Radiant Cash Management Services – Asset Light Play On Cash Logistics

Your post is more or less aligned to the original posted by me. Nevertheless, my comments on the antithesis (refer marked in bold) is inline just to ward off concerns/worries, if any. Would not really call this as antithesis but more of risk to the business some of which is again an overlap with that in the original post.

ANTITHESIS

1. The contracts they enter into with the customers do not contain price escalation clauses, and as a result, they are faced with risks concerning inflation.

Mgmt did mention in the concall that they do have flexibility to revise prices to take care of inflation. They have done so in the past too.

1. As the capex and hiring for the DBJ segment has been done, if sales do not pick up Q3-4, opt leverage is a double-edged sword, radiant can be impacted

Operating leverage is always a double edged sword for any business. Per concall, Mgmt sees this as an opportunity and hence invested in the first quarter itself and expect contribution q3 onwards. Almost all jewellery companies have clocked healthy sales in the last few qtrs.

1. If cash volume reduces, ncm and cash processing directly take a hit, as here revenues are volume-based.

Don’t see this happening anywhere in near future. On the contrary, assured volume based transactions (even if not increasing qtr on qtr) makes it a repeatable business directly contributing to the bottom line (costs remaining constant).

1. Payment options other than cash, including credit cards, debit cards, POS terminals, Stored value cards, UPI, and mobile payments have increased significantly in India in recent years, and a continued shift in consumer trends in India concerning the use of cashless payment methods could result in a significant reduction in the use of cash as a payment method.

It’s a risk and needs to be watched. But having said that, India will certainly not become a cashless economy in a fortnight. Cash is still prevalent even in developed economies as you rightly pointed out.

1. The insurance claims below can also be rejected, or delayed, or the actual amount payable may be more than the insurance amount.

It is always better to have insurance to mitigate the risk to a certain extent if not to a full extent rather than not having it at all. The loss due to theft etc is still much lower than the competitor.

Since the overall cash management market is very lucrative and yielding, there is a risk of new players coming into the market, well-capitalized MNC players

This is possible. The analogy to be seen is the logistics industry – companies of the likes of TCI XPS and see how many are actually profitable. The key strength of this business is its asset light nature, the geographic coverage and the operational efficiency with which it serves the repeated transactions qtr on qtr which is not so easy to replicate at ground level in a fortnight.