Indian trend, further outsourcing from banks, formal retail growth, that is answering the question and new solutions, new offering that instead of working in silos, offer a blended product, okay, with -- that is having some cost of -- some saving of cost for customers, while allowing the cash management companies to have higher participation on the cash management of our clients. ATMs is more at this point of time, a market of replacement of machines more than a market of growth, okay? So I hope that I have answered that.

Thanks, Oscar. We have another question from Nitin. His question is on -- while UPI and cards compete with each other, they are both trackable and cash may not be as easily trackable. So what are your comments on the introduction of the digital rupee, which can, in some ways, be a competition to cash?

I think, again, it's very interesting. And even we have been analyzing this and it's very interesting the movement of India to digital rupee because it has been one of the -- that has been the largest economy of introducing the e-currency. It's not the first one. I think today, there are 13 markets, 13 countries in the world that have introduced some sort of e-currency. So -- and I think the same that I was telling, e-rupee, I think it's more competing with -- and it's not clear. Indeed, we have been speaking with some prominent banks about this, and there is no clarity how rupee is going to be used yet. It has been launched, but it's not clear how -- what is the usability or usability is going to be. But having told that, I think it's competing more with other payment methods because the main attribute that cash has is anonymity. And e-rupee or the e-rupee or many other -- or most of the other payment methods or all the rest of payment methods don't have that capability or that capacity or that attribute. Indeed, e-rupee is based on blockchain that is a tool -- it's a tool for [ flexibility ]. Indeed, to know what is -- what are you doing and to know from every point in the chain what is happening with a given transaction. So we have listened to some of the possible uses of e-rupee interesting, to be honest, it's more at this point of time a pilot and experiment. And to be honest, the main problem is going to be that part of anonymity. Okay. It's part of the, I would say, it's a counter definition of what e-currency is.

Sure. I think Nitin has another question. Nitin, please we'll unmute line. You can introduce yourself and ask your question.

I have a little understanding about this still this is right. Whenever you do a transaction through UPI, it goes via bank. So it's completely trackable. But the digital rupee doesn't go through a bank, it goes through your wallet to another wallet. Similarly, like cash, where you remove money from your wallet and give it to somebody else's wallet. So it's not as anonymous as cash, but the trackability is much lesser than UPI. So I was wondering whether -- if suppose the government says, we will not track a wallet, say, under INR 5 lakhs a year. Then it's -- in a way, it's like turning a blind eye to a certain amount. So you think this will have an effect on the total cash moved?

I think the first thing, to be honest, we are entering into the hypothetical world. UPI is, I would say, is convenient as is cash. If that would happen, we don't know. And we don't know -- okay, because the main point that you have seen, okay, what happens globally with cash is that, it's correlated with somehow with black money and because of that black money is correlated with that anonymity. So making the digital payments being anonymous or entering into that will be feeding precisely what the governments, okay, think is like a part of cash that is that anonymity. So I think it's unlikely to happen because of that, okay? So I don't see that, to be honest.

So if we are a derivative of black money, then this is going to be strong forever.

Yes, but that is true, okay. Is -- I don't see that part, okay? And even -- and another thing, please, it's not -- there is another thing that has happened and is maybe -- I'm sorry, if I extend a bit more, it may be a change of mindset. Cash has been always like linked to black money. Indeed, please, let's consider the demonetization, okay, as recent as that in India. But sorry, today, the scams that are happening, the frauds that are happening because digital methods of payment, the currencies people pay ransoms in cryptocurrencies, the problems of QR codes that instead of being -- sorry, instead of being -- sorry, read for making a transaction -- sorry, for -- they are telling you to read for getting some money when the [indiscernible] come is a fraud. So to be honest, today, all these payment methods that apparently have been so well promoted by having billions of losses, much more than the losses of cash. Today, that is another reality, globally speaking.

Thanks, Nitin, for your question. We'll now take the question from Aasim. Please go ahead. Introduce yourself and ask your question.

Yes. Sorry, I have not noticed that. So yes, just to introduce myself, I'm asking Aasim from DAM Capital Advisors. So I was just asking about the -- just wanted to understand the processing bit of the overall cash market. You said that in India, only 10% is processing, 90% is cash logistics, while globally, this ratio is 40-60. So just wanted to understand what kind of a market potential can come out of from processing, what all segments are there? And how much does that expand our addressable market from current levels? Any [ numbers ]?

Yes. So -- okay, thank you for that. And it's one of the big opportunities in India when we look at India. And when we consider the normal evolution in some other markets, please, because cash, maybe the good thing of being in India is that sometimes you feel like back to the future, when you operate from here. Though, India has their own way to do things and their own reality. But yes, as I commented, okay, in -- when I was presenting that slide, today 90% is cash logistics, 10% cash processing. That is the reason or one of the reasons that maybe you will understand better why we are the largest player, the largest competitor in the industry, much more than the rest and entering into currency chests in India. That is where banks have in-house their cash processing activity. Today, 42% of the currency chests that has been outsourced in the market have been outsourced to SIS Prosegur. That doesn't cope with our market share, but we see the future. So we have been strongly focused on that. So I was presenting one number, considering the size of the market, and this will be an opportunity of around INR 1,300 crores per annum for the whole industry going forward. If that part is outsourced to cash management companies, but as it happens in mature markets in any other part of the world.

Okay. So INR 1,300 crores is the overall market for currency chests that you mentioned?

Yes. And for some banks that continue doing cash logistics operation in-house.

In-house, yes. So just wanted to understand how much of this percentage is being done in-house today by banks, which is not outsourced?

