Last month, Radiant CMS announced the strategic acquisition of Acemoney to expand its presence in the fintech landscape. Acemoney provides comprehensive and advanced digital banking solutions designed specifically for retail outlets, cooperative banks and cooperative societies in rural areas.

Through this acquisition, Radiant CMS plans to leverage the growth in digital transactions by offering an innovative “phygital” platform that combines cash and digital banking services to customers in Tier 3+ regions.

We sat down with Muthuraman N, director, strategy and investor relations at the company to learn more about the acquisition and the company’s plans going forward.

The Listing

Radiant CMS went public earlier this year, so we asked Muthuraman, how the transition has been and the IPO experience. “The company has had private equity investors since 2015. So in terms of our process, reporting, etc. all that had been put in place. The investor is Ascent Capital, a fairly seasoned investor who has invested in some 70-80 companies. So they have definitely helped us in putting together governance structure, board reporting, audit committee and all of that. So to that extent, compliance management, etc., has been there is no big change in the way we were functioning.

But yes, post-listing, quarterly pressures are there. We understand that there’s a need to balance our long-term goals of continuous investment in new businesses, with keeping the results healthy to give confidence to the shareholders,” Muthuraman told Benzinga India.

The Acquisition

Coming to the acquisition, Muhturaman took us through the entire process of the acquisition and the considerations that went into it. “We were looking for some synergistic acquisition. The company has been generating a fair degree of cash and we need to find avenues for deployment. But at the same time, we are a fairly conservative management, so we can’t write fancy checks. So we were looking at some business which is closely synergistic with our existing businesses.”

And Acemoney fit that bill. He added that apart from that, the company also thought that the acquisition was done at a fair valuation especially considering how pricey fintech valuations can be. “We paid about ₹11.2 crores, of which 9.2 crores went into the company. So ₹11.2 crores for a 57% stake puts the enterprise value at about ₹17 crores, of which 9.2 crores went into the company.”

He added that the company believes that over the next three years, this business could account for a whole 4%-5% of total revenue.

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Expansion

Talking about how the company plans to expand the company’s reach Muthuraman talked in detail about Acemoney’s model and also laid out the region they are planning to explore going forward.

“AceMoney has developed an ultra-low-cost white label model for getting the end customers of cooperative banks into the digital banking platform. Most reasonably well-managed cooperative banks have a core banking solution but they don’t have digital banking. So Acemoney for a very low conversion cost as in it would be as low as one or two lakhs of investment. A white-label digital banking product goes and sits on top of the core banking solution. So they can instantly offer their digital banking solutions to all their customers.”

He highlighted that Acemoney has been offering this model in Kerala, Tamil Nadu and it has been fairly successful, but the company plans to expand to other states as well. “This cooperative bank concept is popular in Maharashtra, Punjab, and Karnataka. So we are looking at expanding in those markets”, he added.

He further explained that apart from the initial one-time fee they also get a recurring fee for transactions that adds to the overall revenue and profitability.

Q2 In Rearview

The company’s numbers during the September quarter were subdued. The company’s revenue was up around 5.6% year-over-year at ₹93.5 crore, profits, on the other hand, slumped over 30% YoY to ₹10.2 crore. So we asked Muthuraman about the reason behind the numbers and also if things could change in the coming quarters.

“It looks like a low growth, but if you see over a longer period the base effect of very healthy growth in 2022-23 is having some impact. Even within this, we have had fantastic growth in organized retail and in e-commerce.”

He further explained that while they have seen some bounce back in the petroleum segment it is still below historical peak levels. He attributed this to the Ukraine-Russia conflict. “We are at almost 80% of the historical peak” he stated. Talking about the drop-in profits, Muthuraman said that the company is looking to make fresh investments and that takes capital infusion, and in turn, it has affected the profit margins in the near term.

Talking about whether the numbers could see an uptick going forward Muthuraman said, “The current quarter has been fantastic as the festive season has been very good and this is our best quarter every year.” He expects this Q3 momentum to continue in Q4 as well.

Focus Ahead

Talking about the company’s focus going ahead Muhthuraman said that the company’s focus is on revenue growth. “There are opportunities that are presenting itself, we don’t want to let go of these. Operating cash flow will continue to be very healthy and short-term profitability pressures will be there but since the core profitability is strong we can afford to take these risks.”

He adds that the company will be looking at further acquisitions if the opportunity comes along.”But as I said, as we have demonstrated in this acquisition, we are not fancy payers, we cannot afford to pay fancy valuations or anything of that sort, but if the business synergies match, then we will certainly give it a look.”

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