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

Ladies and gentlemen, good day, and welcome to Radiant Cash Management Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raju Barnawal from Antique Stockbroking. Thank you, and over to you, Mr. Barnawal.

Thank you. Good morning, and welcome, everyone, to Q1 FY '27 Earnings Conference Call of Radiant Cash Management. Today, we have with us the management team of Radiant Cash Management, represented by Mr. Alexander David, Whole-time Director; Mr. Venkataramanan, CFO; and Mr. Muthuraman, Head Strategy and IR. With this, I hand over the call to Alexander for his opening remarks, post which we will start the Q&A session. Thank you, and over to you, sir.

Thank you, Raju. Good morning, everyone. Unfortunately, our CMD is today a little unwell, so I would be representing him today on today's call. Thank you for joining us today for Radiant's investor call. The stand-alone revenues for the quarter grew by 7% over the same quarter the previous year. This growth was driven by commencement of a recent large mandate with IDBI Bank. We also had healthy growth in revenues from cash van operations. The revenue decline in E-com Logistics segment has been arrested and the segment reported positive growth in the current quarter. we handled cash volume of INR 0.43 trillion during the quarter, a growth of about 2.3% over the same period last year. We had one of the least amount of gross cash losses in this quarter at about INR 2 million. We continue to have the lowest cash losses in the industry by a wide margin because of our robust risk management systems. Our stand-alone EBITDA margins for the quarter Q1 FY '27 dropped to 13.5% from 15.9% in the same quarter last year. The drop is on account of increase in our manpower costs, specifically the cost of gunmen in certain regions and increase in minimum wages in few states affected our margins for this quarter. The company has sought significant price revision with all its customers and expect the same to materialize in the current quarter. The improvement in profitability of core business hinges on 3 critical aspects; business growth, price revisions and cost optimization. We have added experienced resources from the industry to drive our business growth, both from banks as well as direct clients. The recent initiatives taken at our industry level is expected to help in price revisions as well as abating the intensity of competition. Cost optimization is an ongoing exercise. We are increasingly using technology for cost reductions and expect to see the impact in the coming quarters. Radiant Valuable Logistics has shown very good traction with revenues reaching INR 22 million for the quarter. Induction of senior resources from the valuable logistics industry and signing up of a new marquee national chains has helped improve revenues at a brisk pace, and the management is confident of reaching breakeven in the current quarter. Coming to our consolidated financial performance. The overall consolidated PAT has dropped to INR 52 million in Q1 FY '27 from INR 57 million in the same quarter last year as the fintech subsidiary reduced its losses in this quarter. The subsidiary is currently scaling up its soundbox and QR code deployments with several rural and urban banks and improving its transaction revenues on installed based on POS machines. The team is confident of turning EBITDA positive in the current quarter and contribute meaningfully to the overall profitability of the company in the full year. Mr. Muthuraman will provide more details on Acemoney performance and future plans. We remain committed to provide transparent updates on our progress and answering any questions you may have. I would now request Mr. Muthuraman to speak about the performance of Acemoney, followed by Mr. Venkataramanan to speak about the financial performance and KPIs.

