Radiant Cash Management Services Limited (RADIANTCMS.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Radiant Cash Management Services Q2 FY '26 Earnings Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raju Barnawal. Thank you, and over to you, sir.

Thank you, and welcome, everyone, to Q2 FY '26 earnings conference call of Radiant Cash Management. Today we have with us the management of Radiant Cash represented by Colonel David Devasahayam, CMD sir; Mr. Alexander David, Whole-Time Director; Mr. Venkataramanan, CFO; Col. Benz Jacob, CEO; and Mr. Muthuraman, Strategy and IR. With this, I hand over the call to MD sir for his opening remarks, post which we'll start the Q&A session. Thank you, and over to you, sir.

Good morning. Thank you, Raju. Good morning, ladies and gentlemen. Thank you for joining us today for Radiant's investor call. At the outset, apologies for not holding the analyst call at the end of the previous quarter due to certain unavoidable commitments. Let me assure you all that from here on, we'll consistently hold the analyst call at the end of every quarter and provide transparent updates on the developments in the company. Coming to the performance for this quarter. Our standalone revenues were nearly flat over the same period last year at about INR 1.02 billion. Our EBITDA margins are lower at 14.9%, mainly on account of losses in the valuable Logistics segment and secular increase in our fixed costs. Volume of cash handled during the quarter at INR 0.41 trillion remained flat over the same quarter in the previous year. We are taking several measures to improve the revenue growth and restore the profitability to past high levels. I'm highlighting the key measures below, which I believe would start yielding results in the coming quarters. We have started offering a wider array of services to banks to capture a higher wallet share. These include cash sorting machines, ATM replenishment through cathode swap, cash deposit machines and an increased thrust on cash van operations. We have strengthened our direct clients business, which has continued to grow at a healthier pace and now constitutes 15.7% of our standalone revenues. We have initiated certain cost reduction measures across every region. Through rigorous benchmarking of several productivity measures, which is expected to reduce costs to the tune of INR 50 million on an annualized basis at current level of operations from the third quarter onwards. A strong focus on achieving growth and breakeven in valuable Logistics segment has resulted in near doubling of revenues in this division, though on a small base. While costs have increased correspondingly in this quarter on account of a few senior hires and new routes for our marquee customers, we are confident of significant improvement in gross margins and achieving breakeven in the current financial year. Onboarding of a distributor network to handle low cash volume points with the help of technology and lastly, a significant thrust on improving transaction volumes in our fintech subsidiary, Acemoney, which carries better margins and provide more sustainable revenue streams. At the same time, our core business of cash pick up and delivery continued to grow at a muted pace in this quarter due to lower thrust of banks in pushing cash management services at this point to their clients. We have strengthened our sales teams across all business verticals and launched several new initiatives in sales and marketing to improve the core business volume. At the same time, significant improvement in cash volumes handled was witnessed in the current quarter. That is the third quarter on account of the recent government initiatives to boost consumer demand through reduction of GST as well as the extended festive season. In terms of operations, our cash losses continue to be the lowest in the industry because of our robust risk management framework. We continue to expand our geographic footprint with over 15,000 pincodes and close to 9,000 locations, which is helping us maintain our market leadership in the retail cash management segment of the cash logistics industry. We remain committed to providing transparent updates on our progress and answering any questions that you may have. I will now request Mr. Muthuraman to speak about the progress achieved in Acemoney, followed by Mr. Venkataramanan to speak about the financial performance and KPIs.

Thanks, Colonel David. Good morning, everyone. Thanks for joining this earnings call. I'll be presenting the update on Radiant Acemoney, our fintech subsidiary. After a sharp drop in revenues and significant losses in Q1 due to a vendor transition issue, which we highlighted earlier, Radiant Acemoney has bounced back and reached revenues of INR 49 million for this quarter, up from INR 17 million in the previous quarter. Though due to extended impact of the disruption in the first few weeks of this quarter, the performance is still below the delivery capacity and market potential for this business, resulting in EBITDA level losses of INR 15.6 million for this quarter. The business has now come back to healthy profitable levels, and we are confident that Radiant Acemoney will fully wipe out the losses incurred in the first 6 months and contribute meaningfully to the overall profits of the consolidated entity in the remainder of the year. I'd like to present a few numbers to put our performance in perspective. We have installed 14,000-plus POS machines in this quarter and working towards achieving an ambitious target of more than 1 lakh machines for the current financial year. The team used the vendor disruption period to increase thrust on transaction volumes, which has yielded results. We clocked transaction volumes of almost INR 400 crores in this quarter, and transaction revenues now account for almost 25% of our revenues in this quarter, up from an insignificant share in the same quarter last year. I'd like to highlight here that the final aim of this business is to enable transactions at the grassroot level, particularly in Tier 3 and beyond, which will help achieve real financial inclusion besides providing us with a sustained annuity revenue model. We are also in the process of developing many of these retail outlets into business correspondents to provide a much wider variety of financial services, including accepting cash from our retail cash management business at competitive rates to help grow the core business of the consolidated entity. We are continuously expanding both our geographical footprint as well as service offerings to address the untapped markets in rural areas where digital access is still below 50% for merchant outlets, providing huge opportunities for growth. The remaining quarters of the current financial year are quite promising, both in terms of revenue growth and profitability. We'll continue to provide regular updates on the progress of Acemoney to our investors as we scale greater heights in the coming months. I would now request our CFO, Mr. Venkataramanan, to present our financial performance.

