Good afternoon everyone. I would like to welcome the management and thank them for this opportunity.

We have with us today Mr. Rajiv Kaul, Executive Vice Chairman and CEO, Mr.

Pankaj Khandelwal, CFO, and Mr. Anush Raghavan, CBO.

I shall now hand over the call to the management for their opening remarks. Over to you, gentlemen.

Good afternoon and welcome. This is Rajiv.

Let me start with an opening. This has been a very hectic quarter.

Before we dive in, I want to rewind back and to set some quick context for those of you who may be recent participants on our calls. In FY '22 to '24, we had successfully achieved our three key operating goals and metrics on revenue growth, margin expansion, and market share gains.

FY '24 and '25 saw an increase in competitive intensity, and we sat out on most transaction BLA RFPs, where the pricing was pretty low. We in line reduced our capex spend from average of 200 crore a year to 100 crore levels to preserve capital and to avoid low-quality growth.

At the beginning of this year in FY '26, we were quite optimistic and positive. ATM interchange increase had been approved and announced, a key competitor was winding down operations, and we were almost certain to be awarded a large cash RFP, which was fairly unique, from the country's largest bank for almost 10,000 ATMs as the sole eligible bidder.

This itself would have been a 100 to 125 crore of incremental revenue for FY '26, or which would have been a 4% growth from one contract, and for this, we invested in network expansion ahead of the contract. The tides early turned in May with severe impact from both external and internal factors.

We updated you on these in detail in our September 30th analyst meeting. In hindsight, we invested ahead of this contract and our anticipation on things becoming normal was very aggressive given the subsequent delays to that RFP.

This has been a big learning for us, and since then we have tightened our deployment norms to align strictly with contracted milestone with key customers. In this volatility, we have retained our long-term focus and doing the things which we think are right and investing in them.

We restructured the company into three platforms: ATM Management Solutions, Retail and Currency Logistics, and Tech and Payment Solutions. All of these are now at good scale, have market leadership, and a strong margin profile with ability to generate free cash flows to drive their growth.

We also invested in broadening and diversifying our customer base. We invested for growth in retail and tech segments.

In the ATM business, our focus has been on higher value and yield and more fixed-price contracts. FY '26 year-to-date, we have very strong 1,600 crore plus of high-quality order wins.

As we enter calendar year '26, things are beginning to turn. GST 2.0 has had a strong positive impact on consumption in the retail segment, and we see our segments starting to grow again.

Order wins and execution of the order book is strong, and optimization efforts are also bearing results. I would now like Anush, our CBO, to share more details on the business and these initiatives.

Thank you, Rajiv. Good afternoon everyone.

I'll spend a few minutes on the business and operational performance for the quarter. The macro environment has been mixed, but we are seeing signs of stabilization.

On the retail side, cash usage is holding steady, which is a strong positive. In fact, if you look at our investor deck, we have shared some information on how on a same-store basis post GST 2.0, we have seen volumes rebound meaningfully.

In our ATM segment, transaction volumes have stabilized, and this provides a floor for deployment planning. In terms of our key business updates: our SBI cash RFP after intense negotiation was finally awarded and contracted in December.

It is now getting rolled out in Q4. Our total revenue from this is 1,000 crore over 10 years, of which 500 crore would be incremental revenue to CMS.

In terms of other order book, our execution is on track. We have over 750 crore order book just with two customers, ICICI Bank and India Post Payments Bank.

Both of these are about 75% live. Our Tech and Payments business is growing from 235 crore revenue to 330 crore revenue in one year and is on track to hit 400 crore in FY '27.

This is a 30% CAGR. I would also like to provide you an update on the higher DSOs from a few mid-sized MSPs due to credit tightening by lenders post the AGS issue.

We had alluded to this in our previous call. Since then, we have mitigated these risks to a large extent.

We had made provisions in Q2, and in Q3 we took strong tactical actions, which included limiting services to ensure payment discipline. This has had a negative revenue impact, but was necessary to drive cash flow improvements.

DSOs are getting streamlined and should be back to normal levels by end of March. On improving margins, we have taken the following actions: We are optimizing our network and have exited a long tail of unprofitable retail points.

This again has had a small impact on revenue, but it ensures a healthier revenue base and good profitability going forward. The gig operating model for the direct-to-retail business, which was being piloted for most of last year, has now scaled to a team of 2,000 plus partners who are covering 20% of our retail points and have achieved a certain critical mass.

We will also get a more agile and flexible network through this model to handle peak periods and convert part of fixed cost base to a variable structure. We have strong business momentum building up again.

Large customer RFPs are being decided as we speak, and this should help deliver a good Q4 and FY '27. With that, I would like to invite our CFO, Pankaj, for a financial update.