In terms of cash processing, almost everything because the banks have these currency chests. That is a model in India. And even it's something that RBI has been looking at to try to create private currency chests. And it's a discussion that we had before the pandemic with RBI through CLA, Cash Logistics Association of India, I was part of that meeting, and it's something that has been -- or is -- has been considered, okay? So this is something that, as I mentioned, happens in other parts of the -- in the rest of the world, please, okay, will be -- it's something that will be coming to India, yes. So today, it's mostly in-house, mostly in-house.

Okay. So just to like guess a number when you say mostly in-house, would that be like 90% of the...

Yes, yes. 90%, yes, because I was telling, please to be [ current ], what I was presenting, sorry, yes, 90% is cash logistics, 10% is the revenue that is coming from cash processing. So please consider just the other way around, yes.

Okay. So -- and within the 10% that is outsourced, 42% is where you are already present. Is it?

Yes.

Okay. And just -- I mean you, gave a number, INR 1,300 crores. How many currency chests are there in India right now? Would you have a number for that?

Around 3,000 currency chests.

3,000, okay.

But something that I want to -- please because if you are going to make some numbers, okay, to be [ current ], in those currencies where we have entered, we are not doing total outsourcing. We are doing only partial outsourcing and I explained, even it's another idea. We have introduced our staff and cash processing machinery. That is not total outsourcing. Total outsourcing means being responsible of the premise, being responsible of the systems that are inside, being responsible of the indirect staff, okay? So we manage the whole flow being responsible of everything that is inside the furniture, the layout. So there is a partial outsourcing ops, but it's an initial outsourcing. So most welcome.

Sure. And just to understand this a bit further, when you said you manage a lot -- it's possible that you can manage the entire currency chest. Would the currency chest as a facility also be outsourced it is on your books per se and the banks pay a rent or something for that?

To be honest, today, it's a regulation by means of which the license of a currency chest is given to a bank, but that doesn't impede that everything that is inside is outsourced. So we could have -- okay, and we have proposed to banks -- to some banks, and we are working on that now to do the complete outsourcing. So they get the license, and we do everything that is inside, including the premise for a long-term contract.

That would also be part of the INR 1,300 crore market you said, right? Or is that not being counted today because it's...

Yes, yes, yes, yes. And it's an estimate, please, okay, because -- and it depends, in this case, it's not getting the ownership of the premise more the rental on a rental basis.

Sure. Got it. And just secondly, on the doorstep banking service that you guys are doing. So besides retail, other -- I mean, what other touch points do you touch? Or is it still more organized retail?

No, no, no. Today, regrettably, in India, organized retail for our industry, please, is progressing slowly, though, it's progressing clearly. So we are servicing every point that has cash, own cash, can be an oil station, can be a retail, not organized, can be organized or less organized, a hospital, can be a liquor shop, can be everything because when there is cash is the need to move the cash.

So some form of retail is where we are focused, not like loan collections or some other...

No, no, no. In our case, is -- okay, if there is the need -- sorry, we are not entering into that space that is today is occupied by BCs, business correspondents. In our case, if somebody has the need to collect cash, B2B because for money laundering, we only get cash from businesses, formal businesses that have a KYC with the bank. So we get the money from that commerce whatever it is, can be retail, can be some other sort of any point of cash collection talking generally, in general terms, and we get that to a bank account of a customer -- of that customer.

Got it. And just last question. I think one more point in your slide was that SIS Prosegur' losses as a percentage of revenue is only 0.1% versus the 1% to 3% for the industry. So just wanted to understand why -- what are we doing differently for -- to have such a low loss? Or is it the revenue mix that also helps us?

We are doing things differently. And maybe the best one to tell us would be Lloyds of London, where we have our insurance and all the main cash management companies have their insurance there. By Lloyds of London, we are recognized as the best company of managing risk. And this is part of where we use the technology. We do things differently. And maybe because of that part of Prosegur that is working in Latin America dangerous countries, we have taken some steps [indiscernible] what is the Indian reality that are giving results. We are using the technology. We have commented about NOC. We -- is higher risk cash vans is an audit up where all our [ details ] have and have a check lease by means an app where they include all the data. We have a very strong recruitment process that is through system where all data has to be put in. There is a validation at corporate until that validation is not done, the person cannot get the registration number. We send that data automatically from the system to an external agency to verify that data and have a very tight SLA to answer. We have, for instance, in ATMs, we have to -- for submitting the password for opening an ATM an OTC. We need to have the need of a service. So we have connected all systems to get a window to the person that is supplying the random password for the first to have a service. Second, we make some random questions to the custodians to verify that the custodians that are asking for the password are those custodians that are supposed to be. We have a tool that is called Cyclo from where all queries from customers are recorded and we have a very strict timeline to answer where the custodians are aware at a given day in the route are coming. So we know immediately automatically where the custodians and where are they and automatically in the system, we do a recovery or the person is fired considering certain thresholds that we have internally. We've got a cloud system where we deposit all -- we take 5 photos of every ATM service and 4 photos of every DSB service. All those photos are in a cloud to we collected for recon automatically, if there is an query, [ ETC, ETC, ETC ]. So it's not a question of business mix. It's a question of what we are doing things differently.

Understood. Great. Thanks for the comprehensive answers.

Thank you. Thanks, Aasim, for your question. I hope you've address them appropriately. We'll take that as a last question. Thank you, everybody, for joining in today's call and over the past few sessions. I hope you've thoroughly enjoyed some of these conversations. We look forward to interacting with you in person as well. Thank you, Oscar, for your time. We can now close the session.

Thank you to everybody.