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CMS Info Systems IPO in progress: Should you subscribe to the issue?

CMS Info Systems IPO in progress: Should you subscribe to the issue?

Shares in the IPO are available in a price band of Rs 205-216 per share. The issue will close on December 23.

CMS Info Systems has garnered Rs 330 crore from anchor investors ahead of its initial public offering (IPO) on Tuesday. CMS Info Systems has garnered Rs 330 crore from anchor investors ahead of its initial public offering (IPO) on Tuesday.

The initial public offer (IPO) of cash management company CMS Info Systems opened today. Shares in the IPO are available in a price band of Rs 205-216 per share. The issue will close on December 23.

The firm has garnered Rs 330 crore from anchor investors ahead of its initial public offering (IPO) on Tuesday. The company has allotted 1.53 crore equity shares to 12 anchor investors at Rs 216 apiece, aggregating to Rs 330 crore.

BNP Paribas Arbitrage, Goldman Sachs, Nomura, SBI Life Insurance Co Ltd, ICICI Prudential Mutual Fund (MF), Aditya Birla Sun Life MF and SBI MF are among the anchor investors.

Shares of the IPO will be allotted to eligible investors on December 28 and the stock is likely to be listed on December 31, 2021.

Investors can bid for a minimum of 69 equity shares or one lot by spending Rs 14,904. A retail individual investor can apply for up to 13 lots or 897 shares by spending Rs 1,93,752.

The objects of the issue are to carry out an offer for sale of equity shares by promotors aggregating up to Rs 11,000 million and to achieve the benefits of listing the equity shares on the stock exchanges.

Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors and 15 per cent for non-institutional investors. CMS provides cash management services, which include ATM services, and cash delivery and pick-up.

The company's integrated business platform is supported by customised technology and process controls, which enables it to offer customers a wide range of tailored cash management and managed services solutions. It caters to broad set of outsourcing requirements for banks, financial institutions, organized retail and e-commerce companies in India. It operates business in three segments -- cash management services, managed services and others.

Here's a look at what brokerages said on the prospects of the issue.

Angel One is neutral on the issue.

"CMS Infosystems derives majority of its revenues by providing various services to the banking sector. CMS is primarily dependent upon the banking sector for most of its revenues and has high client concentration with top three customers accounting for 44.6% of revenues for the first five months of FY2022. The company's business would be impacted in case we witness a third Covid wave in India. Given the dependence on a single sector, high client concentration and possible impact on business due to a third Covid wave we have a Neutral recommendation on the IPO," Angel One said.

Religare Broking is positive on the CMS Info Systems IPO with a long-term perspective.

"With less competition and high entry barriers in the sector, we believe leading players like CMS Info Systems would benefit from industry trends," according to Religare Broking. "The company is well placed with a market share of 24.7 percent based on the total number of ATMs serviced, and 41.1 percent based on the total number of outsourced ATMs. They have a strong pan-India network and have long-standing relationships with leading banks. Besides, they offer integrated services to customers and provide them with a one-stop solution which is an added advantage," the brokerage said.

"Going forward, the company's focus is on expanding its network in semi-urban and rural markets and growing the customer base by adding new customers. Also, it aims to continue to develop processes and systems which would support its business and operations to grow. The company has further plans to expand into three new business areas which include remote monitoring outside of the ATM and banking sectors, end-to-end currency management and financial services distribution. The company's financials have been healthy," Religare Broking added.

Choice Broking

The brokerage has assigned a subscribe call to IPO. "At the upper end of the price band, CMS is demanding a  price-to-earnings multiple of 19 times its FY21 earnings, which is in line with the multiple of its sole listed peer," Choice Broking said.

"Considering the continued vital role of the cash in the domestic economy and its diversified product portfolio across the cash management value chain coupled with its dominant market position in the sector, we assign a 'subscribe' rating for the issue," the brokerage added.