REDINGTONNSEQ4 FY22May 26, 2022

Redington Limited

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Management on call

Rajiv Srivastava

MANAGING DIRECTOR -

S.V. Krishnan

GLOBAL CHIEF FINANCIAL

Key numbers — 40 extracted

Rs.17,324 Crore

ng out in the world but let me give a color on the numbers. Our revenue for the quarter stands at Rs.17,324 Crores which is a 12% growth year-on-year and 13% in terms of absolutely on gross accounting basis. EBI

12%

me give a color on the numbers. Our revenue for the quarter stands at Rs.17,324 Crores which is a 12% growth year-on-year and 13% in terms of absolutely on gross accounting basis. EBITDA growth has b

13%

rs. Our revenue for the quarter stands at Rs.17,324 Crores which is a 12% growth year-on-year and 13% in terms of absolutely on gross accounting basis. EBITDA growth has been 14% which is higher than

14%

wth year-on-year and 13% in terms of absolutely on gross accounting basis. EBITDA growth has been 14% which is higher than revenue and PAT has been 15% growth which is again higher than EBITDA and re

15%

gross accounting basis. EBITDA growth has been 14% which is higher than revenue and PAT has been 15% growth which is again higher than EBITDA and revenue both, so that is on a consolidated basis for

22%

enue both, so that is on a consolidated basis for all the geographies we operate in. India grew 22% in revenue, 8% EBITDA and PAT of 8% whereas the overseas saw a revenue growth of 4%, but very str

that is on a consolidated basis for all the geographies we operate in. India grew 22% in revenue, 8% EBITDA and PAT of 8% whereas the overseas saw a revenue growth of 4%, but very strong EBITDA grow

India grew 22% in revenue, 8% EBITDA and PAT of 8% whereas the overseas saw a revenue growth of 4%, but very strong EBITDA growth of 18% and PAT of 20%, so those are the numbers for the quarter go

18%

A and PAT of 8% whereas the overseas saw a revenue growth of 4%, but very strong EBITDA growth of 18% and PAT of 20%, so those are the numbers for the quarter gone by. For the year, we crossed the

20%

whereas the overseas saw a revenue growth of 4%, but very strong EBITDA growth of 18% and PAT of 20%, so those are the numbers for the quarter gone by. For the year, we crossed the revenue of Rs.6

Rs.62,732 Crore

20%, so those are the numbers for the quarter gone by. For the year, we crossed the revenue of Rs.62,732 Crores which is a 12% growth on gross accounting basis and net is 10%, very strong EBITDA growth for th

10%

rossed the revenue of Rs.62,732 Crores which is a 12% growth on gross accounting basis and net is 10%, very strong EBITDA growth for the year at 31% and PAT growing 69% for the year, so I think both

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Guidance — 14 items

Rajiv Srivastava

opening

“Looking ahead to this quarter, we continue to anticipate a reasonable demand environment and expect to sustain strong revenue and margins from our recently implemented operating improvements amidst the backdrop of geopolitical uncertainty, which we all know is playing out in the world but let me give a color on the numbers.”

Rajiv Srivastava

opening

“The prognosis which is a future version for this economy growth is also positive and we can talk about in terms of near-term challenges, but largely the GDP growth forecast for the year looks like quite positive for each of these countries and all of these countries are going through a very strong technology adoption.”

Rajiv Srivastava

opening

“Now we know that there will be a shift in this as we go forward, but for the moment it has been a very strong driver.”

Rajiv Srivastava

opening

“With this initial commentary, let me stop over here and open it up for your comments and your observations, questions and we will be more than happy to take it everything on.”

S.V. Krishnan

“Just one more point to your question, Just on the first point with respect to the comparison to Q3 of last financial year, you would have seen in the last couple of years, Q3 has always been on the higher end mainly because of certain new launches that are being done in the mobility space to correspond to the festive season, so there will be some spike in revenue that time which will enable better profitability.”

Chirag Setalvad

“One was in terms of Apple if you could highlight the performance for this quarter and because of the change in GTM, what kind of performance could Apple deliver next year also considering the supply constraints in the system so that is my first question and the second was in terms of profitability I think the company has done a remarkable job so would like to understand what you think is sustainable overall consolidated profitability?”

