Radiant Cash Management Services: Take a measured call

Radiant Cash Management Services Limited is tapping the capital markets with its issue, which would open on Friday (December 23) and close on Tuesday (December 27). The issue consists of a fresh issue of Rs60 crore and an offer for sale of 3,31,25,000 shares in a price band of Rs94-99.

Radiant Cash Management Services Limited (Radiant) is an integrated cash logistics player with a leading presence in the retail cash management segment of the cash management services industry in India. Radiant is one of the largest players in this segment in terms of network locations or touch points served as on March 31, 2022. The company provides services across 13,044 pin codes covering all districts other than Lakshadweep with about 55,513 touch points serving more than 5,388 locations as of July 31. The company's marquee clients include some of the largest e-commerce players, banks, insurance firms, retail chains, NBFC's, railways and petroleum distribution outlets.

The company moved Rs13 lakh crore of currency through its RCM business in the year 2022, while in the first four months of FY23 this figure was Rs4.85 lakh crore. As per the Frost and Sullivan report, a company who was commissioned by Radiant to prepare the report, they had the second highest EBITDA margin, ROCE and ROE amongst organised players in this segment.

The promoter of the company is an ex-serviceman, someone who served the Army and last rank held was Colonel. Even today the company employs roughly a fourth of its workforce from ex-servicemen. The key management or leadership team also consists of ex-servicemen. This ensures discipline, frugality and zero error. The company in terms of cash lost during the course of business is virtually zero and reconciles its cash on a daily basis.

The company earns revenues from five broad verticals. The largest segment is Cash pickup and delivery which accounts for 67 per cent of the revenues. This is followed by Network currency management which accounts for 22.5 per cent of the revenues. Another nine per cent comes more or less equally from cash processing and cash vans. On a daily basis the company collects about Rs467 crore.

The company has a very interesting business mix in terms of geography and size of towns. Tier-1 accounts for about 12.8 per cent of revenues, Tier-2 for about 19.6 per cent of revenues and Tier- 3 a massive 67.6 per cent of revenues. It is this breakup which makes Radiant unique and its key differentiator with its competitors. This becomes an entry barrier as well.

The breakup of revenue from users is interesting with the largest portion coming from BFSI space accounting for 34.72 per cent. This is followed by E-commerce at 15.75 per cent. Organised retail is 11.13 per cent. Others include railways, retail petroleum depots, restaurants, courier services, hospitals and pharmacies and others.

The client base is big with some of the best names amongst private banks, foreign banks, public-sector banks (including the largest PSU bank) being their customers. In terms of revenues, the company reported revenues of Rs286 crore, EBITDA of Rs54.59 crore (EBIT margin 20.73%) and a profit after tax of Rs 38.20 crore (pat margin of 13.31%). For the first three months of the current FY23, company reported revenues of Rs 84.04 crore, EBITDA of Rs 21.81 crore (EBIT margin 35.86%) and a profit after tax of Rs 15.31 crore (pat margin of 18.15%).

Q1 21-22 and Q1 22-23 were not comparable because of the severe impact of the Delta variant which hit the country last year during the quarter. In the current year FY23, things have been normal and hence the bouncing back of revenues. There is some seasonality in the business of the company and the first half of the year is around 40-43% of revenues and the second half about 57-60% of revenues.

Based on FY22 EPS of Rs 3.77, the PE band is 24.93-26.26. The EPS for the quarter April-June 22 is Rs 1.51. If one were to annualise the same, the EPS for FY23 based on first quarter annualised would be Rs 6.04. The PE band at these earnings would be 15.56-16.39.

The company is into a niche segment of the broader cash management and ATM business. Unlike its peers, CMS and AGS Transact, it is not present in the ATM business. Its core business is the retail cash management business.

The share price band looks expensive if looked at from FY22 earnings perspective. If, however, one look at the business from Q1 FY23 annualised basis, the PE becomes attractive and is lower than the lowest of the sector or peer set.

Take a measured call on the business and the prospects going forward. With the company focused on Tier 2 and Tier 3 where cash is king even today, it's a long time before digitisation and UPI can dent the business edge. Invest with a medium-term perspective so that when the company does declare results for the December quarter, the numbers of April-June would be validated.

(The author is the founder of

Kejriwal Research and Investment Services, an advisory firm)