ETMarkets Management Talk | CMS Info Systems CFO Pankaj Khandelwal on threats from UPI, CBDC

Edited excerpts from a chat:

In Q3 your revenue grew 21% YoY. What does the demand outlook look like for FY23?
This is our seventh consecutive quarter where CMS has achieved robust growth in revenue. This growth, coupled with an EBITDA growth of more than 20% year-on-year. Pre and post–Covid, CMS has performed well, with revenues growing at 22% and 23% in FY22 and the first nine months of FY23. respectively with 9 months of FY23 revenue at Rs 1,413 crore.

At CMS, we currently have an order book of over Rs 1,000 crore in the first 9 months of FY23. The focus is on the implementation of the order book wins, and most of our key projects in the order book are on track. Our enterprise sales strategy has played well for us as we continue to win contracts with multiple customer logos across business lines.

How do you see your revenue growing in the next 2-3 years?
Our revenue growth is a reflection of our strong market leadership, our sharp focus on execution, our methodical expansion strategy and our ability to win large & complex end-to-end outsourcing deals in the banking sector. We remain committed to achieving our medium-term goal of doubling the revenues to Rs 2,500-2,700 crore by FY25. A strong CAGR of 19% will be delivered based on our well-diversified business mix of 60:40 across Cash Logistics, Managed Services and Technology Solutions.

The growth of CMS is a derivative of the formalization of the economy, driven by India’s consumption story. Outsourcing of crucial non-core activities by banks, the proliferation of organized retail, and the adoption of e-commerce, which has a high share of cash on delivery (CoD), are key enablers of our business.

Additionally, we always look at growth opportunities across the business services curve to facilitate frictionless commerce in India. Our most recent business, offering ‘AIoT Remote Monitoring Service’ has today expanded by 10X to more than 20,000 sites and offers remote monitoring along with insights backed by data for business enablement.

Banks have been on a branch addition spree. How do you see this trend going ahead and impacting your business?
Over the last few years, there was a definite need to widen banking services access in India. At an overall industry level, we are witnessing private banks refocusing on branch network expansion. This renewed focus is driven by new additions and upgrading the existing ATM infrastructure. In the upcoming infrastructure expansion drive, there will be an addition of 10,000-12,000 new branches that will be set up by private sector banks and approximately over 40,000 ATMs will be set up by PSU banks.

One of the critical elements of the current expansion drive by banks in India is to be capital efficient and align with global outsourcing practices. CMS with its end-to-end service offering to banks as their chosen outsourcing partner is a direct beneficiary of the same. We take pride in offering an integrated solution covering the deepest and remotest parts of the country seamlessly and efficiently to banks and financial institutions.

Do you foresee any threats from the likes of CBDC and UPI?
We believe in a world of co-existence in the payment landscape as it enables freedom of choice. Our CMS Cash Index shows an uptick in the velocity of cash, with metros outpacing semi-urban and rural areas. Data also reflects a secular growth trend of cash usage in the Retail, Financial Services & Logistics sector.

We are monitoring the potential of CBDC. We believe its potential and impact would be more in the wholesale/institutional segment than the retail sector. Large enterprises and business houses can take advantage of CBDC for their treasury management and cross-border payment settlements as it provides interoperable money in the digital payment ecosystem.