Companies

IPO-bound CMS Info Systems looks to ride on banks’ ATM refresh and upgrade cycle

K. R. Srivats | | | Updated on: Dec 19, 2021

Rajiv Kaul

Sees larger banks driving ATM network expansion in India in coming years

CMS Info Systems, a leading cash management services provider, expects to ride on the ATM infrastructure expansion that banks are likely to embark upon in the next few years after recent stagnation, its Vice-Chairman and CEO Rajiv Kaul has said.

“We see a large opportunity in public sector banks’ refresh and upgrade cycle which in next two years will yield lot of orders (for ATM and cash management services) getting passed. The value of contracts is also getting large,” Kaul told BusinessLine .

Also read: CMS Info Systems’ IPO to open on December 21

CMS Info Systems, which will hit capital market with a ₹1,100 crore initial public offering (IPO) on December 21, is already having an order book of about ₹2,000 crore and expects banks to do even more outsourcing in the next few years as they get more efficient in every aspect of their cost structure.

Kaul said that today banks are expanding and refreshing their infrastructure and they have aggressive plans. “Larger banks will drive this expansion, their base is high and customer segments are broader. Opportunity is also fantastic now for us because of the consolidation that banking system has seen. It was a tougher opportunity earlier as there were nearly twenty plus banks. Now, we need to deal with only nine banks after consolidation,” he said.

Coming out of capex stagnation

Banks are coming out of an extended capex stagnation and credit down cycle over the last five years on account of high non-performing assets, demonetisation, goods and services tax implementation and consolidation among the public sector banks.

The upcycle is expected to drive expansion into semi urban and rural (SURU) areas, which are actually under penetrated at 15 ATMs per 1 lakh individuals of 2020. The ATM penetration rate in India is about 22 ATMs per 1 lakh individuals at an overall level. The global average for ATM penetration stands at 47 ATMs per 1 lakh individuals.

In contrast, the penetration rate for US, Brazil, China and Mexico is 123, 103, 95 and 62, respectively, per 1 lakh individuals as of 2020.

The number of ATMs in India grew at a compounded annual growth rate ( CAGR) of 20 per cent between fiscal year 2011 and fiscal year 2016, but the increase between fiscal year 2016 and fiscal year 2021 slowed down to a 3 per cent CAGR ( reaching 255000 ATMs). The number of ATMs in India is expected to increase from 255,000 as of March 31,2021 to 365,000 as of March 31, 2027, representing a CAGR of 6.16 per cent.

“In 2014-16, there was lot of contracts that came in for expanding the ATM channel. Then you hit a brake such as demonetisation, GST and public sector bank’s NPA crisis. Public sector banks had to deal with mergers and NPA crisis. Now banks have just started coming out,” Kaul said.

Despite the year of Covid-19, when most of other industries could not operate fully, many large public sector banks have come out with Requests for Proposals (RFPs) for ATMs partly to upgrade their end of life ATMs and partly to expand their network, he added.

“I firmly believe that the ATM opportunity is big, the ATM base in India will grow But I don’t think it will hit double digit growth,” Kaul said.

Published on December 18, 2021
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