REDINGTON - Redington

📊 NSE: REDINGTON 🏢 Trading 📅 Last Updated: 12/14/2025 11:43

💰 Financial Performance

Revenue Growth by Segment

In Q2 FY26, SISA (Singapore, India & South Asia) revenue grew by 22% YoY. Global revenue (excluding Arena) grew by 20% YoY, while Global revenue (including Arena) grew by 17% YoY. In Q1 FY26, the company reported revenue of INR 25,952.0 Cr, a 22% YoY growth driven by improved performance in MSG (Mobility Solutions Group) and CSG (Consumer Solutions Group).

Geographic Revenue Split

Redington's revenue is split between SISA (54% of consolidated revenue) and META (Middle East, Turkey, and Africa), which contributes 46% of consolidated revenue. Within META, the UAE grew by 21.29% in FY25, while the Saudi market saw a correction due to pauses in Mega and Giga projects.

Profitability Margins

Operating margins were 2.5% in FY25, down from 2.6% in FY24 due to competitive pricing and large deals. In Q2 FY26, PAT growth (32% YoY including Arena) outpaced revenue growth (17% YoY). ROE stood at 20.8% in Q2 FY26 compared to 21.4% in Q2 FY25, reflecting a slight moderation despite higher absolute profits.

EBITDA Margin

In Q2 FY26, EBITDA for Global operations (excluding Arena) grew by 33% YoY, while Global operations (including Arena) saw 23% EBITDA growth. SISA EBITDA grew by 19% YoY. Operating margins are expected to sustain at 2.3-2.4% over the medium term as the company shifts toward high-margin IT enterprise and cloud services.

Capital Expenditure

Redington maintains a strategy of minimal capital spending and moderate capex plans. The company focuses on reinvesting profits into working capital to support 10-12% market growth, with a specific focus on a 20% ROCE target for new investments.

Credit Rating & Borrowing

CRISIL maintains a 'Stable' outlook. Interest coverage ratio improved to ~4.0 times in 9M FY25 from 3.2 times in 9M FY24. The company has a healthy financial risk profile with adjusted gearing at ~0.4 times and a total outside liabilities to tangible net worth (TOL/TNW) ratio of 2.0 times as of March 2025.

⚙️ Operational Drivers

Raw Materials

Not applicable as Redington is a distributor; however, its 'input' costs are primarily the procurement of IT hardware (servers, storage, networking) and mobility products (smartphones) from global vendors.

Import Sources

Products are sourced globally from IT and Mobility vendors, with significant operations and sourcing hubs in Singapore, India, UAE, and Turkey.

Key Suppliers

Global IT vendors including Apple (previously via RIIL), and various brands in the TSG (Technology Solutions Group) and MSG (Mobility Solutions Group) segments.

Capacity Expansion

Not a manufacturing entity; however, the company is expanding its digital capabilities and implementing SAP across all business locations to enhance its Management Information System (MIS).

Raw Material Costs

Cost of goods sold is the primary expense. The company maintains average receivables and inventory provisions at less than 0.1% of revenue (FY24), indicating high procurement and inventory efficiency.

Manufacturing Efficiency

Efficiency is measured by working capital cycles. In Q2 FY26, inventory days were 23 (down from 26 YoY), while debtor days were 60 (up from 58 YoY).

Logistics & Distribution

Logistics are a core competency, enabling the company to handle 'Make in India' brands and large-scale data center deployments in India and META regions.

📈 Strategic Growth

Expected Growth Rate

10-12%

Growth Strategy

Growth will be driven by the SSG (Services & Solutions Group) and Cloud business, which saw triple-digit growth in META. The company is crafting 3-year plans for multi-year investments in SSG. Additionally, Redington is participating in 'Make in India' brand expansions and large data center deals in India, prioritizing incremental revenue and ROCE over margin percentages.

Products & Services

IT hardware (servers, storage, networking), software, cloud services, smartphones, and tablets.

Brand Portfolio

Arena (Turkey), and distribution rights for major global IT and mobility brands.

New Products/Services

Expansion into Cloud services and SSG (Services & Solutions Group) which are expected to be primary profitability contributors in the future.

Market Expansion

Focus on the UAE (21.29% growth) and Africa, driven by enterprise wins and mobility performance.

Market Share & Ranking

Maintains a leading position in SISA and META markets; revenue grew at a 14.1% CAGR over 5 years ending FY25.

Strategic Alliances

Partnerships with global IT vendors and cloud providers; divestiture of Paynet business in Turkey resulted in a USD 74 million profit.

🌍 External Factors

Industry Trends

The industry is shifting from pure hardware distribution to cloud and software services (SSG). Redington is positioning itself by investing in these high-margin areas to offset the low margins of traditional hardware distribution.

Competitive Landscape

Competes with global distributors; management notes that Redington's return ratios (ROCE 17.2%) and profit percentages are superior to many global peers.

Competitive Moat

Moat is built on established relationships with global IT vendors, a robust Management Information System (SAP), and a strong financial profile with INR 1,372 Cr in cash as of March 2025.

Macro Economic Sensitivity

Sensitive to interest rate movements and macro-economic trends in India and META regions. High interest rates increase the cost of funding working capital-intensive operations.

Consumer Behavior

Shift toward enterprise demand and data center requirements in India is driving a change in the product mix toward TSG and SSG segments.

Geopolitical Risks

Regulatory, fiscal, and currency pressures in the META region, specifically Turkey, pose ongoing risks to stability.

⚖️ Regulatory & Governance

Industry Regulations

Compliance with the Companies Act 2013 and Ind AS. The company has a documented Internal Financial Control (IFC) framework with no reportable material weaknesses.

Environmental Compliance

Direct exposure to environmental risks is not material given the distribution nature of the business.

Taxation Policy Impact

Subject to standard corporate tax rates in India and international jurisdictions (Mauritius, Singapore, UAE, Turkey).

Legal Contingencies

Not disclosed in the provided documents; however, the company evaluates restructuring options for RIIL (associate company) including winding up.

⚠️ Risk Analysis

Key Uncertainties

Potential for lower profit percentages on large deals (TSG) and the impact of the '10 to 11' refresh cycle which has not yet shown a significant impact.