Redington India Ltd Management Discussions.

economic overview

Global Economy: During 2019, the Global

Economy encountered multiple challenges including protracted trade disputes leading to shrinking of global trade, rising tariff barriers, slow-down in investments and in manufacturing activities. The demand-side constraints affected global commodity prices, including oil and metals. In their attempts to bolster demand through increased liquidity, several Central Banks lowered policy rates. The US dollar strengthened across all other major currencies, making imports more expensive. As per IMF estimates, the Global GDP growth slowed 2.9% for 2019 (from 3.6% in 2018). This slowdown was uniform across advanced as well as emerging economies, except Africa.

COVID-19: Quite unknown to the rest of the world, towards the end of 2019, an unprecedented health emergency was gathering steam in the city of Wuhan in China. The Novel Coronavirus disease (christened COVID-19), went on to become a pandemic, spreading across continents like a raging wild-fire. By the end of March 2020, COVID-19 had brought the world of business to a grinding stop. Country-wide lockdowns not only halted domestic economic activities but also disrupted global supply chains with unimagined severity. By the mid-May 2020, authorities across the globe were cautiously attempting to begin a stage-wise lifting of lockdowns, starting mankinds long and arduous march back towards normalcy.

Given the severity and universality of the pandemics impact, all economic forecasts are now subject to frequent revisions. In its April 2020 World Economic Outlook, IMF has predicted the global GDP to record a rare contraction of -3% in 2020, while predicting a sharp rebound to a 5.8% growth in 2021.

Indian Economy (FY 19-20): The country entered 2019-20 in election mode, with a six-week, seven-phase polling to elect a new Union Government. Return of a government with a strong mandate offered a continuity of policy, reform and growth. The drag of the NBFC crisis from the earlier year, however, continued to weigh heavily on private investment and consumer demand.

Doubling of farmers income, rationalizing corporate taxes, attracting global manufacturing to set up base in India, ease of doing business and expanding exports, all aimed at propelling Indias economy towards the $ 5 trillion mark, are stated objectives of the Government of India. Aiming to revive growth by way of boosting private investment and consumption, the Union Government and Reserve Bank took major policy decisions, bringing about a substantial reduction in Corporate Taxes by and successive lowering of interest rates.

The banking sector, caught up in its own challenges, however, was not in a position to pass on the benefits of lowered rates in full to its borrowers.

The country went into a nationwide lockdown from March 25, 2020. While COVID-19 had a definitive impact on Q4 FY 20 metrics, the countrys economic challenges were evident even before the onset of the pandemic. As per IMF, the Indian economy recorded a modest growth of 4.2% in 2019. The growth rate is expected to drop sharply to 1.9% in 2020 before rebounding to 7.4% in 2021.

Middle East and Central Asia: IMF

estimates the regions growth rate to be 1.2% in 2019 (1.8% in 2018). The region is set to experience a sharp de-growth of -2.8% in 2020, before recovering to a growth of 4.0% in 2021. Most countries of the region will continue their efforts towards their long-term goal of building and strengthening non-oil segments of the economy, reducing the dependency on oil income to the extent possible.

Sub-Saharan Africa: During 2019, subSaharan Africa recorded a growth of 3.1%, with a modest decline of 0.2% from the year before. The growth rate is predicted to turn negative at -1.6% in 2020, before rebounding to 4.1% in 2021.

information and communications technology (ict) industry overview

Global ICT Scenario: The global ICT spend grew by 5% to reach $ 4.91 trillion in 2019. While the traditional ICT spend ($ 4.15 trillion) grew by 4%, a whopping 17% growth in spend in New Technologies ($ 0.77 trillion) propelled the overall growth. Hardware spend ($ 1.11 trillion) grew by a modest 3%.

The COVID-19 pandemic is predicted to stall growth, with ICT spending ($ 4.90 trillion) remaining flat in 2020. From 2021 through 2023, overall ICT spending is projected to grow by at least 5% annually, driven by New Technologies, Cloud and Mobility.

Over the next 5 years, growth in traditional tech spending is forecast to come from four sectors; Cloud, Mobile, Social and Big Data / Analytics. New Technologies, such as IoT, AI, Robotics, AR/VR and Blockchain and Next-gen Cybersecurity will also drive significant growth.

Global Laptop Market is expected to grow by US $ 7.52 billion during 2020-2024, progressing at a CAGR of 1% during the forecast period, with the Asia Pacific region witnessing the highest growth. Demand for lightweight and high-end specifications is expected to result in high growth in demand for 2-in-1 laptops. The premium segment accounted for a significant market share as these laptops offer long battery life, wide display screen, robust processors, and attractive design. Spiraling usage of online and augmented/virtual reality gaming among youths and professional gamers is bolstering market growth for gaming laptops.

Global Smartphone markets de-grew by -1% in 2019, as per Counterpoint Research. Shipment volumes declined to 1,486 million units in 2019 from 1,505 million in the previous year. This was the second consecutive year of contraction for smartphone shipments.

