CMS Info Systems trading at 16% premium in grey market; here's all you need to know

CMS Info Systems IPO

CMS Info Systems, which launched its Rs 1,100-crore initial public offering on December 21, was trading at a premium of Rs 35 in the grey market, according to IPO Watch data. It translates to a premium of 16 percent to its issue price of Rs 205-216 a share.

CMS Info Systems is the largest cash management company in the country and among the biggest worldwide based on the number of ATM points as of March 31, 2021.

Its public issue, which closes on December 23, is a complete offer-for-sale by promoter Sion Investment Holdings Pte, which holds 100 percent of the company. After the issue, the promoter shareholding will fall to 65.59 percent.

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Investors can bid for a minimum of 69 equity shares and in multiples of 69 thereafter. Retail investors can invest a minimum of Rs 14,904 for one lot, and a maximum of Rs 1,93,752 for 13 lots.

On the first day of the issue, the company received bids for 1.48 crore shares against 3.75 crore shares on offer, subscribed 40 percent.

While retail investors subscribed 79 percent, non-institutional investors bid for 1 percent; whereas institutional investors are yet to put in their bids.

The company is engaged in installing, maintaining, and managing assets and technology solutions for banks, financial institutions, organised retail and e-commerce companies in India.

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For FY20-21, the company’s total currency throughput, or the total value of the currency passing through its ATM and retail cash management businesses, amounted to Rs 9.2 lakh crore.

As of August 31, CMS had a network of 3,965 cash vans and 238 branches and offices to cover all Indian states and union territories.

While Angel One has a “neutral” rating on the issue, Anand Rathi, GEPL Capital and Choice Broking have recommended “subscribe” and KR Choksey has advised to “subscribe for listing gains”.

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Brokerages believe the company has a strong product portfolio, integrated business platform, long-standing customer relationships and a track record of productivity and operational excellence.

Unfavourable government policies and regulations, a decline in the financial position of the banks, which could affect the expansion of the ATM network and outsourcing activities, sustained cost inflation and competition are some of the risks, Choice Broking said in a note.

“At the higher end of the price band, CMS would be trading at P/E multiple of 19x FY21 EPS of Rs 11.4, which would be at a slight premium to SIS,” said Angel One.

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The brokerage attributed its "neutral" view to CMS’ dependence on the banking sector for most of its revenues along with a high client concentration, with the top three customers accounting for 44.6 percent of revenue for the first five months of FY22.

Brokerage firm KR Choksey, however, is comfortable with the valuations due to strong medium-term outlook on the business as “increase in velocity of physical currency in circulation is a sweet music for the company”.

The company will finalise the share allotment on December 28, and unsuccessful bidders will get refunds by December 29. Successful investors will get shares in their demat accounts by December 30.

CMS Info Systems is expected to list on the BSE and the National Stock Exchange on December 31.

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