CMS Info Systems Limited — Q2 FY26

Cms Info Systems Ltd Q2 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=L4d3SotFfcg Published: 6 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the CMS Infos Systems Limited Q2 FI26 earnings conference call hosted by Asian Market Securities. 0:13 13 seconds As a reminder, all participant lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation 0:20 20 seconds concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. 0:29 29 seconds Please note that this conference is being recorded. I now hand the conference over to Mr. Ali Gandhi. Thank you and over to you ma'am. 0:42 42 seconds Good afternoon everyone. On behalf of Asian market securities I welcome the management and thank them for this opportunity. We have with us today Mr. 0:51 51 seconds Raji K executive vice chairman and senior Mr. Pank Pankal CFO Mr. Anush Razam, Chief Business Officer and Mr. 1:00 1 minute Pit Pirani, Chief Operating Officer. I shall now hand over the call to the management for their opening remarks. 1:07 1 minute, 7 seconds Over to you, sir. 1:10 1 minute, 10 seconds Thank you. This is Rajie. Good afternoon everyone and thank you for joining our Q2 FI26 analyst call. Many of you would 1:18 1 minute, 18 seconds have attended our second analyst day in Mumbai on September 30th wherein we shared the in detail the industry 1:24 1 minute, 24 seconds landscape H1 trends some surprises and challenges and also the opportunities for FI27 with potential for FI30. 1:34 1 minute, 34 seconds Our youngest and fastest growing tech solutions business is growing rapidly generating significant momentum. The 1:41 1 minute, 41 seconds securance acquisition has closed and the teams are now working together on both the goto market and the synergy implications. 1:49 1 minute, 49 seconds Our retain solutions and currency logistics business has had an impact in H1 from subdued consumption levels and 1:56 1 minute, 56 seconds extended rains which affected rural income significantly. Our ATM management solutions business is going through a 2:03 2 minutes, 3 seconds period of transition and churn which has a bearing on growth and profitability in H1. But our competitive position, strong 2:11 2 minutes, 11 seconds business fundamentals with consolidation will deliver growth in H2 and FI27. 2:16 2 minutes, 16 seconds Order wins for the quarter are at 500 crores, most of which are fixed price contracts in nature and from leading private sector banks. 2:27 2 minutes, 27 seconds October is off to a good start with positive news. And with this, I would like to now hand over this to Anush, our chief business officer, to give you a more detailed business update. 2:38 2 minutes, 38 seconds Thank you Rajiv. Good afternoon everyone. 2:42 2 minutes, 42 seconds You know the second quarter was a transitional quarter for us. The industry is still recalibrating after last year's consolidation and that has 2:49 2 minutes, 49 seconds temporarily affected deployment cycles and network utilization. 2:54 2 minutes, 54 seconds Several large private sector banks have rationalized their off-site ATMs due to lower transaction levels while the roll 3:01 3 minutes, 1 second out of new BLA ATMs under PSU contracts slowed as some MS MSPs have faced funding constraints. 3:09 3 minutes, 9 seconds Taken together about 4,000 ATMs were temporarily inactive within our portfolio which along with weaker ATM 3:16 3 minutes, 16 seconds transaction volumes due to extended rings have led to an revenue impact of about 15 crores. Post the AUS issue, 3:25 3 minutes, 25 seconds banks had reduced credit limits and exposure to certain MSPs. This has impacted the working capital cycles and increased our DSOs. 3:33 3 minutes, 33 seconds We have taken a prudent provision of 10 crores in this quarter, a proactive step to maintain balance sheet hygiene while continuing to ensure significantly 3:42 3 minutes, 42 seconds improve collections and cash flows in H2. 3:47 3 minutes, 47 seconds For the cost side, two factors come into play. First, people cost increased due to long-term waste settlements and key reasons. We have to be extra watchful 3:56 3 minutes, 56 seconds that these negotiations didn't cause any adverse offs impact. These multi-year agreements are not complete and will be offset through reproductive norms over time. 4:06 4 minutes, 6 seconds Second, operating costs are higher as we had maintained a full network during the quarter since the large PSC bank cash outsourcing contract closure was still 4:14 4 minutes, 14 seconds pending. The RFP has since then concluded. 4:18 4 minutes, 18 seconds As a result of both of these, our eit was impacted by lower network capacity utilization and the temporary cost overhang. Productivity drives and 4:27 4 minutes, 27 seconds pipeline growth should bring our margins back to prior levels over the next two quarters. 4:33 4 minutes, 33 seconds Coming to H2, there are positive developments. The large PSU bank cash outsourcing has closed after extensive 4:40 4 minutes, 40 seconds negotiations and represents a 500 cr incremental revenue over 10 years for CS. 4:48 4 minutes, 48 seconds Further banks have reallocated volumes across MSPs to ensure better traction on RFP roll out. This gives us visibility 4:57 4 minutes, 57 seconds of getting to 74 to 75,000 ATMs in our cash business by March of this fiscal year. 5:05 5 minutes, 5 seconds Another major BL tender for 4,500 ATMs which are mostly an expansion and not replacement was bid at prices which are 5:13 5 minutes, 13 seconds very close to interchange levels. This is a clear sign of improving pricing discipline in the ecosystem. 5:20 5 minutes, 20 seconds At CMS, we're also targeting a 6% improvement in pricing and realizations in our ATM cache business by March. 5:28 5 minutes, 28 seconds In our retail business, volumes were softer during Q2, but recovered strongly in October with a 20% increase on a 5:36 5 minutes, 36 seconds month-on-month basis. This is the highest since the pandemic. Our investments in gig operating model continues to scale very well and should 5:44 5 minutes, 44 seconds expand to cover 20% of all retail points by March strengthening both cost agility as well as rural reach 5:52 5 minutes, 52 seconds with clarity on deployments new PSU contracts and ongoing cost initiatives. 5:57 5 minutes, 57 seconds We expect sequential improvement in both revenue and margins through Q3 and Q4. 6:04 6 minutes, 4 seconds With that, I'll hand over to Kuni, our chief operating officer for an update on our Hawkeye business and operations. 6:10 6 minutes, 10 seconds Thanks, Anosh. Uh, so in our tech and PL payments business, we already demonstrated our tech progress and 6:19 6 minutes, 19 seconds solutions at the analyst day. We welcome all of you to come and visit our tech center at Mahape Navi Mumbai 6:27 6 minutes, 27 seconds on our Hawk AI remote monitoring platform. It continues to grow rapidly and is on track to reach 50,000 plus 6:35 6 minutes, 35 seconds sites by the end of the year. Uh this started at around 30,000 sites at the beginning of FY26. 6:43 6 minutes, 43 seconds On the enterprise side, our nonBFSI portfolio, continued to expand. We have successfully implemented 1300 plus D 6:53 6 minutes, 53 seconds stores for a leading Quickcommerce player and received an additional order for 500 sites. The pipeline for this business is growing strongly across 7:02 7 minutes, 2 seconds NBFCs, insurance, gold loan, logistics, diagnostic chains and others. 7:11 7 minutes, 11 seconds In October, we achieved a significant milestone for a critical unified build and operate project at a PSU bank 7:20 7 minutes, 20 seconds covering approximately 2,000 branches with extensive AI use cases. This represents one of the first large scale 7:29 7 minutes, 29 seconds integrated surveillance transformation in India and position CMS strongly for large PSU branch monitoring RFPs in FY27. 7:40 7 minutes, 40 seconds As we speak, multiple banks are expected to roll out these solutions at the branches in the next two years. The RFPs 7:49 7 minutes, 49 seconds for over 35,000 branches are being formulated by the banks. This itself represents a huge 3,000 cr plus revenue 7:58 7 minutes, 58 seconds opportunity for the industry. This makes us confident of achieving our hot air target of 80,000 sites by FY30. 8:09 8 minutes, 9 seconds Shifting gears to the operation side, we are doubling down on four key areas to drive transformation and bring about 8:17 8 minutes, 17 seconds significant automation and cost synergies. First, rewiring our core operating systems to leverage machine 8:25 8 minutes, 25 seconds learning to design roots and tips across the network. Second, carving out a delivery model for customers who value premium services. 