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Mohit Nigam, Head - PMS at Hem Securities highlighted six reasons that impacted IPO subscription of CMS Info Systems.“First, its business depends significantly on the use of cash but the RBI is planning to introduce digital currency that will impact the amount of cash in circulation. Second, the company’s business is highly dependent on the banking sector in India and, any adverse development with respect to Indian banks can adversely affects their utilisation and demand for cash management services,” he said.The company’s top five customers contributed 55.73 percent of total revenue in FY2021, and it is exposed to various operational risks as they handle large volumes of cash, which are third and fourth reasons, respectively.Also read - IPO fireworks in New Year too; companies likely to garner Rs 1.5 lakh crore through initial share sales
“Fifth, the success of businesses depends upon their ability to effectively deploy, implement and use information technology systems and advanced technology initiatives in a cost-effective and timely basis. Sixth, the offer is entirely an OFS and the proceeds from this offer will not be available to the company,” Nigam said.The company’s cash management services business contributed 68.61 percent to revenue in FY21 and contribution from managed services business to revenue in FY21 was 27.88 percent.It recorded higher profit at Rs 168.52 crore for the year ended March 2021, rising from Rs 134.7 crore a year back, but revenue seems to have impacted by COVID-19, falling to Rs 1,306.09 crore from Rs 1,383.23 crore. It clocked profit of Rs 84.47 crore on revenue of Rs 626.29 crore for the five months to August 2021.Also read - Global Health, Veeda Clinical receive Sebi approval to launch IPOs
CMS Infosystems is also supported by the promoter, Sion Investment Holdings Pte Limited, an affiliate of Baring Private Equity Asia, a private equity firm that has over $27 billion assets under management as of June 2021.In the financial year FY21, its top five customers in terms of revenue contributed 55.73 percent and top 10 customers contributed 75.13 percent. Its customer base of ATM cash management business is diversified, including over 13 MSPs (managed services providers), and service 45 public and private Indian banks (including HDFC Bank, ICICI Bank, Axis Bank) directly and through MSPs, as well as white label ATM deployers, as of August 2021.“CMS Info Systems is a stock for the long term that enjoys dominant market leadership supported by a strong management team and has delivered stable financial performance. The business is expected to benefit from positive industry drivers such as the under penetration of ATMs in India and the shifting trend towards outsourcing,” said Swapnil Shah, Head of Research at BP Wealth.“The business could be impacted in the short term if there is a third COVID wave. Besides, the issue did not gather much attention from the investors and thus is trading at a low grey market premium,” he said.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
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