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US-based ATM deployer says India's cash crisis will ding profits

December 9, 2016

Leawood, Kansas-based ATM deployer Euronet Worldwide Inc. has downgraded its fourth quarter earnings estimates in light of ongoing cash supply shortages in India combined with further strengthening of the U.S. dollar against currencies in many of the countries where it operates. 

The Indian government made a surprise announcement on Nov. 9 that 500 and 1,000 rupee banknotes — which comprised 86 percent of the nation's currency — would no longer be recognized as legal tender and would be removed from circulation.

Initially, the Indian government said its actions would result in cash shortages lasting a week or two. However, a month after demonetization, the paucity of banknotes continues to disrupt everyday life across the country.

"[B]ased on recent communications from the Indian authorities, together with the company's experience through the end of November, the company now believes that access to cash will be limited for a longer period than originally anticipated," Euronet said in a press release.

The company said that the cash supply shortage will adversely affect its fourth quarter revenue earned from ATM cash withdrawals on more than 12,000 ATMs it owns or operates in India, as well as revenue earned from money transfer remittance payouts. 

"The economic situation in India is unfortunate for our business, but it is transitory and we expect to resume normal operations in India soon," said Euronet chairman and CEO  Michael J. Brown. "In the meantime, our hearts go out to the millions of Indians impacted by the cash shortage who are unable to obtain cash to pay for their bare necessities. I am proud of our teams in India who are doing everything possible to help bring cash to Indian residents across the country."

In addition to the impact of the Indian demonetization, certain foreign currencies have weakened substantially since Euronet gave guidance in October.  The company now expects that these two items will have an negative impact of 7–9 cents, and accordingly reduced its guidance for 2016 adjusted earnings per share to between 98 cents and $1.

Based on the Indian authorities' representations, the company expects that business in India will return to normal by the beginning of 2017.