Baring PE Asia eyes a partial exit from CMS

THE PROPOSED OFFERING WILL SOLELY COMPRISE A SECONDARY SALE OF SHARES BY BARING

MUMBAI: Baring Private Equity Asia is preparing to list CMS Info Systems Ltd, India’s largest cash management company, through an initial share sale estimated at about ₹1,500 crore to ₹2,000 crore, said three people aware of the development.

The private equity firm will look to exploit a runaway rally in domestic stock markets this year to profit from its 2015 purchase of the Mumbai-based firm, the people said, requesting anonymity. CMS Info Systems is a wholly owned portfolio company of Baring.

The proposed offering will solely comprise a secondary sale of shares by Baring, the people cited above said, adding that the offer size has still to be finalized and may be increased, depending on market conditions.

“Work on the draft prospectus is in the final stages, and the DRHP (draft red herring prospectus) should be filed in the first half of August. The company has enough cash reserves to meet its growth plans, and thus the IPO is only going to be an offer for sale for Baring to return money to its investors. At the current size of the offering that they are looking at, they will be returning the entire amount they spent in acquiring it,” one of the two people cited above said. Investment banks Kotak Mahindra Capital, Axis Capital and DAM Capital are advising CMS on the IPO.

A spokesperson for Baring declined to comment.

This will be the second attempt by Baring to take CMS public.

In 2017, it had filed draft papers with the markets regulator, but let its 12-month approval period lapse without launching the IPO.

For more than a decade, CMS has been owned by private equity investors, first by Blackstone, which took a controlling stake in 2008, and later by Baring, which bought the company in 2015 for about ₹2,000 crore. CMS is involved in ATM and cash management, ATM installation, maintenance services and card personalization services.

For the pandemic-impacted FY21, CMS saw its revenue fall to ₹1,311.4 crore from ₹1,383.3 crore in FY20, according to a 15 July report by credit rating agency Icra. Profit, however, rose to ₹168.5 crore in FY21 from ₹134.7 crore in the previous year.

Icra had reaffirmed the company’s rating at AA on the back of its healthy financial performance, driven by improved profitability to 22.8% during FY21 from 18.4% in FY20 and continued debt-free position.

“Further, the few high-value contracts worth ~₹2,075 crore under the managed services segment won by CMS in FY21 and Q1FY22 along with existing contracts and the likely increase in rate realizations by up to ~30% for a large number of contracts in cash management services due to expe-cted implementation of a stringent operating requirement for almost 70% of CMS’ managed ATMS in the near term provides revenue visibility over the near to medium term,” Icra said.