Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CMS Info Systems Ltd (BOM:543441, Financial) reported a strong quarter with 17% revenue growth and 13% adjusted PAT growth.
- The company added 3,000 touch points in Q1, bringing the total to 140,000 points in its managed services business.
- Order book wins for the quarter were robust at INR200 crores.
- The company is investing aggressively in developing its IoT RMS tech stack and secured a significant win with the Artemis project at a leading bank.
- The company is confident of achieving its FY25 revenue guidance of INR2,600 crores to INR2,700 crores, translating to a growth of 15% to 19% for the year.
Negative Points
- Q1 usually has a seasonality impact, further affected by a long collection cycle impacting cash velocity in several large states.
- Adjusted PAT margin stood at 16.4%, which may not meet some investors' expectations.
- The cash logistics business grew by only 10% year-on-year, which is relatively modest compared to other segments.
- There are ongoing concerns about bad debts and provisions, with amounts around INR80 crores to INR90 crores being written off annually.
- Margins in the managed services segment decreased from 18.6% to 17.1%, attributed to lower activities due to elections and lack of economies of scale.
Q & A Highlights
Highlights of CMS Info Systems Ltd (BOM:543441) Q1 FY25 Earnings Call
Q: Can you explain the provisions for bad debts and how they are expected to trend in the future?
A: Rajiv Kaul (CEO) - The provisions for bad debts were around INR90 crores last year. We aim to keep this number around 4.5% in FY24, down from 5.1% in FY23. The implementation of cassettes should help reduce this provisioning over time.
Q: What caused the lower margins in Managed Services this quarter?
A: Pankaj Khandelwal (CFO) - The EBITDA growth of the Managed Services business is around 20%. The change in business mix can impact quarterly margins, but we continue to deliver higher margins overall, with a PAT margin of around 15.4%.
Q: What is the revenue mix target for Managed Services and Technology Solutions by FY27?
A: Rajiv Kaul (CEO) - We have not provided guidance for FY27. For FY25, we expect a 40% revenue contribution from Managed Services and Technology Solutions, with the current mix at 39%.
Q: Can you provide an update on the retail cash management business and its competitive landscape?
A: Rajiv Kaul (CEO) - Our retail cash management business continues to show strong growth, driven by investments in technology and a strong sales team. We are focusing on expanding the market and creating partnerships with fintech and payment banks.
Q: How do you measure profitability for retail and bank touchpoints?
A: Rajiv Kaul (CEO) - Profitability is difficult to measure by individual line items as resources are fungible. Established businesses have higher profitability, while new high-growth areas may be less profitable initially.
Q: Are there any new partnerships with banks for expanding touchpoints?
A: Pankaj Khandelwal (CFO) - We work with almost every bank in the country. The focus is on expanding the solution set and integrating technology to bring greater efficiency and better risk management.
Q: What is the expected CapEx for FY25 and its allocation?
A: Rajiv Kaul (CEO) - We have guided to a CapEx of INR300 crores for this year, with a significant portion allocated to executing new wins and technology investments.
Q: What is the outlook for the BLA (Brown Label ATM) business?
A: Rajiv Kaul (CEO) - The BLA business is expected to remain around 15% of our overall revenue. We will bid for contracts that offer a good return profile and focus on maintaining a balance between growth and profitability.
Q: Are there any plans to change the company name to reflect the evolving business?
A: Rajiv Kaul (CEO) - We are evaluating how to better communicate our evolving business, which may include a name or positioning change in the future.
Q: What is the expected growth rate for the company's revenue in the coming years?
A: Rajiv Kaul (CEO) - We aim to achieve a revenue growth of 15% to 19% for FY25, with a target revenue range of INR2,600 crores to INR2,700 crores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
