The Crow Verdict: I have an uncle (early 50s) who only pays by cash - for everything from his bimonthly haircut to Sambhaji bidi to holidays. He handles about 2 dozen demat accounts and files for each IPO through physical forms. It baffled me so I asked him why. He says he has 0 trust in online payments. I told him most of them like UPI are free but even then he swears by his "hari patti". Even in Nov 2016 and Mar 2020, he only dealt in cash, and by the looks of it, he will continue to do so till he dies. His son (late 20s) has somewhat shown progress and deals online too. But he refuses credit and only uses a debit card (which is like a plastic remote control for "rokda"). Yet, about 10-15% of his transactions are online. Rest is cash.
This somewhat translates to India''s cozy relationship with "Georgekutty", a slang for cash in Malayalam language. Despite DeMon and the first wave Covid-19 pandemic, less than 90% of transactions in India were by cash. Take a minute to think about this. If UPI and other cashless transactions were to overthrown cash, it would have at least made headway over the last 4 years. Nothing happened, so all of us are going to continue to have a romantic relationship with cash for the foreseeable future. Handling cash is somewhat of a delightful feeling, no? Especially those notes that are fresh, crisp out of an ATM machine...
You should then thank CMS Info Systems for those crispy notes. And RBI too. Being the largest cash management company in India, you would think CMS is an obvious bet. Sure, it handles about 25% of ALL ATMS in the country, which is the 3rd largest ATM market in the world. Ironically, India also has one of the lowest ATM penetration in the world. A company like CMS should then mint money in the long run.
Not so much, though. After the arrival of digital payment systems, cash has lost its sheen. The effect is even worse on the stock market where you judge a company by its future outlook. Unfortunately, cash management as a business is not so appetizing. With the idea of a digital currency being floated by RBI, the concept of cash points catching up and just around the corner, and heavy regulation to how ATMs are handled, the future prospects of CMS and its ilk look dim. It''s not like RBI is getting listed, mind you. Of course, the company is debt-free (unlike its listed peer), has good +ve cash flow, good margins, and an average offer valuation with a P/E and P/B of about 19 and 3 respectively. Yet, it is not enough.
This is a pure OFS so all the "cash" will go to the investors'' pockets (jokingly which should be in our banks'' ATM machines). Promoter holding will be down from 100% to 66% and that''s a steep drop that does cast some doubts in my mind.
All of these don''t inspire me much to invest in CMS. More so when you consider its closest peer, Prosegur. Prosegur in India is a JV between the Spanish company (world''s largest cash management company) and SIS. So SIS Prosegur is the competitor which had a market share of about 30% back in 2014, 3 years before it listed on the bourses. A year later, CMS was fully bought by Sion Investment Holdings (Singapore) and within 6 years managed to take the lead. This shows that CMS is better equipped than SIS Prosegur, which had a decent IPO in 2017. It was well subscribed and gave investors a very short-lived, small listing pop. Since then the stock has split (1:2) and it is now trading at about only 11% from its listing price. Not so great performance, and even worse when you adjust for inflation.
That story just gives me the reverse pangs. I am no longer hungry for this IPO. Being the last IPO of calendar year 2021, you would want to join the euphoria but I don''t see any listing gains on this as of now. Neither do I see any marvellous recovery in the long run. The GMP plummeted from a high of 42 to 5 and that''s alarming.
For a 20-year bet, CMS will be a good counter. It will perform better than SIS stock for 2 reasons: 1, SIS is majorly a security company and its cash management is only a small part so you can''t compare; 2, its financials are weaker than CMS. But considering the market sentiments, the GMP fall, and most importantly, the fully priced offer, this can be avoided. You may do bottom fishing after it lists.
I will wait till 3 PM to see subscription figures and if QIB and Total is above 3X, will apply so that I get a max of 1 lot in retail just to join the year-end market euphoria tradition. There is a tad chance of discount listing so you should be prepared with a stop loss strategy. If subscriptions don''t improve, this IPO is as good as an ATM machine with a cardboard stuck to it that says "ATM out of order".
Red flags - 4 out of 11. Keep crowing!
Always in restraint of Mrs. Crow.
Zerodha (Trading Account)
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