Thanks, Anush, and good afternoon everyone. Let me take you through the Q3 financials.

I will focus on the underlying operating performance as our reported numbers this quarter includes regulatory and one-off items. Our consolidated revenue stood at 618 crore, a sequential growth of 1.6%.

While headline growth appears modest, the quality of revenue has improved sharply. Service revenue is up 4% on quarter-on-quarter basis.

Managed Services and Technology is up 18% quarter-on-quarter from 216 crore to 254 crore. EBITDA and margin operational efficiency is on track.

Business EBITDA grew 9% quarter-on-quarter to 158 crore rupees. EBITDA margins expanded by 160 basis points moving from 23.9% in Q2 to 25.5% in Q3.

This margin expansion was driven by the two segments: Cash Logistics, EBITDA up by 6% and margins expanded by 170 basis points; Managed Services and Tech, EBITDA up by 12% to 78.5 crore rupees. I want to clarify the movement in PBT and PAT to ensure the underlying trend is understood.

Reported PBT dropped from 95.6 crore to 88.1 crore in Q3. This is due to specific one-off item.

In Q2, there is a base effect of one-time gain of around 12 crore rupees from the provision reversal of ESOP and performance-linked incentives. If you normalize these exceptional items, our core operating PBT has actually grown sequentially, reflecting the business and margin improvements.

In Q3, we have also made one-time provision for new labor code of rupees 11.1 crore, resulting in PAT after exceptional items for 54.4 crore rupees. Now I'll talk about the capex and liquidity.

YTD capex is around 275 crore. While we have conservative in capex for '24 and '25, this current spend is linked to the execution of around 1,600 crore rupees order book that Rajiv mentioned.

This is growth capex, not maintenance capex, and it is primarily driver for the revenue visibility in FY '27. In terms of outlook, business momentum has picked up a pace.

In FY '25, our EBITDA margin was 26.1%, which is dropped to 22.8% in this quarter. However, in Q3, we should see that the overall EBITDA margin expanded by 100 basis points to 24.5%.

This should further improve to 25% to 26% range for the FY '27. With that, I hand it back to the Rajiv.

Thanks, Pankaj. In our closing, I just want to cover three topics.

First, the revenue mix. Secondly, M&A and capital allocation.

Thirdly, the FY '27 outlook. I do want to point out, and you can refer this to the slides we have on the investor deck, our mix of revenue is substantially changing.

It's getting much better and broader. Over two years from FY '24 to year-to-date FY '26, the contribution from our largest customer has reduced from 22% of revenue to 18%.

The whole category of private sector banks and the direct-to-retail revenue, that contribution is increasing from 24% to 30%. The PSU bank revenue contribution is up from 19% to 22%, and the revenue we earn from our MSP partners is down from 35% to 29% of revenue.

This mix change is going to have a positive impact on margins as we broaden and diversify the nature of our business and the nature of our customers. Second, on M&A and capital allocation, I will reiterate what we have said always: our capital allocation priority is, first, fund organic growth and order book execution; second, pursue accretive M&A where we see either consolidation opportunities or a synergistic expansion opportunity; third, return surplus capital to shareholders through dividends.

We see as of now a very good or, I would say, a better M&A environment than we have seen in the past. Earlier this year, on the back of having scaled our vision AI platform into a market leader, we were able to make an accretive acquisition of a leading player, Secur-Eyes.

This was our first deal in the last four years. The investment here finally is 70 crore rupees.

On February 11th, a couple of days ago, we signed a term sheet for a business transfer agreement with a leading MSP to acquire their ATM Management Solutions business. The deal value here we estimate to be in the range of 100 to 125 crore, and we aim to close this deal by March end.

This is going to drive consolidation of the market and will also be value accretive to CMS. More details on this once the transaction closes.

At the same time, we are closely evaluating deeply other opportunities in both the retail and the payment tech infrastructure sectors. On buybacks, given the feedback we had both at the analyst call and after from shareholders, given the recent change in taxation, which makes it more equitable to all shareholders, and also keeping in mind the growth opportunity ahead of us, this has been discussed at the board.

We will be evaluating this in line with better clarity on our balance sheet and the needs of capital by the end of the year and will update you accordingly. Let me move to the third item, which is relevant and most important right now, is the FY '27 outlook.

As we have already alluded to, calendar year '26 is off to a pretty good start, and we hope to retain and build on that momentum going forward. FY '25 and '26 saw us defend our revenue position well, even though we didn't grow much, but we defended our revenue well.

We also maintained our market share amidst a lot of volatility in the overall ecosystem. Our Hawkeye business specifically is growing rapidly.