The global mobility market was impacted by challenges on both,

Global ICT Spending ($ Million)

2019 2020 2021 2022 2023
Traditional Technologies 4,146,194 4,005,032 4,130,413 4,277,843 4,453,674
New Technologies 766,521 891,760 1,030,455 1,189,208 1,362,017

Source: IDC

Global GDP Growth Trend (%)

2018 2019 2020 2021
World Output 3.6 2.9 -3.0 5.8
Advanced Economies 2.2 1.7 -6.1 4.5
Emerging Market and Developing Economies 4.5 3.7 -1.0 6.6
India 6.1 4.2 1.9 7.4
Middle East and Central Asia 1.8 1.2 -2.8 4.0
Sub-Saharan Africa 3.3 3.1 -1.6 4.1

Source: World Economic Outlook, IMF

demand as well as supply fronts. Heightened trade and geopolitical stress weighed heavily on the supply chain of components such as memory chips. The fallacy of dependence on a single-source got exposed, prompting vendors to realign their future strategies

India ICT Spectrum: ICT spend in India grew by 4.7% to reach $ 90.87 billion in 2019. Enterprise Software and IT Services led the chart with double-digit growths of 11.7% and 10.5% respectively. Devices grew by 7% while Data Center Systems recorded a moderate 1.4% growth. Communication Services recorded a negative growth of -1.7%.

Like in all other investments areas, the COVID-19 crisis is expected to adversely impact the ICT spend in 2020. As per Gartner, ICT spend is projected to de-grow to $83.5 billion, a decline of -8.1%. This would be the first decline in ICT spending in India, in a 5-year span. Spending on devices and data center systems is projected to record the steepest declines, at -15.1% and -13.2%, respectively. CIOs in India will consider extending life cycles of their existing device assets which will delay new purchases.

Amid overall contraction, technologies such as tele-health, smart-chatbots, mobile applications that enable remote service deliveries and distance learning education software is predicted to witness increased spending.

18.1%, shipping over 11 million units during FY 2019, the highest volume recorded in the last 6 years, on the back of Government schemes of free laptops for school & college students. Increasing customer preference for thinner and lighter machines with enhanced mobility features resulted in the highest-ever annual shipments of Notebook PCs, constituting 67.7% of total PC shipments. Demand for Gaming PCs grew by 51.1% YoY.

Your Companys strategy of offering a bouquet of Compute products from leading PC brands helped it effectively address the underlying demand. Our focus on modern retail and multi-brand retailers, with customized brand-based solutions, enabled your Company outperform the industry. Gaming PC is an important growth segment and our deep engagement with brands specializing in this segment helped us increase our share of the demand from gaming enthusiasts.

Your Companys focus on the growing segment of "Thin & Light" Premium Notebooks helped us increase its share of the High-value product portfolio.

This segment is expected to maintain

India IT Spends

(in $ Millions) 2019 Spend 2019 Growth 2020 Spend 2020 Growth
Data Centre Systems 3,670 1.4% 3,186 -13.2%
Enterprise Software 6,287 11.7% 6,125 -2.6%
Devices 36,595 7.0% 31,077 -15.1%
IT Services 15,573 10.5% 14,924 -4.2%
Communications Services 28,744 -1.7% 28,227 -1.8%
Overall IT 90,869 4.7% 83,540 -8.1%

Source: Gartner

company business review

Your Companys Distribution business is structured under four broad categories; Consumer Business, Enterprise Business, Mobility Business and Services business.

India Operations

Consumer Business (Compute,

Print and PC Accessories): The Indian PC market witnessed an impressive year on year (YoY) volume growth of

its growth momentum in the coming years.

The Printing Industry witnessed the continued contraction in the traditional printing segment. However, the Continuous Ink Supply System (CISS) based printers gained adoption due to its significant "cost per page" advantage. Our bouquet of best-inclass CISS printers, coupled with an efficient & assured delivery system of genuine ink-cartridges helped your Company gain market-share in this

product category. Commercial printing segment has increasingly transitioned towards Managed Print Service (MPS) and Print as a service (PaaS), which allows Enterprises a monthly Opex option. We are strongly engaged in this emerging value chain, providing guaranteed and uninterrupted support to our partners towards the Supply of high value Print HW and Consumable.

Enterprise Business: (Products & Solutions encompassing Servers, Storage, Security, Software & Networking) :

India: Evolving continuously with changing customer requirements, the Companys Enterprise Business has emerged as a preferred IT solutions provider for its vendors and its partners. We offer consulting and advisory services across platforms and networks to our partners, coupled with implementation and support across Hardware, Software & Cloud assets; as they endeavor to offer solutions and services to meet the end-users business needs. With a high degree of competency in the Cloud Solutions and Services space, your Company helps customers transition its IT Infrastructure from Capex to Opex regime.

