Ladies and gentlemen, good day, and welcome to CMS Info Systems Limited's conference call, hosted by Emkay Global Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Avinash Singh from Emkay Global Financial Services Limited. Thank you, and over to you, sir.
Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Rajiv Kaul, Executive Vice Chairman and CEO, Mr. Pankaj Khandelwal, CFO, and Mr. Anush Raghavan, CBO. I shall now hand over the call to the management for their opening remarks. Over to you, gentlemen.
Good afternoon, and welcome. This is Rajiv. Let me start by with an opening. This has been a very hectic quarter. Before we dive in, I want to remind, rewind back and to set some quick context for those of you who may be recent participants on our calls. In FY 2022 to 2024, we have successfully achieved our three key operating goals and metrics on revenue growth, margin expansion, and market share gains. FY 2024 and 2025 saw an increase in competitive intensity, and we sat out on most transaction BLA RFPs, where the pricing was pretty low. We in line reduced our CapEx spends from average of INR 200 crore a year to INR 100 crore levels, to preserve capital and to avoid low-quality growth. At the beginning of this year in FY 2026, we were quite optimistic and positive.
ATM interchange increase had been approved and announced. Our key competitor was winding down operations, and we were almost certain to be awarded a large cash RFP, which was fairly unique from the country's largest bank for almost 10,000 ATMs as the sole eligible bidder. This itself would have been INR 100 crore-INR 125 crore of incremental revenue for FY 2026, of which would have been a 4% growth from one contract. For this, we invested in network expansion ahead, ahead of the contract. The tide certainly turned in May, with severe impact from both external and internal factors. We updated you on these in detail in our September thirtieth analyst meeting. In hindsight, we invested ahead of this contract, and our anticipation on things becoming normal was very aggressive, given the subsequent delays to that RFP.
This has been a big learning for us, and since then, we have tightened our deployment norms to align strictly with contracted milestone with key customers. But in this volatility, we have retained our long-term focus and doing the things which we think are right and investing in them. We restructured the company into three platforms: ATM management solutions, retail and currency logistics, and tech and payment solutions. All of these are now at good scale, have market leadership and a strong margin profile, with ability to generate free cash flows to drive their growth. We also invested in broadening and diversifying our customer base. We invested for growth in retail and tech segments. In the ATM business, our focus has been on higher value and yield and more fixed-price contracts. FY26 year to date, we have very strong INR 1,600 crore plus of high-quality order wins.
As we enter calendar year 2026, things are beginning to turn. GST 2.0 has had a strong positive impact on consumption in the retail segment, and we see that segment starting to grow again. Order wins and execution of the order book is strong, and cost optimization efforts are also bearing results. I would now like Anush, our CBO, to share more details on the business and these initiatives.
Thank you, Rajiv. Good afternoon, everyone. I'll spend a few minutes on the business and operational performance for the quarter. The macro environment has been mixed, but we are seeing signs of stabilization. On the retail side, cash usage is holding steady, which is a strong positive. In fact, if you look at our investor deck, we have shared some information on how, on the same store basis, post GST 2.0, we have seen volumes, you know, rebound meaningfully. In our ATM segment, transaction volumes have stabilized, and this provides a floor for deployment planning. In terms of our key business updates, our SBI Cash RFP, after intense negotiation, was finally awarded and contracted in December. It is now getting rolled out in Q4. Our total revenue from this is INR 1,000 crore over 10 years, of which INR 500 crore would be incremental revenue to CMS.
In terms of other order book, our execution is on track. We have over INR 750 crore order book just with two customers, ICICI Bank and India Post Payments Bank. Both of these are about 75% live. Our tech and payments business is growing from INR 235 crore revenue to INR 330 crore revenue in one year, and is on track to hit INR 400 crore in FY 2027. This is a 30% CAGR. I would also like to provide you an update on the higher DSOs from a few mid-sized MSPs due to credit tightening by lenders post the AGS issue. We had alluded to this in our previous call. Since then, we have mitigated these risks to a large extent.
We had made provisions in Q2, and in Q3, we took strong tactical actions, which included limiting services to ensure payment discipline. This has had a negative revenue impact, but was necessary to drive cash flow improvements. DSOs are getting streamlined and should be back to normal levels by end of March. On improving margins, we have taken the following actions: We are optimizing our network and have exited a long tail of unprofitable retail points. This again, has had a small impact on revenue, but it ensures a healthier revenue base and good profitability going forward. The gig operating model for the direct-to-retail business, which was being piloted for most of last year, has now scaled to a team of 2,000+ partners who are covering 20% of our retail points and have achieved a certain critical mass.
We will also get a more agile and flexible network through this model to handle peak periods and convert part of a fixed cost base to a variable structure. We have strong business momentum building up again. Large customer RFPs are being decided as we speak, and this should help deliver a good Q4 and to FY 2027. With that, I would like to invite our CFO, Pankaj, for a financial update.
