CMS Info Systems Limited (NSE:CMSINFO)

Investor Day 2023

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May 25, 2023

Good evening, everyone. Once again, request everybody to take their seats. We are going to start the event. We will have the Tech Expo zone open after the Q&A session, so request everybody to move on to their seats now. Once again, requesting everybody to start taking their seats, please. Very warm welcome to everybody to CMS Info Systems' Investor Day event. My name is Anuj Sonpal, CEO of Valorem Advisors. We represent the investor relations of the company. On behalf of the company, I would like to thank everybody joining us today. I know it is a busy day, a lot of corporate earnings, and a lot of analyst calls, so thank you everybody for taking the time out and joining us today. Before we begin, I would request everybody to kindly switch off or silent your mobile phones. Once again, I hope everybody had a chance to visit the tech zone. We will reopen it after the Q&A session, so please make way to your seats. Please note that the agenda of this analyst meet will be that the management will start off by giving a short presentation, post which we will open the floor to the Q&A session as well. We request everybody to hold their questions till the end of the presentation, after which we will have a chance to take everyone's questions one by one. If you have a question for the management, there will be representatives with mics, so please raise your hand and they will find you, and hand over the mic to you. As mandatory, let me mention a short cautionary statement before we start the event. Some of the statements made in today's event may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's event is purely to educate and bring awareness about the company's fundamental business, financials, and future growth strategies. We will now start the event with a short video on CMS and how it is today seamlessly connecting commerce in India. Thank you. What is money worth if it is not spent? It is the velocity of money that keeps the business and economy ticking. Every time cash changes hands, a transaction is fulfilled, and a new commerce point begins. And we connect these millions of commerce points to power the Indian economy. We are CMS, built to connect commerce. We ensure that no business or transaction ever stops. Access to money at lowest cost everywhere. Seamless cash logistics every day. Secure transactions every minute. But that is not all. We support banks with automation solutions for an improved consumer experience. Our ALGO software solution provides a secure environment and a seamless ATM interface. Our AIoT-enabled remote monitoring platform provides critical insights to businesses. We enable India's economic growth from Ladakh to Andaman, the Rann of Kutch to Arunachal Pradesh. With 16,000 PIN codes, we cover 97% of Indian districts, including the remotest areas. We play an essential role in a connected commerce experience by moving 1 lakh crore rupees seamlessly every month, securing 30% of India's ATMs for a safer environment, protecting business interest of more than 2,000 consumer retail chains, fulfilling 1.5 million payment cards for unique experiences every month, preventing more than 1,000 critical threats by being a step ahead in remote monitoring. We are the invisible force powering commerce in India. We are CMS, and we connect commerce. Okay. Now, let me just introduce you to the management participating with us, the management panel. We firstly have Mr. Rajiv Kaul. Mr. Rajiv Kaul is the Executive Chairman, Whole Time Director, and the CEO of the company. Mr. Kaul has been associated with the company since 2009. He holds a bachelor's degree in engineering, specializing in computer science from Birla Institute of Technology, Mesra, and a postgraduate diploma in business management, specializing in marketing and finance from Xavier School of Management, Jamshedpur. He has over 24 years of experience across technology, private equity, and cash management industry. Prior to his association with CMS, he was associated with Actis Capital LLP, from London as a partner, and also with Microsoft Corporation India Private Limited in the capacity of General Manager and Managing Director of India, from where he moved to Redmond, U.S.A., as the Senior Director of Emerging Markets, including BRICS. He's currently nominated as a member of the Board of Governors at his alumni, Birla Institute of Technology, Mesra. We then have with us Mr. Pankaj Khandelwal, who is the President and Chief Financial Officer of our company. He has also been associated with the company since 2009, and prior to the demerger, was associated with CMS Computers Limited since 2006. He's currently responsible for finance, legal, and secretarial function of our company. He holds a bachelor's degree in commerce from University of Rajasthan and is qualified chartered accountant from ICAI with over 27 years of experience. Next, we have Mr. Anush Raghavan, who is the President of the cash logistics business. Mr. Anush has been associated with the company also since 2009. He holds bachelor's degree in academic law from University of Mysore and a postgraduate diploma in management from IIM Ahmedabad. He has over 14 years of experience in business management and business development. He has previously been associated with Hay Consultants India Private Limited in the capacity of an associate consultant. He's also the President of Cash Logistics Association and Currency Cycle Association. Lastly, we have with us Mr. Manjunath Rao Pare Parmeshwar, who is the President of the managed services and technology solutions business. He has been associated with the company since 2012. He holds a bachelor's degree in science with specialization in statistics from Madras University. He has over 34 years of experience in sales and marketing across sectors. In the past, he has been associated with NCR Corporation India Private Limited in the capacity of interim managing director, CashLink Global Systems Private Limited in the capacity of Chief Operating Officer, and Diebold Systems Private Limited in the capacity of Director of Sales and Marketing. Without any further delay, I request Mr. Rajiv Kaul to take the stage and start his presentation. Thank you. I am okay. Thank you, Anuj. Good afternoon, good evening. Thank you for coming here today to attend our first investor day since we listed about 15 months ago. I have been a part of CMS, as Anuj said, since 2009, where I spent more than half of my professional life and career helping build with my team a very unique company. We have already introduced my team members who will be speaking to you today. Some of you would have had a chance to meet the other team members at the back when we had the experience zone going on for the last one hour, which will continue after the session if you want to have a look at what we end up doing. Listing this company on December 31, 2021, was a very important milestone for our part of our dream of what we want to try and build this company and this institution going forward. Today's session, over the next approximately 20 slides, 45 to 50 minutes, we hope to talk to you about three things: who we are, what do we do, and how do we do it. Therefore, going into our background, into our journey, I just want to give you a little bit of a flavor of where this all started. When I left Actis Capital, it was with the courage and motivation to become an entrepreneur. I came back to India looking to create a domestic leader in outsourcing of business services. I ended up partnering with Blackstone at that time to convince the promoter family, which owned CMS Computers, to divest a majority stakeholding to us at that time. That was 2008, 2009, and that is where CMS Info Systems got created. Now, sorry, I can look here. If you think of our journey in those 14 years, we think of that as three distinct phases. I think it is important to understand our history and our culture as you think about us as an investment and a growth opportunity. When we acquired CMS, it had a variety of business services which it was into. The largest business was around IT infrastructure maintenance services, where it competed with the likes of Wipro and HCL in the country. The 2008 GFC crisis had a delayed impact in the Indian banking system. 2009, 2010 were fairly difficult years, which led to a lot of churn, and we made a fundamental bet saying that we will only focus on businesses where we have a right to become a number one, where we can be a dominant market leader, and we will move out of any other business. We hived off other business units and instead focused on, at that time, a smallish business of cash logistics. If you were to rewind and imagine cash logistics at that time, it was a very nascent sector. It was less than INR 500 crore-INR 600 crore in revenue, and mostly it was a business around evacuation and processing of currency at retail stores. The ATM business was very small. And we realized the potential this could have in India, and therefore we went about building a massive distribution network ahead of time. We penetrated the deepest corner of the country with a branch network, with a route network. And we were lucky in many ways because that is the period which saw a dramatic boom in the growth of ATMs in the country, driven by two factors. The first was private banks rushing to capitalize on the growth of semi-urban, rural India. Number two, the Ministry of Finance drove the public sector banks to open a lot of ATMs in the remotest parts of the country where people did not have physical banking access, and this was their way of driving financial inclusion. Our investment infrastructure thankfully coincided or was a little ahead of this market growth which came in, which really catapulted us to become a very large number one. We acquired, in fact, at that time, another competitor so that we could be the only company in our sector at that time to have a pan-India reach and presence. But as with high growth, what happens is it attracts a lot of competitive intensity. The number of players in the sector went from 4 to 8, but we kept our focus on becoming a world-class cash logistics organization. We also expanded in the area of banking automation at that time because banks felt that we could leverage our network and cash management to actually offer and handle their automation needs in the remote parts, in the remote districts. In fact, remember, we entered the space and we won a large founder finder grow order of deploying 8,000 to 10,000 ATMs for one of the largest banks in the country. That is sort of journey one, phase one, which really was about getting our core really strong and robust. As I move into phase two. Wave two, I would say would be between 2016, 2019. If you think of that period in India, this was characterized by fairly low economic growth. This also witnessed demonetization. We had a big change through GST. And finally, the banking sector, to whom we cater, were suffering from a fairly large NPA issue. And that is the period when banks obviously had to double down and sort of consolidate, and they couldn't invest for growth. What we did at that time were two things. Number one, we sort of protected our core. We kept focused on our core cash management business. But we took our earnings. This is a low growth period. We took our earnings and invested that into expand into the managed services adjacency. We realized that we had to cater to a broader market opportunity. It also was a time where because of all this volatility in the market and low growth, smaller quality companies are suffering, and we thought that is our opportunity for us to be able to enter into a broader TAM. On top of this, RBI became very focused on the rights of Indian consumer, what protection they need, how can they safely transact at an ATM, and therefore, banks had to start investing a lot into their ATM networks from a safety and security perspective. This phase ended in 2020. FY 2020, in fact, I remember was a fantastic year after three years of lackluster growth. We grew revenue by 20% in FY 2020. In this wave, in the last four years, when you think of it, we've had almost a year and a half, which has gone towards handling COVID as an epidemic around the world and the country. But in these four years, given the expansion strategy, we've had very rapid growth. We expanded in managed services. Our managed services business, which let's say in 2016, was close to INR 30 crore services revenue, last year hit a INR 500 crore revenue mark. That's a CAGR of 50%. In fact, if you think of our oldest business, cash logistics, across this entire cycle has grown at a 16% CAGR. So 2021, in fact, if you are to think about a particular year where the CMS management and leadership team cemented its reputation, it was FY 2021. Couple of things. One, we dealt with COVID, which meant a little different than most of us here. Our team members on the ground had no luxury of sitting and working from home. They had to be on the roads managing currency every day for banks and citizens. We do provide a critical service which can't really shut down. The safety of people are very important. Thanks to the diversification of our business lines, we are able to arrest our revenue decline to a very minor. Our revenue dropped by 6% or 7%, but our PAT grew at least that year by 18%. We came out of the year strong, and FY 2022, December 31st, we actually listed the company. So a lot the company did during that period. The other highlight in this period for us was that we launched a new business, which is our youngest business on IoT remote monitoring, and Manju is going to talk to you a little bit more about it. But I remember after the IPO, when we were sharing in our quarterly results our plans for this business and the excitement we have in the sector, we were quite bullish about this to be a high growth potential and an optionality for investors who joined us during the IPO journey. Since then, this business, which is mostly a tech SaaS play, and some of you had a chance to look at it at the experience zone, has grown rapidly. At the end of March, this business is tracking to an annual revenue run rate of almost INR 100 crores. This is one of the steepest, fastest growths in a SaaS-oriented business, which is focusing domestically in the country. The last 2, 3 years have also seen banks coming out stronger, recapitalized for growth, and looking for first refreshing their installed base of automation and also for expansion as they chase deposit growth. Public sector banks are looking for outsourcing more. Private sector banks are looking to increase depth of branches in the country. From our sector, our cash logistics and managed services, I think a lot of the changes which happened from FY 2016, 2017, 2018, 2019 onwards, and even then COVID, has resulted in a lot of the smaller players either shutting down or selling out. If you look at this journey, our whole history and journey has been about compounding our growth throughout the history of our company. This graph will actually give you a better idea of our journey. You can see wave 2, right? Where we sort of were flattish in revenue, where we are looking at using some of our earnings to expand into the next set of sectors. But we maintained our revenue line, we maintained a profit line. We didn't let it dip. Wave 1 was really when we grew revenue from INR 200 crore, 5x growth. We also used that time to actually deleverage and become a debt-free company. Since then, we haven't kept any debt on our books at all. We don't believe in having debt. Wave 2 was really about consolidation, tackling intensity of competition, lower prices, lower margins, defending our turf, yet expanding judiciously into adjacent areas. Wave 3 has been about, again, rapid