CMS Info Systems

Key Red Flags and Areas of Caution for CMS Info Systems Ltd

While CMS Info Systems exhibits a strong credit profile ([ICRA]AA+ Stable reaffirmed in April 2025) with healthy growth, leadership in cash management (~42% market share), and net debt-free status, there are several operational, litigation, and compliance matters warranting caution. These are primarily industry-inherent (cash handling risks) or resolved/historical, but investors should monitor. No evidence of large-scale frauds or major corporate governance failures. Summarized below from announcements, annual report (FY25), and credit rating report:

1. Operational Risks: Cash Embezzlements and Losses

• 28 instances of cash embezzlements by employees/contractors in FY25, totaling ₹21.72 Cr (FY24: ₹12.05 Cr). Recovered ₹3.20 Cr; ₹2.49 Cr written off.
  • Management quote (Annual Report): "Certain incidences of cash embezzlements by few employees... were detected... The Management continues to invest in additional security measures."
  • Police complaints/insurance claims filed; Form ADT-4 to MCA.
• Provisions for cash shortages/claims: ₹66.27 Cr (standalone).
• Credit rating notes: 4-6% of revenue routinely provisioned for theft/fraud/robbery risks, mitigated by insurance, AI surveillance (prevented 900+ burglaries, 2,700+ incidents), and RBI-compliant controls.
• Caution: Inherent to cash-in-transit business (~₹14 lakh Cr handled annually); monitor write-off trends.

2. Litigations and Contingent Liabilities (~₹604 Cr Consolidated)

• Tax/Regulatory Disputes (Annual Report Note 30):

  Type	Amount (₹ Cr, approx.)
  Service Tax	19.34 (Securitrans sub.)
  Income Tax	20.64
  GST/Excise/VAT/Customs	~14
  Total Disputed	60.4

  • Securitrans Service Tax Demand (Apr 2024): ₹19.34 Cr + interest + equal penalty for 2016-17; alleged "suppression of facts... to evade payment" (Rules 4/9/6(3) Cenvat Credit). Subsidiary appealing; impacts consolidated results.
  • Income Tax Penalty (Feb 2024): ₹6.24 lakh u/s 271(1)(c) for alleged TDS failure; appealing.
• Labor Litigation (BKKM vs CMS): NCLT (Dec 2023) ordered absorption of ~employees from old CMS Securitas merger (2010 scheme). Appealed/won at NCLAT (Nov 2024); SC dismissed BKKM appeal (Mar 2025).
  • No material impact; resolved favorably.
• Management view: "Ultimate outcome... will not have a material adverse effect" (no provisions made).
• Caution: Tax disputes sizable vs. PAT (~₹350 Cr FY24); appeals ongoing.

3. Corporate Governance and Compliance

• Secretarial Audit: Delay in filing 2 MCA forms (prior year, inadvertence); no penalties.
• Promoter Changes:
  • Sion Investment Holdings (PE) sold 26.66% stake (Feb 2024), exited fully; declassified as promoter (Apr 2025). Nominees resigned.
  • Rajiv Kaul increased stake to >6% (Feb 2024).
  • Neutral: Standard PE exit; no control issues.
• Other: No whistleblower/fraud complaints, POSH cases, SEBI/stock exchange penalties, or auditor qualifications. CSR unspent ₹0.27 Cr (transferred).
• Credit rating: Notes delayed client payments inflating receivables (improved by Q3 FY25).

4. Other Risks (MD&A/Annual Report)

• Industry/Regulatory: Digital payments (UPI/cards) eroding cash usage; RBI interventions raising costs.
• Cyber/IT: Potential attacks; zero breaches (ISO 27001/PCI DSS certified).
• Receivables: ECL provisions ₹53.39 Cr; stretched due to key client delays.
• Historical: CTO resignation (Nov 2023); minor inventory write-downs (₹2.36 Cr).

Overall: Low-to-moderate risk profile. Issues are operational/tax-related, not systemic fraud/governance lapses. Strong mitigations (insurance, orders ₹1,700 Cr visibility). Monitor Q3 FY26 results (Dec 2025) for litigation updates/receivables. Market cap ₹5,669 Cr dwarfs contingents. No web/news hits on major unreported issues as of Dec 27, 2025.