Objects of the issue:
- Carry out the offer for sale of up to 10.06 Mn shares
- Achieve benefits of listing the equity shares on the stock exchange
Investment Rationale:
Strong market position built around proprietary technology and network effect resulting in high entry barriers
Their innovations in the space of digital maps, geospatial and digital transformation specifically localized for a challenging geography such as India, has helped them build a moat and create what they believe is a strong barrier to entry for companies looking to operate in India. The Geospatial guidelines provide that all digital maps and geospatial data of finer accuracy will be stored and used within domestic territories – cloud, servers, and other forms. This also gives MapmyIndia a competitive edge to partner with global brands for providing navigation related services within India. They have earned their leading market position today in the B2B and B2B2C market for digital maps and location intelligence technologies by capitalizing on their early mover advantage, creating a
niche market, developing proprietary and integrated technologies, full stack product offerings, continuous innovation and robust sustainable business model. (Source: F&S Report)
Strong presence in Tier 2 and Tier 3+ locations
As of July 31, 2022, out of the total touch points covered by the company, 86.1% of touch points were located in tier 2 and tier 3+ towns and cities which contributed about 85.6% of the total revenues of the company. With the government’s financial inclusion programs like Pradhan Mantri Jan Dhan Yojana and other direct benefit transfers in place, cash utilization and circulation is expected to grow further in tier 2 and tier 3+ towns and cities, leading to an increase in the demand for cash management services in these areas. Moreover, a higher preference for cash management services among retailers, NBFCs, restaurants, insurance companies, and railways, especially in lower-tier cities, is likely to fuel growth for the company’s business.
Valuation and Outlook:
Radiant Cash Management Services Ltd. is one of the largest players in the RCM segment in terms of network locations served in the industry. The company believes that increased financialization and formalization of theIndian economy will require a greater amount of cash to be processed and in circulation, benefitting the company in the long run. In addition, the company aims to shift its business mix towards providing more value-added services which will help to improve the margin profile. However, RCMSL is exposed to multiple operational risks and is subject to seasonal fluctuations in the end-user industries. On the upper end of the price band, the issue is valued at a P/E of 26.3x based on FY2022 earnings which we feel is on the steeper side compared to its peer
group (SIS Limited and CMS Info Systems). We, therefore, recommend an “AVOID” rating for the issue.