The server & storage market remained flat in 2019, although demand remained strong in selected sectors like BFSI, Manufacturing, Education and Government. The overall networking market too remained flat, largely on account of the slowdown in telecom spending, while showing significant growth potential due to DC footprint expansion across enterprises.

Organizations that are looking to digitally transform themselves recognize the need to adopt software- based technologies to improve manageability. Technologies like SD-WAN offers a high degree of flexibility and agility in this area. Software market registered a 10% growth with Collaborative Applications, Enterprise Resource Management (ERM) Applications. Content Workflow & Management Applications and Customer Relationship Management (CRM) are the top opportunity areas for the vendor community.

The advent of loT in Indian enterprises has enabled multiple organizations build use cases around smart processes and improve interoperability. However, increased network speed and lower latencies are crucial for attaining maximum advantage. The introduction of 5G technology would act as a catalyst in driving the adoption of IoT in the coming years.

The growing adoption of software as a service (SaaS) based solutions among the large and SMB segments, the strong emphasis on digital transformation (DX) initiatives, and the customer experience (CX) enhancement, acted as catalysts for the growth of enterprise applications market in India.

The Cyber Security market in India is expected to grow from $1.97 billion in 2019 to $3.05 billion by 2022, a CAGR of 15.6 percent, almost 1.5 times the global rate, according to a pre-COVID joint report by PwC and Data Security Council of India (DSCI). The report coincides with the announcement of the data protection bill by the Government of India. The three main factors driving Indias cybersecurity market are digital growth, rising cyber-attacks, and stringent regulatory mandates. The cybersecurity market will be defined by three key sectors— Banking, Financial Services and Insurance Industry (BFSI), Information

Technology and Information Technology-enabled services (IT and ITeS) and Government. Your Company is poised well to take advantage of all emerging growth opportunities.

Your Company is investing, learning and transforming to emerge as an indirect Solution Provider for many Technology Brands in India. We believe that technology practices like Digital Transformation, Cloud Transformation, Hybrid Cloud, Cyber Security, Data Center Modernization, Application Modernization, Al & ML, IoT & Analytics, Enterprise DevOPs & Automation etc., would drive future growth in IT investments.

Mobility Business

Bringing some cheer to the global mobility segment in 2019 was the Indian customers continuing appetite for Smart Phones. Clocking a 7% YoY growth in smartphone shipments ($158 million), India replaced the USA to become the second-largest smartphones market in 2019. The growth was propelled by mid-tier segment products with enhanced features. The Average Selling Price grew 5.5% YoY to about 12,300.

The online channel continued to expand its share on the back of the new launches, discounts, cash-back and other schemes. Still, retail outlets remain the largest channel for mobile phone distribution in India and the most significant Go-To-Market (GTM) channel for long-term success for any brand in India.

Your Company enjoyed a very strong growth in the Mobility segment on the back of the successful launch of new smartphone models and stable business ecosystem.

Going forward, the demand for Smart Phones are expected to remain strong, fuelled by attractive pricing strategy as well as affordability schemes from key vendors. An extended period of social distancing would bring added utility to smartphones, such as online schooling for kids, virtual meetings for executives, etc. These applications are expected to persuade the consumer to upgrade to a new smartphone with added features, memory and storage capacity.



India: The Indian Cloud market has started to offer significant growth opportunities, due to several factors: increased customer awareness, consumerization of IT, proliferation of the "start-up" ecosystem, diverse vendor ecosystem, increasing investments in infrastructure, increasing availability of specialized talent, strategic partnerships and the impetus from key Government Digital Initiatives.

Organizations are opening up to multicloud environment with increasing adoption of applications through a Software-as-a-Service (SaaS) model. Continued adoption of microservices, containers, and open-source platforms are helping grow the Platform-as-a- Service (PaaS) market in India.

The Indian Infrastructure-as-a-Service (laaS) market beginning to offer excellent growth potential. Key factors influencing the growth of IaaS in India are:

• Globally competitive, localized IaaS supply ecosystem. Large global vendors - AWS, Google Cloud and Microsoft now have in-country IaaS facilities.

• Improved infrastructure facilities, economic benefits, increased innovation and a vibrant start-up and connected ecosystem, which are more attuned to a "pay-as-you- use" culture.

Your company has a significant early-mover advantage in the Cloud space and its investments in Cloud Infrastructure, Skills & Capabilities in offering Cloud products, services and solutions have positioned it as the Cloud Solution Provider with a difference amongst the vendor and channel community.

The Companys Cloud business has witnessed a high growth trajectory over the past couple of years and FY 19-20 was a break-through year for its Managed Services offerings. Your Company expects to derive significant Earning advantages through its Cloud Services capabilities over the next few years.

Digital Printing:

Digital printing has evolved fast in the past few years and has found acceptance in Photography & the Packaging sectors. Printing photos, especially wedding albums have witnessed a tremendous revolution in adopting digital printing with HP Indigos unique value-added offerings.

With an installed base of 250+ HP Indigo Presses across 100+ cities, our exclusive partnership with HP Indigo in India offers us a unique business opportunities in offering Digital Printing Solutions.