8:35 8 minutes, 35 seconds Third, given the large opportunity in retail, we are scaling up our gig operations with automation and control to provide cost flexibility and growth. 8:46 8 minutes, 46 seconds And last but not the least, extensively leveraging AI agents and bots to automate workflows and customer service 8:54 8 minutes, 54 seconds to deliver significant cost savings. I'm expect I'm excited about the impact these initiatives will have in 9:01 9 minutes, 1 second supporting our growth and margin aspirations. 9:04 9 minutes, 4 seconds With this I would like to call upon Pankage our CFO to talk about financial performance of Q2. 9:14 9 minutes, 14 seconds Thanks Monik and good afternoon everyone. 9:17 9 minutes, 17 seconds Our consolidated revenue this quarter declined by approximately 3% from 627 cr 9:24 9 minutes, 24 seconds to 609 cr on a sequential basis primarily because due to temporary dip in our ATM cashistic volume 9:32 9 minutes, 32 seconds from segmental revenue basis many services and tech revenue increased by 5% sequentially from 258 cr to 271 cr 9:43 9 minutes, 43 seconds and caship revenue dropped by 5% from 400 7 cr to 395 cr linked to drop in ATM count and retail cash volume per point. 9:56 9 minutes, 56 seconds Our patch for the quarter was 73 cr reflecting a 20% decline compared to 94 10:03 10 minutes, 3 seconds cr in the previous quarter with pet margin at 12.1% a contraction of 280 basis fun from the last quarter. 10:13 10 minutes, 13 seconds This was driven by the flow through impact of the revenue dip temporary lower realization from the largest PSU 10:20 10 minutes, 20 seconds bank customer and higher provisioning due to increased AR on account of reduced current availability to MSP ecosystem post AGS. 10:29 10 minutes, 29 seconds We are actively engaging with these customers to streamline the payment cycle within S2. 10:36 10 minutes, 36 seconds In addition, there is the impact of higher wages due to signing of long-term waste settlements which are renewed every 3 to four years. While we could 10:45 10 minutes, 45 seconds have focused on reducing our network cost in H1 linked to delay of the contract and the business volume, we have to be careful that employee 10:54 10 minutes, 54 seconds engagement remained positive and harmonious. 10:57 10 minutes, 57 seconds In terms of our H1 performance, overall revenue saw a growth of 1% while service revenue grew by 5% yearon year. This 11:06 11 minutes, 6 seconds driven by performance of the service component of our managed services and tax business which had an annual growth of 18%. 11:16 11 minutes, 16 seconds The tax for first half of the year stood at 167 cr compared to 182 cr in the same period last year. 11:26 11 minutes, 26 seconds As part of our broader cost restation approach and considering H1 performance, the performance will increase will not 11:35 11 minutes, 35 seconds rest and inventive will not approve to the leadership team in this financial area and these are tied to performance. 11:44 11 minutes, 44 seconds This vision is consistent with our culture of accountability and employment leadership of rewards are aligned with 11:50 11 minutes, 50 seconds the business outcome and share industry as well as life this year for our 11:59 11 minutes, 59 seconds investments in H1 is 175 fully estimate of around 300 cr. 12:07 12 minutes, 7 seconds You remember we had deferred and cailed KA since last year F35 12:13 12 minutes, 13 seconds on cash flow H1 is easily weak weak in the terms of collection and DSO resulting in the lower OCS in the first half of the year. 12:25 12 minutes, 25 seconds The AR net of provision was 959 cr as on 31st as on 30th September 25 12:33 12 minutes, 33 seconds which is lower than September 24 of 990 cr. 12:37 12 minutes, 37 seconds However, temporary decrease in account receivable by 70 cr resulted in a negative OCF. Our historical 12:48 12 minutes, 48 seconds our historical five-year OCF AITA has been average 70% with majority of it acrewing in the second half of the year. 13:00 13 minutes Our cash balance remain strong at 687 cr in line with last H1 despite higher 13:07 13 minutes, 7 seconds capex increased dividend payout and pay payout for the securities acquisition. 13:13 13 minutes, 13 seconds We expect to return closer to our FY25 CH margin level by end of this fiscal year supported by incremental revenue 13:21 13 minutes, 21 seconds from new contracts and network cost optimization initiatives. 13:26 13 minutes, 26 seconds With that, I would like to invite Rajiv for his closing remarks. 13:36 13 minutes, 36 seconds Thank you Bankage. 13:39 13 minutes, 39 seconds Let me summarize the key points for all of you. 13:42 13 minutes, 42 seconds The FBI cash RFP has concluded and contracting and final approvals are under progress. As this project goes to 13:51 13 minutes, 51 seconds live status, revenue from this outsourcing contract is an incremental 500 cr opportunity for us over the next 13:58 13 minutes, 58 seconds 10 years. More importantly, this also creates a very good reference point for other PSU banks to outsource more 14:07 14 minutes, 7 seconds bankowned ATMs directly for cash management with strong companies. 14:14 14 minutes, 14 seconds ICIC Bank is on track to become our second largest customer. Post AGS, the bank shut down almost 3,000 off-site 14:22 14 minutes, 22 seconds ATMs in H1, but they are working with us to rapidly deploy currency recyclers to bring back the network to earlier levels. 14:33 14 minutes, 33 seconds With just these two contracts going live in H2, the ATM management solutions business should get back to growth in H2 and deliver double digit growth in F527. 14:45 14 minutes, 45 seconds Three other large bank RFPs across both private sector and public sector are expected to conclude in the next six to 14:52 14 minutes, 52 seconds nine months which gives us further opportunities for growth for FI27 to FI30. 14:59 14 minutes, 59 seconds The short-term pain in the last year the collapse of an industry player the credit taps being tightened for some 15:06 15 minutes, 6 seconds MSPs are eventually going to help the ATM industry consolidate faster. This is also creating a better pricing environment for upcoming RFPs. 15:19 15 minutes, 19 seconds In the retail business, October has seen a strong jump in cash volumes and we hope these positive consumption trends 15:27 15 minutes, 27 seconds will sustain and continue in H2 with GSGdriven reforms and demand. 15:35 15 minutes, 35 seconds Our Hawkeye platform scaleup is massive. 15:40 15 minutes, 40 seconds I want you to reflect on this business which was created post IPO in 2022 and this business has gone from a size 15:49 15 minutes, 49 seconds of 0 crores to 100 crores in its first 3 years and is now likely to go to 250 cr revenue in the next two years. 15:59 15 minutes, 59 seconds We do see smaller players unable to compete leading to consolidation. 16:05 16 minutes, 5 seconds We will on our part continue very aggressive investments in the Hawkeye tech platform to drive this high 50% 16:12 16 minutes, 12 seconds growth gagger opportunity and for this to become a large part of our revenues. 16:18 16 minutes, 18 seconds Tech investments are also higher and needed to transform our core operations to reduce physical operating costs and 16:26 16 minutes, 26 seconds to create a strong tech mode to help in sustaining margin profile and give us more agility. 16:36 16 minutes, 36 seconds Looking back at the beginning of the year, while we knew FI26 will be a softer year between FI26 and FI27, 16:44 16 minutes, 44 seconds but H1 threw up surprises at the macro and industry level, which we have explained in enough detail. While these 16:51 16 minutes, 51 seconds are unpredictable, our team has solid experience in handling worse situations. 16:57 16 minutes, 57 seconds FI 1617 we dealt with demonetization and FI 21-22 we dealt with CO each time we 17:05 17 minutes, 5 seconds have prevailed come out stronger leaner with higher market share to deliver strong growth as a team we are aligned with our 17:13 17 minutes, 13 seconds stakeholders and shareholders punk has already detailed the non-vesting of performance ethos for FI26 as well as 17:20 17 minutes, 20 seconds non-approval of performance linked compensation for the From a key near-term metric, the H1 17:30 17 minutes, 30 seconds services revenue of 1125 crores should grow by 9% to 1225 crores in H2. 17:39 17 minutes, 39 seconds This will mean an overall FI26 services revenue growth of 8%. 17:46 17 minutes, 46 seconds That run rate in H2 of annuality revenue will provide us with a very good base to hit our FY27 services revenue target of 17:55 17 minutes, 55 seconds 2700 to 2,800 crores which is a 15 to 19% growth goal. 18:01 18 minutes, 1 second With that, thank you so much and we'll move to Q&A. 18:06 18 minutes, 6 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 18:15 18 minutes, 15 seconds telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. 