Thanks, Alex. Good morning, everyone. Thanks for joining this earnings call. I'd be presenting the update on Radiant Acemoney, our fintech subsidiary. As I had mentioned in our last analyst call, PIDF subsidy was discontinued in December 2025, after which the focus of Radiant Acemoney has been to improve its transaction revenues, from the installed base of point-of-sale machines and business correspondence from among this network. Radiant Acemoney has also increased its trust on deployment of soundbox and QR codes for rural and urban banks, which has gained significant traction. Radiant Acemoney currently provides soundbox both on outright and rental models and has target to deploy over 50,000 soundboxes in the current financial year. Besides transaction revenue and soundbox deployment, Radiant Acemoney has diversified its revenue base to include establishing corporate BC network for banks, providing white label UPI solutions and extending its fintech software solutions for smaller banks and NBFCs. Initial traction has already been achieved for each of these businesses in Q1 FY '27, and the management is confident of scaling them up in the current financial year. Currently, we have a network of over 20,000 BCs, cumulatively deployed over 58,000 soundboxes so far and facilitated a transaction volume of INR 570 crores in Q1 FY '27. 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'll present the company's key performance indicators and financial performance for the quarter ended 30 June 2026. The retail cash management business grew at 5.3% during this quarter over same period last year, with the growth coming mainly from the IDBI mandate that commenced in this quarter. In terms of sectors, BFSI in organized retail grew at a healthy pace, while railways, petroleum and e-commerce segment witnessed sluggish growth in this quarter. In this quarter, we handled INR 0.43 trillion of cash, a growth of about 2.2% over the same period last year. Direct clients accounted for 18.4% of our revenues for this quarter, up from 14.3% in the same period last year. Our gross cash losses for this quarter stood at INR 2.06 billion or 0.005% of the total cash handled during the year. This is one of our lowest cash losses in a quarter since we went public in 2023, and also the best performance in the industry, a reflection of our strong focus on risk management with ex-servicemen culture in our company. Radiant Valuable Logistics reported revenues of INR 22.1 million, reporting sequential growth of 24% in QY FY '27 over Q4 FY '26 and is well on its way to achieve positive EBITDA in the current financial year. Coming to a financial vision -- financial performance. Consolidated revenue for the quarter was INR 1.08 billion, representing 5.8% growth over same period last year. Stand-alone revenue growth of 7.05%. The stand-alone EBITDA margin for the quarter of 13.5% as against 15% in the previous quarter despite reduced losses in Radiant Valuable Logistics. Key reasons for this margin reduction was sharp increase in manpower-related costs, namely employee costs, driver and gunmen costs and service charge expenses towards cash activities. Short increase in minimum wages in a few states and shortage of licensed gunmen in several Southern states are driving for the higher manpower costs. The company has taken up with all its customers for price revision and expect the same to materialize in the current quarter. The consolidated EBITDA margin for the quarter improved marginally to 11.01% from 10.7% in the previous quarter due to narrowing down of losses in Radiant Aceware. The working capital management continue to remain excellent with debtors reducing to 65 days revenue in June '26, down from 70 days revenue in March 2026. Cash balance continues to be healthy at INR 2.1 billion as on 30 June '26, of which free cash flow is INR 644 million. For the remaining quarters of FY '27, the management expects Aceware and Radiant Valuable Logistics to turn profitable, improving EBITDA margins on the back of price revisions from customers and higher growth revenue of the core business. The management is actively working towards meeting each of these milestones and confident that the same will reflect in the financial performance in the coming quarters. Now I hand over the floor for question and answers.

[Operator Instructions] The first question comes from the line of Ankit Kanodia with Zen Nivesh.

Sir, my first question is related to the payment...

Sorry, Ankit, we lost you.

Mr. Ramesh, please go ahead.

Sorry, is there a question coming up, operator?

Yes, Mr. Ramesh, please go ahead with the question. Since there's no reply from the line of Mr. Ramesh, we will come up the next that is Vinit Sahu, an individual investor.

Yes, can you hear me?

Yes.

Yes. So you talked about key [indiscernible] the growth and profitability and 2 of them, which is business growth and cost reduction, you have been talking for last 6 quarters without any real settlement. The third is price hike, which I think is new one that you talked about. So my question to you is price hike, the inflation has been there for 5 months, right, from March onwards, and you are dealing with a bunch of private companies. So what is taking price hike so long? And what exactly will the business growth because your core business itself has grown at 1% or 2%? And so can you just elaborate on these 3 levers and when, how this is going to get achieved?

Yes. Sahu, right? Our contracts are typically long-term contracts with the banks with specific identified prices -- automatic price escalation on an annual basis. That's how the industry operates. In the past, there has been a steady growth in number of points that they give to us, which will accommodate the cost increases, which happens -- inflationary cost increases. Now in recent times, because of lack of fresh points that banks allocate to us, either because of competitive pressures or because of their change in focus. The number of points from the banks are not increasing. So that is why our focus is on improving the direct clients. So that is the reason and correspondingly in the same period, obviously, demand power costs have increased, both regulatory as well as market driven. Regulatory in terms of minimum wages in certain states, particularly Northern states and Karnataka and market-driven, particularly for the gunmen costs. Because of that, the industry, the cash flow association as an industry made an appeal to Indian Bank Association and advanced levels of discussions have happened, and IBA has formed a committee for looking into the price revision and promised to revert it in a very short period of time, and we are expecting these negotiations to get completed in Q2, and the price revision should come through. Regarding your -- so the cost reduction is an ongoing measure. If you can see that in a sense despite the -- but in our volume of cash, if you see over a longer period of time, the volume of cash handle remains same, the number of points have increased, which means the cost of servicing those points are higher. But we have been able to contain our costs, particularly bank charges and cash executive expenses. But own employee costs because of inflationary nature has increased at about 8%, 9% every year, whereas our revenue growth has not been. So cost is fairly in our control, and we have -- management has taken conscious measures. Price revision addressed. The revenue top line growth is where we do face challenges. Management is conscious. We have hired certain senior resources from the industry now and also we could increase our focus on direct clients. So today, it is about 18%, up from 14% and we believe our future growth could come largely from improvement in increasing trust in the direct clients business. So as an organization, I think we are infusing the sales DNA across the hierarchy, and it is definitely taking longer than what we had anticipated in the past. And -- so we are taking measures to address that. And we expect that the current year revenue growth should [indiscernible]. So IDBI mandate has helped in this quarter's growth. But beyond that, we have lined up a few large names and direct clients, and we hope that the revenue growth will cross double digits in the current year.