During FY20, customers printed 1.70 Billion impressions on HP Indigo machines supplied, installed and maintained by your Company. This represented a 12% YOY growth, at a time when traditional printing volumes have witnessed de-growth.

Overseas operations

Over the past decade, your Companys decision to spread its business risk by establishing its presence in Emerging Markets other than India has started paying rich dividends. The Overseas business has become the major contributor to consolidated Revenue and Profit and this is a major enabler for your Companys record of

consistent growth over the past few years.

Overseas YOY Contribution
Business Growth
Revenue 11% 63%
EBITDA 17% 61%
PAT 10% 73%


Overseas Business FY 19-20
ROCE 19.80%
Free Cash Flow 175 Cr

Redingtons Overseas operations are carried out through its wholly-owned subsidiaries; Redington International Mauritius Limited, Mauritius (RIML) for addressing the Middle East, Turkey, Africa (META) region and Redington Distribution Pte Limited, Singapore (RDPL), which addresses the South Asian region comprising of Sri Lanka, Bangladesh, Nepal and Maldives, apart from handling "Zero-Duty" business opportunities in the Indian Market.

RIML: META operations contribute a lions share of Revenue and Profit of your Companys Overseas Business. Redington has been the pre-eminent Distributor of Technology Products &

Solutions in the META region for over a decade and is the leading partner for its Vendors in all the markets where it operates in.

Despite geopolitical challenges, macroeconomic issues including substantial currency devaluation in some of its markets and the onset of Covid-19 in Q420, your Companys business in META maintained its unblemished track record of double-digit growth in Revenue, EBITDA & PAT. The impact of Covid-19, was experienced initially largely on the supply side, during late January & in February, with factories and ports being progressively shut down, causing delays and shortfalls in shipments. Starting March20, with the rapid spread of the pandemic and steps taken by most countries to impose the partial/total lockdowns, there was significant impact on the demand-side as well.

Demonstrating a high degree of determination, perseverance and reflecting its leadership position in the region, the Team entrusted with your Companys business across META geographies delivered a double-digit Revenue growth across all four business verticals; Consumer, Enterprise, Mobility & Cloud.

In the Consumer Business, your Companys META operations consistently outperformed the Industry, thereby gaining PC market share across the region. It is the largest distributor not only for all major PC brands but across most GTM categories. Its leadership position in Consumer business can be attributed to meticulous, category-wise stock planning and a finely tuned order execution & delivery engine that offers industry-leading TATs in the region.

The Enterprise Business, across META, led with even stronger growth, with increased demand across technology practices - Cybersecurity, Network infrastructure and Cloud. With its state-of-the-art Executive Experience & Briefing Centre, REDVAULT - a unique Video-wall facility for demonstrating Proof-of-Concept for technology practices & solutions, your Company offers its partners and their customers an opportunity to experience technology concept demos hands-on.

Growth in META Enterprise Business during FY 2019-20 resulted from significant spends in IT infrastructure in most of the markets that your Company operates in. However, impact of COVID-19, and a sharp decline in oil prices, is likely to result in slowing down of IT investments and consequently, lowering of demand for Enterprise products and services during FY 21.

The META operations of your Company has always had a very strong focus on

Working Capital Management (WCM) and Business Hygiene (BH) and it intends to continue to keep these as priority areas, as we move into the post-COVID-19 era.

Your Companys business in Turkey showed strong recovery over the previous year, on the back of an increase in demand as well as a relatively non-volatile exchange rate.

A consistently high double-digit growth across all metrics has been the hallmark of your Companys META operations over the past 5 years and is the foundation for the consistent and unbroken growth record in Consolidated Revenue, EBITDA & PAT

META Operation FY 19-20
Parameters (in Crores) CAGR FY ‘16 to FY ‘20
Revenue 14.20%
EBITDA 12.20%
PAT (AMI) 15.70%

RDPL: RDPL operations during FY 2019-20 faced significant challenges due to a clear shift in business from hardware to software, subscription and services. This impacted the Zero-duty business in india, the mainstay of RDPL Revenue, as Indian customers started transitioning from duty-free imports to Rupee purchases. Reduction in Indias corporate tax, depreciation of INR and reduced interest rates have made India

a highly competitive market and this has also prompted some of the major Vendors to move their Zero-duty billing model to ex-India billing, further impacting RDPLs available business opportunity.

The aftermath of the tragic events during Easter in April 2019 caused appreciable economic slowdown and created a difficult business environment in Sri Lanka. This, combined with a significant deprecation of Sri Lankan currency led to de-growth in Revenue and Profit for your Companys Sri Lanka operations during FY 2019-20.

On the positive side, the Bangladesh market saw revenue growth from infrastructure and software-related products, mainly on account of business from verticals like Government, Telecom and BFSI.