growth and acceleration. Where a lot of what we have put into place has started coming out in terms of wins we've had. When the whole PSU banks started with the refresh cycle, we raced ahead and almost won an order book of INR 2,000 crore, which is still rapidly growing. Our IoT business also has helped us drive a higher level of growth. When you think of these 14 years and the average revenue CAGR of 17%, you have to keep in mind that the last 3 out of the 4 years, our revenue has grown at 20%, which is sort of unique, right? Normally, your earlier years is when you grow fast. We have, and then we had a slowdown, and then again, we are rapidly accelerating our growth. So our margins have, of course, grown very well in this period. So that's our sort of journey. That's to give you a quick history and context of who we are and what we have done. What we exactly do is where my colleagues are going to come and tell you about it. I'm going to invite Anush to come and talk about our cash logistics business. Thank you. Thank you, Rajiv. Good afternoon, ladies and gentlemen. Thank you for sparing your time to be with us here today. It is always a tough act to follow Rajiv, but I think if there is one area in which I can compete, it is that he has spent half his working life in CMS. I have spent significantly more time than that in CMS. Almost 80% of my working life has been here. It has been a very interesting journey. I could share a lot with you about all the experiences that we have gone through, the challenges, the learnings, how as a team, we have taken on crisis and dealt with those situations. But if I had to simplify it and just say it in one word, I have loved it. If somebody gave me a chance to do this all over again, I would not hesitate and would just not change anything about it. A lot of it goes to the quality of team that I work with. For the quality of talent, the motivation, and the commitment levels, it has been a phenomenal experience working with the CMS team. Today, as a publicly listed company, to be able to share our future and the journey with you, thank you for reposing your trust and faith in CMS. It is truly a privilege to be here with you today. The history also of the cash business, if I go back over the last decade, what we have built here really is a logistics network, which is amongst the largest, the deepest, and the widest of its type in India. In terms of our reach, we are present in more than 16,000 PIN codes across 97% of the districts in the country. That aside, when you look at us in terms of scale, it is truly massive. Imagine all the notes in circulation, not the currency in circulation, but just the sheer number of notes in circulation in India today are more than all of the currency in the U.S., Europe, and several other economies put together. What CMS does is we processed almost all of that currency through our channel just in the last 12 months. The aim for CMS or the mission when I think about what we are trying to do here is we seek to make banking more efficient. We want to make sure currency is available anywhere, any place, and at the lowest possible cost. Now, you may ask me, what is the relevance of all of this to today's life? What is the role of cash in society? For the last seven years, at CMS, we have been publishing a cash index, which tracks where money is coming from and where money is being spent. This year, what we have done is we have detailed that out into a report. We call it the CMS Cash Vibrancy Report. All of you would have a copy of it. Please, I would urge you to go through it in your spare time. Without going into a lot of the detailed metrics, I will just share with you the three things which really matter. The first is the ATM channel in India today. That channel today does 50% more transactions than all of the credit and debit card transactions across online and offline spends. For people who talk about what is cash versus digital, I just want this to sink in for a little bit. The ATM does 50% more transactions than all the cards put together in the country across online and offline. In a way, that just goes to show what is the criticality in terms of its functioning as a payment system in society today. Second, in a recent research report by the Bain consulting, they estimated that 65% of all retail spends in India today are in the form of cash. That brings me to the third point, which is when you look at the CMS Cash Index, and this is something that research has shown, the CMS Cash Index has a very high degree of correlation to several other macroeconomic indicators. All of us look at indices like the PPI or the PMI to determine what is the state of the Indian economy, how well are we doing, how vibrant is the economy. You can also gather the same input and the same trends when you look at our cash index. That is because consumption and usage of cash is so critical and is so closely weaved in into the Indian story. At CMS, we try to address this through our businesses. We have three businesses today, which power the cash cycle in India. The first of this is our ATM cash channel. This is the largest revenue contribution to our cash logistics business, but it was not always the case. If I go back 10, 12 years in history, the ATM used to be a smaller business, and it was the second-largest business after retail cash. We were managing only about 7,500 to 8,000 ATMs in India, and we had roughly a 25% share of the market. That was also when, based on observation, discussion with people, and understanding the government policy, we realized that there was a significant market shift that was bound to happen. If India were to grow, banking and financial systems had to grow. It was imperative that there is a network and a distribution reach available, which enables that growth. So we invested a little bit ahead of time in creating this network in semi-urban and rural India. Soon enough, as private and public sector banks grew and ATM deployment started scaling up, private banks deployed ATMs through the brown label ATM model. The public sector banks had a mandate from the Ministry of Finance saying, an ATM has to be set up in each branch location. That led to a rapid growth of the network, and we were an obvious benefactor from that. Our ATMs under management grew rapidly, but more importantly, our market share increased by almost 10 to 12 percentage points. We went from 25% to almost 35%, 37 percentage points. In a way, that sort of seeks to show how we always try to understand what is the economic scenario we are operating under and how do we sort of anticipate some of these shifts. Today, in CMS, we handle close to 72,000 ATMs. Almost one out of every two ATMs outsourced by the banking system is done by CMS. We work across all the banks. We have a market share of 47% today. Our revenue or business model is linked not to the usage of the ATM or the number of transactions which the ATM does, but to the number of visits we make to the ATM on a monthly basis. It is this figure that has been relatively stable and steady for many years now. The reason for that is the banks need our help, and we constantly work with our customers to optimize the amount of currency that is loaded into each ATM relative to how much the ATM is dispensing. If an ATM is doing INR 5 lakhs of dispensation, we load the appropriate amount of currency. If it is doing INR 20 lakhs, we load an appropriate amount. The key is always to ensure a balance, because too much cash in an ATM is idle cash which costs the bank interest. Too little cash and then you have a risk of cash outs. As a result of which, despite what happens to ATM transactions and ATM usage, our visits are relatively linear. This corresponds to a revenue model that is relatively fixed in nature. More than 90% of our ATM revenues are fixed, giving us a very good ability to predict and forecast how our growth would pan out in the years to come. Our second business is where we work with the transaction banking partners and the various banks to help the broad-based retail and merchant network with cash solutions. We service more than 52,000 locations of different retailers. This could be organized retail, large format, fuel pumps, e-commerce logistics, NBFCs. On a monthly basis, we handle more than INR 13,000 crores of cash for this channel. What we do here in India is quite unique and unparalleled anywhere else in the world. In global examples, if you go to any of these other developed economies, you will see that a cash company visits a retail outlet once, maybe twice a week. In India, we do this activity every single day. We pick up all this currency, bring it back to a CMS facility, we process it, and then we put it back into the banking system. Why do we do it? Why is India different? Because it is for the success of retail, getting working capital efficiency and keeping the cost of capital as low as possible is extremely critical. This is also why we have pioneered two new businesses within our RCM business. We created the retail cash vault solutions, and some of you may have seen that in the experience zone. We have deployed this at more than 500 locations in the country today. So large format retailers who have multiple cashiers and billing counters in their stores, and then they have to manage the shift operations of all these tills and the cashiers. How do they manage cash? How do they handle the change of shifts? That is sort of where our retail cash vault comes in. People use a closed user group card, they swipe it, and they put the money, and that is it. It brings an amazing amount of convenience and risk management to these retail customers. Our CashX solution is where we partnered with a wide range of fintech and payment banks to be able to offer accelerated settlements and real-time reconciliation to retail. As a result of this, what we are trying to do is make currency behave almost like a digital payment. Under our CashX solution, the moment our employee picks up cash from a retail outlet, within a matter of minutes, the retailer gets a credit and is able to reconcile sale done to collection on a real-time basis. We do all this at a fraction of the cost of a digital payment. 60% of the work we do in retail today is metro and urban. Based on how India is changing and based on the growth of organized retail, I feel very positive and bullish about how this coming decade is going to be critical for the growth of retail in India, just like how the previous decade was transformational for the ATM business. Our third leg is the CIT business, and this is where we work with the banks, helping optimize the flow of currency from the chest to the bank branches. Remember, for a bank, money in the currency chest is what counts as reserve ratios for what they have to maintain with RBI. Money outside the chest is where they start having an interest cost for capital that is outside. So there is a daily effort to make sure that we again achieve a balance of cash between the chest to the bank branches and back. At CMS, we service more than 10,000 to 12,000 of these bank branches on a daily basis. As banks invest to grow their physical reach and distribution and increase the number of branches, that will act as a very strong tailwind for the growth of the sector. That is our business model. If you were to really ask me what makes CMS tick, what really is the big differentiator? I think that really comes down to the way in which you are able to integrate all of these business activities. We have market leadership. We are the only company that has market leadership across all these businesses. Our number two competitor is a different brand in all of them. What we are able to do, and we do not call ourselves a cash management company. The reason we call ourselves a cash logistics company is because we are able to plug in all of these different businesses into our route network. Through the use of technology, we have been able to make our routes and our core infrastructure fungible. You may have a route which does an ATM replenishment in the morning. It does a CIT work for a branch in the afternoon, and in the evening it could be doing a retail cash pickup. That is the way in which we have been able to create this operating leverage of incremental businesses and tying in the benefits of all these businesses into creating a very strong productivity-led growth platform. Last four years, we have been able to grow our productivity by 20%, and that is a figure which we keep working with on a continuous and consistent basis. This helps keep our unit cost of operation as low as possible. We also use technology to be able to provide a very superior and superlative experience to our customers. What we are able to offer them by way of a quality of service and reliability is far ahead of market and competition. That allows us to price ourselves at a premium to competition. Both of these vectors which are operating to try and keep our unit cost as low as possible and try and keep our pricing as much as we can, is effectively what creates a very strong differentiation for us, all of which is visible when you look at it from a financial perspective. The reason that we are able to grow our margins by 2.5 times almost in the last 5 years, and the reason that we are able to increase our margin percentage by almost 600-700 basis points in the last 3 years, is because of this operating leverage and the synergy of this platform. When you look at the quality of our business, of quality of revenues, what really sticks out is we love this annuity business. It gives us this very strong ability to go back and figure out how do we want to handle cost inflation and pass it through from a pricing perspective. I am very proud of the fact that since the inception of this business, we have had almost 100% customer retention. That speaks to the testament of the reliability and the quality that we provide to our customers. It is also very exciting when I think about what are the growth opportunities for each of these businesses. 