Thank you, Muthuraman. Good morning, everyone. Thanks for joining us on this investor call today. I will present the company's key performance indicators and financial performance for the quarter and half year ended September 30, 2025. Coming to business performance. During the financial year so far, we added 10 new clients and 120 new end customers in our retail cash management business. At the same time, we had a drop of 2,364 points in the last 6 months, mainly on account of loss of a few regions of railways and loss of one major e-commerce logistics client who got acquired in this period. In this half year, we handled INR 0.83 trillion of cash, a growth of 1.3% over same period last year. As a result, the overall business has remained flat at INR 2 billion for this period. At the same time, I would like to highlight the fact that today, we produce more than 75,000 touch points, covering approximately 14,500 pincodes across 9,000-plus locations and continue to have the widest network in the industry. In terms of segment performance, we witnessed healthy growth of 30% plus in E-Commerce segment and 24% in Petroleum segment, while Railways and E-Commerce Logistics reported more than 50% drop in this quarter compared to the same period last year. The share of direct business continued to improve and now account for 16% of our cash management revenues as against 13% in the same quarter last year and 4% the year before. Our Diamond Bullion Jewelry segment has grown at a healthy pace in top line this quarter and have added a few marquee customers with significant growth potential. At the same time, our costs, particularly related to air cargo have also increased, resulting in continued losses for this quarter. The senior management team has been strengthened and the routes have been consolidated and the management is confident of achieving breakeven in this business vertical in the current financial year. Consolidated revenues for the quarter were INR 1.07 billion, representing 4.6% growth over the previous quarter. Consolidated EBITDA margins for the quarter stood at 13.1%, an improvement of 150 basis points over the previous quarter. The improvement in EBITDA margin in this quarter was achieved on account of 3 factors mainly: one, strong focus on cost control; two, reduced losses in Acemoney, our fintech subsidiary, which suffered in the previous quarter due to a onetime vendor displacement shock. Third, healthy growth and contribution from our cash van operations. The management is confident of significant improvement in margins in the remaining quarters of the current year. Radiant continues to have very low cash losses from operations, well below the industry standards. We are one of the lowest cash losses in this quarter, a reflection of our strong risk management practices. In summary, the revenue performance for the year has been muted due to company-specific factors highlighted earlier as well as due to extended monsoons. Despite muted revenue growth, EBITDA margins have improved due to strident cost control measures undertaken by the management. The management is working on several sales and marketing initiatives across all verticals, direct sales, diamond bullion jewelry business, cash van operations, insta credit and our core business of retail cash management, and we believe these measures will reflect in better growth and margins in the remaining period of the current financial year. I now hand over the floor for question and answers. Thank you, everyone.

[Operator Instructions] The first question is from the line of Abhishek Chawla, an individual investor.

Just a bookkeeping question. In the cash flow statement, when we mentioned fund held relating to cash management activity, could you just share, is this the cash -- the company's cash that has been for the rotation? Or is this the client's cash?

It is the client's cash.

This is what -- the client cash is already netted off. If you see [indiscernible] in the cash in bank -- in the notes in our annual report, if you see, the total gross cash minus what is belonging to the client is netted off and what is -- this is a net amount which belongs to Radiant Cash management, but it is not free cash, but is used in daily operations of the company. This will be cases where we fund the client on the same day, but we get credit the next day or where we use it for during holidays or evening pick ups et cetera, or wherever we do the cash [ burial ]. These are the instances where our own cash is used. And also in cases where low denomination notes and coins are collected, we accumulate that and then dispose off subsequently, but we fund the client for the full amount.

The next question is from the line of Madhur Rathi from Counter Cyclical Investment.

Sir, I'm relatively new to the company. So I wanted to understand, sir, what has led to our margins declining from close to 27%, 28% to 12%, 13% for the past 3 quarters?