Your Company also gained revenue opportunities due to new brand relationship with vendors like Oracle & Dell/EMC.

financial review

Consolidated Financial Performance

The consolidated financials of the Company and its subsidiaries ("The Group") have been in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Companies Act, 2013 ("the Act") read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time.

The consolidated financial statements are presented in Indian Rupees (?) which is the functional or presentation currency. The financial information presented in Indian Rupees has been rounded off to the nearest Crore unless otherwise indicated.

Segment-wise Performance

The Company has identified "India" and "Overseas" as operating segments, in accordance with Ind AS 108. The reported operating segments:

• Engage in business activities from which the Group earns revenues and incurs expenses.

• Have their operating results regularly reviewed by the entitys

chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

• Have discrete financial information available

Analysis of the Consolidated Financial Performance

The Financial year 2019-20 has been good despite the challenges faced by the Company. In March 2020, the World Health Organization declared the COVID-19 to be a pandemic. Your Company has adopted measures to curb the spread of infection in order to protect the health of its employees and ensure business continuity with minimal disruption. In view of the pandemic relating to COVID-19, your Company has considered internal and external information and has performed an analysis based on current estimates while assessing the recoverability of assets including, trade receivables, inventories and other current / non-current assets (net of provisions established) for any possible impact on the consolidated financial statements. Your Company has also assessed the impact of this situation on its capital and financial resources, profitability, liquidity position, internal financial controls etc., and is of the view that based on its present assessment; this situation does not materially impact these consolidated financial statements of the Group.

Your Company will continue to closely monitor any material changes to future economic conditions and is hopeful of coming out of the challenge successfully.

Apart from COVID-19, there were also challenges due to market environment in the India segment and geopolitical/ currency-related challenges in the overseas segment. There was a depreciation in a few currencies against US $ especially in Turkish lira during the financial year. Despite all these challenges, your company grew both its revenue and profits compared to the previous financial year.


Revenue crossed 50,000 Crore during the financial year 2019-20 in spite of the COVID-19 impact and

subdued performance by ProConnect. Consolidated revenue grew by 10.6% during the financial year 2019-20. All business verticals registered growth.

IT business grew by 1.8%, mobility business grew by 26.5% and services business grew by 9.4%.

During the year, India business grew its revenue by 10.3% and overseas business by 10.7%.

Gross Margin

Gross margin grew by 2.8% (5.6% of revenue) during the financial year 2019-20 over the financial year 201819 (6.0% of revenue). Reduction in consolidated gross margin percentage is on account of a lower gross margin percentage from the India segment. India segment gross margin percentage reduced to 6.4% in the financial year 2019-20 from 7.2% due to lower contribution by ProConnect in the financial year 2019-20 compared to the previous financial year. ProConnect gross margin reduced due to loss of contracts in subsidiary companies and loss of revenue due to the COVID-19 impact.


The consolidated overheads reduced by 1.7% in the financial year 2019-20 in spite of revenue growth of 10.6% and an increase in the average exchange rate of US $ by 2%. The reduction in cost was possible due to various cost control initiatives implemented by the company.

Employee Costs

Employee cost increased by 8.2% during the financial year 2019-20 due to:

• Increase in the average exchange rate of US $ by 2%.

• Acquisition of Auroma in the India segment.

• Increment to the employees across geographies.

Other Expenses

Other expenses reduced by 90.1 Crores in the financial year 2019-20 in spite of the increase in the average exchange rate of US $ by 2% and writeoff of 32.6 Crores of advances paid to a service provider, in India segment.

The reduction in other expenses is due to the ensuing reasons:

• Reclassification of rent cost as depreciation of leasehold asset and interest cost as per Ind AS 116, the impact of which is 72.6 Crores.

• Decrease in sales promotion expenses in India Segment due to change in arrangement with certain vendors, the impact of which is 97.6 Crores

• Lower forex loss in overseas segment as compared to the previous year, the impact of which is 18.6 Crores


EBITDA grew by 11.4% during the financial year 2019-20 with a CAGR of 7.1% over the past 5 years. EBITDA growth is higher than the gross margin growth primarily on account of reclassification of rent cost as per Ind AS 116. EBITDA growth without Ind AS impact for the financial year 2019-20 is 3.8%. Reduction in EBITDA is due to reduction in gross margin by 0.8% and write-off of advances in India segment.

Finance Costs

Finance costs increased by 14.9 Crores during the financial year 2019-20 primarily due to reclassification of rent cost as interest cost per Ind AS 116, the impact of which is 20.6 Crores.

Sans the impact of ind AS 116, finance cost reduced due to reduction in average working capital utilization and lower interest rates in the India segment. Working capital days as of balance sheet date reduced significantly by 16 days in India segment, 1 day in overseas segment and 6 days at consolidated level.

Profit before tax (PBT)

PBT grew by 11.1% during the financial year 2019-20 with a CAGR of 4.5% over the past 5 years.