40% of the ATMs today are still serviced by the banks themselves and have not been outsourced yet. 80% of organized retail is untapped by our sector. We have started this initiative of direct to retail, where we built our own sales teams. For a company like CMS today with our scale, reach, and the quality of financials and the governance that we have, the retail sector is today very comfortable in talking to us directly. We identify the solutions that we can help them with, whether it is technology or automation related, and then we onboard them to one of our banking partners. That is sort of also how we are trying to improve the presence of our retail cash business broader into semi-urban and rural India. The CIT business, 60% of the CIT business is still very semi-organized today, and there is a strong push on the banks from the regulator and the Reserve Bank of India to change this in their future outsourcing. Our volumes have grown significantly in the last 2 years. We have added more than 20,000 business points in the last 2 years, which sort of translates to a 10% volume CAGR. Fundamentally, when you think about why banks partner CMS and why we are able to grow our share, in the ATM business, we have been able to grow our market share by almost 500 basis points in the last 3 years alone. Is the fact that as CMS, what we represent to them are we are a reliable, well-funded, high-net-worth, and most importantly, the safest player for them to work with. When banks think about working with a company in this sort of a business where they are entrusting us with hundreds and thousands of crores, the safety is a key factor and also of paramount importance to them. That sort of really brings me to thinking about when you think about understanding the cash logistics business and what makes us tick, what makes us grow, it's not really the usage of cash. It's really fact that our growth in the past and in the future is very intrinsically linked to how consumption in the country grows, how per capita income grows, we are linked to the growth of organized retail. We are in some way linked to the growth of India. That's why I like to think that we are really a story where the sum of the parts is much more than the whole. The business of cash logistics is a lot more than just the business of cash. It's very exciting when I think of what we have been able to achieve and what more we are able to do in the years to come, and how we can further scale and grow this business, and would love to have you along for that journey. Thank you. With that, I request my colleague, Manjunath, to join me on the stage. While that is happening, would also like to give you a peek into the video of trying to understand how technology works within the cash logistics business. We at CMS saw an opportunity to simplify an operationally intensive process by providing scalable digital solutions, and we have taken a technological leap through a 360-degree view on cost efficiency, risk mitigation, and agility. Our dispatcher module intelligently assigns crew daily to multiple routes basis cash forecasting. Route Mapper allocates ATM and commerce points for the crew to build operational efficiency. CMS Connect app automates real-time reporting to access transactions across the business points. CMS Agile platform automates transaction reconciliation to bring time efficiency. It is extremely crucial to manage risks in the cash logistics cycle, and we do it at each step. ALGO OTC application provides automated GPS-enabled passcode for cash replenishment towards a secure environment. RCM app brings agility by offering real-time tracking through QR code and drives client satisfaction. Machine learning driven analytics engine helps with risk profile prediction to prevent human induced risks. This makes us incredible. We are CMS, and we connect commerce. We are incredible, right? To start off with, good afternoon, good evening, ladies and gentlemen. I stand before you today as someone who has spent 30 years in the ATM ecosystem. Maybe a little over 30 years. When Pankaj Khandelwal, our CFO, introduces me to everyone, he says, "He's the first one who installed the ATM." I smile to myself because I know that I was not the first one to install the ATM, but I was there when there were five ATMs in the country. Today, there are 260,000 ATMs. So I've grown along with the ATMs as they grew in the Indian market, right? While I was at NCR, I had this opportunity to work with CMS in many of the managed services contracts that we have won, along with their help. But we gave them great respect because of their reach and their infrastructure. In 2009, when Rajiv and his team just came into CMS, they invited me as I was the MD of NCR, and they wanted NCR's perspective of what they think about CMS. When I went there, I told them that they had a large IT infrastructure. They had cash logistics business, and this together could play a huge business for them in the managed services sector. In 2012, Rajiv convinced me to join CMS, leaving the safe environment of multinational sector and joined as the head of sales. When I came into CMS, first thing Rajiv said was, "Walk the talk. You told something to me in 2009, now you do that." As my journey went closer to CMS and I witnessed what all they did very closely, I was so impressed with their role that they have in handling ATMs as well as bank needs. I realized that it was imperative for CMS to actually get into the broader sectors of managed services. But it was a little tricky because there were many players in that segment at that time. We decided to build rather than buy. That was the philosophy of CMS, and I followed that philosophy. Plus, a lot of customers at that time wanted CMS to become an OEM in the banking automation space. I hope all of you had a chance to look at our solutions on there. If you don't, please do visit. The importance of banking automation solutions at that space was that the banks needed for their network expansion. During demonetization, we saw the sector was actually getting little weak, and we had an opportunity to acquire a small managed services company for its tech services. As well as, we wanted to familiarize ourselves with how to use managed services and also learn, get ourself familiarized with it. We did that, and we went beyond that and through all these years, we set up four key businesses. The four key businesses, all of them offer end-to-end the capabilities to the customer. The first one is the banking automation solution, the second one is ATM as a service, the third one is the software, and the fourth one is the remote monitoring services. Together with all of this is what a managed services ecosystem is in the banks. Let me take you to the first business of mine, which is the banking automation solution. Banks will expand, and they will need automation solutions in their branches. As they go deeper into their network, there will be fewer companies to support them with the branch automation solutions. The multinational OEMs struggle to go as it expands into the interiors. We decided to take a different approach. We decided to take a partnership approach. We were looking for a world-class OEM who could support us with the entire solution range, what you saw at the back, which was basically the ATMs, cash recyclers, kiosks. We chose one, our partner who was from Korea. He is globally number 2, Hyosung. Along with this expansion of the branches, there was also significant opportunity for, as Rajiv mentioned, about existing ATMs would require upgrades and replacements. Those are also significant opportunities. Together with the branch expansion and this refresh program, we see close to 100,000 ATMs coming up for bids in the next 3, 4 years. Along with the Government of India's push for Make in India, at the right time too, we decided to take the plunge, and we built our manufacturing plant in Chennai. Some of our competitors had done this already 3, 5, 7 years ago, and they spent a huge capital doing so. We timed it correctly and strongly because the market maturity of the ecosystem of good suppliers were available for us. We could set it up at a fractional cost of the entire plant. The next one. The second part of my business is the ATM-as-a-service, and this is what actually the main portion of our business, which Anush talked about so eloquently a little earlier. ATM-as-a-service has got 2 segments. One is managed services, another one is the end-to-end outsourcing services. Managed services, when the banks have got their ATMs installed in their branches, and they outsource these ATMs to companies for providing them high uptime. Companies like CMS, along most of these opportunities require cash management also. The revenue model here is fixed monthly rate, and the contracts are 3-5 years. We have about 12,000 ATMs in this sector, which represents roughly about 6% of the market share. Please consider that as we started this business very recently. The second part of the business is the end-to-end outsourcing business, which is also called as brown label ATM, which popularly you might have heard. In this model, many private banks and few public sector banks have outsourced a percentage of their ATMs for this end-to-end outsourcing. The bank here lend their name, and that's why it's called brown label ATM. The bidder will have to spend the capital. The revenue model here is monthly fixed rate or linked to transactions. We have about 5,500 ATMs in this business, and which roughly represents 5% of the overall outsourced market. We have been doing this for last 3, 4 years ago. We have been very selective with the customer, as Rajiv said, and where we will invest the capital and based on the returns that we will get for the capital that we do. The revenue model, as I said, is transaction linked or monthly rate. Out of our 5,500 ATMs, 20% of this base is monthly fixed rate, as well as 30% of the base, the ATMs are installed in the branches. The advantage of installing in the branches is because the costs are significantly lower. We are able to predict the transactions also because the usage pattern is well known. Using our, like Anush talked about the cash report. We use analytics of our cash usage as well as majority of the services we do in-house. What are these services? The services like incident monitoring, cash replenishment, our field maintenance services. All of these services we do in-house, unlike many other service aggregators in this business. As I said before, we are very careful in where we put the capital, focused on the return. My third part of the business is the software business. Software, as you know, in the ATM that you have just experienced. Software plays a very critical role in customer engagement, customer retention and as a delivery channel for the banks. It is a very important piece of the activity that the banks look for because they have currently, what, about 260,000 ATMs? Most of the software is static, and it is heavily dependent on the OEMs. What happens is it is very difficult for the bank to change the software or make it customer friendly across their entire base because there are multiple OEMs and multiple hardware configurations. This puts a very difficult time for the banks to actually improve even the uptime. In India, that is why the multi-vendor software was created, which is the software that we have now deployed across many ATMs. The largest bank in India floated a global RFP for this software because they were having huge challenges around any changes to be made in their ATM network or to improve the uptime in their network also, they were struggling. This project was won by CMS, and it was very prestigious. It was about INR 500 crore order for us. It was very complex, but we successfully completed it. Today, the bank has improved its uptime as well as one significant factor, because of the change in the software control that they have today, they were able to make it a digital services platform. Today, whatever the bank has got on the internet banking platform is found on the ATM screen. The customers find it very unified interface available on the ATM. Many public sector banks today are queuing up because after the consolidation, they have multiple list ATMs, multiple OEMs. They are all queuing up to make their ATM as a digital services platform. This software that we have been very successful with over 65,000 ATMs, we branded it ALGO. To the fourth part of my business, which Rajiv mentioned proudly, and I am also very proud of this business. It is the youngest part of my business. It is the AIoT remote monitoring services. I think, when I earlier saw all of you queuing up to look at the future-ready remote monitoring, I was actually filled with pride. Before I get into the business, I need to talk to you about a little bit of history. Historically, ATM sites had manned guards, but this approach had lot of issues. Plus, Reserve Bank of India instructed the banks that they must provide safety and security at the ATM. We were very keen to get into the sector, but what happened is the sector attracted a lot of venture capital funds and therefore we decided to wait and watch. Some good companies were set up during this period, but in order to grow fast, they attracted unsustainable revenue models and growth. During COVID-19 pandemic, some of our customers who could not scale up with these players for the rollout came to us and we seized that opportunity, and we invested in deep tech. Actually, before that, we actually went and acquired a small company of 2,000 sites, and just before the deep tech was invested, we acquired this small company of 2,000 sites and we improved their platform. They had a platform. We improved that platform into a deep tech AI and IoT-based solution, and we started serving. What I will do now is I will show you a small video, which will take you through the AIoT business, which will be much better than me talking about it and struggling with it. With the evolution of advanced remote monitoring system, while addressing your surveillance concerns, you can now add a new dimension to your business through artificial intelligence. Welcome to the world of future-ready remote monitoring by CMS, powered by AIoT and RPA platform. Capture customer journey, footfall, track in-store customer activities, identify patterns and trends, queue management and energy consumption. With 40 plus deep learning artificial intelligence modules, get store statistics, aisle analytics, conduct health and safety audits, detect missing objects, and much more. Through our 500,000 connected devices, we secure more than 20,000 business commerce sites across India. Leverage the power of future-ready remote monitoring and never miss an insight. We are CMS, and we connect commerce. The 2,000 sites that we acquired. On that platform, when we built this AIoT deep tech solution for us, we powered it completely with the robotic process automation. I think if there was a demonstration, and I would request all of you to go and take a look at the demonstration. Currently, our robust platform handles more than 21,000 sites. On the video, it said 20,000, and this video was shot about a month ago. Since then, it has become 21,000 live sites. The strength of this platform is that it handles more than 60,000 alerts every day, and more than 50% of it is handled by the robotic process automation with zero misses, and the balance is handled by the manual agents. More than 1,000 critical threats have been averted by this platform. This established us as the number one in this banking ATM segment of the remote monitoring. We continue to invest deep tech because we have to stay ahead of the competition. We have built more than 40 plus AI modules. How are they important to us? Because this will allow us to expand into the adjacent sectors of our businesses, such as retail, hospitality, healthcare, warehouses, and premises. So this opportunity is very significant for us. Next. As I said, we are number one in the banking sector as an AIoT remote monitoring services player. What I will do is to summarize my four businesses. I would like you to take you through the financials to summarize my business. We have grown significantly in the last three, four years in our business, in my business, and we have contributed very large amount of revenue for the CMS's revenue. We were about 15%, as Rajiv mentioned, in FY 2019 of the CMS's revenue, and today we have contributed close to one third of the CMS's revenue. We have grown to that level. In spite of the CapEx invested in our business, we have close to about one third of the revenues of CMS. Am I right, Pankaj? We are close to about INR 560 crores of the CMS's revenue. So that's a significant achievement for us over the last three, four years that we have contributed to CMS, and we also have significantly contributed to the EBIT margin. More than 330% EBITDA we have done. As I stand before you today, I'm full of pride and excitement for the future of CMS's business in the managed services space. I am proud to say that today we are number one in the AIoT remote monitoring services, we are number one in the software business, we are a market leader in the banking automation solution space, and we are also the brand to be reckoned with in the managed services space. Thank you very much, and for this opportunity, I will hand it over to Pankaj Khandelwal just now. Thank you, Manju, and good afternoon to all of you. I have had the privilege to working with CMS for last 17 years. It has been a unique experience. Initially, working with promoter group, then the large private equity player, and now as a listed entity. I have had opportunity to see CMS transform and adapt. We have gone from a very high-debt company to practically zero-debt company, and from very thin single-digit margin profile to a strong double-digit margin. Both our businesses have done very well. Higher volume and focus on execution of our order book help us to improve our revenue by 20%. 