Redington Limited has delivered its all-time quarterly revenue of ₹26,764 crores and highest ever profit of ₹400 crores, evidencing a year-on-year 14% revenue and 17% profit growth. The company is seeing profitable growth geographically as well as business segment-wise with India and the UAE contributing towards top line revenue growth of 18% and 26% respectively. Firm execution, frugal expense, and judicious working capital management (33 days) are helping achieve this feat.
Financial Performance
- All-time highest quarterly revenue: ₹26,764 crores.
- Highest ever profit: ₹400 crores, a 17% increase year-on-year.
- Revenue Growth: 14% growth.
- PAT margin: 1.5%, sustaining profitable growth.
Geographical Performance
- UAE: Strong revenue growth of 26%.
- India: Revenue grew by 18%.
- Saudi Arabia: Signs of profitable recovery.
- Africa: Continued strong growth momentum.
Business Segment Performance
- Cloud Business: Drives growth of 42% based on achievement in Hyperscaler business and subscription software.
- Technology Solutions Group (TSG): Robust 28% growth fueled by enterprise buying and large deals.
- Mobility Solutions Group: Stable at 9%, with strong demand for high-end smartphones.
- End Point Solutions: Increased by 6%.
- CSG (Cloud & Subscription Software): Is maintaining profitability with more-than-average net profit contribution.
Operational Highlights
- Working capital: Enhanced to 33 days, minimizing financial expenses.
- ROCE (Return on Capital Employed): 27%.
- OPEX (Operating Expenses) management: Increased only 1%, much less than revenue growth.
- Cost increase factor: Increased from ₹33 crores to ₹71 crores on account of high-credit deals.
Turkey Market Update
- Economic Condition: Inflation eased below 45%, while interest rates fell to 45%.
- Subsidiary Arena: Efficient management of inventory and receivables led to a modest profit.
- Paynet Divestment: Under final consideration from the Central Bank.
Market Outlook & Future Plans
Cloud, AI, and Digital Transformation: Growth prospects in these segments are encouraging.
Q4 FY 2024-25 Outlook:
- Favorable demand in India on account of fiscal year-end.
- Middle East & Turkey can see possible slower demand due to festive season.
- Saudi Arabia: Recovery being led by high-end investment in AI and cloud technologies.
- Expansion Plans: Foraying into newer markets like South Africa, Kazakhstan, Azerbaijan, Singapore, and Malaysia.
Strategic Focus Areas
Cloud Solutions Expansion: Higher margin business with growing investments in SaaS, Platform as a Service (PaaS), and Professional Services.
AI-based product cycle: Anticipated surge in PC and smartphone sales from AI-powered devices.
Profitability Management:
- EBITDA likely to be held at 2.3%–2.5%.
- Free Cash Flow management: Temporary fluctuations as a result of changes in working capital but long-term stability anticipated.
Question & Answer (Q&A) Session – Redington Q3 FY 2024-25 Earnings Call
Working Capital Intensity & Future Expectations
Question by Nitin Padmanabhan (Investec):
Working capital days have come down to 33 days. But the contribution of Non-Mobility business has gone up.
Is this a structural shift, or do you anticipate working capital days coming back to normal levels?
Answer by S.V. Krishnan (Finance Director):
- The steady-state working capital band is likely to be between 35 to 40 days.
- September quarter had a big reduction in working capital, which resulted in this lower level.
- The growth in the Non-Mobility business did not affect working capital substantially this quarter, but in the long term, we anticipate it to stabilize at the 35-40 days level.
Q4 Growth Outlook for India & Middle East
Question by Nitin Padmanabhan:
Since Q4 is India’s fiscal year-end, might we witness more robust demand?
Will Saudi Arabia (SISA) and Rest of the World (ROW) corporations sustain present growth patterns?
Answer by V.S. Hariharan (Group CEO):
- India and UAE continue to be strong, led by the fiscal year-end and deal backlog taken from Q3.
- Saudi Arabia (SISA) is exhibiting optimism, although March being a celebratory month in UAE & Turkey may result in mild demand moderation.
Turkey Market & Paynet Divestment
Question by Nitin Padmanabhan:
Factoring costs went up from ₹33 crores to ₹71 crores. Is it largely Turkey, and will it go back to normal after Paynet divestment?
Answer by S.V. Krishnan:
- Factoring cost rise was not because of Turkey but because of some big deals with higher credit terms.
- Factoring cost in Turkey went up marginally (from 31% to 36%), but the real hit came from non-Turkey markets due to one-off large transactions.
- Paynet divestment approvals by the Competition Commission have been completed, but approval by the Central Bank is pending.