Rajiv Srivastava

“Like as I said our overall mobility business came down so Apple also came down for us just because there were supply shortage situations in the quarter, our contribution of Apple to overall revenues is a little down from the earlier times, but we do see a very strong going forward because there will be new launches coming up in the next two quarters.”

Rajiv Srivastava

“It continues to be our largest brand and continues to be a very positive story as we are thinking about Apple last year now and for the next year as well, so we will continue to do everything right.”

Rajiv Srivastava

“We will be extremely watchful and cautious and we will watch every single day, every single moment because we operate in a environment today which is highly dynamic and highly volatile and we got to make sure that we adjust and readjust our business priorities and our operations on an absolutely real time dynamic basis so we feel good about where we are right now we feel good the fact that in the near term, in the interim the gross margins should hold up and we will continue to watch this space.”

Rajiv Srivastava

“Chirag I am sure you must be watching what is going on in the financial markets around the world and in India so I am sure all of us will be together in this but I feel good about where we are right now that everything should hold up.”

Risks & concerns — 11 flagged

Our IT products and IT business grew very fast, it grew at 24%, our services business grew fast at 12% and our mobility was a decline last year it was a negative 11% and let me give you why mobility was declining and within the IT products which grew.

— Rajiv Srivastava

Mobility was a decline because last year in three out of the four quarters there has been a considerable pressure on supply, the supply chain in the world has been disrupted, there are a lot of commodity shortages because of which lots of brands have been struggling with supplies.

— Rajiv Srivastava

I am hoping they will come out of it this year and let us keep our fingers crossed, but that led to a decline in the revenue of phones or smart phones or mobility business.

— Rajiv Srivastava

We will be extremely watchful and cautious and we will watch every single day, every single moment because we operate in a environment today which is highly dynamic and highly volatile and we got to make sure that we adjust and readjust our business priorities and our operations on an absolutely real time dynamic basis so we feel good about where we are right now we feel good the fact that in the near term, in the interim the gross margins should hold up and we will continue to watch this space.

— Rajiv Srivastava

And just a quick follow up what would have been the impact of the change in GTM for Apple for last year in terms of lost revenue?

— Chirag Setalvad

My actual question was about the risk of let us say Apple decided a different GTM strategy and if I guess managing risk is one of your key concerns probably now as we’ve ranked them up so I just wanted a sense from that first.

— Sandeep Dixit

That risk is forever there, this is the risk of not only Apple it is a risk of larger distribution business that you can get disintermediate at any point of time and all good companies you would find that they would have to mitigate the risk of disintermediation not only Apple but it can be anything.

— Rajiv Srivastava

A model change for instance when the world went from offline to online that was the risk of disintermediation to Redington.

— Rajiv Srivastava

When company like Apple decided to go in that way or HP decided to go, so we will do geography based distribution, it is the risk to us, but like all good companies Redington also has a very good way of trying to understand the risk read them into the future and then apply your own mitigation approaches to minimize the risk and actually grow and you saw it happen last year.

— Rajiv Srivastava

Extremely quite profitable and I really compliment my team in Turkey for their ability to manage the most volatile region of the world right now from an economic perspective.

— Rajiv Srivastava

Having said that I just want to say normally for these businesses, the festive season is a peak period so that is something that we had seen in the previous period itself so I do not think there needs to be any extra concern.

— S.V. Krishnan

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Q&A — 12 exchanges

Good morning and congratulations to entire team for such fabulous number and keep surprising us in terms of not just the business, but also in terms of the way you are managing your working capital. I have two very specific questions. One, in continuation of your opening remarks where you mentioned that we are now going for a change in the way customer buys the product and the entire business model and bucket sizing is getting changed, so could you just little bit elaborate in terms of how does this going to play out from our mix of business, because we will be more focused on B2B or within th

Rajiv Srivastava

Thanks so much. I look both your questions are very, very interesting and let me give you and very close to what we are doing right now, so let me give you a sense of what is happening in the customer buying behavior and you mentioned clearly the buying behavior is shifting like I said we used to all go and buy from shops and retails and malls wherever we used to and even before pandemic had started the model started to pivot towards a convenience and customer choice model. You get the convenience of ordering from anywhere and everywhere and you get to choose where you sit behind and then just

