Can you tell me about the pricing and valuations of the CMS Info Systems IPO?

CMS Info Systems Ltd is into cash management, ATM management and other support services to the banks and financial institutions in India. It is one of the largest players in this rather specialized area and provides hardware, software, service and logistical support to the financial institutions. In terms of verticals, CMS covers cash management services, banking automation, banking control infrastructure and card issue and personalization.

CMS is 100% owned by Sion Investments which is an arm of Baring Private Equity Asia. In the IPO, Sion Investments will look to hive off 34.41% of its stake to the public. The IPO will open for subscription on 21st December and close on 23rd December. The basis of allotment will get finalized on 28th December and the stock will get listed on the bourses on 31st December. The issue will entirely be an offer for sale.

In the offer for sale, Sion Investments will offer a total of 509.26 lakh shares to the public at a price band of Rs.205-216. At the upper end of the price band, the IPO will be worth Rs.1,100 crore. Since there is no fresh issue, there will no fresh funds coming into the company. CMS is a cash rich company with consistent profits with 77% growth in net profits over FY19. Net margins, EBIT margins and ROE hav been robust for CMS.

At the upper end of the price band, the stock is valued at around 18 times FY21 earnings. Also, the company has created some niche entry barriers and has been a leader in cash management and in ATM management despite stiff competition from large entities like NCR, Hitachi, Brinks and SIS. However, most of the companies with a similar profit get similar valuations so score for any upgrade in valuations may be limited.