The initial public offer (IPO) of Radiant Cash Management Services Ltd opened on December 23 and will close on Tuesday, December 27. The company has fixed price band of ₹94 to ₹99 per share.
The IPO on the first day received muted response from retail investors, qualified institutional buyers (QIB), and non-institutional investors.
The company, which was founded in 2005, is the industry leader in India's organised retail, banks, financial institutions, and e-commerce sectors for retail cash management services (RCMS).
Key customers of the company include Axis Bank Ltd, Citibank, Deutsche Bank Ltd, HDFC Bank Ltd, ICICI Bank Ltd, Kotak Mahindra Bank, Standard Chartered Bank, State Bank of India, The Hongkong and Shanghai Banking Corporation Ltd, and Yes Bank Ltd.
As of July 31, 2022, it offered its services across all districts in the nation with the exception of Lakshadweep through its 55,513 contact points, encompassing 13,044 pin codes throughout India.
On July 31, 2022, 55,513 of its touch-points, or 86.06% of them, were found in tier 2 and tier 3+ towns and cities.
The public offering that has a face value of ₹1 per equity share, consists of a fresh issue of shares worth Rs. 60 crore and an offer for sale (OFS) by existing shareholders of up to 3.31 crore equity shares.
The company has fixed the price band at ₹94 to 99 per equity share for the proposed initial public offer.
What do brokerages say?
The company's marquee clientele, pan-Indian presence with a strong network in Tier 2 and Tier 3+ locations, and capacity to cross-sell value-added services has left a lasting impression on majority of brokerage houses.
One of the reasons Arihant Capital Markets Ltd recommended 'Subscribe for long term' for the issue is that the company is one of the top players in the RCM market in terms of network locations or touch points.
The brokerage in its report said that the expansion of the RCM industry in India is anticipated to be largely influenced by the rise of the organised retail sector and the associated outsourcing potential.
The brokerage also believes that the company has a track record of excellent financial performance and shareholder returns, and is supported by reputable institutional investor Ascent Capital, who made an investment in the company in FY15.
In line with Arihant Capital Markets' recommendations, HEM Securities Ltd has also given the issue a 'Subscribe for long term' rating.
"Company’s diversified client base with long standing relationship and ability to cross-sell value added services has robust operational risk management with significantly built up technology to optimise operational profitability," said the brokerage in its report.
Futher, according to brokerage SMC Global Securities Ltd, long-term investors may choose the issue.
"Radiant is amongst the top three players that account for more than 75% of the total market share of the RCM market. However, the business is highly dependent on the banking sector in India to generate revenues. The company derives a substantial portion of its revenue from a limited number of customers," said the brokerage in its report.
Brokerage houses, Reliance Securities Ltd, Ventura Securities Ltd, and Marwadi Financial Services has recommended 'Subcribe' rating to the issue.
"In view of the leading integrated cash logistics player, strong financial track record with healthy double digit operating margins and double digit return ratio, strong presence across India, multiple key marquee clients, focus on continuous technology improvement and attractive valuation, we recommend ‘Subscribe’ to the issue," said Reliance Securities.
The brokerage firm Marwadi Financial Services has the same opinions as Reliance Securities and thinks the issue is being offered at fair prices when compared to those of its competitors.
"We believe that India being an underbanked and rapidly developing country, the outlook for banks and their cash management will continue to remain strong. Furthermore, considering the long-term growth opportunity in the Indian e-commerce space, cash movement from retail touchpoints is expected to grow significantly in the coming years. Hence, we recommend 'Subscribe' rating for the Radiant IPO," added Ventura Securities.
On the other side, brokerage Cholamandalam Securities Ltd has recommend a 'Subscribe with Caution' rating to the IPO. The brokerage in its report said that from a valuation point of view the company will trade at a price-to-earnings (PE) of 26x but with higher than average return on net worth ratio (RONW).
Brokerage, Jainam Broking Ltd in its report said that the valuations of the company looks expensive on the basis of price to book and price to earnings ratios. Hence, the brokerages' recommendation is 'Neutral' on the IPO.