Thanks, Anush, and good afternoon, everyone. Let me take you through the Q3 financials. I will focus on the underlying operating performance, as our reported numbers this quarter includes regulatory and one-off items. Our consolidated revenue stood at INR 618 crore, a sequential growth of 1.6%. While headline growth appears modest, the quality of revenue has improved sharply. Service revenue is up 4% on quarter-on-quarter basis. Managed services and technology is up 18% quarter-on-quarter from INR 216 crore- INR 254 crore. EBITDA and margin operational efficiency is on track. Business EBITDA grew 9% quarter-on-quarter to INR 158 crore. EBITDA margins expanded by 160 basis points, moving from 23.9% in Q2 to 25.5% in Q3.
This margin expansion was driven by the two segments, cash logistics, EBITDA up by 6%, and margins expanded by 170 basis points. Managed services and tech service, tech, EBITDA up by 12% to INR 78.5 crore. I want to clarify the momentum in PBT and PAT to ensure the underlying trend is understood. Reported PBT dropped from INR 95.6 crore to INR 88.1 crore in Q3. This is due to a specific one-off item. In Q2, there is a base effect of one-time gain of around INR 12 crore from the reprovision reversal of ESOP and performance-linked incentives. If you normalize these exceptional items, our core operating PBT has actually grown successively sequentially, reflecting the business and margin improvements.
In Q3, we have also made one-time provision for new labor code of INR 11.1 crore, resulting in PAT after exceptional items for INR 54.4 crore. Now, I'll talk about the CapEx and liquidity. YTD CapEx is around INR 275 crore. While we have conservative in CapEx for 2024 and 2025, this current spend is linked to the execution of around INR 1,600 crore order book that Rajiv mentioned. This growth CapEx. This is growth CapEx, not maintenance CapEx, and it is primary driver for the revenue visibility in FY 2027. In terms of outlook, the business momentum has picked up a pace. In FY 2025, our EBITDA margin was 26.1%, which is dropped to 22.8% in this quarter.
However, in Q3, we should see that the overall EBITDA margin expanded by 100 basis points to 24.5%. This should further improve to 25%-26% range for the FY 2027. With that, I hand it back to Rajiv.
Thanks, Pankaj. In our closing, I just want to cover three topics. First, the revenue mix, secondly, M&A and capital allocation, and thirdly, the FY 2027 outlook. I do want to point out, and you can refer this to the slides we have on the investor deck, our mix of revenue is substantially changing. It's getting much better and broader. Over two years, from FY 2024 to year-to-date of FY 2026, the contribution from our largest customer has reduced from 22% of revenue to 18%. The whole category of private sector banks and the direct-to-retail revenue, that contribution is increasing from 24% to 30%. The PSU bank revenue contribution is up from 19% to 22%, and the revenue we earn from our MSP partners is down from 35% to 29% of revenue.
This mix change is going to have a positive impact on margins as we broaden and diversify the nature of our business and the nature of our customers. Second, on M&A and capital allocation, I will reiterate what we have said always. Our capital allocation priority is, first, fund organic growth and order book execution. Second, pursue accretive M&A, where we see either consolidation opportunities or a synergistic expansion opportunity. Third, return surplus capital to shareholders through dividends. We see, as of now, a very good, or I would say, a better M&A environment than we have seen in the past. Earlier this year, on the back of having scaled our Vision AI platform into a market leader, we were able to make an accretive acquisition of a leading player, Securens.
This was our first deal in the last four years. The investment here finally is INR 70 crore. On February eleventh, a couple of days ago, we signed a term sheet for a business transfer agreement with a leading MSP to acquire their ATM management solutions business. The deal value here we estimate to be in the range of INR 100 crore-INR 125 crore, and we aim to close this deal by March end. This is going to drive consolidation of the market and will also be value accretive to CMS. More details on this once the transaction closes. At the same time, we are closely evaluating deeply other opportunities in both the retail and the payment tech infrastructure sectors.
On buybacks, given the feedback we had both at the analyst call and after from shareholders, given the recent change in taxation, which makes it more equitable to all shareholders, and also keeping in mind the growth opportunity ahead of us, this has been discussed at the board. We will be evaluating this in line with better clarity on our balance sheet and the needs of capital by the end of the year, and we'll update you accordingly. Let me move to the third item, which is relevant and most important right now is the FY 2027 outlook. As we have already alluded to, CY calendar year 2026 is off to a pretty good start, and we hope to retain and build on that momentum going forward.
FY 2025 and 2026 saw us defend our revenue position well, even though we didn't grow much, but we defend our revenue well, and we also maintain our market share. Amidst a lot of volatility in the overall ecosystem. Our Hawkeye business specifically is growing rapidly. We have taken this business from zero to INR 100 crore revenue run rate ARR in FY 2021 to 2025, and FY twenty—sorry, FY 2021 to 2024, in three years. From FY 2024 to 2026, we are seeing this double from INR 100 crore- INR 200 crore level range. More importantly, we have now built a strong enterprise-grade product, which will be very useful as we bid for some large RFPs coming up in the coming year in new sectors for Hawkeye.
While Q2 and Q3 were adversely impacted, and this has affected margins for the year, we have detailed these out in our past calls and the analyst meeting. With Q3, we have bottomed out. With momentum strong from execution of order wins we have, we do forecast a strong positive trend going forward. Overall revenue for FY 2027 should be in the INR 2,800 crore-INR 2,900 crore range. The services revenue component of this should be in the range of INR 2,700 or INR 2,800 crores, which was the target we set out when we met you in September 30. The bridge from where we are right now to getting to this is that we are hoping to end Q4 strong.
