Simultaneously, the agency has reaffirmed the company's short-term rating at ICRA] A1+” and the long-term rating at ICRA] AA”.
The agency said that the revision in outlook on CMS Info Systems' (CMS) rating reflects ICRA's expectation that the company is likely to register a healthy revenue growth and higher accruals generation over the near to medium term.
This is expected to be aided by CMS's leadership position in the cash management business, likely increase in rate realisations by approximately 40% over the near term due to higher implementation of the RBI's stringent operating requirements for cash management business in India, healthy order book under the managed services segment and increased revenue contribution from higher value-added services.
This, coupled with a comfortable capital structure, is expected to continue to result in a healthy financial profile, marked by robust debt protection metrics and strong liquidity position.
In addition to the revenue visibility provided by the healthy order book position, the expected increase in total ATMs in India and increase in outsourcing of ATMs by banks will enhance the growth opportunities for the company.
The ratings continue to derive comfort from CMS' geographic reach with pan-India presence across 16,000 pin codes and long-term established relationships with its clientele comprising reputed players from the banking domain and managed service providers.
The ratings, however, remain constrained by the regulated nature of business as well as increase in usage and acceptance of alternate payment methods like net banking, mobile wallets, unified payment interface (UPI), credit cards, etc., though the total currency in circulation and ATM withdrawals have continued to increase in the last few years.
The ratings also consider the inherent vulnerability of the business to the risk of cash loss in transit due to theft, fraud, armed robbery, etc. However, strong internal processes and comprehensive insurance cover provide comfort.
ICRA notes the acquisitions by CMS over the last few years. None of the transactions have been sizeable, relative to the scale of operations of CMS. Moreover, the extent of capital expenditure undertaken along with the size of CMS' acquisitions and financing means of the same, would remain monitorable.
CMS is a cash management and managed services provider. The cash management segment includes ATM cash management, retail cash management and cash in transit. The managed services include banking automation, brown label ATM, managed services, software solutions and remote monitoring.
The company's consolidated net profit jumped 46.80% to Rs 69.01 crore on a 22.57% increase in sales to Rs 453.30 crore in Q1 FY23 over Q1 FY22.
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