We have taken this business from 0 to 100 crore revenue run rate ARR in FY '21 to '25 in FY '20 sorry, FY '21 to '24, in 3 years. From FY '24 to '26, we are seeing this double from 100 crore to 200 crore level range.

More importantly, we have now built a strong enterprise-grade product, which will be very useful as we bid for some large RFPs coming up in the coming year in new sectors for Hawkeye. While Q2 and Q3 were adversely impacted and this has affected margins for the year, we have detailed these out in our past calls and the analyst meeting.

Q3, we have bottomed out. With momentum strong from execution of order wins we have, we do forecast a strong positive trend going forward.

Overall revenue for FY '27 should be in the 2,800 crore to 2,900 crore range. The services revenue component of this should be in the range of 2,700 to 2,800 crore, which was the target we set out when we met you in September 30th.

The bridge from where we are right now to getting to this is that we are hoping to end Q4 strong. There are some key deals under discussion and negotiation which we hope to finish strongly by March, which would allow us to end Q4 strong, enter FY '27 with a services run rate revenue closer to 650 crore.

If you gross it up by four times, that will give you roughly a 2,600 crore services revenue for FY '27, and then growth in the year should get us closer to the 2,700 to 2,800 crore services revenue growth. Add product revenue of roughly about 100 crore, we should be in the ballpark of that 2,800 to 2,900 crore overall revenue.

EBITDA margins, Pankaj has detailed out the reasons of us going down and our bridge from there. If you want to summarize our overall dip in EBITDA margins, what I would just put them into three factors: about roughly about 1.5% impact in both wage inflation and the investments we made in building infrastructure for a contract which took time to pan out; and then about 1 1.5% dip in margins which is linked to both increase in fleet cost as well as higher overall ECL provisions and risk provisions.

These are improving. I think we'll see improvement of that in Q4, and with the bridge from there to next year, we should be able to see EBITDA margins in the 25% to 26% 26% range for FY '27.

Thank you, and now we can move on to Q&A.

Hi. Thanks for the opportunity.

I had a couple of questions. The first one was to get more clarity on the revenue bridge to FY '27 which you spoke about.

If I look at it from a different perspective of how much of this bridge to FY '27 revenue are things which you have already contracted and have in hand versus where you are counting on, let's say, consumption improving or some other improvements in the broader macro? If you could break it up into those two kind of components?

Thank you.

Hi, Praveen. Anush here.

Q3, if you look at it, was about 577 crore. As we all shared, I think there is a lot of work that has happened on the order execution through this year.

We also have the large SBI order which is going live in Q4. That plus a few other deals that we are in discussion with, the goal for us is right now to just be relentlessly focused on execution and to enter Q1 with a services base of the 577 growing to about 650 crore.

So 650 into 4 gets you to 2,600. 2,600, you add about 100 crore of incremental growth through FY '27 and 100 to 125 crore of product, that gets you to that range of about 2,800 to 2,900 that we alluded to.

Would you say that this 650 which you're talking about is largely what you have in hand and you have to just execute on that? Or is there any assumption built into that saying that consumption needs to grow?

Let me try and give this answer in a different manner, because I have to be cognizant of the fact that this is a team which forecasted very well for three years, and then I think the last 1 1.5 years our forecasts have not really played out. We will be a little careful right now, Praveen, and therefore bear with us as we build confidence in forecast and reality.

The 650 sort of a number, I think we have almost 95% certainty on this number. We would want to wait to see where we end with March, and so I think the 650 into 4, the 2,600 is fairly certain.

The bridge from 26 to 27 2,800, that's something we have to earn and work for in the remainder of the year.

Understood. Understood.

A couple of other questions. One was on the retail cash management part.

I think you have in your presentation, you have referred to rationalizing low-yield customers. Just wanted to understand, is this kind of a indication that this is kind of a course correction from your earlier kind of aggression in this part of the market, or just wanted to get some color on that?

It's a great question. I think the way I would phrase is, in the last two, three years, we've been fairly aggressive in this market from a market share perspective, right?

As other businesses were scaling very well, we were happy to invest with aggressive pricing, network expansion. Also we've built up a sales engine in the last two, three years to attack and address the D2R customers.

In a year which was reasonably tough, I think it was very important for us to look back and optimize our network and look at what makes sense. We did go and engage.

Again, when you're growing the network, there will always be X percentage of network which is not going to be profitable, right, as you're entering newer markets, smaller locations. When I think in Q2, Q3, given the overall trend of the business, we wanted to step back and look at how much of these customers will be profitable longer period, and we took an attempt to see if where we can increase prices and where we think the prices just don't make any sense.

I think what Anush and his team have done, what Puneet have done is sort of, I would say, just do a sort of I don't know what the right word is, but just prune this up in line with making sure that we are building our business and margins in the right line. Now, I think this will be a journey we'll go through up and down, right?