There are some key deals under discussion and negotiation, which we hope to finish strongly by March, which will allow us to end Q4 strong, enter FY 2027 with a services run rate revenue closer to INR 650 crore. If you gross it up by four times, that will give you roughly a INR 2,600 crore services revenue for FY 2027, and then growth in the year should get us closer to the INR 2,700 crore-INR 2,800 crore services revenue growth. At product revenue of roughly about INR 100 crore, we should be in the ballpark of that INR 2,800 crore-INR 2,900 crore overall revenue. EBITDA margins, Pankaj has detailed out the reasons of us going down and our bridge from there.
I mean, if you want to summarize our overall dip in EBITDA margins, I would just, you know, put them into three factors, about roughly about 1.5% impact in both wage inflation and the investments we made in building infrastructure for a contract which took time to pan out. And then about 1.5% dip in margins, which is linked to both increase in fleet cost, as well as the higher overall provision, ECL provisions and risk provisions. These are improving. I think we'll see improvement of that in Q4, and with the bridge from there to next year, we should be able to see EBITDA margins in the 25%-26% range for FY 2027. Thank you. And now we can move on to Q&A.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Praveen Kumar from Equitas Capital Advisors. Please proceed.
Yeah, hi. Thanks for the opportunity. I had a couple of questions. The first one was to get more clarity on the revenue bridge to FY 2027, which you spoke about. So if I look at it from a different perspective of how much of this bridge to FY 2027 revenue are things which you have already contracted and have in hand, versus where you are counting on, let's say, consumption improving or, you know, some other improvements in the broader macro? So could you if you could break it, break it up into those two kind of components. Thank you.
Hi, Praveen, Manish here.
Yeah.
Q3, if you look at it, was about INR 577 crores. As you know, we all shared, I think there's a lot of work that has happened on the order execution through this year. We also have the large SBI order, which is going live in Q4. So that plus a few other deals that we're in discussion with, the goal for us is right now to just be relentlessly focused on execution. And to enter Q1 with a services base of the 577 growing to about INR 650 crores. So 650 into 4 gets you to 2,600. 2,600, you add about INR 100 crores of incremental growth through FY 2027, and INR 100 crores-INR 125 crores of product, that gets you to that range of about 2,800-2,900 that we've alluded to.
So would you, would you say that this INR 650, which you're talking about, is largely what you have, you have in hand, and you have to just execute on that? Or is there any, you know, assumption built into that, saying that, you know, consumption needs to go through what, you know?
So, you know, let me try and give this answer in a different manner, because, you know, I have to be conscious of the fact that this is a team which forecasted very well for three years, and then I think the last one, 1.5 years, the forecasts have not really played out. So we will be a little careful right now, Praveen, and therefore bear with us as we build confidence and forecast in reality. The 650 is sort of a number. I think we have almost 95% certainty on this number. But we will want to wait to see where we end with March, and, so I think the 615 to 640, the 2,600 is fairly certain.
The bridge from 26 to 27, 2,800, that's something we have to earn and work for in the remainder of the year.
Understood. Understood. Just a couple of other questions. One was on the retail cash management part. I think you have in your presentation, you have referred to rationalizing low-yield customers. So I just wanted to understand that earlier you were somewhat— I mean, is this, is this kind of an indication that this is kind of a course correction from your earlier kind of aggression in this part of the market? Or, I mean, just wanted to get some color on that.
So, it's a great question. You know, I think the way I would phrase is, in the last 2-3 years, we've been fairly aggressive on this market from a market share perspective, right? As other businesses are scaling very well, we are happy to invest with, you know, aggressive pricing, network expansion. And also we built up a sales engine in the last 2-3 years to attack and address the D2 customers. In a year, which was reasonably tough, I think it was very important for us to look back and optimize our network and look at what makes sense. We did go and engage, and when you, when you're growing the network, there will always be X% of network which is not going to be profitable, right? As you're entering newer markets, look to smaller locations.
Then, I think in Q2, Q3, given the overall trend of the business, we wanted to step back and look at how many of these customers will be profitable longer period. We took an attempt to see if where we can increase prices and where we think the prices just don't make any sense. So I think what Anush and his team have done, with Puneet, have done, is sort of, I would say, just do a sort of, I don't know what the right word is, but just prune this up in line with making sure that we are building our business and margins in the right line. Now, I think this will be a journey we'll go through up and down, right? When you are in more aggressive and high-growth periods, you will invest.
Some investments will bear fruit, some will not. And then you ought to course correct.
Understood. Understood. And, one other question on the provision that you have taken on, in terms of the receivables in Q2. I think, Anush had referred that, you know, you expect that to stabilize by the year-end. So a couple of, I mean, just wanted some clarity on that. One is that, what kind of a revenue hit have you taken on, you know, in terms of, having to, tighten your, receivable norms, with, with these, kind of, customers? And, secondly, you know, given—I mean, if you are continuing to see stress in the ecosystem, how much more revenue hit you can expect from this kind of, you know, stress persisting in the system? Thank you.