Strong growth in PBT in spite of moderate growth in EBITDA (3.8% without the impact of Ind AS 116) is primarily due to impairment loss of 71.1 Crores taken during the financial year 2018-19 in the books of Redington Gulf FZE (RGF). Redington Gulf FZE (RGF) carried out an impairment exercise of its investment in its subsidiary at Turkey, Arena Bilgisayar Sanayi Ve Ticaret

A.S (Arena) due to the deteriorating economic situation in Turkey. Turkey has delivered growth both in revenue and profits during the financial year 2019-20.

Impairment losses recognized during the financial year 2019-20 towards investments in India and overseas is 4.7 Crores

PBT grew by a modest 0.4% during the financial year 2019-20 without considering the above impairment losses.


PAT grew by 1.5% during the financial year 2019-20 with a CAGR of 5.9% over the past 5 years. PAT grew at a higher percentage than PBT (0.4% without considering one-time impairment loss) due to the revised lower taxation rate in India segment.


Cash flow

Operating activity

Cash generated from the operation during the financial year, 2019-20 was 965.7 Crores. Working capital was well managed throughout the year in both in India and in Overseas Segment, resulting in positive cash flow from operation.

Investing activity

Cash from investment activities was negative at 57.5 Crores during the financial year 2019-20 largely due to investment in SAP during the year.

Financing activity

Cash flow from financing activity was positive at 443.3 Crores despite payment 352.9 Crores of dividend.


Return on capital employed reduced in the financial year 2019-20 due to lower EBIT owing to onetime write-off in India segment and losses owing to COVID-19.

ROE (Return on Networth)

Return on Average Equity has marginally dropped, due to lesser earnings growth in the current year. Lower growth in earnings is majorly due to one-time write off during the year and COVID-19.

Book Value per share

Book value increased by 10.5 due to higher EPS of 13.2 per share, despite higher dividend payment in the financial year 2019-20.

Key Ratios

Particulars FY 2019-20 FY 2018-19
ROCE (Net of cash) (%) * 19.3 19
ROCE (Gross) (%) * 14.4 16.5
Return on Average Equity (%) ** 12.6 13.7
Book Value/ Share (in ) 110.3 99.8
EPS (in ) 13.2 12.8
Interest Cover (Times) 4.2 4.4
Gross Debt : Equity (Times) *** 0.5 0.3
Net Debt : Equity (Times) *** 0.03 0.1

* ROCE represents return on average capital employed. Goodwill has been excluded and Capital reserve has been included for computation of ROCE.

**ROE represents the return on average equity. Goodwill has been excluded and Capital reserve has been included for computation of ROE.

*** Equity for computation of Debt: Equity represents equity attributable to the shareholders of the Company and Non-controlling interest. Goodwill has been excluded and Capital reserve has been included for computation of Debt: Equity.


EPS increased in the financial year 2019-20 due to the delivery of profit growth at consolidated level.

Standalone Financial Performance


Revenue grew by 12.4% during the financial year 2019-20 with a CAGR of 9.5% for 5 years. While the Company performed well during the year, it was mainly driven by mobility business which grew strongly by 51%. Revenue grew despite the loss of few days in April 2019, on account of implementation of SAP and 9 to 11 days in March 2020 on account of lockdown imposed by the Indian Government due to COVID - 19 pandemic.

*De-grew due to a reduction in selling price on account of introduction of GST.

Other income grew by 542% during the financial year 2019-20 on account of dividend received from subsidiary companies.

Gross Margin

Gross margin increased from 5.0% to 6.0% during the financial year 201920 on account of dividend income of 350.4 Crores received from subsidiaries which contributed to


Gross margin from business dropped by 0.21% due to:

• Change in sales mix.

• Change in the arrangement with certain vendors where sales promotion expenses were reimbursed as expenses which were earlier earned as gross margin


Employee benefit expense

Employee cost increased by 3.9% during the financial year 2019-20 due to

• Increase in compensation and incentive to employees representing 2.9%.

• Increase in actuarial valuation for employee benefits representing 1.0%.

The Company continued its strategy of exercising strict caution on its headcount in the Core business while continuing to invest in new-age business verticals.

Other expenses

Other expenses decreased by 33.5% during the financial year 2019-20 due to:

• Decrease in sales promotion expenses by 26%. Certain vendors changed the arrangement to reimburse sales promotion expenses which were earlier earned as gross margin.

• Implementation of various cost-saving measures including consolidation of warehouses.

Several cost measures were initiated and the expenses were judiciously spent to improve operational leverage, which aided in reducing the overall expenses during the financial year 2019-20.


EBITDA grew by 19.2% during the financial year 2019-20 excluding dividend income from subsidiaries. EBITDA growth is higher than the revenue growth due to:

• Growth in gross margin as adjusted for change in vendor arrangement for sales promotion expenses.

• Reduction in other expenses due to implementation of various cost saving initiatives.

Finance Costs

Finance costs decreased by 13.8%, due to:

• Decrease in interest rates which contributed to a decrease of 8%.

• Reduction in working capital (leading to a reduction in debt)

which contributed to a decrease of 5%.