33% growth in PAT. 300 basis point improvement in our margin, which was driven by our expansion into tech-related new businesses and automation in cash logistic business. The EBIT of our managed services business had grown by 49%, and at the same time, our cash logistic business EBIT has grown by 27%. In fact, if you look at our eight quarters, we have had a very consistent and strong quarter-on-quarter and year-on-year growth. In seven of these eight quarters, our PAT grew by more than 20%. In last quarter, we have first time in history of CMS had crossed the INR 500 crore revenue mark. Taking a longer term view, our financial over the last five years, our revenue has grown 14% CAGR. It could have been better. Please note that this period, we have two years of the COVID. 95%, if you see the INR 1,858 crore number in FY 2023, 95% of our revenue is from services business. And majority of this revenue is multi-year recurring, which gives us a very predictability of the future revenue. Our EBITDA and PAT had grown 3 times, and margin has almost doubled. This was driven by changing business mix and high value-added services, scale and synergy across business lines, and investment in technology and automation. INR 1,100 crore of the OCF we have generated in last 5 years, were driven by mainly our margin profile and the improvement and the razor-sharp focus on our working capital management. Getting the investment capital cycle very right is very important. We are very judicious in when and where to invest our capital. From 2016 to 2018, when we are not sure of the industry cycle, we have reduced our CapEx and done a CapEx of only INR 70 crore. When the environment changed, and we see the signal of the improvement, at the same time, PSU Bank was recapitalizing. We have started into investing in the CapEx. During this time, we have also expanded our managed services offerings. Over last 5 years, we have invested more than INR 700 crore for the growth and expansion. Despite this peak investment, we have expanded our ROE by 700 basis point to 21%. Also at the same time, we have consistently paid dividend, and our dividend payout ratio is around 23% and above. As on March 2023, we have INR 450 crore of cash and cash equivalent in our books. This liquidity is going to be a differentiator for us because the flexibility to invest when our opportunity comes will help us to improve further. During the year, outlook of our credit rating has improved to positive and then upgraded to AA+. I am happy to inform you, only 1% of the company in our peer group have AA+ or more credit rating. With this, now I request Rajiv to talk about future growth opportunities. Thank you. Thank you, Pankaj. Nice job, Pankaj. My team has done a good job. I am left with 5-7 minutes to wrap up. This is the fun part, right? This is what excites us. This is what brings us to work every day. I want to talk to you about where we see growth, how we think about growth in the coming years. Before that, it is important to understand the principle on which we work and how we think about growth, right? I am going to use this slide. I am going to borrow this slide, but I have seen it somewhere, which is sort of what is our playbook for growth, right? Fundamentally, we think about first, we will continuously seek to invest in our core business. 10 years ago, the core was cash management. Today is both cash management and managed services. Our goal there is to be world-class. When we are world-class, we will have the best quality a customer can get. If you have the best quality, your customer retention is not an issue. You are able to sometimes charge a premium. More importantly, it helps you attract talent, and you can become world-class by deploying a lot of technology. If you think of the CMS management team of our top 10, 15, 20 people, less than 20% of our people come from the sector. That is deliberate. If you look at the four of us who are here, Manju is the only one who comes from the sector. I come from a tech background, Anush comes from a consulting background, Pankaj comes from a financial and obviously a manufacturing background. That helps in having a very different mindset compared to your peer group. It is a mindset where you are constantly looking to improve, and that is what we call innovation, where there is nothing limiting what we want to do. We do not come with any preconceived notions. The goal is to give a customer a great experience, high quality, lowest cost. Maintaining the lowest unit cost economics is critical for us. In a logistics business, it is very critical, and that is what we seek to do. You take what you earn from your business and then you look at expansion. When you think of expansion, invariably, you think both horizontally and vertically. Usually, it leads to technology-oriented solutions. You are moving up the value chain. The approach here, again, we take is very different. Normally, you would look at a company with a new technology offering. They would want to pilot it out, let us say, at a smaller customer. They'll make it work, improve it, go to the mid-size customer, improve it, go to a big customer. Then we thought of go reverse. We will put our name and reputation on the line and bid for large, complex projects with the largest banks in the country. We think differently. We think if we can make it work at that level, the rest will follow. That is very critical for just deepening your customer engagement. Manju talked about the multi-vendor solution business. It is a big risk and a big bet for us. You think of that particular bank, their operating system of the ATMs is managed by CMS. The seat at the table you have is not only on the ATM channel or the branch banking channel, but you're also with the CTO and CIO of the company. The bank thinks of you very differently. You're way more critical to them than just for the currency logistics business. When you use that and you can win with large banks and with large financial institutions, it's sort of you're bringing the best of CMS. You think of any bank today, we would have started with a retail cash logistics offering in 2008 or 2009, moved to ATM cash logistics, then moved to a banking automation, then hopefully an ATM managed services offering, and now an AIoT offering. You think of a vector and think of the number of services we're selling to a bank, it has increased dramatically over time. Our cost of sale remains very low still, right? The same team will be managing the customer. Then we look at ourselves as a very deep B2B company. We track how many customers we have at each category revenue. When I think of INR 100 crore-plus revenue customers for us annually, this was maybe zero five years ago, three years ago, five customers today. You think of the INR 50 crore to INR 100 crore customers, again, this would have ramped up. You think of even INR 5 crore annual run rate customers that are gone from 15 to maybe 30 today. At each level, having a different set of offerings, having the right to win makes a big impact when you're a B2B business services company. For us, that's the playbook we want to continue on, right? We want to strengthen our core, make sure we never lose that. That's our right. We generate cash flows, invest in expanding TAM, and make that a virtuous cycle so that we can continue to accelerate growth in our core and also expand the market opportunity which we are playing in. With that, let's switch to how we think about growth, where we are today. The macro is looking very positive. When I think of the country dynamics right now, the expectation of what India can do in a global economy over the next three to five to maybe 10 years, there is pragmatic bullishness. Our economy remains a consumption-oriented economy, which works very well for CMS. Consumption leads to spend of currency, that leads to growth for us. When I think of the biggest industry set we cater to right now, which is the banks, the banks have looked the best condition they have been ever. If I talk to CEOs of large banks in the country, they are looking at growing their business 4x in the next 10 years. If a large bank can grow 4x, we should be able to play a role in that growth and helping enable that growth, helping them get their network, the reach, and hopefully grow faster than that. When I think of retail, which has rebounded with a vengeance after COVID, you look at e-commerce growth, and I think of that opportunity for us. That's a multi-decade growth opportunity for us in the cash logistics business, and hopefully some new services we aim to launch for them in the coming years. Then I think of what happens in India today, and if you get rid of the rhetoric and the noise and the marketing from others. We look at this data every day, and it's in your CMS India Cash Vibrancy Report. The amount of currency we collect, not from just organized retail, but we collect from NBFCs and insurance and collections companies and petrol pumps, is very robust. So I look at this backdrop, it gives us a fairly strong confidence in how we think we can grow in the coming years. For our four businesses right now, I look at our cash logistics business. There is 40% of India's ATMs, 100,000 ATMs are still managed by a bank themselves. Now, 60% is outsourced. This used to be 50%, let's say, five years ago. The 50 has become 60, it'll become 63, it'll become 65, it'll become 70. I don't care how long it takes, but that's the direction this will move in line with any global trend. Anuj talked to you about the retail side of the business, which has bounced very well with very high growth. The initiatives we are launching there of partnering with payment banks, of working with large format retailers, of going directly to retail and offering solutions, I think that should give us a very good growth for that business. I look at the managed services business. First, large public sector banks, after the mergers, have a refresh cycle where 80,000 ATMs are outdated and have to get refreshed to the latest technology. That will play out in the next 2 to 2.5 years. The private sector banks, which had a lull in expansion, are right now growing their branches. Declared data on the private sector banks talks about 10,000 new branches coming up, which will lead to almost 20,000 new ATMs coming in. The BLA business, where we remain a cautious and a small but important player, itself will see almost 100,000 ATMs moving from the balance sheets of banks to private sector players. So this is a huge, massive opportunity. We will judicially choose which parts of it we want to operate in. In our remote monitoring business, more than 60% of the installed base of ATMs and branches need to get the solution implemented. It's still not there. There's also the 40% which will expire and will move to the next generation technology over the next 3 to 5 years. Immediate adjacencies for us is going from ATMs to bank branches to NBFCs to gold loan branches to retail to warehouses, whatnot. We've had a very dramatic ramp-up. We will take some time to consolidate this business and our technology offerings and create the AI module so we can have the next big wave of growth in the sector. Finally, in organic growth. As a team, we have had a very good experience of driving programmatic M&A. I do also want to caution because I know M&A gets lots of people excited, we are not a buy and grow team. We look usually for small acquisitions to enter new sectors. In our core businesses, we are willing to make bigger bets, provided the valuation is right. We have done almost six to seven acquisitions in the last decade, but the sum total of money we spent is less than INR 250 crore-INR 300 crore. We look for aggressive payback periods, which is either the cost at which you buy the company or how you drive synergies. The industry will consolidate both in cash logistics and managed services. There are many companies which do not have the financial strength or the technology capabilities to see the next five, seven years of change which the industry will bring. Outside this, when I think of the areas we have been examining over the years, I have not yet done a deal or a transaction for various reasons. Fintech remains an area of strong interest. Broader business services. I have to keep reminding myself that when I came to CMS, my dream and vision was to make a market leader in business services. Puneet, anything we should worry about? That may be my timer. It is very easy. It is not- It is here, it is not there. When you put this together and you think of the TAM opportunity, we are talking about market opportunity for us where the market size in FY 2021 to FY 2027 over a six-year journey should grow from INR 8,500 crore, the market, to INR 22,500 crore. CAGR of roughly 19%. We are not equally going to play in all of those spaces with the equal rigor. There are some which is core, some we are very keen to grow into, some we will be careful about. But that is a market opportunity of growing about two and a half times. When I correlate this to where we are, during IPO, after IPO, we talked about our growth aspiration, and we gave a guidance. The only guidance we have given is that we will look to double our revenue from FY 2021 to FY 2025, which sort of is going from INR 1,300 crores to INR 2,500-INR 2,700 crore range. At the midpoint today, at the end of FY 2020. That is a CAGR of, I think, 19%. At the midpoint today, we are a little ahead, where we are growing at 20%. So we seem to be on track to be hitting the target we set out. It is important for us to give you an indication of the midterm from where we stand today and not just be content with looking at FY 2025. So we are looking to double FY 2020 under 25. When we think of FY 2023 to 2027, it is not a target. It is just an aspiration. It is a very early peek into how we aspire to grow. We look to grow from 75% to 100% from here, which would put us in the roughly INR 3,400-INR 3,800 crore revenue range. Before I end, I want to summarize the investment thesis beyond the numbers. I am grateful to some of you who are shareholders. We have over one lakh shareholders in the company already. I am grateful to our 25,000-member team. I am grateful to my entire leadership team, which is here, for being part of an exciting journey. What you have here is a different company in many ways. It is a cautious company, growing very well, with a team which has weathered many cycles, has seen many ups and downs, and has consistently driven growth over chunks of time and still kept expanding margins. It is a team which has delivered, and if you had to correlate, create a XIRR sheet from 2009 to 2023 with everything we have done, the XIRR would be close to whatever price was yesterday. Today, the stock would be close to a 24% XIRR. It is a team which has been very judicious about capital allocation. We have almost spent 80% of capital on growth ourselves, and maybe 20%, 25% into M&A. With that, I would like to end. We would like to pause before we get into Q&A, and thank you for your attention and your time. Thank you, management. That was a very exciting presentation. We will start the Q&A session now, just a couple of minutes before we get the management seated. We have two people roaming around with mics, so if you have a question, please raise your hand and one of our team members will find you. Request you to hold your questions to two or three per participant, just to give interest to everybody. We start? Who's sort of choosing and doing what? Your team is doing? Okay. You'll see them stand. Okay. Is