We'll answer that question in two parts, Praveen. One is I'll take the revenue part, and I'll hand over to Pankaj for the ECL, for the provisioning part. The Q2 was, you know, a specific provision that we had to take on account of, you know, seeing the significant change in the, you know, external market conditions and what some of our customers, especially the mid-sized MSPs, were going through. Post, you know, the shock in the ecosystem, the tightening of the liquidity and the credit taps to them. Q3, we took a slightly different approach, as I shared, which is we were really focused on try improving our overall DSO situation.
That meant that we had to take certain calls in terms of our revenue exposure, but more importantly, how we invested quality and cost in running networks or sometimes, you know, shutting them down. Not easy calls to take, but the effect of that is visible in the Q3 revenues. With respect to the provisions, Pankaj will just answer that.
Yeah. For risk and ECL provisioning, we look into them on an annual basis, not on a quarterly basis. The risk provision for FY 2023 was around 5% of the revenue, which we have reduced to 4% in FY 2024 and 3.7% in FY 2025. This year, we are expecting the same to be in the range of around 4.25%-4.5% of the revenue, because the ECL specifically have a lag effect. So as our DSO increases, ECL increases, but as I, Anush has explained to you, the DSO reduces over a period will impact the reduction in the ECL provisioning going forward.
Thanks for the clarification, but, Anush, could you-
Sorry to interrupt, Mr. Praveen. May we please request you to rejoin the queue for the follow-up question, sir. Several participants are waiting for their turn.
Okay.
Thank you. Next question is from the line of Abhishek Chauhan from Eklavya Capital. Please go ahead.
Yeah, I have two quick questions. So the first one is, last quarter, the management had forecasted 9% growth in the services revenue in H2 compared to H1. So what is the services revenue growth for Q3 as compared to Q2? That is the first question I wanted to ask.
Four percent.
4%. All right. And the second is, there is a dramatic increase in the employee benefit expense, this quarter of about INR 18 crore.
And that looks pretty big for a quarter where appraisals are generally not due. So what was the specific reason of this increase?
So, as I explained to you, there was a last quarter. In last quarter, there is a one-off item of around INR 12 crore, wherein we have reversed the provisioning for the ESOP, as well as the performance link incentive provisioning. So that is the impact of around INR 12 crore reduction in the last quarter. Otherwise, the total cost, employee cost and service and security cost, there is a reduction in the overall service and security cost and the employee cost. And whenever you look, look both the add, both the items, service and security cost and employee cost, add both the things and calculate the number. There is a reduction in, in considering adjusting of INR 12 crore and adding this both. There is a reduction in the cost of this thing.
Right. But service and security is different from employee benefit. I wanted to ask specifically about that. A couple of-
INR 12 crore different.
Yeah, INR 12 crore is purely in the employee cost.
Mm-hmm.
When we-
Okay.
We, when we add about the total employee and the workforce cost.
Mm-hmm.
Workforce is either our own employee or a third-party employees. You have to add both.
So service and security includes the outsourced staff, which will be working with us. So therefore, that's overall-
Oh
-part of our, wage cost.
Okay, okay. All right, got it. Thank you. That's all from my side.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the question queue, please restrict your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Next question is from the line of Krushi Parekh, from BugleRock PMS. Please go ahead.
Yeah. Hi, team. So I think my question is in continuation to the earlier question on the aggression that we had shown in the retail side, but now we are pruning a little. So, that, I think that part is clear. Can you just help me understand also additionally is that how we are looking to take this up going forward, and any particular areas that we are targeting, first of all? Surrounding this, how is the big strategy deployment working out for us, the challenges that we have overcome? And within the growth part, any new areas for Hawkeye or RMS that we are looking to deploy, especially when you mentioned that some new sectors we are looking to build the solutions for. So that is my first question.
Hi, Krushi. Let me answer both your questions. As far as the retail is concerned, I think our, in terms of our sales focus, our aggression continues to be, you know, what it was, simply because we think this is an important part of our future growth. Retail is a very large opportunity, and, you know, we think of it more in terms of decadal, you know, opportunity. Because the formalized and outsourced as part of what is broader retail in India is still so small. I think, the way to think of it is, it is our responsibility to do what we can to create this addressable market. Now, as part of that, it will always take a little bit of time for us to figure out the parts of the business which have been onboarded.
You need to give them some time, six months, one year, 1.5 years, for them to sort of achieve full revenue status in terms of translation into what is the estimated realizations and throughput. In Q3, post GST 2.0, and as we have shared, for us to start looking at this sector by sector, along with the consumption report that we have, it gave us a lot more clarity on the parts of the sector which are seeing, you know, more vibrancy, versus some, you know, deals that we had, which probably didn't. Given that we were getting into the whole network optimization stage, it made a lot of sense to sort of take, start taking some calls, right? Which is, you know, every business, every operations will have some churn that we would like to impose.
It may be 2% of the long tail, it may be 5% of the long tail. That is what we have alluded to. Coming into Hawkeye, I think we've spoken about how, you know, within Hawkeye itself, it, you know, the goal for us is in the longer term, to think about productizing this. The experience that we've had and the amount of investments that we made in the technology and the R&D in building a lot of advanced AI use cases, will serve very well when we think about translating this into the broader retail.