18:26 18 minutes, 26 seconds Ladies and gentlemen, we will wait for a moment while the question assembles. 18:32 18 minutes, 32 seconds The first question is from the line of Vikar from Unifi Capital. Please go ahead. 18:39 18 minutes, 39 seconds Uh Rajiv good morning uh tough quarter and thanks for the detailed uh background and context setting. A couple of questions you know just so that I got your previous your last comment right. 18:50 18 minutes, 50 seconds Uh did you call out that the combination of cash management services and managed services revenue would be about 1225 18:57 18 minutes, 57 seconds crores in H2. This is excluding the hardware component. I'm sorry if that's a repetition. 19:03 19 minutes, 3 seconds Yeah. So I think Vic if you uh reflect back on both the analyst day and the way we said businesses are merging into each other we sort of are focusing on the 19:12 19 minutes, 12 seconds annoying and services revenue will cut across all our business lines and will not include product revenue right right uh no that's that's 19:21 19 minutes, 21 seconds interesting thank you uh so the the SBI RS that we've closed this quarter right so uh at the base case that amounts to 19:28 19 minutes, 28 seconds about a 70 cr to a 150 cr revenue potential for anom but I also understand that you're already building a part of that for services that we're doing uh 19:37 19 minutes, 37 seconds you know by by major goodwill before the RFP was finalized. So the question Rajiv here is that what's the incremental 19:43 19 minutes, 43 seconds revenue uh at at stake here or or is the entire 50 to 70 cr likely to be incremental. 19:53 19 minutes, 53 seconds So I think the if you look at the commentary that we have shared in the presentation as well as in the form now the the 500 cr 20:02 20 minutes, 2 seconds that we're talking about uh is only purely reflective of the incremental revenue opportunity. 20:07 20 minutes, 7 seconds Okay. Incremental. Got it. Uh that's that's interesting and some very interesting comments on the gig model. 20:14 20 minutes, 14 seconds Uh Rajiv, could you please uh you know flesh that out more and what that does from a fixed cost savings perspective and number one and secondly on the 20:22 20 minutes, 22 seconds employee cost reduction that we've seen in Q2 uh how should we read this going forward? If you just call out the cash non-cash component is this a one time 20:29 20 minutes, 29 seconds reduction. Uh I understand a part of the ESOPS to invest and probably you've added back some part of the uh uh incentives that would have occurred. uh 20:38 20 minutes, 38 seconds how how are you thinking about this hierarchy going forward? 20:42 20 minutes, 42 seconds Um so by the way I'll take the first part of the question on the gig and reward to punk for the comments on the second part. The gig is really if you go 20:50 20 minutes, 50 seconds back and think about what we're trying to do on the retail opportunity is to really sort of try and expand the market which is to go beyond just the urban 20:58 20 minutes, 58 seconds semi urban and expand it from the current 200,000 outsource market closer to a 500,000 uh market. All of this of 21:06 21 minutes, 6 seconds course needs investments on the business side and being able to you know create the new use cases using technology and solutions to integrate with retailers 21:14 21 minutes, 14 seconds from the operations and service delivery. It also needs us to demonst create a certain agility in creating 21:21 21 minutes, 21 seconds service delivery models in places where you know our network perhaps doesn't exist or the density of business points 21:28 21 minutes, 28 seconds do not justify a large fixed cost network operations. The gig serves as a very useful way to drive growth into some of these underpenetrated markets. 21:39 21 minutes, 39 seconds What Pun spoke about in terms of using a lot of machine learning algorithms is to also constantly keep evaluating our 21:47 21 minutes, 47 seconds network operations looking at the density and deciding on a very frequent basis almost on a weekly fortnightly basis what are the best sort of 21:55 21 minutes, 55 seconds resources to deploy for the different types of business points. So gig becomes a very useful almost you know edge case scenario for opening up these markets as 22:04 22 minutes, 4 seconds they mature over a period we'll evaluate what are the right ways to do it and you know routes and what type of routes for example I I just want to add 22:11 22 minutes, 11 seconds very quickly would probably be applicable just for the new business cases and and and not existing uh centers of uh cash cash pick up is that 22:20 22 minutes, 20 seconds right so I think overall what we will have to examine is basis the risk profile and what amount of money we have to handle 22:28 22 minutes, 28 seconds and the network density and reach we will start having more or more of our operations remote areas on a gigbased 22:35 22 minutes, 35 seconds model uh where we don't need to deploy the entire crew and all but I think just step back a little bit again I just want to add to what said um you know if I go 22:44 22 minutes, 44 seconds back two to three years many times when you talk to a large when you're working with banks only right when you walk to directly to a retailer or NDFC or a gold 22:52 22 minutes, 52 seconds loan company you can't go and pitch a solution and say you know what only I can only do 600 branches is where I have presence the remaining yog. So I think 23:00 23 minutes for us the idea is to say accept whatever is the entire network and then figure out how will we deliver it for that we have invested in creating gig 23:08 23 minutes, 8 seconds capacity that gig capacity will not always be profitable or will not you know function fully in the first 3 6 9 months but at least gives comfort to our 23:16 23 minutes, 16 seconds direct to retail clients that we will support them end to end and over time we need to get faster in how we see how to make this network operationally 23:25 23 minutes, 25 seconds profitable and that's where the investments in ML and are going in to be able to uh tailor our ramp up rand down 23:32 23 minutes, 32 seconds in line with how we take business points. 23:36 23 minutes, 36 seconds Okay. And on the employee cost reduction bit is is this a one-off? I mean uh how are you thinking about this going forward? I I I understand your comments 23:44 23 minutes, 44 seconds on the uh ESOP and the incentive bits that how should we model this perhaps the next year around. 23:52 23 minutes, 52 seconds I think the the the employee cost reductions which you're seeing in Q2 especially linked to the two things we talked about are are one-off and therefore they won't obviously be you 24:00 24 minutes won't see that in Q3 or Q4. However, as Punit and Alish both talked about, I think we are driving very significant productivity. Oh, also sorry, there's 24:08 24 minutes, 8 seconds also employee cost increases which are in terms of more more longer term through our LTS agreements. But um I think we've already started off fairly 24:17 24 minutes, 17 seconds uh intensive productivity and cost optimization efforts which in H2 won't happen only in Q3 should help us make up for this. 24:27 24 minutes, 27 seconds So, so, so quantitatively what does that mean? I mean do we reward to our underage of 90 crores a quarter or will it be between 80 and 90 cr a quarter 24:34 24 minutes, 34 seconds quantitatively magic I don't know the answer to that question right now I think we don't have 24:41 24 minutes, 41 seconds a we also will not be able to forecast Q3 Q4 line by line costs uh right now we'll tell you end of Q3 but I think our goal is to make sure that our emitted 24:49 24 minutes, 49 seconds path margins are trending back to normal by the end of the year okay and and just last question thanks for bearing with me you know the provisions that we've taken uh is there incremental stress That's in H2 as well. 25:00 25 minutes Uh are we scaling down that business? Uh how should we read that on provision context? 25:16 25 minutes, 16 seconds So in addition to usual risk provisioning, we had taken incremental ECL provisioning due to elongated payments from certain MSPs. 25:25 25 minutes, 25 seconds uh we are working closely with them to streamline the payment and uh we expect that the normal risk provisioning plus 25:32 25 minutes, 32 seconds ECL provisioning to be in the range of uh 4% revenue in line with our historical trend. 