it on? Go ahead, yeah. Yeah, hi. Thanks for the opportunity. I think in one of the earlier calls or conversations, you had referred to getting into collection services as one of the possibilities, right? I saw the slide where you illustrated right to win as an important metric, right? Just wanted to understand from your perspective, in verticals like collection services, et cetera, how would you develop a right to win? Number one. Number two is, again, correct me if I'm wrong, but your experience with interacting with banks is more on the CTO, CIO side of it. Whereas when you get into these other kind of services, you might have to interact much more with the business side of the divisions. How would you bridge that kind of a gap? Yeah, those are my two questions. Thank you. Let me take the first question on collections. There is always a constant endeavor within CMS to keep looking at newer opportunities for growth. This is a business that we first did very small scale pilots in just before COVID, and then we ramped down that efforts because we just got focused on just securing and then growing our core business. What we like about the collection space is everyone in India that you speak with, whether it's banks or fintechs, new-age payment banks, everyone is talking about lending money. Hardly anybody was talking about collecting money. But then when you anecdotally speak with a lot of people, you realize that this is a very critical part of their business. Just the regulatory norms around in provisioning for delayed collections and NPAs just make this very critical in terms of their competitiveness and success. Our idea was to try and see, is there room for us to craft a business model which is built on three things. The first is there are more than 30, 40 different, very small, semi-organized to unorganized collection agencies in the country today, but no one has scale and no one who's working across the country. The second was, if you look at the different parts of the collections value chain, there is technology, there is then the whole contact center and how do you reach out to the customer. The third part is the field and the collection, actual collections part of it. There are many companies doing each one of these. There are many new-age companies as fintech who are doing the first part very well. There are large established BPOs doing the second part. Then, like I said, there's a very large set of people doing the last one. But there's no one doing all of this together. The third element, which actually sort of interested us the most, and when I go back when I spoke about why banks fundamentally work with CMS, is the fact that looking at what has happened in the collection space in the last 12 months, we have read enough stories about one bad actor creating so much of a reputational risk. to the NBFC or to the bank. I think that's important. When banks seek to partner, they want to work with companies who have the same sensitivity towards reputation management and towards managing brand and doing things in a certain right way. As we stand today, we are still in the incubation process of our collections. We've put together a team of almost 100 people. We have hired five to six very senior leaders from the industry. We will treat FY 2024 as the period when we would like to incubate, invest, and see how this business can scale if we can craft it in the manner that we've thought about it. We've got pilots going with five to six large NBFCs. We are in discussion with at least 15 to 20 more. But we will use this year as a period where we would like to try and see how this works out. Towards the end of FY 2024, we will come back and update you on what would be the future prospects for us in this business. Just to add to a couple of points there. We deal with many people in banks, right? The CIO, CTOs is actually more recent with managed services and software, but the ATM channel or the cards team, we've been dealing with them for a long time, even at the branches. They're the brand and reputation of quality of what we do. Therefore, this business is also of more concern. We want to make sure that and that's the reason we have not acquired anybody. Because when you acquire, whatever the culture may be, it's a bootstrap venture, we do it in-house, we want to do it right, it may never take off. But we will not mess up with the brand, and we will not take risks to do this in a manner which is wrong. Testing year, may take two years, I don't know, but we have been bullish about the potential opportunity here. We will go at it pragmatically like Anush talked about. But we've been very surprised with the interest of large NBFCs for CMS to enter. Can we execute and deliver a better solution? We don't know. We'll have to see that out. Okay. Just also request you to state your name and organization where you are from before you ask the question. There are some people still standing. If they want to sit down in the front. Manish, you want to sit down? Yeah, thanks for the opportunity. This is Varun Arora from GE Shipping Family Office. My question is to Manjunath and Rajiv, you, regarding managed services. When we think of BLA business, you mentioned the word cautious, right? Just want to understand the risks that are there in that business. What are the risks that you are wary of? When you work with certain banks, how do you decide with whom to work? What are some of the key parameters you look at? Yeah, thank you. I am not sure whether you got it. I did mention that if you get a chance, please go through what the CMS Cash Index report that we have shared with you. That gives you the analytics of cash usage. It also indicates where it has been more prevalent, where the cash is available, cash is being transacted, and from the retail, the entire value chain of it. When we decide on which bank to bet on, having been in the cash management space for so long, we know effectively which banks have large transactions, large debit card base, and how they want to populate and look at their business. That is how we decide whether this is worth investing our capital or not. Not that we are worried about the capital. We are only worried about the return in the capital. If you go behind banks, every bank wants to outsource, right? Every bank wants to outsource, even the small debit card strength banks also want to outsource. But we are careful in that aspect of choice. I want to add to that. Sorry, is my mic on? No. I just want to use my mic, that's fine. I don't need to. There is a regulatory interchange price in the country, which is INR 70 per transaction. That doesn't change. We want to work here. The reason we are cautious is because in our earlier journey, wave one, we saw many companies come and become managed service providers, set up the capital, build ATMs for banks, grew very well, but they sort of modeled this on a transaction level, which didn't sustain either due to more because it's a supply. If you put 100,000 ATM in the country, the number of transactions per ATM is going to dip down. And if you actually don't add up, it should actually hopefully steadily go up. So figuring that out is one. Second is contract management. If you're entering into a long-term outsourcing deal, think of IBM and Bharti 20 years ago. Contract management is critical. Who's the counterparty risk you're taking? You can say it's a bank, but the contract is very careful about how can you pass on the price increase? What happens when ATM shut down during COVID for 2 months? I don't know, many things. So I think for us, building in the risk of what can go wrong and then still win in a competitive market and drive an IRR, which is way ahead of anybody else, limits the opportunity for us. That's why we are cautious. There are many banks who would love for us to participate in this. We don't want to lend our balance sheet unless we can foresee return of capital, return on capital in their 7- to 10-year period. We, of course, model the fact that X transactions will go down over a period of time. It could go down because of digital. It could go down because there are more ATMs coming to the country. Therefore, being cognizant of that risk and maintaining our return profiles is not a very easy task. Rajiv, that was a very impressive presentation. Thank you. I haven't had the chance to read the cash report. The question I'm struggling with, Rajiv, is that all across the world, or let's say even in India, you can see a clear effort by the government to cut down usage of cash. The INR 2,000 rupee note is now gone. Digital form of payments are becoming all-prevalent, even in the lower down blue-collar workforce. I'm sure all our behavior around cash is changing. Personally, for example, I don't think I've used my physical wallet to pay for cash for, I don't know for how long. How does one intuitively think about why the usage of cash in the economy cannot suddenly plummet? It's holding up so far, and I'm perplexed about why it's holding up. But as the government keeps finding new avenues to cut down usage of cash. For example, just at the top of my head, a thought that occurs is, what if the government forms a rule for organized retail that any sale transaction over INR 100,000 will attract a higher GST, right? As a nudge to customers to use digital. How does one gain the confidence that the usage of cash in the economy will grow in line with nominal GDP growth, and that what is core in your business, the core revenue stream, might not suddenly be at the risk of mortality? Sure. You want to take this? Yeah. I think I can take on some of. Sorry. I will take on some of these points, and the team can add to it. I think the first is, like you said, Manish, it is not very easily understood from an intuitive perspective. I think a lot of the cash business is reasonably counterintuitive, which is why we saw there is some merit in trying to flesh out as much data as we can about what cash we handle, where it comes from, and where it goes, to try and provide as much clarity as we can. We have tried to make some sense of the data. I am sure when people go through it, there will be many other insights that can come out. What we have always believed in, and this is something, in my 13 years in CMS, I have been hearing it at least for the last 10 years, has been the argument is usually a binary one, which is there is a cash versus digital. I heard this with debit and credit cards and then wallets and then UPI. All kudos to the country. I think the innovation of UPI and just the space with which the traditional innovation and scale has happened is just phenomenal. But fundamentally, I do not think life is binary in that way. I think it is a lot about coexistence. That is point number one. The second is, and I think fundamentally what leads to cash being very resilient and very sticky in the Indian context has been essentially where we are as a country in our development curve. We are relatively a still middle-income country. We still have a very long way to go before the large masses of people have better per capita incomes, and that is when they can start choosing to exercise discretion in terms of how and in which manner they want to spend their money. Right now, a lot of the spends and consumption driven is around essential spends. Third, I think this is the most important argument. When you compare cash versus a lot of other different payment systems, we are a fraction of the cost. If you add in the total cost of cash management in terms of what companies like us incur, what banks incur, and what merchants incur, I think somewhere it falls into a range of about 15 to 20 bps. When you compare that to other digital payment costs, whether it's cards which are between 100 to 150 bps, or in UPI, which has a certain cost of transaction, despite the fact that it's subsidized, there's a real cost of transaction because of the technology investments and the risk cost and the whole chargebacks that go into it. The last point I would like to make is, if one were to think of a scenario in terms of what if, what happens, look at our analogs in the global context, right? If you take any of the other cash management companies, just to give you an example, like maybe a Brinks or a Loomis, who derive a large part of their revenue from developed, mature economies in the Europe and the U.S. For the last three years, for the last five years, whichever timeframe, they've been able to grow their revenues. A larger portion of their revenues are from cash logistics. They've been able to grow their revenues at about 10% CAGR. I want to answer this in a different manner, MG, which is, what we cater to is, first of all, is organized currency, formal currency. We have no play in the informal currency of the country. I wish it was, we'd be 10 times the size. So we have no business model around the informal currency cycle. In fact, all of these moves bring back currency into more formal economy. That's when we feel we have a bigger chance. Why did we bounce back post-demonetization? Why did we not dip much during COVID? We've had big shocks. Again, I'm not saying shocks won't come, changes won't happen. I'm just saying that our business model, what Anush was trying to explain in his presentation, isn't around the amount of currency we handle. It's to do with the number of business points we handle. We think there is a growth dynamic in that, both in ATMs, low growth, retail, higher growth, and we earn money based on the number of business points we cover and not the physical amount of currency we are handling there. Number 2 is the fact that when I think of financial inclusion, what we see in semi-urban, rural, currency is a very important backdrop. I will transfer money today to somebody who is working with me digitally. He or she will then go and transact INR 50, INR 100, INR 200 by cash. That currency is still roaming around there, doesn't come back. I actually think contra to what people like to think of, because when you refer to currency in circulation increasing, I don't see our life correlated with that at all. I actually think that if, I could be wrong, but my contra view is that if currency in circulation goes down, our revenue will go up a lot. Because you will need more of a work to get the efficiency of the currency cycle going. We have been talking to the regulators, saying, "When I am going to a bank currency chest, withdrawing the money, depositing it in the ATMs, then I have a different route going to retail, bringing it back. Why can't I just do that from my chest?" Why do we have to make those trips? I just think there is a lot to be done on efficiency of working on the currency ecosystem in the country. Currency should not be such a large percent of GDP. We actually think that our business model will do far better with more activities and more trips because Anush, our cost is really very low. When I compare the cost to a UPI transaction, we are still a fraction. And I think we will be a very efficient model for the country to save printing our currency or time, which may not be a focus for the regulator right now. Sorry, just a follow-up question, Rajiv. Did I understand you right? That let's say there is an ATM which today dispenses, say, INR 10 lakhs a day. If that ATM, because let's assume currency usage in the country declines- Sure instead of INR 10 lakhs a day, the ATM dispenses only INR 5 lakhs a day, half. Yeah. Would your revenue stay unimpacted on revenue you earn per ATM? The way we look at it, and then Anush can tell you the data on how the currency. Number one, currency dispense through ATM is also linked to inflation, right? A per transaction amount five years ago, INR 3,000, today is INR 5,000. Inflation, growth, whatever it may be. Number of transactions may have been in the 100, 110 range per day. But our revenue model for an ATM business