About the company:

Colonel David Devashayam, a former army officer, launched Radiant Cash Management Services (RCMS) in March 2005. In terms of network locations or touchpoints served, the company is one of the biggest participants in the retail cash management segment of the cash management services industry in India. The company is an integrated cash logistics player. With more than 42,420 contact points and 12,150 pin codes, the company serves more than 4,700 sites across all districts in India (apart from Lakshadweep).

The company's clientele includes some of India's biggest foreign, private sector, and public banks. Axis Bank Limited, Deutsche Bank Limited, HDFC Bank Limited, ICICI Bank Limited, Standard Chartered Bank, Yes Bank Limited, and State Bank of India are a few of the clients.

Services provided by the company:

The company provides a wide range of cash management outsourcing needs for Indian banks, financial institutions, organized retail, and e-commerce businesses. The company is active in the following five business verticals : -

1. Cash pick-up and delivery: The range of services in this area includes collecting and delivering cash from end users on behalf of the company's clients. Cash and valuables are moved via a variety of forms of transportation, including two-wheelers, hired cars, and specially-made armored vans, depending on volume. For the three months ending June 30, 2022, Fiscal 2022, Fiscal 2021, and Fiscal 2020, respectively, the company moved an average of Rs.4,648 million, Rs.4,179 million, Rs.3,649 million, and Rs.4,303 million in cash daily from all clients. Another service the company offers is "cash-in-transit," which picks up and distributes cash based on the customers’ demands.
2. Network currency management: The services in this section include collecting cash from end users, depositing it in the company's current accounts, and then transferring it either immediately afterward or the following working day to the client's accounts.
3. Cash processing: Cash processing services consist of classifying the currency notes as soiled, mutilated, fit, issuable, counterfeit, ATM-ready bundles, etc.
4. Cash vans and cash in transit: The company also provides specially constructed armored vans for long-term or short-term rental for moving money or precious metals.
5. Other services: The company also provides large retail establishments and banks with man-behind-the-counter and currency chest operations. As of July 31, 2021, the company had 28 safes with a capacity to hold up to Rs.100 million in currency, 11 vaults with a capacity to hold up to Rs.500 million in currency in each, 16 strong rooms with a capacity to hold up to Rs.200 million in currency, and 11 vaults with a capacity to hold up to Rs.500 million in currency in each.

The objects of the offer:

The proceeds of the issue are proposed to be utilized towards the funding of the following objects: -

1.  Working capital requirements.
2. Capital expenditure requirements for the purchase of specially fabricated armored vans.
3. General corporate purposes.

Key Financials:

With a CAGR of 6.76%, the company's sales climbed from Rs. 2517.80 million in FY 2019–20 to Rs. 2869.74 million in FY 2021–22. EBITDA and Net Profit have also grown at CAGRs of 3.27% and 2.31%, respectively. However, as seen in the graphics above, both the EBITDA margin and the net profit margin have decreased. This indicates that the company's profits are not rising in tandem with its sales due to an increase in other expenses.

Valuation:

As per the RHP, the company has two listed peers which are SIS Limited and CMS info systems limited.

1. On the upper price band of 99 the company is asking for a PE multiple of ~16.40 however the average industry PE works out to ~17.
2. On the upper price band, the Price to book value demanded by the company comes to ~6.13 however if we were to compare it with the peers the PBV of SIS limited and CMS info systems limited comes around ~2.65, and ~3.33 respectively.
3. As per the PE the issue has been reasonably valued but as per the PBV, the issue seems to be a bit expensive.

Key Risks:

The top three clients make up 43% of total revenue, and the top five clients make up 64.27%. A small number of clients making up a significant portion of the revenue shows customer loyalty, which is positive. However, depending on the clients is a drawback. The company's revenue may suffer if one or two key customers leave.

IPO Details:

1.  The IPO will open for subscription on 23^rd December 2022 and close on 27^th December 2022.
2. The IPO lot size is 150 shares and a retail individual investor can apply for a minimum of 1 lot worth Rs.14,850 and a maximum of 13 lots worth Rs.193,050.
3. Shares worth Rs.3879.40 million are being offered, out of which Rs.600 million is the fresh issue and the balance of Rs.3279.40 million is offer for sale.