25:40 25 minutes, 40 seconds I think overall our MS from some of these MSPs the revenue stream is about 8 to 10% overall revenue. I don't think we are looking to right now but we will 25:49 25 minutes, 49 seconds control exposures. H1 generally, you know, I think is just always seasonally very weak for payment cycles from banks 25:57 25 minutes, 57 seconds to vendors to MSPs to us directly. H2 things always pick up. Um, this year has been a little bit more tighter. I think 26:04 26 minutes, 4 seconds as I said some of the credit takes have been lower but we are working closely to get this under control. 26:11 26 minutes, 11 seconds Yeah. And and and just so that I I know how bad this is. Uh I mean what's what's what's the aging year? Have we crossed six months on this centur? uh what's what's the rough aging count there? 26:22 26 minutes, 22 seconds So we we provide on the basis of uh expected credit loss and the risk provisioning what we do for our cash 26:29 26 minutes, 29 seconds reserves and this is based on the it is not only the MSP overall overall I I I appreciate that that policy s but just 26:37 26 minutes, 37 seconds so there are a bit more quantitative I just would like to understand how bad is this I mean this is beyond four months is beyond six months just a rough cut 26:45 26 minutes, 45 seconds with I don't need the exact day count the DSO level reic in H1 this year is the same as it was last year at this point in September last year 26:53 26 minutes, 53 seconds I I and gentlemen you know for this specific pool of 10 crores like I mean obviously this is stressful so uh you 27:00 27 minutes know is this beyond 6 months is this beyond a quarter so what's the quantitative break up of that we are this time code is a basically uh 27:08 27 minutes, 8 seconds between Q2 and Q3 Q1 and Q2 what is the incremental provision we have made for uh cash business that this 10 code 27:16 27 minutes, 16 seconds represent that and largely it repres largely it is because of the MSPs the additional uh 6 to 9 months would be the 27:23 27 minutes, 23 seconds pool of time if you're talking yeah that's what I'm yeah that's what I'm coming for and and and just lastly uh if I just got one of your uh comments 27:30 27 minutes, 30 seconds right 3,000 crores of RFPs in pipeline uh uh did I get that right and how should we imagine uh you know this going 27:38 27 minutes, 38 seconds down to CMS no let me let me u I think Anusha Pit explained this so the if you specifically look at Hawkeye Hawkeye has 27:46 27 minutes, 46 seconds a subvertical opportunity where bank branches are going to move to this level of technology for you know surveillance 27:54 27 minutes, 54 seconds security whatever they need to do. We had a very intensive uh project which is 28:01 28 minutes, 1 second going live right now. We know there is many banks which are coming up and working on on their RFPs. These are 28:09 28 minutes, 9 seconds technologically fairly high-end or have consulting firms helping them come up these RFPs. The pipeline of these RFPs 28:16 28 minutes, 16 seconds will be roughly 30,000 to order 35,000 branches. That will present an opportunity of a 3,000 cr 28:26 28 minutes, 26 seconds revenue size for those banks just for those 30 35,000 branches to whichever companies are able to win in that. So I 28:33 28 minutes, 33 seconds think they're specific to branch um branch level remote monitoring solutions where Hawkeye is a leading contender. 28:43 28 minutes, 43 seconds I got that. And just the very last question before I get back to you. 28:45 28 minutes, 45 seconds What's the scale of a payments business today and what's what's the uh playbook here specific payment business? Well, I think 28:53 28 minutes, 53 seconds from the payments business right now, our payments business is uh limited to specifically what we do in our card management and card personalization 29:01 29 minutes, 1 second solutions which um and however you go back to what we talked about in the analyst day. I think we are making very 29:08 29 minutes, 8 seconds aggressive and active efforts in uh through M&A to look at uh B2B fintech 29:16 29 minutes, 16 seconds and payment type firms uh to see how do we expand our range of services to both 29:22 29 minutes, 22 seconds banks and to NBFCs. So right now it is limited to what we do through card personalization services which is 29:29 29 minutes, 29 seconds roughly uh the revenues are reported separately anyways in P&L. You can have a look. Um but in future we hope this 29:36 29 minutes, 36 seconds will grow uh through more technology and payment companies. This will be part of part of our overall network. 29:44 29 minutes, 44 seconds That's right. Thank you. Is it possible to quantify what the hardware that part of our business might be in H2? I mean because you've already called up the 29:51 29 minutes, 51 seconds service and start I think hard businesses roughly I think as a trend line are in the 10% zip code 29:58 29 minutes, 58 seconds each year. The timing of this is not usually under control but 10% of revenue roughly. Maybe we are overall vic I 30:05 30 minutes, 5 seconds think we are looking to have this as a lower percentage so maybe 700% of overall revenue in this year. 30:11 30 minutes, 11 seconds All right. Got it. Thank you. I'll be touched. Thank you. 30:15 30 minutes, 15 seconds Thank you. The next question is from the line of Vikran Bendar from Ashoko Investments family office. Please go ahead. 30:24 30 minutes, 24 seconds Uh hi sir. Good afternoon everyone. Uh so my question was regarding the three segments that you have right for ATM 30:32 30 minutes, 32 seconds cash management solutions, retail cash uh retail solutions and technology solutions. How are the profile margin profitability profile margins are 30:39 30 minutes, 39 seconds defined in each sector right because the businesses are completely different like the uh cash logistic business you have 30:46 30 minutes, 46 seconds like operational efficiency needs to be on top and cost leadership is important to grow that business. How whereas if you look at technology side of business 30:55 30 minutes, 55 seconds the like innovation part the product differentiation comes into play. So how is the profile margin defined between these segments if uh anyone can take on that. 31:07 31 minutes, 7 seconds So um so I think first of all the three segments we talked about we we we will start reporting revenues uh by these 31:15 31 minutes, 15 seconds segments of the year. We've just finished our large ERP refresh and we end of the year we'll give you revenue 31:23 31 minutes, 23 seconds by the three businesses we explained to you in the analyst summit. Coming to profitability I think it's not just profitability also return metrics ROC's 31:31 31 minutes, 31 seconds I think for us every business uh if you look at our overall 25% ROC I think there'll be some business a little 31:38 31 minutes, 38 seconds higher some business a little lower uh but our overall aim is to create these three platforms which can self-fund their growth and therefore need to have 31:46 31 minutes, 46 seconds and sustain good good margin profiles and good return metrics as a principle we don't normally invest in any project or a business unless we are able to see 31:55 31 minutes, 55 seconds a minimum IR error of 18 or 20% in the business and um roe in the 18 20% range or ROC in the 20% plus range. We today 32:04 32 minutes, 4 seconds cannot give you detailed profitability metrics by business simply because the entire network runs together but by then 32:12 32 minutes, 12 seconds by then hopefully we should have almost 80% of the network running independently linked to that business. There'll still be 20% that will be shared but at that 32:19 32 minutes, 19 seconds point we'll have a better sense of each business's operating metrics at that level. 32:25 32 minutes, 25 seconds Yes. Uh just on that just uh expanding this question like uh like how the capex is uh defined across the three segment 32:33 32 minutes, 33 seconds like is the management focusing more takes on the technology side of business going forward uh as it is a a growing uh growing business and needs needs to 32:41 32 minutes, 41 seconds scale up accordingly to the management of around ATK side. So is the going towards more of it and uh are the return profiles matching with that for the technology business particularly? 