Radiant Cash Management Services IPO opens today: Should you subscribe or give it a miss?

The Rs 388 crore IPO by Radiant Cash Management Services will open for public subscription on Friday. Ahead of its IPO, the company allotted 1,17,55,681 shares to anchor investors at Rs 99 apiece, fetching Rs 116.38 crore. The IPO comprised a fresh issue of 6,060,606 shares aggregating up to Rs 60 crore and an offer for sale (OFS) of 33,125,000 shares aggregating up to Rs 327.94 crore. The IPO will be sold in the Rs 94-99 price band.

A total of 35 per cent of the quota is reserved for retail investors, who can bid for a minimum of 1 lot comprising 150 shares worth Rs 14,850 and a maximum of 13 lots or 1950 shares worth Rs 1,93,050. Choice Broking has assigned ‘subscribe with caution’ on the IPO; Reliance Securities, Ventura Securities and Marwadi Financial Services have ‘subscribe’ ratings on the issue.

Radiant Cash Management Services is an integrated cash logistics player with leading presence in retail cash management (RCM) segment of the cash management services industry.

Radiant provide services across 13,044 pin codes in India covering all districts, with about 55,513 touch points serving more than 5,388 locations, as of July 31. Its clients include foreign, private and public sector banks, and the end user of its services include e-commerce companies, retail chains, NBFCs, insurance firms, ecommerce logistics players, railways and retail petroleum distribution outlets.

At higher price band, Radiant is asking for an EV/sales multiple of 3.1 times, which is at significant premium to the peer average of 1.3 times. The issue is highly priced, said Choice Broking.

“However, considering the company’s dominant market positioning in the domestic RCM market, its wide coverage across the tier-2 & tier3+ cities and potential future growth from these regions, and operating leverage in the business, we assign a “Subscribe with Caution” rating for the issue,” it said.

Reliance Securities said Radiant is a leading integrated cash logistics player, has strong financial track record with healthy double digit operating margins (Ebitda margin of over 20 per cent) and double digit return ratio (RoE of 27.3 per cent).

It noted that the company has strong presence across India, has multiple marquee clients and is focusing on continuous technology improvement. It finds valuations attractive and recommended ‘Subscribe’ to the issue.

Ventura Securities values the IPO on a PE basis. It said Radiant is asking for a trailing 12-month PE of 23.1 times. It said since India is an underbanked and rapidly developing country, the outlook for banks and their cash management will continue to remain strong. 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, it said.

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