When you are in more aggressive and high-growth periods, you will invest. Some investments will bear fruit, some will not, and then you have to course-correct.

Understood. One other question on the provision that you had taken on in terms of the receivables in Q2.

I think Anush had referred that you expect that to stabilize by the year-end. Just wanted some clarity on that.

One is that what kind of a revenue hit have you taken on in terms of having to tighten your receivable norms with these kind of customers? Secondly, if you are continuing to see stress in the ecosystem, how much more revenue hit you can expect from this kind of stress persisting in the system?

Thank you.

We'll answer that question in two parts, Praveen. One is I'll take the revenue part and I'll hand over to Pankaj for the ECL for the provisioning part.

The Q2 was a specific provision that we had to take on account of seeing the significant change in the external market conditions and what some of our customers, especially the mid-sized MSPs, were going through post the shock in the ecosystem, the tightening of the liquidity and the credit taps to them. Q3, we took a slightly different approach, as I shared, which is we were really focused on improving our overall DSO situation.

That meant that we had to take certain calls in terms of our revenue exposure, but more importantly how we invested quality and cost in running networks or sometimes shutting them down. Not easy calls to take, but the effect of that is visible in the Q3 revenues.

With respect to the provisions, Pankaj will just answer that.

Yeah. For risk and ECL provisioning, we look into on a annual basis, not on a quarterly basis.

The risk provision for FY '23 was around 5% of the revenue, which we have reduced to 4% in FY '24 and 3.7% in FY '25. However, this year, we are expecting the same to be range of around 4.25% to 4.5% of the revenue, because the ECL specifically have a lag effect.

As a DSO increases, ECL increases. As Anush has explained to you, the DSO reduces over a period, will impact the reduction in the ECL provisioning in going forward.

Thanks for that clarification. Anush, could you

Okay.

I have two quick questions. The first one is last quarter the management had forecasted 9% growth in the services revenue in H2 compared to H1.

What is the services revenue growth for Q3 as compared to Q2? That is the first question I wanted to ask.

4%.

4%. All right.

The second is there is a dramatic increase in the employee benefit expense this quarter of about 18 crore, and that looks pretty big for a quarter where appraisals are generally not due. What was the specific reason of this increase?

As I explained to you, there there was a last quarter in last quarter there is a one-off item of around 12 crore rupees wherein we have reversed the provisioning for the ESOP as well as the performance-linked incentive provisioning. That is impact of around 12 crore reduction in the last quarter.

Otherwise, the total cost employee cost and service and security cost, there is a reduction in the overall service and security cost and the employee cost. Whenever you look look both the add both the items, service and security cost and employee cost, add both the things and calculate that number.

There is a reduction in considering adjusting of 12 crore rupees and adding this both, there is a reduction in the cost of this thing.

Right, but service and security is different from employee benefit. I wanted to ask specifically about that.

12 crore is purely in the employee cost. When we add about the total employee and workforce cost workforce is either our own employee or the third-party employees you have to add both.

Service and security includes the outsourced staff which will be working with us. Therefore that's overall part of our wage cost.

Okay. All right.

Got it. Thank you.

That's all from my side.

Hi team. I think my question is in continuation to the earlier question on the aggression that we had shown in the retail side, but now we are pruning a little.

I think that part is clear. Can you just help me understand also additionally that how we are looking to take this up going forward and any particular areas that we are targeting?

Surrounding this, how is the gig strategy deployment working out for us, the challenges that we have overcome? Within the growth part, any new areas for Hawkeye or RMS that we are looking to deploy, especially when you mentioned that some new sectors we are looking to build the solutions for.

That is my first question.

Hi, Rushabh. Let me answer both your questions.

As far as the retail is concerned, I think in terms of our sales focus, our aggression continues to be what it was, simply because we think this is an important part of our future growth. Retail is a very large opportunity and we think of it more in terms of decadal opportunity.

Because the formalized and outsourced, as part of what is broader retail in India, is still so small. I think the way to think of it is, it is our responsibility to do what we can to create this addressable market.

Now as part of that, it will always take a little bit of time for us to figure out the parts of the business which have been onboarded. You need to give them some time: 6 months, 1 year, 1.5 years, for them to sort of achieve full revenue status in terms of translation into what was estimated realizations and throughput.

In Q3, post GST 2.0 and as we have shared, for us to start looking at this sector by sector along with the consumption report that we have, it gave us a lot more clarity on the parts of the sector which are seeing more vibrancy versus some deals that we had which probably didn't. Given that we were getting into the whole network optimization stage, it made a lot of sense to sort of start taking some calls, right, which is every business, every operations will have some churn that we would like to impose.