for cash logistics has mostly become fixed today. It was variable earlier. I think of pre-demonetization 2015, we were making maybe 11 and a half trips per month. Today, we are making 11 trips a month, every alternate day on an average. The question is why? Why do we have to make those trips? Why don't we make three trips, right? One, you can say maybe physically, the ATM can only hold so much capacity. Maybe. And now with INR 2,000 rupee notes going in, it can actually hold lesser, possibly. But we don't get it. This is noise, right? I simply look at the fact that saying, if a bank in India has to hold currency in its chest, they pay no cost for it to the RBI. The minute the currency leaves the chest, whether to get into one of our networks or vans or for whatever reason, they have to pay an interest cost. The interest cost at 4%, 5% is far higher than the trip cost we make, and therefore the banks will keep using our ecosystem to get just in time right. They will never let cash dry in an ATM. They never let cash dry out at a branch. Can you imagine a bank who runs out of cash in branches? There could be a run for the bank, right? Therefore I said, our unit cost economics, you could argue that in five years' time, we are the only one player left and we can charge six times the money. We have to compete with ourselves the cost to make sure the cost of what we do remains very competitive for the banks to be able to continue to use us. Sorry, does that help? Yes. Okay. Thank you. Stay focused. Hi, I am Dr. R. Ramakrishnan, Chairman, Transforme Advisors. My compliments to the team. What comes through very clearly is amazing teamwork, a high degree of empowerment, and a high degree of ownership from everyone who has spoken today. My warm compliments on that. I had two questions. I noticed that in FY 2021, the revenues went down while the operating profits and the operating profit margin went up substantially. Leads me to the question whether during the COVID time, because you were taking a riskier business in terms of managing all the ATMs, putting in money there, were you able to improve margins and thereafter sustain margins? What is the reason for that margin uptick? The second question is, obviously, given the very large different options that one has today in terms of making a payment outside cash- Sure Very easily you can use UPI, very easily you can do transactions through net banking, very easily, there are payments banks that are around, et cetera. And then multiple options you are having, including RuPay, et cetera. So what do you see as the impact, say, 5 years down the line in terms of the current business model? Because quite a bit of what you are doing is physical cash related and cash management related and things like that. If so, what are you planning in terms of a shift? I really appreciate what is being planned in terms of IoT and intelligent IoT and all of that. That is a step in the right direction. Third question, whether there are opportunities internationally in terms of the gamut of operations that you have handled and the complexity. Handling many countries would be like handling a small state in India. Do you see any opportunity of this kind internationally? Thank you so much. Great questions, Ram. I am going to take some of them because they are closer to my heart. International is something we have evaluated very many times, right? 2012, 2013, 2015, 2016. Then we gave up every time. We said, "This is too much distraction. We need to focus on our core. We think we got a lot of growth opportunity here." It is not easy to think of We also looked at many failed companies from India who tried to expand globally, and we said, really what worked for them was either technology offering or labor arbitrage. We cannot explore that in our business. We said, "We have enough growth here. Let us focus here." But again, we thought about it about 12 months ago when a large global customer of ours, a multinational customer of ours, wanted us to set up shop in the U.S. Now, we were looking at South Asia, right? South Asia, not in Middle East. We said, "Why?" And they said, "Because when we work with, let us take whatever company in the U.S.," they said, "We plan the entire month with them, which ATM, which day of the month, which retail store, which day of the month, they still cannot execute. Here we let you know in the morning the 4,000 ATMs they will go to, and you finish it by the end of the day. We want this network there." It felt good, and we said, "We just have enough opportunity here, therefore, we will still focus here." But when I think of from a long-term perspective, the IoT business, potentially, yes, we would, because we think if we can become really world-class in that, there is something we can export. We would take a different approach. We would partner with the best companies there to go launch it. We still think, again, we have a great market opportunity. It's a massive market opportunity. We can do well. Also, we'll have to attract some talent to think about that. I think from a technology business, yes, we will. From the cash logistics business, I think we have enough opportunity, and I don't think really we would want to distract ourselves. To your first question on how do we think for a 5 years perspective with all the different payment options available. Our view is that we feel our Let's take retail. Just the growth in retail and the number of points we have seen coming up. That retail store, if you go to any retail store, whether it's in Bombay or Delhi, I'm talking metro still, right? 60% of our retail business is actually urban. Only 40% is semi-urban or rural. There will be a new retail store in these cities. They will need cash management. The amount of transactions a day could be 50% in cash, could be 20% in cash, but they need a company like us to come and manage it for them. We also have currently a very large market, which is sitting under the cash logistics players, which is handled and tackled by business correspondents, by the payment banks dealing with currency. That's where when Anuj talked about CashX as a solution which we want to launch and partnering with them. We think there's a massive amount of money which we can handle in the formalized manner out there. I think from us, the business model still remains about formalization, more commerce points to transact, and they will have some ratio of digital and cash. Whatever cash levels they have, INR 10,000 a day, INR 50,000 a day, INR 1 lakh a day, they will need somebody like us to come and evacuate and manage it for them. I missed and forgot your second question. Sorry. What was, do you remember Second was more about which business is for future. The margin expansion. Oh, margin expansion. FY 2021, we did a few things. One, we were lucky when COVID hit. I think first thing, we had been driving a lot of automation of internal operations for a year and a half. We did not know. We just tried to automate and just get some of that done. Secondly, we were looking to acquire a company, and thanks to COVID, we could acquire it faster and much cheaper, so that revenue and business came onto our network very quickly. Number three, we are able to manage cost, and we are able to scale up or protect revenue. Third, our expansion into the managed services business has started playing out. Some of the contracts have started delivering results. The big ones came later, but some of them started coming in. Our revenue dip was, I think, 6%-7%, and the PAT increase was In fact, I remember pre-IPO, and during IPO, people are like, "This margin profile is substantial improvement. This was cost-cutting. Obviously COVID, you cannot repeat it." Thankfully to now we have taken that much, much higher after that. Yeah. Thank you. Thank you. Hello. Am I audible, sir? Yes. Yeah. This is Piyush Jain, individual investor. Sir, I want to check, we are generating around INR 350 crore to INR 400 crore free cash flow every year, cash flow from operation. This year also, we had around cash flow of INR 350 crore to INR 400 crore. INR 450 crore cash we are having on the balance sheet. So what I understood, banks wants to do more of the outsourcing ATM, which is your brown label or something, where they don't want to do CapEx, and the CapEx would be done from your side. So what is the outlook for next two to three years where this cash flow generation of the next three years and the cash sitting on the balance sheet will be used, and how much would be the annual CapEx would be from your side? First, this is. Second question, we are doing some ATM manufacturing site in the Chennai or some manufacturing. I don't know about how much CapEx would go there. But will it be a manufacturing will be a lower margin business, which will impact our blended EBITDA as a overall? Sorry, your. Yeah. Third point, like the EBITDA margin is improving from 16%, 3-4 years back. Now we are around 27%-28%, and this last quarter, we did around 30%, 31%. So this EBITDA will be sustainable for next 2-3 years or the way we are growing and the target around INR 3,400 crore by FY 2027 or something. The further operating leverage will kick in and we can, an annual basis will go move towards 30% plus something. Thank you for my side. I hope what all you're saying, a lot of what you're saying comes through. But, Pankaj, do you want to answer some of these questions? Yeah. So if you see the first question of around INR 450 crore of the cash available with us. See, I just told you that we are paying around 23% of the dividend payout ratio. And over a period last 5 years, from 2019 to 2023, we have spent around INR 700 crore of the CapEx for the expansion and the growth. There is a lot of refresh cycle of the ATM which is coming, but we are very judicious in investing the CapEx. Whatever is our threshold for the IRR, we will invest only for those type of projects, not for the other projects. We are looking for a lot of other opportunities, which may come during the next coming period, where we will invest for that. BLA, we are always very cautious. I'm saying we are cautious because considering that it should threshold our IRR limit, as well as we are very choosy about the banks we put for the BLA for that. I will tell you about your other question. Are you finished? Yeah. Yeah. Thank you. Yeah. The manufacturing assembly is a very strategic decision. When you think about any new RFP which will come out, or most large RFPs, they will be end-to-end. Balance sheet or not is a separate issue right now, right? They will say, "We want someone to be able to provide the machines. They should do the maintenance, they should do the cash management, they should do the remote monitoring." Bank could spend the capital, they could want you to do the capital. That does not matter right now. If you want to bid for them, given the new Make in India norms and push, if you don't have manufacturing, you can't even bid for it. You are out. You lose the entire value chain. Therefore, I don't think this is about "kitna kharcha hoga," it doesn't even matter. It is a necessary thing for us to do. Having said that, therefore it's not about making low margins. I don't think this will lead to lower margin on how we sell. Our focus remains on doing things which make sense. To your second question on INR 450 crores, we have on our cash flow generation, how do we deploy the capital? How do we give it back? Absolutely valid questions. Our view today, and that can change over time, is the fact that we don't want to be sitting on too much cash. However, we want to have cash available for strategic moves. Growth capital is easier to forecast and predict, but strategic moves, you don't know. I think we're at a very good juncture, the best I've seen in the last five or six years, when you think of potential for M&A. Global impact on VC cycles, impact on India, fintech industry in India, lack of their business model, lack of many of their viabilities, them having good technology but not able to penetrate the bank. We know the banks. We have a distribution network. Partnerships could emerge. We do not know. We will see. We have been giving dividends, and we will continue to give dividends, hopefully, basis board approvals. Over time, I think if we do not see a good use for our cash, that will get returned to shareholders, obviously. There was something else? CapEx certification. The capital direction is. Last two years, we have spent about INR 200-INR 210 crores of CapEx. Our capital forecast needs for this year are roughly in the INR 150 crore-INR 175 crore range. Unless we win a huge order, big win, multi-recurring revenue streams, which needs a capital investment, we will come back and update you. But as of now, that is what we think as the capital cycle needs for us. Also, growing and expanding and upgrading our network. You also had one more point I wanted to make out here on CapEx. We talked about the plant. The manufacturing plant was done last year within the capital outlay we had. So we did not go and spend more. We actually managed that within the budget we had for there. In fact, we came a little lower than what we had forecasted. EBITDA margin. EBITDA margin. As a management team, now we have done 12, 14 years together. Every quarter, we do simulations on revenue growth, margin profile, market share. You do not get all three right every time, but that is our ideal thing. Where we sit today, you ought to understand that our margin profile is significantly different than many other players. Number two, the sector is growing very well. I would expect very high competitive intensity. How do we grow in that? How do we win in that? When do we focus on share? When do we focus on margins? You will have to hope and trust us to do what we have done till now, to do the right thing. We have capital, thankfully, and therefore we do not need to take debt. But we are responsible for capital, so we think of cost of capital. What our equity return capital rate is 13%, 14%, plus a margin of safety is what we seek when we think about investing capital. But sometimes you have to make strategic moves. When we entered the multi-vendor solutions business, we were willing to do that even at a loss because you just get into a very strategic element. We did not make a loss, we made a profit. But you have to do the right thing for the longer term. So difficult to forecast margin profiles. Had you asked me three years ago, would we be 28% or 30 or whatever, I would not have known. I think we watch it every quarter, and if there is any change coming, we will update you. Follow up on that. What will IT market share or margin protect? I said we simulate and manage this every quarter, right? It depends on the competitive moves. I wish it was only market share. In new businesses, and actually it is also very deal to deal specific, right? How sometimes you want to enter a customer so that you can sell other services. And therefore, we do not take a loss leader strategy, sort of not our culture. But for us, we do think about scale. We think about being a number one, but not number one because there is a marketing element to it. We want to be number one to bring down our unit cost, right? If we can get a unit cost down, it makes it sustainable for the longer term. And also, we have a strong confidence that once we are able to penetrate a customer, our quality will help us do what we do today. Our customer retention is almost close to 100%. It is never 100%, but almost close to 100%. Thank you. Yeah. Hi. This is Pratik Chheda here from Guardian Capital Partners. My question is around remote monitoring. You mentioned in one of your slides that you have tapped more than 40% of the bank branches are on the remote monitoring system. Suppose now we are sitting in an environment where 80%-90% of the ATM branches have been tapped. What would