So in a way, when I think about retail, I think the combination of both what we have as a Hawkeye product and the retail cash, along with a lot more of technological integration, working into, you know, helping stores with reconciliation and, you know, selling automation solutions, will be a very powerful.
I think for us, I would also like to add to what Anush said. You have to take the, you have to keep in mind the industry and how overall retail sector in India suffered in H1 of last year. We saw consumption, you know, all of you will be invested in other companies. Consumption really get impacted till September end. So there was a churn in the sector itself. It is a relatively lower margin sector. There were clear sector trend shift, I mean, from physical retail to online retail to quick commerce, which is impacting those customers. From our side, I think today we have almost, Anush, 150+ direct to retail logos?
One sixty-five.
165 customers, right? This number was maybe 0, 2.5 years ago. With these customers, we are cross-selling, right? We are not only in the business of retail cash management, we are upselling them in retail cash, vaults, we are upselling them with Hawkeye-based solutions and where we end up seeing the return, make sense from both revenue and margin perspective, we will continue to deepen our presence there. There will be some customers, as you work with them six months, you realize the amount of volume of cash and the revenue you can earn is not going to be material.
At that point, you need to have a sort of a clinical viewpoint and examine and sort of let go of that, and use that network capacity for better quality customers. And that's what we, I think, have done. I don't think you should read too much into this in terms of change in strategy. I think it's sort of a aggressive launch and growth. We assessed things in the last, three to six months, to sort of take stock and say what makes sense, what doesn't make sense.
Overall, I think we are seeing a lot more opportunity of cross-selling into our retail customers than just pure cash management.
Sure. No, no. My query was also in relation to one of the competitor talking about increased, you know, competition in this area, in the, on the retail side, and, and, I mean, we being the aggressors in this area. So that is what I was, kind of alluding to.
Yeah, I think you're right. And we have ourselves in prior calls said that we are going to be very aggressive in this area, because, again, we feel that will—y ou know, if you want to grow a market, you will have to make investments, whether it's low cost, low price, deeper market expansion. I think we've done that. We have sort of consolidated back right now in this year, and we'll again you know launch further expansion as we see opportunity in the coming year.
Sure. Appreciate. My second question is that, for the SBI, you know, order, there were talks of 10,000 ATMs, that were in play for the outsourcing. But the announcement that we made is, I think pertaining to 5,000 ATMs. So rest of the ATMs, will it be, coming in, over next year, or, it's, that particular piece is still away right now?
No, I think the total order is 10,000 in terms of what SBI wants to award. If you go back, I think, to some of our earlier commentary, in the first version of the outsourcing process, we were the only eligible participant, and that would have, you know, meant we get the entire 10,000. But unfortunately, with that getting scrapped and them coming out with a new RFP, of that, we were the L1 participant, so we got about 5,000 of those volumes. The rest going to other industry participants.
Okay, so the rest of it has gone to someone else. Okay, clear, got it. Thank you. I'll get back in touch with you. Thank you.
Thank you. Next question is from the line of Nihar Mehta from Bay Capital. Please proceed.
Yeah, I just had a couple of questions. One, if Anush Raghavan can comment on the overall RFP rollout, how is the outlook looking like in terms of new rollouts from banks and cash logistics?
So I think for most of FY 2026, the RFP pipeline has been fairly subdued, just on account of the both industry being volatile, banks, you know, struggling with, you know, dealing with the fallout of AGS, shutting down the ATMs, industry consolidating and understanding, you know, where things are. All of that has led to banks sort of making a shift in their outsourcing strategy. And the two key shifts here are: they are moving away from or are depending less on ATMs and pivoting more towards recyclers. They see recyclers as being a very strong complement to helping branch transactions. And the second pivot is moving away from transaction-based pricing to fixed-based pricing. That is something that as CMS, we've been advocating for a long time. We stayed out of the transaction market for almost last 12-18 months now.
When I think about the RFP pipeline in FY 2027, we see meaningful activity coming back into the market. As we speak, we are aware of almost about 6,000-8,000 ATM units, which are in various stages of the pipeline. This means that there's a total contracted value opportunity of about INR 2,000 crore. I think the timing of when these come out and, you know, what we win and how we position ourselves, that's going to be key.
Okay, understood. Just one more question. What's the cash?
Sorry to interrupt, Mr. Mehta. You're, you're not audible. Your voice is breaking.
Yeah. Just, one more question. What's the amount of cash on the books as on December end?
Hello?
I'm just asking Pankaj.
About 600. It's about INR 600 crore.
Hello.
Mr. Mehta, does that answer your question?
I could not get the last part. INR 600 crore?
Yeah, INR 600 crore.
Okay, thank you. That's it from my side. All the best.
Thank you. Next question is from the line of Prakhar Agarwal from Dexter Capital Advisors. Please go ahead.
Yeah. Hi, team. So thanks for the opportunity. So my question was along the lines of our outstanding order book. I feel like we have won INR 1,600 crore worth of order books in FY 2026. So I wanted to understand, like, which side of our managed services business is this order book tilted to? I mean, is this related to mostly software or our banking automation business? If you could provide some color on that.
