Radiant Cash Management Services IPO Analysis
A retail cash management (RCM) service provider for banks, financial institutions, organised retail, and e-commerce businesses, Radiant Cash Management Services is launching an initial public offering (IPO) of equity shares with a face value of Rs. 1 per share. The range for the issue’s price per equity share has been set at Rs. 94 to Rs. 99. The issue size at the higher price band is Rs 387.9 crore. The initial public offering (IPO) will begin on December 23, 2022, and end on December 27, 2022. The market lot size for the IPO is 150 shares or multiples of that.
With a combined value of Rs 387.94 crore, the IPO consists of a fresh issue of approximately 0.61 crore shares and an OFS of 3.31 crore shares. The firm will use the money to pay for its capital expenditures and to buy specialised armoured vehicles.
Both NSE and BSE will list this company’s first public offering.
The promoter group holding will be 53.21 percent post-IPO as opposed to 66.39 percent before to the offering.
About the business:
Radiant Cash Management Services (Radiant) provides a variety of services, including collecting and delivering cash from end users on behalf of its clients. Radiant mainly offers the following services: 1) Cash delivery services for businesses, people, and public institutions; 2) Cash Management, which includes collecting, transferring, and depositing cash, 3) Network Currency Management, which comprises sorting bills and coins, It also provides vaulting services for large amounts of cash, ATM cards, cassettes, and vital documents, as well as 4) Cash Vans / Cash in Transit and 5) Other Value-Added Services. These services are designed specifically for moving cash or bullion inside the client’s network.
ATM replenishment services, retail cash management services, and cash-in-transit services make up the bulk of the Indian cash management industry. This market increased by 9.7% CAGR from FY10 to FY21 to reach Rs. 2770 crore, and it is anticipated to increase by 19.1% CAGR from FY21 to FY27 to reach Rs. 7900 crore. ATM cash management is the largest market sector for cash management services, accounting for 52% of total revenue. Following this are specialised cash-in-transit vans and retail cash management (RCM), both of which had a 24% revenue share in FY21. The RCM market, which was valued at Rs. 680 crore in FY21, is anticipated to increase at a CAGR of 20.1% from FY21 to FY27 to reach Rs. 2040 crore. The development of the RCM market in India is anticipated to be significantly influenced by the expansion of the organised retail sector and the associated outsourcing opportunities.
Radiant is a leader in the RCM market and an integrated cash logistics player. By the end of FY22, it will rank among the top companies in the RCM category in terms of network locations or touch points served, with a market share of about 40%. By July 31, 2022, Radiant has around 55,513 touch points servicing more than 5,388 sites throughout 13,044 Indian pin codes. Additionally, tier-3+ towns and cities account for almost 70% of its contact points, with tier-2 and tier-1 cities accounting for 17% and 12%, respectively. Total annual currency movement throughout its RCM business rose from FY19 to FY22 by 4.8% CAGR, reaching Rs. 1.3 lakh billion.
While its EBITDA margin decreased marginally from 21.1 percent in FY20 to 20.5 percent in FY22, its sales and PAT grew at a CAGR of 7% and 2%, respectively, over the years FY20 to FY22. In FY22, the firm recorded sales of Rs 286.97 crore, an increase of 29% YoY, and EBITDA of Rs 58.5 crore, up from Rs 47.3 crore in FY21. PAT was Rs38.2 crore for FY22 as opposed to Rs32.4 crore for FY21 and Rs36.5 crore for FY20. In the fiscal years ending in 20, 21, and 22, it had ROEs of 30, 25, and 27, respectively.
Consolidated revenue for the first quarter of FY23 grew by 41.2% year over year to Rs. 84 crore. EBITDA and PAT margin increased year over year by 662bps and 573bps, respectively, to 25.6% and 18.2%. The top line was Rs. 310.5cr on a TTM basis, with EBITDA and PAT margins of 22.1% and 14.8%, respectively.
Outlook and Valuation
The company’s share price is valued at 27.5x PE based on FY22 earnings. However, the PE increases to almost 17.3x if we annualize first quarter results and compute EPS using enlarged equity post issue. Compare this to CMS Info System, one of the listed competitors operating in a related industry, which is offered at 16.67x. Even if we compare market cap to sales, it appears that IPO subscribers aren’t getting anything back. Market cap to sales for Radiant is 3.71 times more than for CMS Info System, its rival, which is 3.07 times higher. As a result, we advise investors to avoid the subject and instead buy shares if they want to gain exposure to the industry.