So you picked up a large deal last year, which would have INR 4 crores from quarter 1 onwards, third quarter. So if I take that INR 4 crores out, our core growth is 0. So are you saying that when you grow by, say, double digit, let's say, 12%,14%, it will be outside this large deal from the brands that we picked up last year?

So including this IDBI bank, we will have a double-digit growth is what our expectation is for the current year.

So if I look at a valuable growth -- valuable logistics and the core, then that means the core business is still growing at non-IDBI and non-valuable business, you are still growing at 3%, 4%, which is less than inflation, isn't it?

That's true. So the challenge has been that the revenue from the -- some of the banks have been declining. In some instances, the banks have stopped offering this as a service to their customers. And in other instances, alternate -- for smaller value points, alternate mechanisms which are not entirely legally approved, routes are being adopted by the industry. So we do face the long tail of smaller points moving out of the entire industry of retail cash management and moving to payments bank. So that has eroded our revenue. Like, for example, we had highlighted that particular phenomenon in e-com logistics segment. There are other few other segments that impact is not very large. So yes. So because of this, it was a negative growth, which we are compensating through addition of direct clients. But yes, the addition of direct clients has not been at a sufficient pace to make up for this loss and still provide for a double-digit growth. We have hired more senior resources from the industry and adjacent industries to help us grow this business. And we expect that the current quarter -- the remaining quarters of this year will help us reach our target of double-digit growth in the current year. RVL is too small to make an impact. It is still to INR 22 million in a quarter, it is too small to make an impact.

Yes, I understand. But RVL has gone from INR 0 to INR 8 crores in a year over last 2 years, so that's like if I take that also out, then the core business is actually negative despite inflation...

It's not negative. INR 8 crores on INR 430 crores is smaller than its 2%.

Sure. Okay. Sir, the next question is regarding Acemoney. So there is hardly any revenue, I think very minor one. And that cost is again coming to around INR 8 crores, INR 10 crores per year. One, of course, you are saying the breakeven, which is fine, but what exactly is the big picture here? I mean it looks too insignificant. It is drag on our profitability. It is not really looking strategic to me, if you look at the outside Radiant, inside Radiant may be a deal, but if you look at the big picture. So can you just explain a bit on Radiant Acemoney. What exactly is the big deal?

Okay. So -- the original intent with which we did the acquisition, got distracted because of the opportunity of the PIDF subsidy, which came through till December '25. The management has gone back to the core business of expanding its network of business correspondents. So if today, we have 20,000 business correspondents. But the location where they are and the scale of economies, we are not yet able to fully leverage that network on the -- of our core business. We have cumulatively probably lost about INR 30 crores of annual revenue to Payment Bank or slightly more than that. Our expectation is that with the establishment of a BC network by Radiant Acemoney, they can provide the same services, which we lost to Payments Bank business. That is one part of the story. The other part is, on its own, the QR code deployment and soundbox deployment have huge potential, and we are able to sign up with several banks and the order pipeline for the current quarter and the next quarter are fairly healthy. So that is the -- that is giving us the confidence that the business will achieve breakeven in the near term. So longer-term objective is that Acemoney should be able to provide half of its time to fulfilling the requirements of Radiant Cash Management and the balance half will be to expand its own network of providing digital banking solutions to those who are coming to the banking system, but not yet into the digital banking system. So this is through smaller banks, urban and rural banks, et cetera, where the bank accounts are open, but none of them have a digital banking facilities. So that is -- these are the 2 objectives over the long term for Acemoney.

Just to add to Mr. Muthuraman -- what Mr. Muthuraman said, Alex here, is the whole strategy behind Acemoney was, we want to -- our biggest today asset as a company today is we have a network. Today, we have spread over 15,000 pin codes. That is a very difficult thing to achieve and which we have achieved over 21 years. And today, as everybody knows, digitization has having a small impact on us, especially in Tier 1 locations. So when we acquired Acemoney, the whole strategy was to use this network to enable them and to kind of show ourselves as a phygital company. We can use our network, use the fintech services to provide digital banking to also then combat these BC operators, their payment banks, to use the fintech to help us also get into that segment as well. So -- and to arrest where we've been losing the business, let's say, in e-com logistics. You might have seen that has now got arrested, and that's steadily growing. So that was the whole strategy behind Acemoney. It's still quite nascent. But we truly believe it is a sunrise industry. And over time, we will be able to see a lot of benefit from it.

Next question comes from the line of Ankit Kanodia with Zen Nivesh.

Yes. Am I audible?

Yes, Ankit.