It may be 2% of the long tail, it may be 5% of the long tail. That is what we have alluded to.

Coming to Hawkeye, I think we have spoken about how, within Hawkeye itself, the goal for us is in the longer term to think about productizing this. The experience that we've had and the amount of investments that we made in the technology and the R&D in building a lot of advanced AI use cases will serve very well when we think about translating this into the broader retail.

In a way, when I think about retail, I think the combination of both what we have as the Hawkeye product and the retail cash along with a lot more of technological integration working into helping stores with reconciliation and selling automation solutions will be a very powerful

I think for us, I would also like to add to what Anush said. You have to keep in mind the industry and how overall retail sector in India suffered in H1 of last year.

All of you will be invested in other companies. Consumption really get impacted till September end.

There was a churn in the sector itself. It is a relatively lower-margin sector.

There were clear sector trend shifts from physical retail to online retail to quick commerce, which is impacting those customers. From our side, I think today we have almost Anush, what, 150 plus direct-to-retail logos?

165.

165 customers, right? This number was maybe 0 two and a half years ago.

With these customers, we are cross-selling, right? We are not only in the business of retail cash management.

We are upselling them in retail cash vaults. We are upselling them with Hawkeye-based solutions.

Where we end up seeing the return make sense from both revenue and margin perspective, we will continue to deepen our presence there. There will be some customers, as you work with them 6 months, you realize the amount of volume of cash and the revenue you can earn is not going to be material.

At that point, you need to have a sort of clinical viewpoint and examine and sort of let go of that and use that network capacity for better-quality customers. That's what we I think have done.

I don't think you should read too much into this in terms of change in strategy. I think it's sort of aggressive launch and growth.

We assessed things in the last 3, 6 months to sort of take stock and say what makes sense, what doesn't make sense. Overall, I think we are seeing a lot more opportunity of cross-selling into our retail customers than just pure cash management.

Sure. No.

My query was also in relation to one of the competitor talking about increased competition in this area on the retail side and being the aggressors in this area. That is what I was kind of alluding to.

I think you're right. We have ourselves in prior calls said that we are going to be very aggressive in this area, because, again, we feel that, if you want to grow a market, you will have to make investments, whether it's low cost, low price, deeper market expansion.

I think we've done that. We have sort of consolidated back right now in this year, and we'll again launch further expansion as we see opportunities in the coming year.

Sure, appreciate. My second question is that for the SBI order, there were talks of 10,000 ATMs that were in fray for the outsourcing.

The announcement that we made is, I think, pertaining to 5,000 ATMs. Rest of the ATMs, will it be coming in over next year or that particular piece is still away right now?

No, I think the total order is 10,000 in terms of what SBI wants to award. If you go back, I think, to some of our earlier commentary, in the first version of the outsourcing process, we were the only eligible participant, and that could have meant we get the entire 10,000.

Unfortunately with that getting scrapped and then coming out with a new RFP, of that we were the L1 participant. We got about 5,000 of those volumes, the rest going to other industry participants.

Okay. The rest of it has gone to someone else.

Got it. Thank you.

I'll get back in the queue. Thank you.

Yeah. I just had a couple of questions.

One, if Anush or can comment on the overall RFP rollout, how is the outlook looking like in terms of new rollouts from banks and cash logistics?

I think for most of FY '26, the RFP pipeline has been fairly subdued, just on account of the both industry being volatile, banks struggling with dealing with the fallout of AGS, shutting down the ATMs, industry consolidating and understanding where things are. All of that has led to banks sort of making a shift in their outsourcing strategy.

The two key shifts here are: They're moving away from or depending less on ATMs and pivoting more towards recyclers. They see recyclers as being a very strong complement to helping branch transaction.

The second pivot is moving away from transaction-based pricing to fixed-price pricing. That is something that as CMS we've been advocating for a long time.

We've stayed out of the transaction market for almost last 12 to 18 months now. When I think about the RFP pipeline in FY '27, we see meaningful activity coming back into the market.

As we speak, we are aware of almost about 6 to 8,000 ATM units which are in various stages of the pipeline. This means that there is a total contracted value opportunity of about 2,000 crore.

I think the timing of when these come out and what we win and how we position ourselves, that's going to be key.

Okay. Understood.

Just one more question. What is the cash balance as on December end?

Yeah. Just one more question.

What is the amount of cash on the books as on December end?

I'm just asking Pankaj.

It's about 600 crore. Around 600.

Hello? Yeah.

I could not get the last part. 600 crores?

Yeah, 600 crore.

Okay. Thank you.

That's it from my side. All the best.

Hi team. Thanks for the opportunity.

