Chennai-based technology solutions provider Redington, which started as a product distribution firm 30 years ago, said it now provides diversified technology solutions and its growth is not dependent only on distribution of Apple products.
“Apple is the one that catches the eye of the market faster. That’s because it’s the topmost brand that we handle. We have got a fairly equally divided portfolio between enterprise and obviously cloud, digital and solar put together. We’ve got a very diversified portfolio,” Ramesh Natarajan, chief executive officer of Redington, told FE in an interaction.
“We have become a technology aggregator in the last many years but the journey moving forward is being the technology solutions provider,” Natarajan said, adding that the firm is creating a factory of proof of concept and centre of excellence so that partners can test, pilot their applications and technologies before they go ahead and start selling them out.
Redington, whose core business is distribution of gamut of IT products, smartphones, and solar and technology solutions, currently works with over 290 brands globally and over 42,000 channel partners.
The company counts Apple, Cisco, HP, Dell, Microsoft, Lenovo, Samsung, among its key vendors, whose products and technologies it distributes. Currently, Apple contributes 30% to the company’s annual revenue. Other vendors like HP, Dell, Lenovo, contribute 12%, 8%, and 7%, respectively, to Redington’s revenue.
“We have been growing at a CAGR (compound annual growth rate) of 24%. So, while the Apple stack has grown, all our other stacks have also grown correspondingly appropriately, and hence the Apple stack continues to be in its strength of what it is but all other stacks have also grown in the same pace, if not better than that,” Natarajan said. “We have a very robust portfolio of smartphones (contribution to revenue at) 25-27%, endpoint devices is another 30%, enterprise portfolio is another 30-31%, and the balance off which is our renewable energy and solar, 3D printing, and cloud, etc,” Natarajan added.
In FY23, Redington’s revenue from operations grew 27% year-on-year to `79,377 crore. Net profit grew 9% y-o-y to `1,393 crore. In the January-March quarter, revenue from operations grew 26% y-o-y to `21,849 crore, whereas its net profit fell 11% to `310 crore.
The company said its pivot from distributor and aggregator to becoming a technology solutions provider has been helping it drive growth. The company is bullish on the smartphones, hybrid work and learn environments, SMB (small and medium businesses) and enterprise technology solutions including cloud, infrastructure for servers, storage, networking, and security. It is also engaging with enterprises to understand the requirements on the emerging technology front amid growing adoption of 5G, Internet of Things, edge computing, and generative AI.
When asked if the company will be able to maintain its growth trajectory going forward, Natarajan said, “Other than the consumer devices, consumer notebooks that would probably take a little bit of a beating and be flattish. We tend to see growth coming from the enterprises, cloud, as well as smartphones priced greater than $300 (over `25,000).”
Natarajan expects Redington to grow at 15-17% in FY24, less than 27% revenue growth in FY23. The reasons which Natarajan attributed to slow growth are consumers going cautious in terms of buying devices, weak global economic scenario, and limited funding with the startups.
“In all my understanding, the growth can be compromised. You might probably see a growth that would probably come down but it is imminent, this year as well as the next. And by the time we expect the global economy to get far better, that will put us back on track,” Natarajan said.
With regard to working capital days, Redington is trying to control it between 35 and 30 days. For Redington, the working capital day cycle is a key metric as it shows the number of days it takes for the company to convert its working capital into revenue. For FY23, the company’s working capital days stood at 36 days, whereas for January-March it was at 32 days.
“There are challenges on collections, on inventories getting extended just because we are coming out of a period where you had demand chasing the supply and suddenly in about four or five months time we’ve got supply chasing the demand,” Natarajan said.