Sir, my first question is related to the payment aggregator license which we have been trying for some time now. Any update or any clarity on how it is progressing and by when we can expect that to start kicking in?

This is Venkat here. See, the payment aggregator application what we file, RBI has asked for certain clarifications and queries on this about 2 months back, will be -- once -- we will be resubmitting the application maybe by the end of this month or in the first week of September. Once that is submitted, we expect the obligation we expect to get the application in hand by early next year, by January or February '27. And we should be -- once it comes we are geared for -- to start the -- our plan is to start the business, at least in the next financial year because application takes about 4 to 5 months' time from RBI.

That was very helpful, sir. Sir, related to this only, given our synergy with payment aggregator license on our Acemoney subsidiary, do we expect any benefit from MDR to help us some time in the future when we start kicking in this payment aggregator work.

See, across the board, if there is an MDR on UPI, it will definitely help both Radiant Acemoney as well as RCMS itself because the unit economics for cash management improves correspondingly. And also, the cash volume today, INR 170 crores of transaction that we have done. Our yield on that will definitely improve. But still it is a debatable point at what point of time the government will, if at all, introduce MDR on UPI transactions. So we'll know the -- once we know when it is being implemented and the quantum, I'll be able to tell you the exact impact. But overall, if it gets introduced, it is definitely positive for both Aceware as well as for Radiant Cash Management.

Got it. Got it. So as on date the way the government is talking about it could be implemented only in the top 6% of the UPI transaction, which is more than INR 2,000 and where the merchant is having, I think, roughly around INR 1.5 crores plus revenue in a year. So do you think in that mode, we'll have good leeway here?

Yes. Yes, definitely, in the sense, this is -- I mean once UPI MDR comes in, this is -- this will be seen like more another bulk -- particularly the retail part, another mode of bulk transaction like in NEFT or RTGS, et cetera. And because of our strong network of -- see today, we have about 150,000 POS machines, 20,000 BCs. So this -- through this network any UPI transaction happens above INR 2,000, that will definitely add to our bottom -- revenue top line.

Got it. Sir, one last question, if I may. And in fact, it is not a question, it is more of a request and suggestion. So we did a good -- declared a good dividend in Q4 FY '26. In fact, what I can see from an investor's angle, don't you think it could have been better or even now, it would be better if you announce a buyback because our cash flow situation is still healthy. And by doing a buyback, we give a signal to the market that promoters and management is signing value at this point. Any color on that? Or any comment on that?

We will give a serious thought and we have received a similar feedback from the other market participants as well. We'll give it a serious thought and bring it up for discussion at the Board -- in the coming Board meetings.

Next question comes from the line of Ramesh with SJ Investments. The next question comes from the line of Kush Shah with [indiscernible] Commercial.

So my question is related to the polymer side where there has been a news around that there is a new rollout of polymer sheets for the INR 10 or INR 20 note. So I just want understand as you are in the cash logistics business for the years and what's your view that when will be the inflection point of the polymer notes would be there in the market? Because if I assume after the demonetization, there has been a lot of cash in the market. So by the new polymer sheet, how it will just affect our business? Positive, negative. If you can share your views of this polymer sheet?

See, in the retail cash management business, we are largely in the reverse cash logistics where we pick up cash from the retail offers to bring it. Whether it is a point or polymer notes or paper notes it doesn't make any difference to our process or to our cost. The CAT, that is cash on operations business, that could be an opportunity like when we had at the time of demonetization to replace the paper notes with polymer notes, we will definitely get more opportunity. So that could be probably a onetime business bump because of this transition, as and when it happens. At this point of time, we do not know clarity on when the government plans to introduce the polymer notes. But the core business is indifferent to the nature of that currency.

Got it. Understood. Just a ballpark of the -- this news there has been accumulating that any timeline that you would also know that around maybe 3 years, 2 years or in coming 5 years, this polymer sheet should be changed.

Sorry. I mean we don't have visibility on when the government plans to introduce. We also read from newspapers just like you do.

Next question comes from the line of Chandramouli Jagannatham, an individual investor.

What is the price increase that you are expecting from the banks?

Mr. Jagannatham, sorry for interrupting. We cannot hear you. Can you speak a little louder?

What is the price increase that you are expecting from the bank?

So okay, it is -- basically, our ask is a cumulative price increase for -- because I think large price revision has happened at this level probably in '21 when the new RBI norms were introduced and banks agreed on a price revision. So last 4, 5 years, there has not been a price revision at the card rate levels. So we do expect it to be substantial, but it will be very precluding on our part to tell that in a public forum what we are negotiating individually with banks and with the association. As in we expect it to be substantial.

When is it expected likely to be?

In Q2, we expect to complete the negotiation.

Effective from April, right?