32:51 32 minutes, 51 seconds Yeah, I think the return profile for the technology business are very good. 32:54 32 minutes, 54 seconds They're already very good and strong from what we can gauge from uh the numbers we look at and that's what drives the investment pace for us to approve it and for the board to approve 33:02 33 minutes, 2 seconds it for us to keep investing in that. I mean uh you look at the growth right I said 0 to 100 grow 100 crores 100 or 250 as the target that will need investments 33:11 33 minutes, 11 seconds however I think those investments are starting to pay off for itself on the second point I think for us when you think about any capital allocation 33:18 33 minutes, 18 seconds whether it is in capex or any other area I think we are looking at it I don't think there is a priority on a particular area there is not a one 33:26 33 minutes, 26 seconds business gets a little better approach I think it is simply we compete we look at what our capital allocation policy is we also look at the project should fend for 33:34 33 minutes, 34 seconds itself and if you think of it in the last one year um we had opportunities for let's say having higher growth 33:41 33 minutes, 41 seconds because in some of the ATMs which companies won and they could not deploy some certain banks came to companies like us to come and take up that project 33:50 33 minutes, 50 seconds to deployment and we uh evaluated it we had the opportunity to get that business and growth but we didn't think it would be sustainable in a 3 to five year 33:57 33 minutes, 57 seconds period and therefore we didn't take that up so we sacrificed and we let go of growth but we weren't confident of the return on that project let's say 34:05 34 minutes, 5 seconds specifically for the uh BLA segment. So um I think for us each project has to meet a threshold uh has to have a margin 34:14 34 minutes, 14 seconds of safety. Um and I think all of our business lines are delivering good return metrics so we're not concerned uh 34:22 34 minutes, 22 seconds on this on this account. Uh just to uh know that uh are you considering like going forward like five to over the next 34:30 34 minutes, 30 seconds year period uh do you see the technology business covering most of the like a significant portion of your revenue mix? 34:38 34 minutes, 38 seconds No no no it cannot no I mean if you look at our overall numbers we've talked about in the analyst deck I think the overall technology sector we saying should contribute by this year into 34:46 34 minutes, 46 seconds roughly 10% of revenue. So can't be I mean you got to keep in mind that we do 70 35,000 ATMs in cash management right that's a huge revenue last three months 34:54 34 minutes, 54 seconds there's almost thousand crores so technology can't become thousand crores overnight right so uh no just just it is 7% so can it go to 15 35:02 35 minutes, 2 seconds 20 over the next period of five years I just wanted to know that how like it is just it is a recent business around 2022 35:09 35 minutes, 9 seconds and it has scaled up to around 7% in the around 3 years so how are you looking over uh like will it grow to 15 20% 35:16 35 minutes, 16 seconds we are looking it to cross 10% by FI26 207. If we get that going, I think the 35:24 35 minutes, 24 seconds opportunity for it to hit 15% in the next three years is quite high. But you have to keep in mind and I've said this from the last three years our core 35:33 35 minutes, 33 seconds businesses around ATM and cash also have been growing at a very good cagger right so therefore you know the contribution 35:40 35 minutes, 40 seconds of these high growth businesses just starting from zero cannot be they can't become 30% because the other core business also are growing well and I 35:48 35 minutes, 48 seconds didn't grow in that also correct we do forecast them to also grow really well right uh and just on the part of this uh 35:58 35 minutes, 58 seconds engineer business that because it has a large spam around like around 8,000 crores as mentioned by you like the BFSI segment you guys have experience over 36:06 36 minutes, 6 seconds like 15 20 years in the BFSI segment. So the customer acquisition becomes easy in that. So the management is now targeting non BSSI sectors and already win 36:15 36 minutes, 15 seconds contracts in commerce and e industry. So how are the customer acquisition costs different and what are the uh major 36:22 36 minutes, 22 seconds problems that we uh that management is facing in acquiring those non BSI targets and is the cost and benefit uh cost benefit is aligned with that just 36:31 36 minutes, 31 seconds wanted to understand that so first of all um I think for us in a technology business there is a platform 36:40 36 minutes, 40 seconds building cost which is amortized over all customers not specific to any sector then there is solutioning cost which is client specific right you customize 36:49 36 minutes, 49 seconds solutions for a particular client we will only customize and there's investment in that some investments work out some don't work out but I think for overall tech business these are 36:56 36 minutes, 56 seconds investments you keep making because you're building the toolkit you're building AI use cases they'll come in handy in other industries also um so I 37:04 37 minutes, 4 seconds think for us the we are only right now able to tackle or cater to clients where there is a large footprint uh smaller 37:13 37 minutes, 13 seconds clients we can't even go after so unless somebody's got 500,000 locations, 2,000 locations. We don't even have the technical people available to build a 37:22 37 minutes, 22 seconds solution case for them. Uh and neither do we want to focus on it, right? We want to focus on large clients. I think a large client needs CMS. Smaller clients don't need CMS. I think they 37:29 37 minutes, 29 seconds will have other companies they can work with maybe more effectively. So um I think the cost for us because it's a horizontal approach are I mean think of 37:39 37 minutes, 39 seconds it you know there may be some use cases different but a lot of the platform cost is funible across sectors right and uh is it differentiation that 37:48 37 minutes, 48 seconds makes this business uh like go across like makes the switching cost high for the customer or what is the case for that uh like a use case I'm talking 37:56 37 minutes, 56 seconds about for the reason I think the the you know it's a good question because a technology business you can get disrupted significantly 38:04 38 minutes, 4 seconds surprisingly with some people. I think the way we do this is because there is cap involved. We lock uh we only work with clients where there are significant locking periods, right? We at least have 38:13 38 minutes, 13 seconds five to seven years. Um now having said that I think we have come ourselves and disrupted people here, right? Because we are the last to enter the sector in 38:21 38 minutes, 21 seconds 2021. So I can't say that there won't be somebody else who can't do this. Tech businesses across any platform have that risk and you have to live with that 38:27 38 minutes, 27 seconds risk. What you can do is keep investing and innovating so that your solution sets are leading are are strong or are 38:35 38 minutes, 35 seconds delivering value to the clients. I think what is the mode for us here isn't only just the tech is that think of supposing 38:43 38 minutes, 43 seconds you and I want to set up this business tomorrow right and we have a VC who gives us 150 crores we go and start building this platform we compete what 38:50 38 minutes, 50 seconds we both have with a CMS is a company present in 250 locations is have thousand engineers in the field to fix 38:58 38 minutes, 58 seconds things go wrong which happens all the time many people deploy stuff but nobody knows what the hell happened to the deployment how would they go fix it and 39:05 39 minutes, 5 seconds the last mile she's gone. I think our mode remains our network reach management and also the the the brand 39:14 39 minutes, 14 seconds for large NBFCs and large banks to trust right 39:23 39 minutes, 23 seconds consolidated balance sheet we can see that there's a significant increase in tangible asset and in capital also there 39:30 39 minutes, 30 seconds in purchase of and intangible assets. So is it easily towards this technology business or is it spread across the 39:38 39 minutes, 38 seconds three elements that you are doing related to that? 39:46 39 minutes, 46 seconds Okay. Okay. All right. Thank you so much. 39:51 39 minutes, 51 seconds Thank you. The next question is from the line of Rushi Parik from Google Rocks. 39:58 39 minutes, 58 seconds Please go ahead. 