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Radiant Cash Management Services

Largest and efficient player in the RCM segment, but issue richly valued

Salient features of the IPO:

• Radiant Cash Management Services Ltd. (Radiant), a leading player in the retail cash management market, is coming up with an IPO to raise around Rs. 390cr, which opens on 23rd Dec. and closes on 27th Dec. 2022. The price band is Rs. 94 - 99 per share.

• The IPO is a combination of fresh and OFS issue. The company will not receive any proceeds from the OFS portion. From the fresh issue net proceeds, Rs. 25.5cr will be utilized for funding the planned capital expenditure and Rs. 20cr will be used for working capital requirement.

• One of the promoter group members is participating in the OFS issue and offloading 1.013cr shares. Ascent Capital Advisors India Pvt. Ltd. (Ascent), an investor selling shareholder is partially offloading 2.3cr shares. PostIPO, the promoter group stake will be at 53.21%, compared to pre-IPO stake of 66.39%. Ascent’s residual stake will be 10.28%.

Key competitive strengths:

• Leading integrated cash logistics player in a consolidating market and present across the value chain of retail cash management

• Pan India presence with strong network in Tier 2 and Tier 3+ locations and fast growing end user segments

• Diversified client base with long standing relationship and ability to crosssell value added services

• Robust operational risk management

• Significantly built up technology to optimize operational profitability

• Steady financial growth

• Experienced management team and backed by a reputed institutional investor

Risk and concerns:

• Unfavorable government policies & regulations

• Restrictions on use of cash as payment option

• Greater adoption of cashless payment methods

• Unfavorable product-mix

• Revenue concentration risk

• Difficulty in maintaining the profitability

• Competition

Below are the key highlights of the company:

• The Indian cash management market mainly comprises of ATM replenishment services, retail cash management services and cash-intransit services. Over FY10-21, this market grew by 9.7% CAGR to Rs. 27.7bn in FY21 and is likely to grow by 19.1% CAGR over FY21-27 to Rs. 79bn. With 52% revenue share, ATM cash management is the biggest segment in cash management services market. This is followed by retail cash management (RCM) and dedicated cash-in-transit vans, each with 24% revenue share in FY21. The RCM market is estimated at Rs. 6.8bn in FY21 is projected to grow by 20.1% CAGR over FY21-27 to 20.4bn in FY27. The growth in the organized retail sector as well as the corresponding outsourcing potential is expected to be major factors for the development of the RCM market in India.

• Radiant is an integrated cash logistics player with leading presence in RCM segment. With market share of around 40%, it is one of the largest players in the RCM segment in terms of network locations or touch points served by the end of FY22. As of 31st Jul. 2022, Radiant provided services across 13,044 pin codes in India with about 55,513 touch points serving more than 5,388 locations. Moreover, around 70% its touch points are in tier-3+ towns and cities, followed by 17% and 12% in tier-2 and tier-1 cities, respectively. Over FY19-22, total annual currency movement across its RCM business increased by 4.8% CAGR to Rs. 1.3lakh cr in FY22.

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