Prakhar, it's mostly a mix of both, you know, integrated contracts on the managed service side and, you know, Hawkeye, especially when you look at the large, you know, complex branch RFP rollout.
Okay, so this also includes, like, Hawkeye contracts with our customers?
Yes.
Okay. Yeah, that's all from my side.
Thank you. Next question is from the line of Akshat Hariya from Multi-Act PMS . Please go ahead.
Yeah, hi. Thank you for the opportunity. So my question was more related to the cash management services. So sequentially, if you look at the numbers, we've still had a degrowth in the cash management part. And, if you look at it, the revenue for that segment has peaked out at around INR 417 crore, and now we are down to around INR 384 crore. So with, the services guidance that you've given for next quarter and for the next year, what is the outlook on this specific segment? And, you know, how much will the SBI order help for this, you know, the recovery in this segment?
I think specific to SBI, you know, as you have called out, it's about INR 500 crore of incremental opportunity over a 9-10-year period.
Yeah, yeah.
So you should think of that as about being about INR 50 crore per year. The delta between 415, 417 to 385, I think, you know, we've sort of explained them in different ways, but fundamentally, it's a link of 2, 3 things. It is a dip in our overall business points or ATMs that we use to handle. The 4,000-odd dip that we had going in from Q1 to Q2 and Q3, that has had an impact. The cleaning up of retail that we've done has had an impact. And also the calls that we had to take to fix our DSO situation has had an impact. With most of these, you know, you know, either being fixed or normalizing right now, we anticipate this to get improved in the coming quarter.
Also, just, you know, I do want to. We have mentioned this before, and I would like our analysts and investors both to start looking at our business in total. Because the managed services business, and it is still being a customer of cash management, is now ramping up, and we have a lot of integrated contracts. So the revenues actually, and that's why you see an interplay, sort of a knock-on. As we merge our P&Ls into the three business lines we talked about, ATM solutions will be one complete business line, where you'll see ATM cash, managed services, brown label ATMs, fixed price machines, all of that will be in one revenue bucket. We think that business overall should grow 15%-18% next year.
The retail and currency logistics business should grow about 12-ish%, and our technology and payments business, which includes Hawkeye and cards, would, I think, grow about 20% for the next year. So that will give you the blend of revenue growth, which we are thinking about. We are working to build our P&Ls on these business lines, and so that you will be able to see the growth in each category by themselves, instead of cash and MS and tech.
Okay. Fair, fair. Understood. So this question was specifically, you know, from your margin guidance also. So for next year, you know, we are guiding the margins to go back to our FY 2025, EBITDA of around 25-26%. And, you know, if you look at your old segment, so where we've moved to new segmental reporting, but since we continue to report old segments also, the margins have broadly been impacted due to the operating deleverage that we've seen in the cash management service. So, you know, the recovery for cash management services is also important for your margins, and based on the next year margin guidance, it is fair assessment that the cash management also has bottomed out within services, and it should grow from these levels.
No, absolutely. You're absolutely right. I mean, I think from a cash management perspective, both from a macro perspective and even from our own what decisions we had to take in Q2, Q3, the revenue has bottomed out. I think currently the trend line is to grow is already growing higher. And Anush mentioned to it, is on our investor deck. If you look at specifically the retail cash volumes, they are very robust, even in December and January for segments. Our ATM cash management contracts we have from, let's say, SBI, and then we think of the ICICI order, which is a managed services and cash management order win. I think that will all lead to both the cash management revenue growing as well as the margin profile increasing.
To set you a quick context, we were roughly about 70,000 ATMs under the cash management about a few quarters ago, which dipped to 68,000. We are back to 70,000 now. We are targeting an aggressive ramp up to 74,000-75,000 ATMs by the end of March or April. As that ATMs and the cash management come in, you will also see the margin profile improving back on the overall business.
Understood. Understood. Very helpful. So last question is on the cost side. So, you know, sequentially, I understand that last quarter had some reversals on account of ESOP and bonus forgo. But even if I ignore the last quarter and if I look at, you know, your YOY employee cost, so that run rate has gone from around INR 81 crore to around INR 100 crore. So we've grown that by around 20%+. And your vehicle, sorry, your service charges have remained flat. So we are seeing an insourcing trend. So, you know, just wanted to understand the background behind this and whether the insourcing trend, as you know, it's complete, and what should be your employee cost and services run rate that we should, you know, understand going forward?
So let me give you the philosophy on how what this, what has happened, and then specifically, Pankaj can maybe answer. I'm not privy to the INR 80 crore-INR 100 crore number right now, which you're referring to.
Overall employee costs, you should think in conjunction of both employee costs and social security. It's not you insource, outsource, depending on where in the regions are you working, and also what nature of business. Right, some of the higher value, more risk business will always be insourced. We have had an increase in overall employee costs if you combine the P&Ls, both two reasons. One was wage inflation linked to us signing long-term wage settlements. Earlier in the year, we talked about this in Q1. We have a 3- to 4-year cycle of signing wage settlements. We normally recoup it back through productivity, but this year, given volume growth was low, recouping it back within the year was difficult, but I think we will start seeing that in Q4, Q1 going forward.