40:01 40 minutes, 1 second Yeah. Hi Dean. Uh so I just want to first understand that uh this decline in the business touch point is it purely 40:09 40 minutes, 9 seconds related to the uh ATMs uh because of uh uh so so what is the reason for the 40:15 40 minutes, 15 seconds shutdown of these ATMs? First stop here. I think we um we detailed this 40:23 40 minutes, 23 seconds somewhat in our investor today. But just to you know uh briefly summarize post the AG situation many private sector 40:29 40 minutes, 29 seconds banks both used it as an opportunity also looking at you know overall ATMs which weren't contributing meaningfully 40:37 40 minutes, 37 seconds in terms of transactions. They pruned those estates down. So some of the large private sector banks at the industry level shut down um large parts of their 40:46 40 minutes, 46 seconds off-site ATM network instead wanting to refocus on setting up new recyclers either on mostly in on-site locations. 40:54 40 minutes, 54 seconds The second uh reason for that churn that we witnessed has been public sector banks which had awarded RFPs under 41:03 41 minutes, 3 seconds mostly the brown label ATM contracts in last year to MSPs. those MS because of again the 41:11 41 minutes, 11 seconds ages situation banks which had curtailed the limits and borrowing exposure to some of the midsized ones found it 41:19 41 minutes, 19 seconds difficult to have the capital adequacy to roll out these contracts. So through most of H1 we sort of dealt with these 41:25 41 minutes, 25 seconds headwinds. As we come into Q3 two things have happened which is you know roll out 41:32 41 minutes, 32 seconds of those private sector contracts have started gaining momentum as Rajiv said you know with bank who soon you know 41:40 41 minutes, 40 seconds emerging as our second largest customer for humans we are well on track to deploying these solutions for them. the 41:48 41 minutes, 48 seconds other set of banks who had given RF orders to some of these MSPs have reallocated that from some of the weaker 41:55 41 minutes, 55 seconds ones to the other more willing ones and those who have the balance sheet strength to roll out these orders. So that sort of you know 42:03 42 minutes, 3 seconds led to that temporary decline of 4,000 ATMs in the last 3 months. But as we have come into October we started seeing 42:10 42 minutes, 10 seconds a pick up in momentum on ATMs coming back um into activations and by end of this year around March we think we 42:19 42 minutes, 19 seconds should be able to make good delta and create some growth for ourselves. 42:24 42 minutes, 24 seconds Okay. So Anush uh just to understand uh so a a good portion of this pruning is behind us now and uh we are now looking 42:33 42 minutes, 33 seconds at the normalized rate of growth in the 80s again. 42:38 42 minutes, 38 seconds Yes. Yes. So for H2 versus H1 being a 9% growth all of this is a contributing factor in that. 42:47 42 minutes, 47 seconds Okay. Okay. So just uh to continue on this particular point. Uh now uh the thing is that uh again there's some 42:54 42 minutes, 54 seconds certain uh grape wines and some uh you know uh uh other conversations in the 43:00 43 minutes industry. Uh a good portion of these uh uh ATM sites are uh you know permanently 43:08 43 minutes, 8 seconds out of the system is what the sense that uh you know I'm getting we are getting out here. Okay. Now 43:17 43 minutes, 17 seconds if say for for next one year two year I mean I mean we do have some orders in hand but if say for next one year two 43:25 43 minutes, 25 seconds year or if the banks are not willing to increase their ATM sites uh is it there something that we have some kind of a 43:33 43 minutes, 33 seconds plan B to ensure that we remain on some kind of track in this? 43:40 43 minutes, 40 seconds Yeah, I think good points, right? So, you know, you have to sort of look at there is no one strategy or tactic being appro uh you know uh adopted by banks. I 43:49 43 minutes, 49 seconds think it really depends on uh private versus public sector approach. For the private sector banks, the the what most of them are seeming to do is to shut 43:58 43 minutes, 58 seconds down or reduce their exposure to off-site networks. Off-site ATMs. So know what private banks used to capture 44:06 44 minutes, 6 seconds transactions on an acquiring basis. That is from debit cards which did not belong to their banks but from other banks. 44:13 44 minutes, 13 seconds Over a period of time with the growth of both you know public sector bank networks and white label networks and the general decline in transactions. 44:21 44 minutes, 21 seconds They have found this to be not a very attractive proposition. instead saying we use the capital and the bandwidth to 44:28 44 minutes, 28 seconds refocus and invest into creating much higher quality networks in their on-site networks which is the branch. So if you look at what just to give you an example 44:37 44 minutes, 37 seconds again of SEC bank what they're trying to do is to remove all of the older ATMs that were there in their branch networks and set them up with new recyclers. 44:45 44 minutes, 45 seconds Um our engagement with them on setting up on our software solution of Algo multi- vendor solution is also to try 44:53 44 minutes, 53 seconds and use this branch as of sort of a technology demonstrator for multiple activities that can be done beyond cash 45:00 45 minutes transactions alone in the coming period and that's the theme that I think we will start seeing happening across other private sector banks. Public sector 45:08 45 minutes, 8 seconds banks are still balancing between onset and offsite. There is no goal there to either reduce ATMs or shut down anything. And when we look at the last 45:15 45 minutes, 15 seconds year, year and a half, out of the top five or six banks in India, both private and public, most of the RFPs or these 45:23 45 minutes, 23 seconds replacements has only happened on two of these largest banks. The next three or four all have going to come out with 45:29 45 minutes, 29 seconds RFPs of a replacement or growth of their networks in the next 12 to 18 months. So I think to us that creates enough of a 45:36 45 minutes, 36 seconds tailwind and opportunity. Also bear in mind that you know I think we've addressed this earlier as well that the 45:43 45 minutes, 43 seconds CMS portfolio over a period of last few years has had a strong bias towards public sector banks because we had a 45:50 45 minutes, 50 seconds very late entrant to this market and consequently grew their business on the back of RFPs. Today with private sector 45:57 45 minutes, 57 seconds banks wanting to redo and refresh their networks that becomes a very interesting opportunity for us to start engaging with customers who we haven't done so with so far. 46:08 46 minutes, 8 seconds Okay. Okay. Uh so so broadly from what I understand we are still largely dependent upon uh you know the trends 46:15 46 minutes, 15 seconds that we have seen it's a temporary blip but hopefully uh uh H2 or maybe next year onwards uh the the lethal in the 46:24 46 minutes, 24 seconds system corrects and we start seeing the growth again. Yeah I'll just go back to what we said. 46:30 46 minutes, 30 seconds I think there is a a very strong growth opportunity within our core businesses and I think Rajiv addressed 46:37 46 minutes, 37 seconds this and we also spoke about this in IST which is when you just look at the ATM market the fact that most of the public 46:45 46 minutes, 45 seconds sector bank ATMs are still not outsourced the refresh pipeline of these ATMs presents itself as a very interesting opportunity. So yes, we had 46:52 46 minutes, 52 seconds to flip off two. We see those ATMs coming back into circulation by Q4 and you know also delivering some growth to 47:00 47 minutes us. That Q4 performance will give us a very solid base for FI27. 47:06 47 minutes, 6 seconds Okay. Okay. And and one more question. 47:10 47 minutes, 10 seconds It's also a very consolidating market, right? And that sort of presents itself as a very interesting structural tailwind to us. 47:17 47 minutes, 17 seconds True. True. Uh just one thing also on the numbers. uh this uh caping wip of 141 cr. So uh what would be the breakup of this? 47:30 47 minutes, 30 seconds Uh I think we'll have a you know pankage go through that and come back to you if you can sort of take up another question in the meanwhile. 47:38 47 minutes, 38 seconds Sure. Sure. So so uh as of now I'm done but uh I I'll be on the call for that. 47:45 47 minutes, 45 seconds Okay. These are the projects under execution like we have around 1,400 cr rupees of the project under execution. 47:52 47 minutes, 52 seconds So these are the the WIP is C CWIP is related to those projects which are under development executions. 47:59 47 minutes, 59 seconds Yeah. 48:01 48 minutes, 1 second Any any particular projects that you are referring to on this? 48:06 48 minutes, 6 seconds Couple of projects we have already given like UBI etc. uh like branch UBI or uh 48:14 48 minutes, 14 seconds uh some of the other fixed fixed price uh BNA etc. These are the these projects are part of that. 48:21 48 minutes, 21 seconds Yeah. I think if you remember last quarter we had about 1,500 crores of orders which were pending execution. 