Demand Drivers in India & UAE
Question by Aejas Lakhani (Unifi):
What are the demand drivers in India and UAE that helped the high growth?
Answer by V.S. Hariharan:
India:
- Technology Solutions Group (TSG) registered good growth, led by enterprise demand and large deals.
- Mobility segment (Apple & Android) experienced good premium smartphone demand, especially because of the festive season in Q3.
UAE:
- Technology Solutions & Cloud businesses benefited from large government & corporate investments in AI & cloud.
- UAE has witnessed heightened deal wins within the enterprise realm.
Gross Margins & Future Trends
Question by Aejas Lakhani:
Gross margins continued to fall after adjusting for inventory provisioning (5.7% to 5.2%).
What are your expectations for gross margins in Q4 and the coming year?
Answer by S.V. Krishnan:
- Inventory provisioning had an effect on earlier quarters but was reversed in part in Q3, contributing 11 bps to gross margin.
- Gross margin normalization is taking place in the industry; Redington’s 1.5% PAT margin continues to be ahead of global peers.
- Big-ticket transactions will involve some margin compromises, but improved operational efficiency & working capital management will compensate.”.
EBITDA Trends & Outlook for Next Year
Question by Aejas Lakhani:
Can Redington sustain EBITDA margins of 2.3%–2.5% in the coming year?
Answer by S.V. Krishnan:
- Yes, Redington is optimistic about maintaining EBITDA margins of 2.3%–2.5%.
- Current 9-month EBITDA is 2.3% and Q3 EBITDA was 2.5%, hence the trend is still within the guided range.
Saudi Arabia Market Recovery
Question by Aejas Lakhani:
Any news on Saudi Arabia? Is the government budget reallocation affecting tech investments?
Answer by V.S. Hariharan:
- Government investments in AI & cloud computing are on the rise as part of Saudi Vision 2030.
- Key tech events & conferences (LEAP) are hosting major international players, which signals a good recovery in the market.
- Although there was nominal growth during Q3, Q1 FY 2025-26 should witness improvement as well.
Large Enterprise Deals Impact on Margins
Question by Aejas Lakhani:
Big-ticket enterprise transactions have smaller margins but superior working capital.
Should we presume that this is the new normal for Redington’s EBITDA profile?
Answer by S.V. Krishnan:
- Yes, the 2.3%-2.5% EBITDA range already accounts for this mix.
- Big-ticket deals are being accepted with an eye on ROCE, guaranteeing profitability at the cost of marginally lower gross margins.
Cloud Business & Profitability
Question by Nirmam Mehta (Unique PMS):
What is the role of Redington in Cloud business, and what is its relative profitability compared to other segments?
Answer by V.S. Hariharan:
- Cloud business constitutes Hyperscalers (AWS, Microsoft, Google) and SaaS solutions.
- Gross margin segmentation:
- Basic Resell Model: 5%+ margin.
- Driving Consumption & Workloads: 6-7% margin.
- Professional Services (Migration, Cost Optimization, Managed Services): 20%+ margin.
- Cloud is more profitable than PCs & Mobility but requires faster growth in high-margin services.
Expansion into New Geographies
Question by Nirmam Mehta:
What is the update on Redington’s expansion into new geographies?
Answer by V.S. Hariharan:
- Penetrated South Africa, Kazakhstan, Azerbaijan, Singapore, and Malaysia.
- South Africa is growing very strongly, and Central Asia markets are scaling up.
- Singapore & Malaysia concentrate on software & cloud solutions.
Solar Business Performance & Future Plans
Question by Sahil Doshi (Thinqwise):
Growth in renewable energy (solar business) has slowed in the recent quarters. Why?
Answer by V.S. Hariharan:
- Policy changes in India’s solar industry (ALMM policies) affected business.
- Redington adapted by aligning with domestic solar panel makers.
- New “Redington Solar Franchise” model introduced under the Prime Minister’s Rooftop Solar Programme.
Hopeful for better growth next year.
ProConnect Logistics Strategy
Question by Nikunj Mehta (Wealth Guardian):
What is the long-term vision of ProConnect Logistics?
Answer by V.S. Hariharan:
- Emphasize integrated logistics (not pure freight/warehousing).
- Focused on high-value mission-critical logistics solutions.
- Guaranteeing profitable growth, rather than volume-based expansion.
Conclusion & Closing Remarks
Redington posted a record quarter with excellent growth, cost discipline, and new market entry. Cloud, AI, and enterprise solutions are the top priorities for future expansion. Q4 FY2024-25 will be expected to sustain the strong growth momentum, albeit with possible regional seasonality effects.