Good morning to the team and great set of numbers in this challenging times. Sir I have questions, I was just comparing with this around Rs.17,300 Crores topline and I am going to just compare this with the December 2020 quarter, Q3 2021, we were roughly about same number, 17,000 approx, but if you look at the operating expenses at that time they were at around Rs.260 Crores and now at Rs.330 Crores, so which element of this operating expenses has seen a big increase, which is leading from 260 to 332 and secondly our employee cost over last couple of quarters, we have seen a lot of up and down

Rajiv Srivastava

Let me give you a color on the expenses that we are doing and what we are doing in expenses I think you will relate this to what I said earlier about investments in technology, in people and how the business is moving towards everything as a service and customer choice model. When you do all these things we got to make sure that we pivot our business from brick and mortar offline model to a omni channel enabled model and so we make a huge amount of investments and we continue to make, you will see our investments continued to be high, it will convert our business to a much more responsive onli

Congratulations on a great set of numbers and thank you for taking my question. I just had two questions. One was on the cloud revenue for Q4 and the subscription revenue within cloud for Q4?

Rajiv Srivastava

All of our cloud revenue is actually subscription revenue only, our cloud revenue for Q4 is Rs.436 Crores which is a 49% growth year-on-year and all of it is subscription that’s how you measure cloud. I am sorry I meant services part of the cloud revenue for Q4? Okay, service is a small part, services revenue in this is I think about Rs.20 Crores, about 4.4%. If I could followup on that how do you see this services scaling up as we go forward in this financial year? Services is the one which is meant to scale up that is where I said we are making a tonne of our investments in employees is all

I just had one short question. I just need your viewpoint on how the go to market strategy from Apple will impact our business? Thank you.

Rajiv Srivastava

Unless Apple has got like any other brand, like any other vendor, every vendor has got their own GTM approach and its strategy where they try and dissect the market, this segment in the market is a lot more. Apple has made a very strong change to go to market model beginning of last year and they shifted a lot of there business from partners like ours to going direct to retail which is Flipkart, Amazon variety in India. They did not make the similar change in Middle East and Africa. They made a different change in Middle East and Africa, they took away some regional distributors in Middle East

Thank you for the opportunity. I had just two set up questions. One is on the revenue part India business effectively grew faster given the high base of last year. If you can throw some light on which segment whether it is IT product driven growth or it was mobility driven growth which helped us to clock such a wonderful revenue growth for the quarter and second on the international part, again in the revenue piece that despite Brightstar acquisition and getting full quarter benefit for this quarter, the revenue were softer and the same question applies to here as well that which segment, was

Rajiv Srivastava

Okay, Chintan you asked many, many, many questions not just two or three, because each one of them is a strong question itself but let us try and answer each one of them. I will do a few and I will leave to Krishnan to handle the rest. So just to give you a sense of revenue grew faster, which products grew faster than the others. Our IT products and IT business grew very fast, it grew at 24%, our services business grew fast at 12% and our mobility was a decline last year it was a negative 11% and let me give you why mobility was declining and within the IT products which grew. Mobility was a d

Good morning and congratulations for a great year and for a great quarter as well. I had two questions. One was in terms of Apple if you could highlight the performance for this quarter and because of the change in GTM, what kind of performance could Apple deliver next year also considering the supply constraints in the system so that is my first question and the second was in terms of profitability I think the company has done a remarkable job so would like to understand what you think is sustainable overall consolidated profitability? Those are my two questions. Thank you.

Rajiv Srivastava

Okay, let me give you a sense on both of them. Clearly, Apple has been a great story, Apple grew very, very fast in last quarter. They grew 33%, growing 33%, a revenue turnover of some 290 billion which took them to 366 billion for the year last year was fantastic but the last quarter, they had a slower growth it was not a launch quarter, the previous quarter was a launch quarter and Krishnan mentioned about that. Like as I said our overall mobility business came down so Apple also came down for us just because there were supply shortage situations in the quarter, our contribution of Apple to

Congratulations for a good set of numbers and thanks for the opportunity. Sir my question is on the supply chain issues which we have been seeing in the mobility side of business right, so you said that we have been seeing this degrowth in the last three quarters because of the supply chain so wanted to understand for how many quarters more you expect the situation to continue, what are you seeing on the ground at the current level and the second question of working capital is a basic one where we have the working capital of around 13 to 14 days right and it is driven by the increase in payabl

Rajiv Srivastava

Krishnan, do you want to take the second question first and I will take. You are right we have been saying that there will be normalization so that is very clearly in place as the situation becomes normalized in the market, the working capital will get normalized, which component of that will get normalized within all the three will get impacted and in our view there will be a good increase in the inventory days and the AR days which has been highly favorable for us in the last few quarters so whenever this normalization happens you will see the change across resulting in increase in working c

Thank you. Can you give us a sense of the product concentration in your sales as in which are the top brands and what is their share of revenues?