My question was around the lines of our outstanding order book. I see we have won 1,600 crore worth of order books in FY '26.

I wanted to understand which side of our Managed Services business is this order book tilted to? Is this related to mostly software or our banking automation business, if you could provide some color on that?

Prakhar, it's mostly a mix of both integrated contracts on the Managed Services side and Hawkeye, especially when you look at the large, complex branch RFP rollout.

This also includes Hawkeye contracts with customers?

Yes.

Okay. That's all from my side.

Hi. Thank you for the opportunity.

My question was more related to the cash management services. Sequentially if you look at the numbers, we still had a degrowth in the cash management part.

If you look at it, that revenue for that segment has peaked out at around 417 crores, and now we are down to around 384 crores. With the services guidance that you've given for next quarter and for the next year, what is the outlook on this specific segment, and how much will the SBI order help for this, the recovery in this segment?

I think specific to SBI, as we have called out, it's about 500 crore of incremental opportunity over a 9, 10-year period. You should think of that as about being about 50 crore per year.

The delta between 401 5 417 to 385, I think, we've sort of explained in different ways, but fundamentally it's a link of two, three things. It is a dip in our overall business points or ATMs that we used to handle, the 4,000-odd dip that we had going in from Q1 to Q2 and Q3.

That has had an impact. The cleaning up of retail that we've done has had an impact.

Also the calls that we had to take to fix our DSO situation has had an impact. With most of these either being fixed or normalizing right now, we anticipate this to get improve in the coming quarters.

Also just, we have mentioned this before. I would like our analyst and investors both to start looking at our business in toto, because the Managed Services business, instead of being a customer of cash management is now ramping up, and we have a lot of integrated contracts.

That's why you see an interview sort of a knockoff. As we merge our P&Ls into the three business lines we talked about, ATM Solutions will be one complete business line where you'll see ATM cash, Managed Services, brown-label ATMs, fixed-price machines, all of that will be in one revenue bucket.

We think that business overall should grow 15% to 18% next year. The Retail and Currency Logistics business should grow about 12-ish percent, and our Technology and Payments business, which includes Hawkeye and cards, would I think grow about 20% for the next year.

That will give you the blend of revenue growth which we are thinking about. We are working to build the P&Ls on these business lines, and so that you will be able to see the growth in each category by themselves, instead of cash and MS and tech.

Okay. Fair, understood.

This question was specifically from your margin guidance also. For next year, we are guiding margins to go back to our FY '25 EBITDA of around 25%, 26%.

If you look at your old segments, where we've moved to new segmental reporting, but since we continue to report old segments also, the margins have broadly been impacted due to the operating deleverage that we've seen in the cash management service. The recovery for cash management services is also important for your margins, and based on the next year margin guidance, it is fair assessment that the cash management also has bottomed out within services and it should grow from these levels.

No, absolutely. You're absolutely right.

I think from a cash management perspective, both from a macro perspective and even from our own decisions we had to take in Q2, Q3, the revenue has bottomed out. I think currently the trend line is already growing higher, and Anush mentioned it is on our investor deck.

If you look at especially the retail cash volumes, they're very robust even in December and Jan for segments. Our ATM cash management contracts we have from, let's say, SBI, and then we think of the ICICI order, which is a Managed Services and cash management order win, I think that'll all lead to both the cash management revenue growing as well as the margin profile increasing.

To set you a quick context, we were roughly about 70,000 ATMs under cash management about a few quarters ago, which dipped to 68,000. We're back to 70,000 now.

We are targeting an aggressive ramp-up to 74, 75,000 ATMs by the end of March or April. As that ATMs under cash management come in, you will also see the margin profile improving back on the overall business.

Understood. Very helpful.

Sir, last question is on the cost side. Sequentially I understand that last quarter had some reversals on account of ESOP and bonus forgo.

Even if I ignore the last quarter and if I look at your YoY employee cost, so that run rate has gone from around 81 crores to around 100 crores, we've grown that by around 20% plus. Your service charges have remained flat.

We are seeing a insourcing trend. Just wanted to understand the background behind this and whether the insourcing trend is complete, and what should be our employee cost and services run rate that we should understand going forward?

Let me give you the philosophy on what has happened, and then specifically Pankaj can maybe answer. I'm not privy to the 80, 100 crore number right now which you're referring to.

The overall employee cost you should think in conjunction of both employee cost and service security. It's not you insource, outsource depending on where in the regions are you working and also what nature of business, right?

More the higher value, more risk business will always be insourced. We have had an increase in overall employee cost if you combine the P&Ls both two reasons.

One was wage inflation linked to us signing long-term wage settlements earlier in the year. We talked about this in Q1.