you see as the revenue potential here, along with the consideration that you have upgraded to the existing 40% to the new software that you mentioned? This is the question, I am coming from a background that you mentioned that the run rate of this remote monitoring system is close to around INR 100 crores right now. My second question is, can you get into a bit of the unit economics of remote monitoring? One of the important business case that you mentioned is that ATMs are looking to replace security guards with the remote monitoring system. What is the cost that implementation of a remote monitoring system cost for a per ATM site versus removing the security guard? Is there any pushback coming from these ATM guys or the retail manufacturers when they get into a more reactionary mode rather than a preventive mode from having a security guard at the site? Lastly, when you say that your aspirational target is to reach around INR 3,700-INR 3,800 crores of revenue by FY 2027, how much would you attribute this to remote monitoring systems? Great question. I will answer the last question last. Just to clarify, 34 to 38, not 37 to 38. I do not want us to you to keep increasing our targets right now. Manju, you want to talk about the economics between having a physical guard at the ATM and remote monitoring? Yeah. Sorry, who asked this question? I could not see you. Sorry. Yes. Typically, if a man guard is put as per the central minimum wages or state minimum wages, there are so many codes, which makes it very difficult. It typically costs on a three shifts for about INR 45,000 a month, the cost of the man guard. A remote monitoring solution offering, depending on bank to bank, they would be paying less than INR 5,000 a month. Yeah. Right. I am talking about an ATM. We are not talking about any other use cases. Your second question was on unit economics. So that is sort of the revenue stream. It is mostly fixed in nature. Your third question was split of revenue. Market share was the first question, with 80% of branches. Yeah. My first question was, if you are sitting in an environment where we have tapped 90% of the bank branches- We haven't. When we get there. Yeah. When we get there. Yeah. Considering that we have upgraded the softwares for the existing 40% also, what is the revenue potential coming directly from the ATMs itself? And leaving out- You have got a laptop. We can do it right now, right? We will just think of it right now. 260,000 ATMs roughly into INR 5,000, INR 4,000 a month, or INR 50,000 a year. That gives you INR 1,000 crore opportunity, mota-mota. I could be wrong. For the ATM side. Forget CMS. We may win, lose, I have no clue on that. You take branches, there are 120,000 branches. A branch solution is more expensive, a little more expensive. It will be INR 6,000, INR 7,000 a month at least. So it is INR 1 lakh per year. INR 1 lakh into those 100 How many branches are there in the country? 120,000 plus. 120,000. So that is about INR 1,200 or INR 1,300 crores. That is just bank branches and ATM sites. Then you go to NBFC branches, then you go to insurance branches, then you go to gold loan branches. I do not even know how many there are because they are not still full customers. We started to talk to them. I think the large opportunity, though, if I remember the TAM slide, it is a TAM which is growing from INR 1,000 crores to INR 4,000 or INR 5,000 crores in that year period. Right or wrong, I do not know, but that is the sort of TAM potential. Retail, I do not think there is an attempt to replace Again, it is not our attempt. We are not trying to replace anybody. Sure. But retail is more about analytics, right? It is not about because it is too late. Somebody takes something, walks out, you cannot do anything with this. It is more about analytics. It is about aisle analytics. It is about tracking who is standing where, how long. Footfalls. Footfalls, all of those things, right? Warehousing is, I think, a bigger area. There are already people with solutions with this. Do not get us wrong. We are not the guys with the solutions there. We have the solution for the branches and the ATMs, which is sort of our core competency right now. But technology is sort of fungible. We are investing in people. We have architects working in it. We have AI models being built. We are hoping to use the scale. A lot of it goes around maintaining these sites. I do not want to give the name, but there was a big name in the consumer side on this long ago in the country. Most of your buildings would have had it. The company has disappeared. It just became a sad situation where they did not have the money to go maintain and manage those networks. I think we are going about this in a very pragmatic manner. I think this could be a INR 5,000-INR 10,000 crore potential market size. We will not be 20% market share in that. We would be, let us say, a INR 1,000 crore business. Will it take 5 or 10 years? I do not know. Will we get lucky and expand internationally? I would want to. This is a business I would love to expand internationally if we could get the right partnerships to go take it to other markets. Are there solutions there? Of course, there will be solutions there. Can we do it cheaper and better? We hope to, right? Early days. I am sorry I cannot give you a lot of clarity. It is 2 years in the business. We cannot speak with the depth of knowledge we have in other businesses, but it is a promising business. Sure. Thanks. Hi. Sorry. Thanks for taking my question. This is Balaji Subramanian from IIFL, and the presentation was quite insightful. Just a couple of questions. The first one is just on your revenue aspiration of INR 3,400-INR 3,800 crores by FY 2027. So what would be the rough revenue mix between your core business, which is cash management, then the managed services and any potential new areas that you may foray into? Number two, it is more of a housekeeping question. Just wanted to understand the progress on the compliance of both the van-related compliance and the cassette swap regulation. Thank you. I think maybe can you hear me? Let me take the second one first. As far as the compliance is concerned for the non-cassette swap part of it, we had indicated that there is roughly a three-year roadmap for us to complete that. We are two years into the three-year roadmap, and right now we are at about 70% completion. A little bit more on ATM, a little bit lesser on retail. I feel fairly confident that by end of FY 2024, and then maybe another quarter or two, we should have most of the compliance process completed. Cassette swap has been a lot slower, but there have been, I am not sure if we spoke about it in the last call, but there have been strong discussions, a lot of discussions between the RBI and the IBA on what is the most effective manner to roll this out. Going from our past learnings on where we did compliance on a bank-to-bank basis, irrespective of which cities it was located in, there is a strong collective thought in the industry, both the cash as well as the banking industry, that we should instead adopt it on a city-wide basis. Hence, there is no disparity of in one city you are doing cash swap for a particular bank, and then for some other bank, it is happening in a different way. It also just induces more operational complexity for us. I think that roadmap of which cities and which timeframe should get firmed up in a matter of a couple of months, and we should maybe have some more clarity on that by the next time we speak. To your first question, Balaji Subramanian. If I look at FY 2021, the cash logistics business would have been roughly 70% of revenue. FY 2023 is closer to 66%. I know the numbers are public. FY 2025 and then FY 2027. Again, this is what I hate about giving an aspirational target. As one of my friends here told me, "As a friend, I hope you do not have to give a guidance, but I would love it as an analyst to get your guidance." This is not a guidance, this is just a directional call. We think the cash logistics business would be 57%-60% of our revenue. We are largely talking organic growth sort of numbers and mixes right now. The software business, which includes the IoT business, should be 8%-10% of our revenue, and then the remaining 30% would be the broader managed services suite of offerings we have. I think that is the sort of what we think right now. Sir, this is Devang from Sameeksha. You mentioned CapEx of INR 150 crores-INR 175 crores earlier. How do you understand this CapEx between what is for your core business and what is for growing in adjacencies? For core business, if you could give a sense of how much is CapEx to sales on an ongoing basis. Would it be like 7%-8% of sales? CapEx to sales, Pankaj can talk, but right now everything has become core. There is no adjacency left right now. Remote monitoring has come to a decent size. It is not in incubation anymore. I think the question is really how much is growth CapEx versus maintenance CapEx, right? Maintenance CapEx for us, Pankaj, how much should we think of? Maintenance CapEx for us is not much, and especially given in last- We have- four, five years, we have invested heavily on especially our core business. Going forward next three, four years, the maintenance CapEx will not be much. INR 25, 30 crores per year maybe, just to be having a safer ballpark. I would think about the fact that basis the projects we have to execute, whether it's IoT, whether I think of managed services, and some of the growth we anticipate, I think most of it is growth capital. This is not including any M&A. How should we think about it longer term? We showed you the FY 2016 to 2023 journey, right? We are INR 23 crores per year for three years, then we are INR 138 crores per year. Very difficult to forecast longer term, but we have sort of guided to the fact that we anticipate CapEx average of INR 150 crores a year. We could be lower. It could be more. If it is more, it's actually good. I think then we are only investing it because we have a long term. We're winning that long term recurring revenue. Why do we invest capital for ourselves? We only invest capital, other than the mandatory upgradation of the network or deepening, is if we have a line of sight to a very strong recurring revenue stream. Therefore, the payback period of that is very important. We have our own internal benchmark thresholds, IRR, other which we'll never go to the board for approval. We've actually left a lot of growth where we are in the mid 10, 15 range, we just drop it. We don't take the risk at all. Okay. How much do we spend on technology? Given our aspirations to go global, how much do we intend to scale this up? I don't want you to think that we have aspiration. We would hope to go global at some point. I actually don't think we are getting the bandwidth to even think about it. There is a lot to be done. Managing a business of our type and nature in India is very intensive. We will get to it when we think we are ready. Right now, I don't think we are ready to go global, so please don't think that's happening right now. From a perspective of technology spend per year, I would say, I don't know, INR 20, 30 crores. Sorry, Pankaj, you know more. I think it is generally less than 10% type. Of the CapEx spend. Of the total CapEx spend. When he says technology. Initially, we talk about initially from 2018 to 2019, et cetera. During that period, a lot of expenditure has gone for automation and the technology. We have seen whatever the videos you have seen, those are the videos related to those technology investment we have made. So let's take INR 20 crores maybe. Roughly at that ballpark. Sir, the next question was on the revenue growth. In the past calls you mentioned the contribution of volume and value is about 50/50. Now in FY 2024, once we reach the compliance levels required, how does the volume value mix will be in the aspiration, in the- So- five-year aspiration- I know where you're going with that. For the purpose of giving everybody else a little direction, I'm going to change the question a little bit, right? Because I don't want people to get fussed about the compliance. Yes, it's important. Yes, we are driving it. The question is really what happens after that? That's the question, really. Yes. Yeah. Again, our viewpoint, right or wrong, Anush, you should give the answer because this is most important relevant for the ATM cash logistics business, not the rest. It's really relevant there. You should give that viewpoint of how we think longer term. No, absolutely. I think if we even really look at our last two years, the 20% revenues that we've been able to achieve CAGR in the cash business. A little bit more than 10% has come from pure volume. When we talk about the rest, that's not purely compliance alone. That's a function of three things really. There's obviously compliance to it. There's also the activity increases that happen, right? Which is, as the economy has opened up, as greater intensity of cash has increased, as we've seen the vibrancy report, all of that leads to improved realizations. The third element of it is just pricing. We've had a demonstrated history for the last decade where we've been able to take, on an average basis, about a price increase of what? 3%, 3.5%. I think the one way to think of it is, if I just take a very not a FY 2025 beyond scenario, but if you take a much longer scenario and one were to sort of Because we keep doing a lot of scenario planning internally. If one were to think of the ATM business and what happens when ATMs stop growing or in a very low growth scenario, what does life look like for us? Historically, whether you look at the last three years or six years or 10 years, the average growth of the overall ATM network has been about 4%-5% CAGR. That's bare bones. That's also coming out of the last four or five years where the banks have just not been able to spend the money to grow this network. As Manjunath said, based on what we think are the ATMs in the pipeline, 40,000 ATMs in the next 12 to 18 months, 80,000 ATMs in the next three to four years. I think that CAGR will increase, but let's assume if we just go with this 4% for now. To this, you need to add in the layer of what is going to be the growth due to incremental outsourcing. The 80,000, 100,000 ATMs which the banks are doing themselves today. That by itself, I think will lead to another 4% to 5% CAGR. If nothing else happens, if companies like us are not investing capital for helping the banks expand their network, because the banks by themselves do not do much. That 8% to 10% expansion of just the bare number of outsourced ATMs will increase. To this, then you add the layer of what would be in terms of our pricing increase. In a low growth scenario, I think pricing increase can be better. In high growth scenario, we still want to keep pricing a little low to try and just manage and deal with all that growth. I think when we think of such sort of almost like a doomsday scenario, what is a very long future scenario for the cash business. On the ATM, which is the most mature or the largest of the three cash businesses, I think that is sort of where we feel saying we should be able to grow revenues by about 13% to 15%. You've seen our historical performance where we're able to sort of bring in a lot of operating leverage to the business. I think if we are able to get that 13%, 15% revenue growth, we should be able to get a higher number of that translating into our bottom line performance. That's one very reasonably pessimistic, cynical version of life, but I hope that helps you. No, we think of it this way. We say take the next decade. We don't know what happens. We can't forecast it. We have no ability to forecast. We still think the various components of the cash business put together, looking historical trends, and not be bullish. We