The second was linked to the fact that we invested and made the wrong decision of investing for capacity, assuming we were getting the whole SBI contract in ATM. That was, with hindsight, a terrible call to make, and we are paying for that, and we're trying to fix that right now. Now, so if you think of, the overall number, Pankaj, you want to talk about the overall number, which you referred to?
Yeah. So if you see that, if you add both the service and security and the employee cost, it is increased around 6%-7% over Q3 of FY 25 to Q3 of FY 26. And this is because of the, as we explained to you, there is a LTS impact, and the new business, whatever we got, is impact of relative to that.
And so there's no, there's no change in insourcing, outsourcing. I think for that, we are fairly agile in what we need to do for the business.
Okay. Understood. Understood. One last question-
Sorry to interrupt, Mr. Haria. May we please request you to rejoin the queue for the follow-up question, sir?
Sure, sure.
Thank you. Next question is from the line of Suraj Singhania from RatnaTraya Capital. Please proceed.
Yeah. Hi, sir. Thank you for the opportunity. Most of my questions have been answered. Just one question was around your CapEx estimates for FY 2026. You had earlier guided for INR 300 crore of CapEx. Now we have done INR 275 crore this year. So what is the CapEx that we estimate for this year and next year? That's one. And one is the housekeeping question, which is since Securens, our Securens business is now being consolidated in our P&L, what is the revenues and EBITDA from the Securens business in Q3 FY 2026?
So, as we have given the guidance that our CapEx will be around INR 300 crore-INR 325 crore, and we have already spent INR 275 crore. We expect that we will in the range of INR 300 crore-INR 325 crore only. Securens is in around INR 18 crore.
Incremental INR 12 crore.
total revenue of INR 18 crore, so incremental revenue of around INR 12 crore in Q3.
Securens will have actually a negative PBT because we will be front-loading the depreciation on their assets.
Got it. Got it. So INR 6 crore was accounted in the last quarter, if I understand that?
Yeah. Yeah.
Yeah. Got it. Thank you, sir.
Thank you. Next question is from the line of Divyansh Gupta from Latent PMS. Please go ahead.
Hi. One question, you had mentioned that, the contracts are now moving from, let's say, cash machines to recyclers. So the question is that as recyclers, do the number of trips that we have to do reduce and therefore lead to a revenue pressure for us going forward? Or we price it in and increase the realization.
No, Divyansh, I mean, if, if I look at our current base also, recyclers are a lot more have a lot more complexity than an ATM, and especially in terms of how they need to be managed and more importantly, serviced. The expectations from customers is also that the quality of service and uptime on these machines have to be of a much higher order. Generally, recyclers are deployed at on-prem branch sites, which means that, you know, they generally have a higher footfall and, you know, so banks are very keen to sort of, you know. For example, if at ATM, they need a 95% uptime, recyclers is almost 97%-98%. So, to us, we actually see recyclers as being sort of an upsell and a higher value solution than ATMs.
But when you say uptime, it means more cash availability, or I'm assuming it, it means more cash availability, but given that-
More end user, end user availability, right? Now, which, which is, which could be cash availability, which could be, you know, how, how do you fix the faults? It could be things to do with the software, things to do with the hardware, but end user availability.
But sorry, just to double-click on it. See, assuming that machine of an ATM and a cash recycler both are of sufficiently good quality, then let's say non-cash metrics will largely be same. And given that the customer can deposit cash, the cash-out situations will reduce. So therefore, does it reduce the number of trips? That was my-
Right. I think you should look at, you know, what a recycler means to different stakeholders. To a bank, it definitely brings about a greater degree of efficiency in terms of how the currency is utilized. It is effectively less cash at float. To us, we also like a recycler model simply because both unit economics wise and in terms of the complexity, it is a higher value, which means that in terms of the monthly fixed fee, it is usually pegged above an ATM. Now, the number of visits might be lesser in certain cases, but that doesn't really change the nature of the revenues, simply because the amount of work that still needs to be done, especially in an ATM, you only need to withdraw cash and load it. In a recycler, you might have to load it, you might have to evacuate it.
There's a lot of reconciliation work that also needs to be done. So it's not as plain speaking as that, but, net-net, it ensures to us a higher realization than what a normal ATM would do. To a bank, it's not necessarily higher cost because they need to look at it in terms of what a cost of a branch transaction is, vis-à-vis what that of a recycler would be. So it is generally a more efficient way of, managing things.
Got it. Understood. The second question was, in the analyst day deck, right, we had mentioned that we have 38% market share in the retail cash management. But, at least that my understanding was that currently we do not have pricing power, or we were looking to increase pricing after, some time. So is there a target market share which will allow us, or how should we understand that when should pricing or ability to price it higher for retail cash management can be expected?
Let me, let me take an analogy on the ATM business, right? Or rather, you know, when I look at what we gain in terms of our ability to, you know, both influence the market as well as influence our own outcomes. I think with each step change in our overall market share, it creates a very different kind of an outcome, and we have seen this. We have seen, you know, what CMS was 15 years back, 10, and now, especially in terms of the way we've been able to unlock incremental, EBITDA margins, accrued. You know, as we've scaled up. In the ATM business, as we went from a 35 to 40 to 45, 50, and closer to 57, 58% market share, all of that step change has had a differential outcome in terms of pricing, route optimization.