We have a three to four-year cycle of signing wage settlements. We normally recoup it back through productivity, but this year, given volume growth was slow, recouping it back within the year was difficult.

I think we will start seeing that in Q4, Q1 going forward. The second was linked to the fact that we invested and made the wrong decision of investing for capacity, assuming we were getting the whole SBI contract in April, May.

That was, with hindsight, a terrible call to make, and we're paying for that and we're trying to fix that right now. Now, if you think of the overall number, Pankaj, you want to talk about the overall number which he was referring to?

Yeah. If you'll see that if you add both the service and security and employee cost, it is increased around 6% to 7% over Q3 of FY '25 to Q3 of FY '26.

This is because of the, as we explained to you, there is a LTS impact and a new business whatever we got is impact of related to that.

There's no change in insourcing, outsourcing. I think for that we are fairly agile in what we need to do for the business.

Okay. Understood.

Understood. One last question is

Sure, sure.

Hi sir. Thank you for the opportunity.

Most of my questions have been answered, just one question was around your capex estimates for FY '26. You had earlier guided for 300 crores of capex, now we have done 275 crores this year.

What is the capex that we estimate for this year and next year? That's one.

One is the data-keeping question, which is since Secur-Eyes business has now been consolidated in our P&L, what is the revenues and EBITDA from the Secur-Eyes business in Q3 FY '26?

As we have given the guidance that our capex will be around 300 to 325 crore rupees, and we have already spent 275 crore. We expect that we will in the range of 300 to 325 crore rupees only.

Secur-Eyes has around 18 crore rupees

Incremental 12 crores.

Total revenue of 18 crore rupees, incremental revenue of around 12 crore rupees in Q3.

Secur-Eyes will have actually this year a negative PBT, because we will be front-loading the depreciation on that assets.

Got it. Got it.

So 6 crores was accounted in the last quarter, if I understand that. Yeah.

Got it. Thank you, sir.

Hi. One question.

You had mentioned that the contracts are now moving from, let's say, cash machines to recyclers. The question is that as recyclers do the number of trips that we have to do reduce and therefore lead to a revenue pressure for us going forward?

Or we price it in and increase the realization?

No, Divyansh. If I look at our current base also, recyclers have a lot more complexity than an ATM, and especially in terms of how they need to be managed and, more importantly, serviced.

The expectations from customers is also that the quality of service and uptime on these machines have to be of a much higher order. Generally, recyclers are deployed at on-prem branch sites, which means that they generally have a higher footfall.

For example, if at ATM they need a 95% uptime, recyclers is almost 97%, 98%. To us, we actually see recyclers as being sort of an upsell and a higher value solution than ATMs.

When you say uptime, I'm assuming it means more cash availability, but given that

More end-user availability, right? Now, which could be cash availability, which could be how do you fix the faults.

It could be things to do with the software, things to do with the hardware, but end-user availability.

Sorry, just to double-click on it. See, assuming that machine of an ATM and a cash recycler both are of sufficiently good quality, then let's say non-cash metrics will largely be same.

Given that the customer can deposit cash, the cash-out situations will reduce. Therefore does it reduce the number of trips?

That was my

I think you should look at what a recycler means to different stakeholders. To a bank, it definitely brings about a greater degree of efficiency in terms of how the currency is utilized.

It is effectively less cash at float. To us, we also like a recycler model simply because both unit economics-wise and in terms of the complexity, it is a higher value, which means that in terms of monthly fixed fee, it is usually pegged above an ATM.

Now, the number of visits might be lesser in certain cases, but that doesn't really change the nature of the revenues, simply because the amount of work that still needs to be done, especially in an ATM, you only need to withdraw cash and load it. In a recycler, you might have to load it, you might have to evacuate it.

There's a lot of reconciliation work that also needs to be done. It's not as plain-speaking as that.

Net-net, it ensures to us higher realization than what a normal ATM would do. To a bank, it's not necessarily higher cost because they need to look at it in terms of what a cost of a branch transaction is vis-à-vis what that of a recycler would be.

It is generally a more efficient way of managing things.

Got it. Understood.

The second question was in the analyst day deck, right, we have mentioned that we have 38% market share in the retail cash management. At least my understanding was that currently we do not have pricing power or we were looking to increase pricing after some time.

Is there a target market share which will allow us or how should we understand that when should pricing or ability to price it higher for retail cash management can be expected?

Let me take an analogy on the ATM business side, or rather, when I look at what we gain in terms of our ability to both influence the market as well as influence our own outcomes, I think with each step-change in our overall market share, it creates a very different kind of outcome, and we've seen this. We've seen what CMS was 15 years back, 10, and now, especially in terms of the way we've been able to unlock incremental EBITDA margins as we've scaled up.