I'll answer this in 2 parts. One is specifically for this quarter and a generic response as well. One is that specific to this quarter, the losses in our Radiant valuable logistics affected our overall margins. There's also been an increase in cost of guards and drivers and a nominal increase in salaries. As we had explained in the past, ours is a high fixed cost and high operating leverage business. So when the revenue grows, costs do not correspondingly increase and results in better EBITDA margins. But absence of revenue growth has had the exact counter effect. So when the revenues are flat, the cost nominally increase typically 7%, 8% to account for cost of living and guards and drivers specifically are at a slightly higher rate because of market conditions. So that has affected our operating margins in the -- at the core business level. The losses at the RVL added to a higher loss at the standalone level and some loss in the Acemoney because of the vendor disruption resulted in lower margins at the consolidated level.

Got it. And sir, if I look -- sir, so what would it require for us to reach the 25% plus margin that we used to do earlier?

Yes. Again, in 3 parts, I'll answer. One is that the Acemoney was a onetime disruption. We are confident that it will contribute significantly to the overall profit for the remainder of the year. So that should help improve the consolidated EBITDA. We are confident that the valuable logistics will achieve breakeven in the current financial year. So the reduction in losses again will help improve. The key reason how our EBITDA margins will restore back to the 25% levels is when our revenue growth for the core business is the mid-teen levels of rate. And there are specific company-specific factors, which Mr. Venkataramanan highlighted, which affected that. Management is conscious of it and taking measures to restore our core business growth.

Sir, for rest of FY '26 and FY '27, sir, can we expect to grow at the mid-teens kind of revenue growth wherein we can achieve a margin improvement?

See, definitely, there will be a margin improvement, both revenue growth as well as margin improvement. October festive season has been fantastic for -- as you would have seen in many other companies as well. So same is the case for us. October has been good. We're expecting that the trend will continue, and we will report definitely much better margins than the first half of the year.

Got it. Sir, just final question from me, sir. Our competitors, they have mentioned that they have got a big quick commerce client to their business. So do we have -- do we cater to quick commerce segment or we are still not present in that segment? And if not, can we expect a client addition in that segment?

No, no, we do have quick commerce clients in our client portfolio as well, yes.

And sir, is this a segment that retail can become big over the next 2 to 3 years or retail cash management will be the dominant segment for us?

No, no. I think your question is wrongly framed. The retail cash management service that we offer to quick commerce clients is providing some growth. It is not that we are getting into quick commerce and doing delivery of anything other than cash. So even I think the competitor also is providing cash management services to quick commerce companies, e-commerce companies, e-com logistics companies and BFSA and several other sectors. At this point of time, BFSA is our largest segment, followed by organized retail. These 2 will be driving our growth. Yes, e-com also is driving our growth and quick commerce also will continue to drive our growth. In fact, this quarter, just now CFO mentioned, we had almost 30% growth in revenues from e-commerce segment.

Got it. And sir, just a final question, sir, we have INR 242 crores of cash on our books as of H1 end. Sir, so how much of this is pertaining to our clients? And how much is pertaining to Radiant's own business?

No, no. 100% of it is Radiant's own cash. Nothing is -- the clients' cash you cannot enter into our balance sheet.

That's right. Because the cash balance, what we have shown is after netting of the client's cash balances. It's our own cash.

Free cash, as I explained. But it is not entirely free cash as we explained. We have given a breakdown of that in our balance sheet in annual reports. We don't do that in quarterly statements. You can say roughly about half of it will be free cash.

[Indiscernible]

Sir, I didn't get that. Sir, can you repeat?

Yes. About INR 75 crores would be our free cash.

Sorry about that, not half of it. INR 75 crores is free cash. rest of it is cash used in cash management activities. For funding leasing, pick ups, for funding holiday pick ups, for funding low denomination notes and coins, for funding same day, day 0 funding, et cetera. And also margin money towards bank guarantee that we provide to banks.

The next question is from the line of [ Gaurav ], an individual investor.

I had a few questions. Number one, the first question that I had was more towards macro-centric view. From where I understand the volume of UPI transaction has been increasing and the digital penetration in India has been increasing. So I just wanted to understand outlook and a viewpoint that you see from your business and the volume -- and a decline in volume that you foresee in the future?

Okay. See, the growth in UPI has been happening alongside the growth in currency in circulation as well. So the currency in circulation, even if you see the latest data as of August 2025, it is almost INR 38 lakh crores growth over same period last year, almost 8% growth over same period last year. So currency in circulation continues to grow, and it will continue to remain at about 12%, 13% as a percentage of GDP. So as the GDP grows, currency in circulation will continue to grow. So that is not a serious challenge that we are facing. The bigger opportunity for us is that we are hardly catering to a very small share of the transactions that happen in cash. And significant number of banks, particularly public sector banks, not yet offer this as a service, the [indiscernible] banking as a service to their customers. So we are doing a direct sales to customers. And today, direct sales is about 16%, 17% of our revenues, and we expect it to continue to grow. So there is no major challenge on account of growth in the digital transactions in the country.

