REDINGTON - Redington Limited Share Price

Management Outlook and Key Points:

Financial Performance & Efficiency:

• Q4 FY24 recorded highest-ever quarterly revenue (Rs.22,513 crores, +3% YoY) and annual revenue (Rs.89,610 crores, +13% YoY). PAT grew 5% in Q4, with margins stable at 1.45%.
• Working capital days improved to 34 (from 36), driven by operational efficiency. Positive free cash flow of Rs.1,102 crores.

Geographic Performance:

• India: Strong growth (+9% YoY) across cloud, mobility, and ESG. Elections delayed government/corporate deals (TSG impacted).
• Middle East: KSA grew 15%, UAE stable. Focus on profitable growth.
• Africa: Challenges in Nigeria, Egypt, Kenya (-16.4% Q4) due to currency volatility; cautious approach to limit risk.
• Turkey: High inflation (68.5%) and interest rates (50%+) pressured margins.

Business Units:

• Cloud: +29% growth in Q4; $1B+ annual subscription revenue. Expanding ecosystem (CloudQuarks platform, ISV partnerships).
• Endpoint Solutions (ESG): +8% in Q4; AI-enabled PC growth expected.
• Mobility: Sequential softness but stable; Apple performance muted.

Strategic Moves:

• Paynet Divestment: Sold for $87M + adjusted cash (total ~$90M). Proceeds to reduce Arena's debt and refocus on core IT distribution.

Future Outlook:

• Demand Recovery: Post-election pickup in India (enterprise, govt deals), AI-driven PC/smartphone adoption, and cloud/hyperscaler growth.
• Africa/Turkey: Cautious optimism for H2 improvement (currency stabilization, IMF support in Egypt). South Africa expansion underway.
• Margins: Target 2.4"“2.6% operating margin; factoring costs (Rs.79 crore in Q4) to stabilize. Focus on ROCE (22.5% FY24) and capital efficiency.
• Risks: Currency volatility (Nigeria, Egypt), Turkey macro, and competitive pressures in cloud/services.

Dividend: To be finalized in June Board meeting.

Question 1:
So I think when you look at the results and the numbers, it broadly looks like there is weakness in certain markets. If you could give some color on the weakness that you're seeing today and how long do you sort of expect this sort of weakness to persist? And even some -- I think the SISA business mobility has sort of weakened quite a bit on a sequential basis. So just your thoughts on the broader market. Maybe if you could just split it by different geos, what you're seeing? And how long do you think the weakness continues when you think you sort of start seeing a recovery? Some color and context.

Answer:
Weakness in Africa (Nigeria, Egypt, Kenya) and Turkey due to currency fluctuations, high inflation, and interest rates. Mobility slowdown in Africa and Apple's underperformance in Q4. India, Saudi Arabia, and UAE remain strong. Africa's recovery expected in 1"“2 quarters; Turkey's challenges persist due to economic volatility but may stabilize with Paynet divestment and potential interest rate improvements.

Question 2:
Sure. And during the quarter, the finance costs have sort of moved up. So one, has intra-quarter debt been high because we are seeing end of period. So that's one. And second, from a factoring costs, have they sort of started coming off? If you could give what the number is for this quarter versus the last and how that's evolving. Yes, those are the 2 questions.

Answer:
Finance costs rose to INR 219 crores (vs. INR 163 crores YoY), driven by Turkey's 50%+ borrowing rates. Ex-Turkey, costs dropped from INR 96 to 79 crores. Factoring costs for Q4: INR 79 crores vs. INR 48 crores YoY. Paynet divestment to alleviate Turkey's debt burden.

Question 3:
Krishnan sir, Could you just call out that how will you -- how will the accounting of the Paynet entity work? What will be the acceleration to the net worth of consolidated Redington on account of this sale? And will there be any business impact on Redington because of this deal.

Answer:
Paynet sale (USD 87M + cash) adds ~INR 650 crores to consolidated net worth; minority interest reduces net impact to ~INR 375 crores. No material business impact"”core IT distribution and mobility operations unaffected. Proceeds to reduce Arena's debt and improve Turkey's financial health.

Question 4:
Got it. Sir, my second question is, could you please call out what has been the sequential as well as Y-o-Y decrease in Africa?

Answer:
Africa's Q4 revenue declined 16.4% YoY; FY24 declined 10.4% YoY. Nigeria (-27% currency depreciation) and Egypt (-34.8%) faced severe volatility. South Africa's recent entry and IMF support in Egypt may stabilize growth.

Question 5:
Sir, the next one is that if you look at the standalone P&L, there has been a significant cut back in opex from INR118 crores to INR84 crores, and that has helped the opex line item. Is this opex line items are fairly stable from here on? Or is there scope for further reductions?

Answer:
Opex reduction due to one-offs (insurance refunds, lower AR provisions). Steady-state opex remains ~INR 2,700 crores. No structural cost cuts planned; focus on maintaining operational efficiency.

Question 6:
I have 2 questions. One is on the Africa and Turkey business. So if we look at FY '25, is it fair to comment that maybe the worst is over for both these geographies, and this can be a good base on which we can see growth in FY '25?

Answer:
Africa: South Africa's expansion and Egypt's IMF-backed stability may drive recovery. Turkey: Paynet proceeds and potential interest rate stabilization offer upside. Nigeria and Kenya remain volatile but improving. Worst likely over; cautious optimism for FY25 growth.

Question 7:
The second question is slightly more on a strategy level. So if I look at your top 5 vendor list, right, all of them are hardware companies. The two segments like TSG and CSG, you have an element of software as well, right, in terms of cloud and enterprise solutions. And both these segments have been quite robust in terms of growth, right? So how soon can we see a software company in your top vendor list? Is it 5 to 7 years? Or will it be sooner?

Answer:
Hyperscalers/software vendors (e.g., Zoho) could enter top 5 in 3"“4 years. Cloud/TSG segments grew 33% and 8% in Q4. Focus on professional services (higher margins) and CloudQuarks platform to drive software ecosystem.

Question 8:
When I look at our overall growth, our MSG segment has declined by 12% quarter-on-quarter. And the TSG has also declined by 5% quarter-on-quarter. So when our working capital days have improved by 2 days from 36 to 34, I wanted to understand, is it because the MSG growth has been lower, which is why we've seen improvement in the working capital days?

Answer:
Working capital improvement (34 days) driven by ESG/TSG operational efficiency, not MSG decline. Initiatives: tighter AR/AP management, inventory control. Guidance remains 35"“40 days; sustained focus on capital efficiency.

Question 9:
Considering this is like the annual, it would be great if you could give some sense on the contribution breakup for Africa, Turkey, India, Saudi Arabia, broadly. So that's one. And second, in the context of what you explained, it looks like Turkey growth, you would want to push the pedal only once the money comes in post the approvals. And Africa, again, I think, is something like that. So does it look like -- from where you're standing, does it look like this year is going to be a little more tail-ended from a growth perspective overall?

Answer:
Revenue split: India (47%), MEA (40%: KSA 30%, Africa 20%, UAE 50%), Turkey (12%). Growth tailwinds in H2 FY25 as Africa/Turkey stabilize. Double-digit growth possible if macro improves. Margins (2.4"“2.6%) stable; services focus could lift profitability.