48:26 48 minutes, 26 seconds This quarter we won 500 crores of new orders u and the pending order book for us to execute is about 1,400. So you know with such large order books which 48:34 48 minutes, 34 seconds are both being executed and won there's always um you know an element of work which has been done and pending approvals will translate into revenues. 48:47 48 minutes, 47 seconds Okay. Okay. Thank you. And any any any particular word on the any acquisition trials or on the admission side? 48:56 48 minutes, 56 seconds Word been done. We will obviously update only when we have something to offer. Right now, nothing. 49:02 49 minutes, 2 seconds Okay. Thank you. Thank you. All the best. 49:07 49 minutes, 7 seconds Thank you. A reminder to all the participants, please restrict yourself to two questions. The next question is 49:14 49 minutes, 14 seconds from the line of SK DNA who is an individual investor. Please go ahead. 49:24 49 minutes, 24 seconds Hello. Good afternoon. 49:26 49 minutes, 26 seconds I was generally impressed by the effort for maintaining the present 49:34 49 minutes, 34 seconds for business as it has been seen for last 12 49:40 49 minutes, 40 seconds quarters. I have some personal 49:47 49 minutes, 47 seconds query which is uh related to the ATMs only as I find that with the increase of the digital transactions. 50:00 50 minutes how the ATM's expansion by the banks will take place say 5 years from now and 50:09 50 minutes, 9 seconds it will impact our currency logistics business and ATM management business. 50:16 50 minutes, 16 seconds How you plan to address the same? 50:25 50 minutes, 25 seconds Thank you sir. Um I think for us when we think of the 50:36 50 minutes, 36 seconds Um I should be audible right hopefully the call is there. So so I think for the currency ATM business first of all um if 50:44 50 minutes, 44 seconds you look at both driven by author banks needing to access their reach of customers their availability banks need to have x 50:53 50 minutes, 53 seconds number of ATMs available to consumers at all times. We think there will be some steady growth in the install base. 51:01 51 minutes, 1 second Interchange has increased by RBI in May and the white label becomes an interesting opportunity where deployers 51:08 51 minutes, 8 seconds are looking to increase ATM network in semi-urban rural. We are seeing higher usage of ATMs in semi-urban rural and 51:17 51 minutes, 17 seconds that's where we think the PSU banks and WA operators can service us more. The private banks as cost of technology 51:25 51 minutes, 25 seconds remains lower and as people costs go higher, we see private sector banks deploying more machines within their branches as they refresh those branches. 51:35 51 minutes, 35 seconds Now former industry today, I think the overall industry uh at a managed services level will have six or seven 51:43 51 minutes, 43 seconds players. We do see this reducing to maybe three or four companies over the next three or four years. Therefore, the 51:50 51 minutes, 50 seconds revenue size and the pool size for companies will go up as smaller or medium players exit. 51:58 51 minutes, 58 seconds As you have fewer players, the need for the service will remain. The transactions at the ATM may reduce. So, if you used to go to an ATM twice a 52:06 52 minutes, 6 seconds month today, you may go once a month or something, but you have to maintain and run this network like you need to maintain and run a branch. I don't think that is going to change in the next 5 to 52:14 52 minutes, 14 seconds 10 years. And therefore pricing which you are doing when there are lesser competitors competing I think will go up. So I think the volume growth may 52:23 52 minutes, 23 seconds reduce in five years time but outsourcing from PSU banks and pricing should make up for it to keep continuing this at a 8 to 10% growth opportunity. 52:33 52 minutes, 33 seconds Having said that, this is a business which was let's say 60% of our revenue some years ago is now at about 50% of 52:40 52 minutes, 40 seconds our revenue and over time as a retail business and a technology business grow faster the share of this business will steadily maybe reduce which is also the 52:49 52 minutes, 49 seconds goal which is to have more business lines which are able to help us drive growth. So I think for us we look at the fact that you know we have multiple 52:58 52 minutes, 58 seconds lines of businesses. We look to expand into other services which we can cater to for our banking NBSC and retail 53:06 53 minutes, 6 seconds clients and um as we drive free cash flow out of our current businesses to invest for growth into new sectors. We 53:14 53 minutes, 14 seconds should be able to maintain a reasonable growth profile. 53:20 53 minutes, 20 seconds That's fine. Thank you. I just would like to ask a question that is that how 53:27 53 minutes, 27 seconds we are utilizing AI in the days to come at the digital intelligence. Sure. So I 53:36 53 minutes, 36 seconds think a great question I think for us um AI we started with extensive machine learning and AI use for our Hawkeye 53:45 53 minutes, 45 seconds platform which is our remote monitoring solution. So we've been doing that for the last 3 four years and investing more and more uh because a lot of the 53:54 53 minutes, 54 seconds security surveillance and all we are doing through Hawkeye solution is by agents and by AI and not with physical 54:02 54 minutes, 2 seconds eyeball monitoring. Uh I think that learning is now pervading into our core operations. fully explained that in his 54:08 54 minutes, 8 seconds notes saying a lot of our route network where we go what we pick up how much we pick up what's going on how do we keep 54:15 54 minutes, 15 seconds changing our routes dynamically basis uh in the seasonality or demand is all being in we are investing in machine 54:23 54 minutes, 23 seconds learning based algorithms to help us drive the next level of operational framework I think for a company of a size this is a big investment but for a 54:31 54 minutes, 31 seconds company of size given the amount of we touch 130 140,000 touch points I think it helps us a portion the cost more 54:38 54 minutes, 38 seconds easily to drive better um uh I would say better uh margins over time. So machine 54:46 54 minutes, 46 seconds learning and AI is being used extensively in our core operational business um is also in our uh BU our business line on Hawkeye. 54:59 54 minutes, 59 seconds Okay, interesting. Thanks for sharing the information. 55:07 55 minutes, 7 seconds Thank you. The next question is from the line of Prain Kumar from Acutis Capital. Please go ahead. 55:15 55 minutes, 15 seconds Yeah. Hi. Uh, thanks for the opportunity. I had a couple of questions. Uh, the first one was on the abit margin on the cash logistics 55:23 55 minutes, 23 seconds business. you have attributed the drop to uh lower I mean lower network utilization and the provisioning. So but 55:30 55 minutes, 30 seconds particularly looking at the network utilization part of it uh how much of it do you attribute to the convention slowdown versus these temporary factors 55:39 55 minutes, 39 seconds which you you know which you attributed to in terms of the some of the network being down currently. So could you throw some light on that in terms of you know 55:46 55 minutes, 46 seconds where do you see this heading in the next uh in in H2 and also during FI27? 