In the ATM business, as we went from a 35% to 40% to 45%, 50%, and closer to 57%, 58% market share, all of that step-change has had a differential outcome in terms of pricing, route optimization. Right now in the retail, I think we're in a zone where we are focusing more on yield management and yield improvement, which means that we're sort of evaluating things on a contract-by-contract basis.

Our focus there is really to continue to increase market share, to continue to expand the addressable market opportunity, and to invest in both building the sales capability as well as using that to cross-sell into technology solutions.

The way I would ask you to think about is, and this is a question we ask ourselves, right? You want to defend your revenue and market position in the market, right?

That's the most important thing right now. You don't want to suffer on revenue and market position.

Margins can go up and down. We are fortunate in many ways to have a margin profile which is substantially better than anybody else we know of internationally or locally.

Maintain that margin profile and growing revenue rapidly, both of those are not easily possible, right? Something has to give at some points of time.

I would argue now with hindsight, the last year has seen the opposite happen, where we defended market and revenue and therefore has had some impact on margins possibly. We will hope to undo that in the coming two, three quarters.

Specifically to retail, I think Anush said, we will look at our network and look at our capacity to see how we can keep growing revenue at a sensible margin profile. Is there a particular market share number where it makes sense?

I don't know, right? I think right now there are four competitors in the sector.

If you have only two, the second one can keep being aggressive on pricing maybe, right? Really you can't determine when and how much pricing power you can get.

I think if you can keep focusing on quality, cross-selling to the customer other lines of businesses, I think you're fine.

Understood. Just one last question.

Hi sir. Good afternoon.

Thanks for the opportunity. We are having a good cash position of around 600 crores in our books and having a great balance sheet as well.

Also with us being market leaders in the business that we do and further consolidating our market share in tough times last financial year and this financial year, are we thinking of enhancing shareholder value through buybacks to gain advantage of the low valuations currently? Yeah.

Hi, Shivam. I think perhaps you have joined late in the initial part of our opening remarks.

As Rajiv mentioned, given the changes to the buyback regulation that have been announced, we feel that right now it is a lot more equitable for all stakeholders, as opposed to the earlier regime. This is something that has been discussed at the board level.

We will evaluate this closer to the end of this year, as we look at our overall capital needs in terms of growth capital, M&A.

I think we we have we do have a fairly active M&A pipeline. We've been working on that for a long time.

We are looking at investing for growth, as I said, our priority is simple: organic, then inorganic, and then returning shareholder returning capital to shareholders, whether through dividends or buybacks. I think we will take the we will have the board discuss that at the appropriate time.

Right now, we are seeing active opportunities in the M&A pipeline. We don't know that doesn't mean deals will happen.

We will continue working at them. What makes accretive sense for us to build and scale our business in with good returns, I think that's the first priority for us as a team to us and to our shareholders.

Okay. Sir, with you seeing buybacks favorably for us, you are seeing

No, no, no. Let me clarify.

It's not about seeing buybacks favorably or unfavorably. I think buybacks, because there has been a constant ask and question on buybacks, we want to address it proactively in line with our capital allocation philosophy, which we have detailed out.

We're not saying a buyback is going to happen or not. If we do see excess capital and we don't have a need for it, we then will evaluate returning it via dividend or buybacks as the board deems fit.

Okay. Sir, if any if buyback was to be possible, can we expect in financial year '27 or this year, this financial year?

I don't think I could forecast this at all. This is not a decision which a management team makes.

I think we've been fairly clear on the way we think about it. We will let you know end of the year if there's any change to the thinking.

Also with buybacks being taxed unfavorably, does that have a bearing on our decision? That was my last question.

Certainly, yes. Absolutely.

You're right, because we have to think of capital allocation in light of all of that. That's why we have proactively talked about it.

Not to say that there's something happening, just to share with you how we think and we are clear to all our shareholders equally to give you an answer on our thinking. We do see capital needs for the growth of the business both organically, inorganically.

If after that we see a sufficient cushion for us to return capital, we will definitely look at it.

Sir. Thank you, sir.

That was very helpful.

Thank you so much. Thank you for your Q&A and for all the questions you asked us.

I think I will summarize by saying that, yes, we've had two quarters of disappointing numbers. We are hoping to turn the tide with Q4 and going into FY '27 strong.

I know there's a revenue forecast which may seem a little aggressive given the Q3 specific numbers and the last two, three quarters of sort of underperformance, but we're hoping to turn it and deliver stronger numbers for you and for us to meet our own internal target which we have set for FY '27 of 2,700 to 2,800 crore of services revenue and overall revenue of 2,800 to 2,900 crore, and with an EBITDA margin of 25% to 26% for the year. Thank you.