Rajiv Srivastava

You saying the top brands is it? Yes, break up of your sales by brands. Our product concentration mirrors pretty much the global brand or the global play out and we have got very strong partnerships with 240 but only a handful of them obviously do much better or are contributing to the higher part of the revenue. So Apple is a big contributor to our revenue so is HP then Dell EMC the whole portfolio of Dell EMC then there is Lenovo and then there is Samsung so these are the five brands which play out the maximum for us. We do not do Samsung in India, we do Samsung in Middle East and Africa and

Congratulations on a good set of numbers. Two things, I want to understand with Apple change in GTM what was our reply or our re-engineered GTM can you please elaborate?

Rajiv Srivastava

Fairly straight. We are giving too much of credit to Apple GTM strategies is not required because every brand will do, every company does what they have to do for their right way of being. We re-engineer GTM all the time and why do you re-engineer a GTM Ronak, because like I said the manner in which products are being bought and the manner in which products have been sold today and consumed is changing, the buying behavior is changing. There is a bunch of customers who are trying to go direct and online I think we have a legitimate right to go and say look how do we fulfill that requirement of

Thanks for the opportunity. I have one question. My question is with regards to Turkey operations if we can provide more details regarding growth and profitability for the full year and our expectations going forward considering the macro in Turkey?

Rajiv Srivastava

Turkey has been a very, very good operation for us and we operate in Turkey under two we have a direct operations in Turkey which is Redington Turkey and then we have a Turkey operation which is through our company, which we acquired in Turkey called Redington Arena and the revenue has been flattish in Turkey and you understand Turkey has gone through a huge amount of geopolitical economic considerations over the last couple of years now. The inflation in Turkey this year happens to be at around 70% pretty much the highest inflation country in the world at this moment but despite all that, our

So just wanted clarification on the GTM Apple change, this one was specific to smart phones in India right?

Rajiv Srivastava

Yes. Okay then the Rs.3500 Crores loss of revenue that would be purely on the India mobility business and although you mentioned that despite the Apple India revenue loss you have grown India business by 19% so I assume that is for the console India business so just on the India mobility side, have there been any mitigating strategies put in place for the loss in Apple revenue? We are obviously contemplating what we can do, mitigation is not a brand specific mitigation, a mitigation overall business specific mitigation and so just a typical mitigation would be what you do with more brands, whe

Thanks so much. Really enjoyed this interaction, there were a wide variety of questions though and it went through the business situation, it went through the customer buying, how we are trying to see the way in which the world is evolving from a technology buying as well as tech perspective all of that and I just want to let you know so first of all thanks so much for the very engaging interaction. We continue to do what we do best which is we continue to make sure we are investing in our business to make it far more streamlined, smooth and efficient, close to customers and partners, a busine

Management

Speaking time

Rajiv Srivastava

Moderator

S.V. Krishnan

Chirag Setalvad

Sandeep Dixit

Aasim Bharde

Chetan Shah

Krish Mehta

Anuj Jain

Chintan Sheth

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Opening remarks

Rajiv Srivastava

Good morning and a warm welcome to everyone on this Redington’s earnings call for Q4 and year gone by. A very happy to be with all of you today morning and we are pleased to report another strong quarter of sales and operating margin growth. Redington achieved record revenue and operating margin for the year as our continued investments in technology capabilities, partner relationships and our comprehensive breadth of offerings begins to payoff. Growing demand for supply chain orchestration is driving strong financial performance across our global businesses. Looking ahead to this quarter, we continue to anticipate a reasonable demand environment and expect to sustain strong revenue and margins from our recently implemented operating improvements amidst the backdrop of geopolitical uncertainty, which we all know is playing out in the world but let me give a color on the numbers. Our revenue for the quarter stands at Rs.17,324 Crores which is a 12% growth year-on-year and 13% in terms o

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