Got it, sir. That was really helpful. And the next question I had. So I just want to understand the targeted EBITDA margins that we're looking for because in the current quarter from where I can see is we have improved from 11.6% to 13.1% sequentially. So how do we see going forward in Q3 and Q4? Because catching up with the festive season, I think there should be some positiveness circulating in the market. I just wanted to have a viewpoint and understanding on that.

We have not put out specific number guidance for the remainder of the year as yet. But definitely, the trend line, what you saw between first quarter and second quarter, it will definitely sharply improve. What we had said in our earlier analyst calls is that in a sense, '27 as in the next financial year, our hope will be to reach our past historical high levels, which is about 25% EBITDA margins.

The next question is from the line of [ Sumair Hussein Naziz from Naziz Investment ].

Could you -- my question is on the payment aggregation and digital payments solution line of business, which was announced along with the results. How do you -- could you elaborate on how this business will align with the Acemoney's current product suite and what strategic synergies do you see between these 2 businesses?

Yes. So the strategy that we have -- I'll answer it in 2 parts. What is the Acemoney's standalone growth strategy and the linkages with the core business of Radiant Cash Management? So the Acemoney's own growth strategy is one to increase its footprint. Today, we already have almost close to 1 lakh POS machines outstanding. In this quarter, we did 14,000. And our -- this year target is incremental 1 lakh machines for the current year. So that is the rollout of the POS machines is the Stage 1. That is the first stage revenue. Then help improve transaction volumes from these POS machines. We do have almost current quarter, 25% of our revenues is from transaction volume. But as the number of POS machine target is ambitious, this share could slightly go down, but the volume of transactions at INR 400 crores for this quarter will significantly improve as in the rest of the quarters. So this is the second level of revenue streams. This is more like an annuity stream. The third level is that roughly between 15%, 20% of these POS machines, these retail outlets will translate into business correspondents based on the volume and maturity of that outlet, et cetera, where we can offer a much wider variety of transactions, Aadhaar Enabled Payment System, bill payments, domestic money transfer, cash withdrawals, cash deposits, statements, et cetera. It will like a mini bank. So these -- I mean, each of these POS machines will at least 10%, 15% of them will function like a micro ATM. So with a much wider variety of services, including other financial inclusion services like micro insurance and bank account opening, et cetera. So this will give much higher unit volume for the retail outlet as well as for Radiant Acemoney. So that is the third stage of maturity as we go along in the Radiant Acemoney's own growth strategy. Now coming to the second part of it, where we see a synergy between in our core business is that as we have said in the past, we have lost some part of the business in the core business to payments banks where these business correspondent outlets have been used for cash collection. So our own network will help us win back those and also offer this as a service. Particularly, this is workable only where the transaction volumes are low, where the vendor or the retail outlet has a wallet balance and they are able to provide those instant credit to the merchants. So that is where we are hoping that the synergy benefits will work out over the coming quarters. I hope this answers your question.

No, I just wanted to understand on the digital payment solutions business, the new line of business that you announced with an investment of INR 3 crores. How would this significantly be different from Acemoney?

No, no. So there's a regulation which mandates that this business cannot continue without a payment aggregator license. Today, we are working with a few banks where bank as a [ AC ] model. Bank as a payment aggregator model, Bapa model. But that will not -- RBI has said that they will not allow that business model to continue and payment aggregation players like Acemoney have to obtain a payment aggregator license, so will require a payment aggregator. So that is why that has been done. By next 2 quarters, we hope to have that license and then roll out -- continue to do the same business, whatever the business strategy that I have indicated requires beyond a particular cutoff date will require a PA license, and that is why that initiative has been taken.

The next question is from the line of Vikas Kasturi from Focus Capital.

I think the line is not active, we can move to the next question, please. Operator?

Raju, you are there?

[Operator Instructions] The next question is from the line of Vikas Kasturi from Focus Capital.

Sir, I had a few questions. The first one is about the drop in railways business. Is that like a onetime thing? Is that something that is temporary? Or is that like a trend that you are seeing?

Okay. So our business from governments are hardly there. This is one such segment where because of the adverse pricing and because of very long payment cycles, we decided not to pursue this aggressively. There are no other major government businesses that we are dependent on through RFP model. So it is more onetime in nature.

Got it, sir. Sir, could you please elaborate a little more about what happened with the Acemoney. There was some vendor shock, something like that, which you described, but I did not understand that issue. Could you please describe that for me, sir?

Giving that much detail as I would like to in a public platform, we'd like to say that the vendor we were operating with there were some issues and due to which we had to move into another couple of vendors, which we have done now. And that's the reason why it had an impact on the first 2 quarters. But as we are seeing right now in October and also towards the later part of the second quarter, we are well on our way to recovery and also to overcome whatever negative performance might have happened in the first half.