Interest cover ratio increased to 3.6 times during the financial year 2019-20 as against 2.7 times for the previous financial year due to a decrease in interest cost and higher profits.

Profit before Tax (PBT)

Excluding dividend income from subsidiaries, PBT grew by 33% during the financial year 2019-20. Higher growth in PBT as compared to growth in revenue is due to:

• Higher growth in EBITDA as compared to revenue growth.

• Decrease in interest cost despite growth in revenue

Profit after Tax (PAT)

Profit after tax grew excluding dividend received by 47.1% during the financial year 2019-20 due to:

• Higher growth in PBT as compared to revenue growth.

• Change in effective tax rate from 32.6% to 21.8%.

Cash Flow Statement

Working capital was well controlled during the financial year 2019-20 which resulted in positive cash from operation of 239.7 Crores. Working capital in the business reduced even with revenue growth of 12.4%.

Cash flow from investment activity was 348.6 Crores for the financial year 2019-20, due to dividend received from subsidiaries.

Funds Employed

Shareholder funds increased from 1,603.9 Crores to 1,801.8 Crores as on March 31,2020, on account of profit after tax of 489.6 Crores and the dividend paid amounting to 295.70 Crores.

Increase in gross borrowing to 1,172.3 Crores from 830.6 Crores is on account of higher cash reserve of 617.3 Crores as on March 31,2020. Cash reserve had to be maintained to meet any contingency that may arise due to COVID - 19 pandemic.

Net Debt as on March 31,2020 was 555.1 Crores compared to 709.4 Crores as on March 31,2019.

Net Debt equity ratio as on March 31, 2020 was 0.31 times as compared to

0.44 times as on March 31,2019. The decrease in the debt-equity ratio is on account of a reduction in working capital and increase equity on account of higher profit after tax.

The Company is favorably poised to capture any upswing in the business opportunity in the ensuing years, without any need for additional equity capital.


Return on Capital Employed has increased from 19.2% to 21.1%, due to increase in earnings in the financial year 2019-20.

ROE (Return on Networth)

Return on Average Equity has increased from 14.6% to 24.6%, due to increase in earnings in the financial year 2019-20.


The Company paid interim dividends during the financial year. A first interim dividend of 1.50/- per share (75% of the face value of the shares) was paid during the third quarter and a second interim dividend of 2.80/- per share (140% of the face value of the shares) was paid during the fourth quarter.

Book value and Earnings per Share

The book value per share increases from 41.2/- per share to 46.3/- per share, mainly on account of growth in standalone profits and dividend income during the year.

The earnings per share increased by 228% for the year ended March 31, 2020 to 12.58 per share as compared to 3.84 per share during the previous financial year. The increase is on account of increase in standalone

risk management

Operating in the field of technology distribution across several countries and geographies, Redington India identifies its primary risks to fall under three broad categories namely inventory risk, receivable risk and currency risk. The company deploys adequate mitigation measures and management oversight to safeguard stakeholders value at all times.

Risks Mitigation Measures Business Outcome
Inventory Risk Stock Rotation Annual Inventory provisioning
Price protection at 0.04% of Revenue over the last 10 years
Marketing Support
Prudent Provisioning
Receivables Post-dated Cheques Annual AR Provisioning at
Risk Credit Insurance on Accounts Receivables 0.10% of Revenue over the last 10 years
Performance linked pay-out only on collection
Strict internal parameters for overdue and bad debts
Currency Risk Hedging all exposures Consistent business
India: ~84% of purchases in rupee dominated invoices, Forward cover for the rest with premium becoming a part of COGS performance despite fluctuating currencies
MEA: Currencies pegged in US $ and US $ denominated transactions
MEA: Effective forward controls and local currency borrowings

The Company is developing a robust module to identify, assess, mitigate & monitor risk elements at the Enterprise level. The Enterprise Risks are classified into three broad categories namely, Business Risk, Financial Risk and Operational Risk. The model is being built to strengthen our core philosophy of de-risking the continuum that long formed the bedrock of Redingtons business. The Companys diversified market presence, comprehensive product portfolio with three layers of core businesses, emerging businesses and adjacencies, and extensive Vendor contracts help it de-risk itself in areas of geographical risks, product & technology obsolescence, overdependence on a particular vendor and product/ solution segment, to a great extent.

internal control systems

Your Company has put in place adequate mechanisms of internal controls of checks and balances that are commensurate with the nature and size of its business. A detailed presentation on the Companys inter control is made in Annexure A of the Boards Report, forming part of this annual report.

human resource development

For well over two and a half decades, your Companys record of consistent growth can only be attributed to the highly spirited, committed and competitive talent pool it is privileged to enjoy. It is the collective resolve and strength of your Companys Human Capital, which has been instrumental to it successfully delivering on its continuous value creation strategy.