55:52 55 minutes, 52 seconds Uh this was the first question. Uh the second question was on uh on what you referred to earlier about you know 55:59 55 minutes, 59 seconds private sector banks and others particularly looking more at on-site ATMs as in the off-site ones. So how do you see that impacting uh your uh uh 56:08 56 minutes, 8 seconds revenues in in your various segments you know this uh movement from uh off-site to on-site both in terms of revenues and 56:16 56 minutes, 16 seconds and some broad margin kind of a profile of that. Yeah. Thank you. 56:21 56 minutes, 21 seconds uh prair uh you know to your second question first is the easier one uh I think broadly the switch from offsite to 56:28 56 minutes, 28 seconds on-site we generally view it favorably for the simple reason that you know it's not so much about where the ATM is but what is the nature of the outsourcing 56:36 56 minutes, 36 seconds model when banks would outsource in the offsite they generally had a preference to move to sort of move to a transaction based model simply because the selection 56:45 56 minutes, 45 seconds of the site was being done by the MSP and not the bank whereas when it switches to an on-site This is more a bank seeking a higher quality of 56:53 56 minutes, 53 seconds engagement with respect to how a branch ATM should be serviced. They they want partners who are able to bring in that resilience that robustness and that 57:02 57 minutes, 2 seconds quality of service of a very different order than what necessarily was being done with site ATM. And that can only happen if there is predictability and 57:09 57 minutes, 9 seconds certainty of revenues through a fixed price model. So we generally sort of tend to have a bias for one you know the fixed price over the transaction. Coming 57:17 57 minutes, 17 seconds to your earlier question on um you know what has caused that dip in the revenue as you rightly attributed from an IBIT perspective it's a combination of you 57:26 57 minutes, 26 seconds know three things the first being the impact on our network utilization generally as we've spoken in the past 57:34 57 minutes, 34 seconds you know managing our network capacity utilization through you know just running a very high quality of productivity management is something 57:42 57 minutes, 42 seconds that we've been doing for many years now Q2 created two unusual situations the 57:49 57 minutes, 49 seconds delays in the closure of this large PSU bank RFP which meant that you know till that time it didn't get closed out we had to carry that capacity and 57:58 57 minutes, 58 seconds consequently the cost and the second being the dip temporary dip in ATMs which is which which is basically meant 58:06 58 minutes, 6 seconds that ATMs which were installed taken out and either were being replaced at the same site or being relocated to a different location from onsite offsite 58:14 58 minutes, 14 seconds to onsite we knew it was going to happen. Now the uncertainty was really in a matter of time. It could be a quarter, it could be a two quarters. Now for that short-term period, just trying 58:23 58 minutes, 23 seconds to recheck the network and ramp up and ramp down the network and capacity and incurring a restructuring cost is not really worth it. So at the end of Q3 and 58:31 58 minutes, 31 seconds then you know Q2 and Q3 when when we speak about this now we believe we have a far better in visibility to be able to 58:39 58 minutes, 39 seconds make the necessary changes to our network capacity both through cost reduction business which comes back into our network leading to overall margin 58:47 58 minutes, 47 seconds improvements and uh you know getting it back onto track the way it was last. 58:54 58 minutes, 54 seconds uh you're right you know and this this is on the physical side of you know business points impacting our network the dip in the cash collections on the 59:03 59 minutes, 3 seconds you know which are more consumption oriented in Q2 in retail have also impacted revenue so if you look at our total revenue impact of about 1820 59:11 59 minutes, 11 seconds crores about 5 crores a month 15 crores is what is attributed to the ATM side and the rest would be on the retail and 59:18 59 minutes, 18 seconds as I shared with you earlier in October with spending coming back on the retail side strongly see you in a 20% increase 59:26 59 minutes, 26 seconds month on month. We think that should lead to a recovery of this business as well. 59:31 59 minutes, 31 seconds Uh so where do you see the cash logistics uh the margin on that heading in the H2 and next year and where some rough sense? 59:41 59 minutes, 41 seconds So as you said no by end of the year we hope to recover that back to where we used to be before this. Wonderful. 59:48 59 minutes, 48 seconds And and your earlier uh response on the offsite to on-site transition. So one question I had I mean one one uh uh uh 59:57 59 minutes, 57 seconds followup question on that was that uh for the on-site ATM is it is it possible that bank might require fewer services 1:00:06 1 hour, 6 seconds and might want to do uh uh some of the stuff themselves and that does that create uh lowers the pool of uh revenue 1:00:14 1 hour, 14 seconds that you can attack uh versus an offsite title? 1:00:19 1 hour, 19 seconds Not really. In fact, you know, uh if anything, it works the other way around. 1:00:22 1 hour, 22 seconds Conventional um experiences data has shown that on-site ATMs tend to attract more number of footfalls simply because these are branches. More people go to transact there for various reasons. 1:00:32 1 hour, 32 seconds Banks are very keen to switch transaction from branch to branch associated on-site locations. It's 1:00:41 1 hour, 41 seconds extremely expensive for a bank to have people walk in to a cash teller and you know do any sort of a transactional banking uh activity. It could be cash 1:00:49 1 hour, 49 seconds related, it could be account related. A lot of that is what they want to transition to their on-site ATMs and 1:00:55 1 hour, 55 seconds recyclers. Uh the only delta between on onsite and offsite is really around electricity where in an onsite because it's part of a branch those are owned by the banks. 1:01:06 1 hour, 1 minute, 6 seconds And on the when you referred that private sector banks are moving more to recyclers versus regular ATMs. Uh how does how are you positioned in that in 1:01:14 1 hour, 1 minute, 14 seconds terms of the hardware? I mean uh do you have because you have traditionally had more experience on the uh uh traditional 1:01:21 1 hour, 1 minute, 21 seconds ATM side versus the recyclers. So how do you see that impact? 1:01:26 1 hour, 1 minute, 26 seconds Not really. I think you know um within the industry the parlance is you know CDs cash dispensers for you know what is 1:01:33 1 hour, 1 minute, 33 seconds traditionally ATMs and recyclers. Um but you know outside we generally tend to use ATMs as a catchall phrase to talk about books. We were one of the first um 1:01:42 1 hour, 1 minute, 42 seconds initiators and pioneers of bringing recyclers also into the country. Um I think it was way back in 2015 or 14 um 1:01:50 1 hour, 1 minute, 50 seconds when we won what was then the largest order for currency recyclers to be deployed across State Bank of India 1:01:57 1 hour, 1 minute, 57 seconds network. So you know we have a fairly deep and well- entrenched history of going back and uh you know we really are a full stack solution in the space right 1:02:06 1 hour, 2 minutes, 6 seconds from having the right product um you know from our partners uh to an engineering team which understands this extremely well and servicing and 1:02:14 1 hour, 2 minutes, 14 seconds solutioning and more importantly when we combine that with the software platform the ALGO the benefit of that in ways in 1:02:22 1 hour, 2 minutes, 22 seconds which a bank is able to use a recycler and provide a whole host of additional services to their customers including 1:02:29 1 hour, 2 minutes, 29 seconds things like account opening KYC and various other non-cash related uh transactions that can be a very powerful combination in fact I want to add one 1:02:37 1 hour, 2 minutes, 37 seconds quick point you know if you think of specifically private sector banks when they think about uh upgrading the branch networks and uh adding more recyclers um 1:02:45 1 hour, 2 minutes, 45 seconds they are very hardware agnostic really they are very service focused like service and quality and in fact we have 1:02:53 1 hour, 2 minutes, 53 seconds um we have one or two clients who would like us to not only worked with our current hardware partner but with more 1:03:00 1 hour, 3 minutes to become hardware agnostic but they would like to prefer CMS to do the work irrespective of which hardware working on now I'm not saying that's a trend for the whole sector and industry but at 1:03:08 1 hour, 3 minutes, 8 seconds least one or two clients have been focused on that with us understood uh thanks for the respect 1:03:18 1 hour, 3 minutes, 18 seconds thank you ladies and gentlemen in the interest of time this was the last question I would now like to hand over the conference over to the management for the closing comments. 1:03:31 1 hour, 3 minutes, 31 seconds Well, uh, thank you so much for so many detailed questions. We thought we would have a more descriptive, uh, monologues from our side and hopefully it reduce 1:03:39 1 hour, 3 minutes, 39 seconds the question, but I'm I'm happy to hear them out and give you better clarity. 1:03:43 1 hour, 3 minutes, 43 seconds Um, as we said, October is off to a good start. We hope that trend bes have a a much better H2 to bring us back 1:03:51 1 hour, 3 minutes, 51 seconds online for our FI27 goals. Uh thank you for your time, interest and patience. 1:03:57 1 hour, 3 minutes, 57 seconds On behalf of Asian Market Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.