try and take a base case. Not terrible case, a base case approach. I think we should grow revenue at 10% to 12%. If you can grow revenue 10% to 12%, your margin should grow at 14% to 15%, maybe higher, I don't know. We don't know competitive dynamics. There are three players, 10 players, we don't know all that. That's what we think as a base case. We clearly, right now, much higher than that, but that's the way we think. We could be surprised positively or negatively, we don't know. Saran, linking this to unit economics, we are the leader, and if we are to keep increasing market share, with whom are we. Is it easiest for us to gain market share from? Are the smaller players, regional players, do we really have superior unit economics from them to gain market share from them? Or is it the number 2 player who is struggling and the larger players from whom we are gaining share? It is a mix, honestly, right? Like I said, I think our gain in the market share, which is most easily visible on the ATM side is a mix of all these things. Which is why I think different banks and MSPs have different preferences. Sometimes they want to work, sometimes outsource or increase share for quality of service, sometimes they do it because we have the reach. I think in the ATM, that is particularly critical because once you invest in a capital and you set up an ATM in a particular place, you want to give it to whoever is the most readily accepting of that location. As opposed to saying, "Give me six months time, I will set up a facility, and I will create a network out there." They just do not have the time to wait for it. Third, and most importantly, is just around the sheer reliability and can I go to sleep every night knowing that my currency or cash is safe with this company? Again, different dynamics for different businesses and different customers have different preferences. But yes, I think as with everything else, as with every industry that is growing and maturing, we are seeing a shift to quality and a shift to safety. In the cash in transit business is the only place you see smaller, regional, semi-organized players. There is an RBI mandate to streamline that. I do not know how long that takes. But that is the most part of a sector which has got the, let us say on a level of compliance, players with lesser compliance. The retail side of the business has got surprisingly lots of local companies at the smaller level handling it. The payment banks also doing some work there. The BC is also doing some. It is a very large market there, but the cash logistics place is basically a 2, 3-player market really. Same with the ATM cash management. That is also just a 3 sort of player market. Who do we gain share from? I think any time there has been a pain point in the industry, their share has moved to the stronger player, whoever that may be. We've been lucky many times, and we hope we can be that in the future. Take the last few questions. Go ahead. Hello, sir. Hi, this is Hamir. Thank you. It was a very elaborate presentation. Thank you to the management. I have one question on the unit cost that you mentioned, I think multiple times during the presentation, first by Anush and then by Mr. Kaul. Can you talk about where are we efficient and what are the reasons behind our efficiency in that cash logistics business? Second thing you mentioned about productivity increase of 20% that you have achieved in the last few years. Can you talk more about it? What are the metrics that you're thinking about? Is that like a ceiling we are sitting on or there are more opportunity to improve on our unit cost. Can you expand on this point? I remember this incident, and I think the team will remember. When the company was changing hands between two private equity players, we had a productivity gain that year of, I don't know, 3.5%. Consulting firms and the PE firms were diligencing this, the 3.5, what next? How to increase 3.5? I'm like, "We don't know. We are trying to increase it." I know we are seven years later, I don't know how again they've done it, but they've done this 20% over the last two or three years. I remember this in 2014, the amount of brain damage, eight, nine consulting people, three private equity companies were going after us saying, "How did you do it? How will you do it in the future?" Sometimes we don't even know how to explain these things. They thankfully happen. Hopefully Anush is a better articulator of that. I can give you a very You simplified that. I can give you a very long answer and I'll just be keeping everybody away from IT sometime. I think if I try to simplify it, right? Fundamentally, it's a business which lends itself to scale. We have spent time and effort and capital in creating a network and scale across the length and breadth of the country. What helps us is when incremental business comes, we have an ability to absorb it without necessarily having proportionate cost increases. That's at a very simplest level. The second thing which really helps us is the fact that, I think people underestimate this a lot when they don't see the fact that there is a certain value to having market leadership positions across all the businesses of cash. You do not necessarily see that in any other player. There may be companies which are large in ATM cash management or retail or CIT, but not all of them. Even the ones which are large in ATM cash management are there because they have a large captive business, not spread across different MSPs. I think having access to that diversity gives us an ability to just sweat a certain portion of our infrastructure routes and fixed cost across all of this. In a way, it also relates to your second question, which is then, what does productivity mean for us? I think that for us also, that keeps changing. But right now, the way we measure productivity is, what is the throughput that we can extract from a route on a daily basis? This may mean that, what is the number of activities that we're able to, for example, measure, which is the number of ATM replenishments, the number of cash pickups, and number of CIT. This is not easy because all of them have different complexities. ATM replenishment work is different from a retail cash pickup, and so on. What we're able to do is to sort of bring it to a normalized level of what we call an activity. An ATM may be 1.5x, a retail may be 0.7, just for an example, and that is what we sort of internally measure. So when I talk about how we've been able to grow activities by 20%, what it means is, for example, if four years back we were doing 14 activities to a route, we're today able to do 16.5. The last part of your question, which is how much can this grow? The only one way to answer it, the same thing which Raju mentioned, which is how we answered it five, six years back, which is, honestly, we don't know. But what we do know is there are regions of CMS and large. When I talk of regions, these are large places. Each region, for example, may be the size of one of our smaller competitors. But there are regions of CMS, which thanks to the combination of density, the quality of work, and the process improvement that we've been able to do there, are operating at productivity levels which are far higher than this national average. To us, those serve as inspiration of figuring out, okay, if this one can do it, what are the factors which are helping propel it and how do we sort of nurture those similar factors in other places? That really is what we do. I want to tell you a couple of things more. I just thought of this. When you think of a team, the culture. Here, there, everywhere. When you come to a field level, I don't want to compare to some of the other logistics companies in different sectors and what they do and the pressures on people. There's not a single CMS team member who's not got paid on the 30th of the month. Fundamentally, they will get paid. If we don't have money, the management will get paid 15th. That was 10 years ago. But we'll make sure people have money on time. Number two, we link some part of the pay to productivity, but not like, you have to deliver 18 boxes. We don't have that culture. We think risk management, safety, security is very important. Our productivity, if we compare it to some other competitors when you're looking to invest or acquire them, we compare as 20%, 30% higher. I think culture plays a big role. Density plays a big role. Semi-urban rural India still doesn't have enough density. We'll have very good density in Bombay, malls. Whatever, but traffic kills you. You go to smaller city, traffic may not kill you, but networks are far-flung. So I think there's enough potential for this to systematically change. But why are we able to do this is we put technology into this, and this is not technology of marketing. We are not a tech company, we need a different multiple. We just put technology into this long ago. Why can we do it? First, we think that way. Some of us have a fairly decent technology background. Secondly, it costs money. When you have a large business, let's assume we've got to put INR 8 crores into the cash logistics technology business this year. On a INR 300 crore revenue, we don't even think about it twice. The next competitor will be INR 400 crore revenue. Can he put in INR 8 crore? Because the cost is same. It's not going to be like, you can't. Therefore, we are able to take the cost, think longer term, apply it, and really keep pushing for it. So many small things come into play. Tech to some level, automation of business to some level. How do you save time? But for us, we also go a lot into how do you reduce the risk in this business. Got it. Sorry. Got it. Just one more question related to remote monitoring that you mentioned as the business. Just from the feel of what you just said, seems like more horizontal technology business. So when you think about that, what's our right to win? And when we think about international, these seems like much more micro-market type of activities that we need to do. So is there a right to win even in international for, in remote monitoring? International, no clue. Yeah. No clue. It's a long dream. We'll see. We'll get to it. It's not something we have indicated or promised anything, nothing like that. Domestically, we want to make it horizontal. Right now it's vertical. This is one business we think we can go horizontal. Who are the players there? We haven't come across any scale player. Because the larger business right now is the BFSI space. You go win one bank, you get 5,000 ATM sites. You can't get 5,000 retail stores. Just not happening. There is a regulatory and a cost focus, and therefore, you are getting a faster ramp-up there. What is the right to win horizontally? For us, the right to win will be, number one, we would have invested in technology on a much larger scale. Let's assume you have a retail-oriented AIoT company and we have a banking-oriented. You will have 5,000 sites max. We'll be at 25,000. Our AI cost of development of the modules can be allocated on a very different level. Number two, everywhere there's a site physically, it needs a physical touch still. Fixing it, something is going wrong. Who are you going to use? You will depend on somebody else. He or she will never land up. Quality of service is terrible. The customer is going to wait. He goes, "I need this fixed now." What do we do? Manju's team got 1,500 engineers who are managing different infrastructure. We can use them. Does it make sense cost per it? We'll see. But I think for us, we have a lot of these things which come into play to give a better customer experience. Many of the older generation video, whatever you used to call it, at home or offices, just never worked because the company could never turn up for three days, five days to fix things for you. People say, "It's not working. Leave it." I think there is a lot which we can do here, but we'll have to prove ourselves and see. We'll also see how lucrative those markets will be. I don't want to be chasing individually each building in Bombay and societies. We don't want to go into that business at all right now. We want to focus on, which is, we are a deep B2B company. We don't want to go away from that. We do a lot of work with banks. We will do more work with NBFCs, we will do more work with e-commerce companies, and we want to keep selling them different solutions. Sorry. Yeah. Thanks. Two, three, cultural change, the way people have started accepting GPay, the government initiative for UPI, the way it has exploded, the way they are trying to come out with the RuPay, which is a comparatively lower cost for a credit card. All this can put together, can bring some flank attack for whatever we are handling. Some of your thoughts on that side for maybe 3 years perspective. I think this is something which has been going for a long time. It got catapulted and thrust much more really post-demonetization. Like Paytm became a huge national brand at that time. We were looking at fintech companies before, but after that, their valuation could not be done at any time. In fact, I know in the lead-up to the IPO, a lot of investor friends would tell me, "Do something like Paytm. If not, do something like Tanla. Do anything, put something new in it." We could never figure out the valuation multiples or whatever many of these companies or anything. We don't understand anything. Right. I don't think it's a flank attack. I think there is a big change which has happened. It got further exaggerated or thrust up during COVID, e-commerce to organized retail. People should say, "Why are you investing in organized retail versus e-commerce?" Fundamental question, right? People have invested in e-commerce and lost money. They may be making money there. We don't know. I think our view is very simplistic. We're saying as India grows, steadily, slowly, fast, we don't know, all boats rise. Our share of that will improve because we are a play on formalization rather than informalization. Therefore, when there is, let's say, money which doesn't come back into banking channel, we can't do anything with it. We would want. Now, if you have withdrawn INR 10,000 a month to spend, it keeps roaming. It does not come back. We handle how much in ATM per month? Almost INR 90,000-100,000 crores. We do INR 100,000 crores in ATM per month. But in retail, we will do INR 15,000 crores. Someday, this should be 1 crore, 1 crore. Should be, logically. I do not know when, but it should be 1 crore. If you go to the U.S., let us say, the ATM business will be a smaller proportion, but retail will be the bigger business. Where people are still going and collecting money and they are organized retail. I think if we look at some of these global trends and we are saying, "Okay, something different is going on." We have still grown in all of these periods. That gives us just confidence to keep growing. We do not think we are growing at the risk or the cost of something else. I think our play, as I have said a few times, is not to do with how much currency you will end up spending, but the more number of formal places we can go and address. Seven years later, the ATM cash management business, let us assume, is, I do not know, 15% our revenue or 20% revenue because we will have new revenue streams by then. We will see. Maybe we will become a mature market at that time. Thank you, Rajiv. Thank you, management, for those answers. Unfortunately, we have run out of time. Please do join us at the Tech Expo if you have not already done that experience. But management, thank you so much for patiently answering everybody's questions. Everybody else, thank you so much for participating. Thank you for being a very attentive audience. Thank you so much for your time. Thank you.

Data Source: Quartr Last updated: May 25, 2023

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