Right now, in the retail, I think we are in a zone where we are focusing more on yield management and yield improvement, which means that we are sort of evaluating things on a contract-by-contract basis. Our focus there is really to continue to increase market share, to continue to expand the addressable market opportunity, and to invest in both building the sales capability as well as using that to cross-sell into technology solutions.
I think, you know, the way I would ask you to think about it, and this is a question we ask ourselves, right? First of all, you want to defend your revenue and market position in the market, right? That's the most important thing right now. You don't want to suffer on revenue and market position. Margins can go up and down. We are fortunate in many ways to have a margin profile which is substantially better than anybody else we know of internationally or locally. Maintain that margin profile and growing revenue rapidly, both of those are not easily possible, right? So something has to give at some points of time.
I would argue now with hindsight, like, the last year has seen the opposite happen, where we defended market and revenue, and therefore, has had some impact on margins, possibly. We will hope to undo that in the coming two, three quarters. Specifically to retail, I mean, I think, Anu said, we will look at our network and look at our capacity to see how we can keep growing revenue at a sensible margin profile. And, is there a particular market share number where it makes sense? I don't know, right? I mean, I think it, if you have one competitor who is willing to—a nyone, right now, there are four competitors in the sector. If you have only two, the second one can keep aggressively being aggressive on pricing, maybe, right?
So really, you can't determine when and how much pricing power you can get. I think if you can keep focusing on quality, cross-selling to the customer, other lines of businesses, I think you're fine.
Understood. And just one last question-
Sorry to interrupt, Mr. Gupta. May we please request you to rejoin the queue, sir, for the follow-up question? Thank you. Next question is from the line of Shivam Parekh from ValueWise Wealth Management. Please go ahead.
Yeah. Hi, sir. Good afternoon. Thanks for the opportunity. So we are having a good cash position of around INR 600 crore in our books and having a great balance sheet as well. So also with us being market leaders in the business that we do and further consolidating our market share further in tough times, last financial year and this financial year. So are we thinking of enhancing shareholder value through buybacks to gain advantage of the low valuations currently? Yes.
Hi, I think as, perhaps you have joined late in the initial part of our opening remarks. As Rajiv mentioned, given the changes to the buyback regulations that have been announced, we feel that right now it is a lot more equitable for all stakeholders as opposed to the earlier regime. This is something that has been discussed at the board level. We will evaluate this closer to the end of this year as we look at our overall capital needs in terms of growth capital, M&A.
Yeah, I think we you know we do have a very active M&A pipeline. We've been working on that for a long time. We are looking at investing for growth. As I said, our priority is simple, organic then inorganic, and then returning capital to shareholders, whether that's through dividends or buybacks. I think we will have the board discuss that at an appropriate time. Right now, we are seeing active opportunities in the M&A pipeline. We don't know. That doesn't mean deals will happen. We will continue working on them and what makes accretive sense for us to build and scale our business in with good returns. I think that's the first priority for us as a team to us and to our shareholders.
Okay. So, sir, with you seeing buybacks favorably for us, so you are seeing,
No, no. Sorry, sorry, sorry. Let me, let me, let me clarify.
Yeah.
It's not about seeing buybacks favorably for or unfavorably. I think buyback-
Okay.
Because there has been a constant ask and question on buybacks, we want to address it proactively in line with our capital allocation philosophy, which we have laid out. We're not saying a buyback is going to happen or not. If we do see excess capital and we don't have a need for it, we then will evaluate returning it via dividend or buybacks as the board deems fit.
Okay. So sir, if any, buyback was to be possible, so, can we expect, in financial year 2027 or, this year, this financial year?
I don't think I could forecast this at all. This is not a decision which our management team makes. I think we've been fairly clear on the way we think about it. We will let you know end of the year if there's any change to the thinking.
Sir, also with buybacks being taxed unfavorably, so does that have a bearing on our decision? That was my last question.
Certainly, yes, absolutely. You're right, because we have to think of capital allocation in light of all of that. That's why we have proactively talked about it. Not to say that there's something happening, just to share with you how we think, and we are clear to our shareholders equally, to give you an answer on our thinking. We do see capital needs for the growth of the business, both organically and inorganically. If after that, we see a sufficient cushion for us to return capital, we will definitely look at it.
Okay, sir. Thank you, sir. That was very helpful.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to the management for the closing comments.
Thank you so much. Thank you for your Q&A and for all the questions you asked us. I think I'll summarize by saying that, yes, we've had two quarters of disappointing numbers. We are hoping to turn the tide with Q4 and going into Q, FY 2027 strong. I know there's a revenue forecast which may seem little aggressive, given the Q3 specific numbers, and the last two, three quarters of sort of underperformance, but we are hoping to turn it and deliver stronger numbers for you and for us to meet our own internal target, which we have set for FY 2027 of INR 2,700 crore-INR 2,800 crore of services revenue and overall revenue of INR 2,800 crore-INR 2,900 crore, and with an EBITDA margin of 25%-26% for the year.
Thank you.
Thank you, sir. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your line.