Rationale

The ratings continue to take into account the demonstrated track record and established position of CMS Info Systems Limited (CMS) in the ATM and cash management (ACM) business in which it continues to be a market leader. The ratings also factor in the healthy financial performance of CMS in FY2019 and H1 FY2020 driven by 17% YoY growth and 31% YoY growth in its operating income in FY2019 and H1 FY2020, respectively at a consolidated level. The company's profitability also improved with an increase in the operating margins over FY2019 and H1 FY2020. Further, the high-value contracts won by CMS during FY2019 provide revenue visibility over the medium term. The ratings take comfort from CMS's comprehensive geographic reach with pan-India presence and long-term established relationships with its clientele comprising of reputed players. The ratings also favourably consider the strong financial profile of the company characterised by its healthy return indicators and debt-free position which results in strong debt coverage indicators. The ratings, however, remain constrained by the slowdown in ATM deployment post demonetisation, albeit moderate pickup witnessed in the current fiscal, and increased usage and acceptability of alternative payment methods like debit cards/credit cards/ mobile wallets etc. The ratings take into account the inherent vulnerability of the business to risk of cash loss in transit due to theft, fraud, armed robbery etc.; however, strong internal processes as well as comprehensive insurance provide comfort. ICRA notes the acquisitions by CMS over the last few years. While none of the transactions have been sizeable relative to the scale of operations of CMS, the size of acquisitions undertaken by CMS, going forward, and financing means of the same would be a key rating sensitivity.