The total number of employees in the Company stood at 1,561 as on March 31,2020. During FY 19-20, your Company accelerated its Human Capital enrichment program through increased digitization, intensified training and development and a brought in a sharper focus on building skills & capabilities in Emerging Technologies. Your Companys objective in its Human Capital Management is to ensure that its talent pool is "future-"ready" while also infusing the best accessible fresh talent.

The adoption of digital technology and processes across functions was intensified during fiscal 20. Continuing digitization is aimed at making processes seamless, elevating user experience and HR functions more accessible and accountable. A digitized Performance Management System monitors and measures performance & productivity indices and guides the Rewards & Recognition Program.

Your Company ensures that it is continuously in compliance with necessary statutory norms, as

mandated by the local laws and the vendor contracts. Interactive video modules of some of the compliance norms are available to employees and are re-iterated on a regular basis, to ingrain the importance of the Companys adherence to Compliance Obligations.

To address the health challenges posed by COVID-19, your Company voluntarily declared 100% work from home (WFH) even before the formal lockdown was announced by the Government. Your Company took all possible steps to reassure its employees about their job continuity. Team leaders remained in constant touch with their team members, keeping track of their well-being and morale. Your Company ensured all possible support to its employees in the event of any emergency.

Your Company will continue to maintain its focus on Human Capital Management & Development, as it considers its people resources central to meeting its business objectives.

business outlook

The impact of COVID-19 on the global economic landscape is expected to be temporary yet widespread and substantial. The pace of the recovery is likely to vary across the geographies and supply chains may remain disrupted for some time to come.

Going by the immediate response to the lockdown, where WFH necessitated the global ICT infrastructure to remain robust and infallible. Some technology products and solutions have transcended from the discretionary and aspiration brackets to now become mandatory requirements. As the world progressively unlocks over the next couple of months, homes will emerge as quasi-workplaces, quasi-schools, quasi-convention centers, virtually positioning ICT products & technologies into the "essential" category.

In the medium-term global ICT spends are likely to contract. Dual constraints inflicted by Lockdowns - supply-side and demand-side - are likely to weigh heavily on the actual numbers.

Yet, fundamentally, the ICT industry will act as an enabler and a catalyst to help the world adapt quickly to the changed circumstances, allowing businesses and social activities to be conducted in different forms. This will only strengthen its penetration into every aspect of socio-economic milieu. investments in Connected Living, Cyber Security, Video Calling / Conferencing, Digital and Enhanced User Experience would ensure recovery of ICT spends sooner, rather than later.

From opportunity standpoint, there are abundant drivers which will help resuscitate the demand growth for your Companys bouquet of Technology Solutions, Services Companys bouquet and Products.

India Business Growth Drivers

• Indias march towards becoming a trillion-dollar economy by 2025

• Rapidly growing digital economy, which is likely to contribute 18-23% of overall economic activity by 2025, with more than half coming from demands due to new and emerging digital ecosystems

• COVID 19 impact - Companies are likely to prioritize investments in Security, Collaboration, Mobility & Cloud

• The smartphone market in India is expected to expand at a CAGR of ~14.6% between FY 2018 and 2023

• Enterprise Networking to become a $3.6 billion market by 2024

• Indias public cloud market could reach $8.0 billion by 2023

• Indias overall software market is estimated to grow at a CAGR of 14.1% between FY 2018 and 2023

• IT Services market will grow at a CAGR of 8.6% between 2019-2023 to reach $14.0 billion by the end of 2023

• The Cyber security market is expected at a CAGR of 15.6% to $3.1 billion by 2022

• SMB spending on IT hardware, software, and services, including business services, is expected to reach $584.0 billion in 2021 at a CAGR of 7%.

• In FY 201 8, Indias Digital Transformation market generated

a revenue of $24.5 billion. It is projected to advance at a CAGR of 74.7% during the period 2019 - 2024.

Overseas Business Growth Drivers

• Government ICT spending in MEA to reach $15 billion by 2023

• Consumer IT spending in META will total $43 billion in 2021, with mobile phones contributing 80% of the value

• Enterprise spending on AI in the Middle East and Africa is expected to grow at a CAGR of 22.0% to reach $530 million in 2022

• IoT spending in the MEA region will grow 15.9% year on year in 2019 and reach $18 billion by 2023

• The Middle East and Africa Cybersecurity market is predicted to expand at a CAGR of 11.9%, and is expected to be valued at $23 billion by 2023

• Digital Transformation spending in META set to top $38 billion by 2021

• The Cloud market in the Middle East and Africa regions are projected to grow 24.0% a year on average, reaching $5 billion in 2022

Your Company is very well positioned to take advantage of all the growth opportunities that the evolving socioeconomic landscape has to offer. Its investments in technology, skills and resources ensures that your Company will emerge stronger from the current challenges and will continue its growth momentum.

These are unprecedented times and the challenges faced by countries, organizations and individuals are grave in nature. Your Companys talented and committed Leadership Team is making determined efforts to ensure that Redington seizes all possible business opportunities to maintain its performance record and continues to deliver shareholder value.