Economic Overview Global Economic Review
In 2023, the global economy exhibited unexpected resilience despite facing significant challenges, including concerns about stagflation and recession. Economic activity remained robust, with inflation rates descending from their mid-2022 peak. This resilience was bolstered by higher-than-anticipated government spending and household consumption, along with an unforeseen expansion in labour force participation. Central banks across the globe implemented interest rate hikes to restore price stability, while adjustments in mortgage and housing markets mitigated the immediate impact of these rate hikes.
The global growth rate for 2023 stood at a steady 3.2%. Although modest by historical standards, this rate reflects the resilience of the global economy amidst high borrowing costs, reduced fiscal support, and geopolitical tensions, including the Russia-Ukraine War and the Red Sea Crisis.
Despite expectations of declining inflation, it remained a concern, particularly in emerging markets, where economies are predicted to return to inflation targets more slowly than their advanced counterparts.
Global Outlook
Projections from the International Monetary Fund (IMF) suggest that the global economy is poised to expand by 3.2% in both 2024 and 2025. Building on the resilience shown in 2023, there is potential for gradual improvement and a return to a more robust growth trajectory. Inflation is expected to decline gradually, especially in advanced economies, as central banks begin to ease policies. Furthermore, increased multilateral cooperation to tackle issues like climate change and geo-economic fragmentation could foster shared prosperity. By collaborating to facilitate the transition to green energy and promoting inclusive growth, nations can contribute to a more resilient and equitable global economy.
World economic outlook growth projections (Real GDP, annual percentage change):
World output | Estimate | Projections | |
2023 | 2024 | 2025 | |
World Output | 3.2 | 3.2 | 3.2 |
Advanced Economies | 1.6 | 1.7 | 1.8 |
United States | 2.5 | 2.7 | 1.9 |
Euro area | 0.4 | 0.8 | 1.5 |
Emerging Markets and Developing Economies | 4.3 | 4.2 | 4.2 |
Emerging and Developing Asia | 5.6 | 5.2 | 4.9 |
China | 5.2 | 4.6 | 4.1 |
India | 7.8 | 6.8 | 6.5 |
Source: World Economic Outlook April 2024, IMF
Domestic Indian Economic Review
The Indian economy expanded impressively by 7.6% during FY24, driven by robustness across various sectors. Consumer confidence surged, as indicated by the RBIs household survey, reflecting growing household optimism. Enterprise surveys supported this sentiment, highlighting favourable business conditions, increased production levels, and improved employment prospects. The economy demonstrated vigorous activity, supported by strong GDP growth and corroborated by high-frequency indicators such as e-way bills, toll collections, and automobile sales.
The labour market showed improvement, with the unemployment rate declining to 7.6% in March 2024. The organised sector, in particular, saw increased job creation, enhancing employment opportunities across the country. Agricultural activities also contributed significantly to rural employment, particularly with the onset of the rabi harvest, which led to decreased demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme
(MGNREGS). Fiscal management remained prudent, with the gross fiscal deficit of the Union government within estimates and direct tax collections growing by 21.6% Y-o-Y.
Inflation moderated throughout the fiscal year, with both food and core inflation easing. While rural inflation experienced a marginal uptick, urban inflation moderated, with the all-India CPI stabilising at 4.9% in March 2024.
Domestic Outlook
The Reserve Bank maintained its GDP growth forecast at 7.0% for FY25. India is on the course to become the worlds third-largest economy by 2030, driven by strong domestic consumption, visible structural demand, and a robust corporate and banking sector. The countrys recovery is powered by shifts to renewable energy, improved trade policies, significant infrastructure investments, and digitalisation. With comprehensive strategic reforms, India is poised for sustained economic growth.
Information and Communication Technology (ICT)
Industry Overview
Global
Globally, Gartner predicts that IT spending will see a significant increase of 6.8% in 2024, reaching a total of $5 Trillion. Despite a slight reduction from previous forecasts, this growth underscores a vital industry trend. While the focus on generative AI (GenAI) captured considerable attention in 2023, it is not expected to substantially impact IT spending immediately. Instead, traditional factors such as profitability and labour dynamics will continue to drive investment decisions, with GenAI likely influencing spending patterns more significantly in the long term. A key development for 2024 is the projected shift in IT services spending, expected to surpass spending on communications services for the first time, reflecting enterprises growing emphasis on efficiency and optimisation amid ongoing economic uncertainties. While consumer spending on devices and communications services has stabilized, the demand for software and services continues to grow, driven by enterprises leveraging technology for revenue generation and operational enhancements.
Worldwide IT Spending Forecast (Millions of U.S. Dollars)
Category | 2023 Spending | 2023 Growth (%) | 2024 Spending | 2024 Growth (%) |
Data Centre Systems | 243,063 | 7.1 | 261,332 | 7.5 |
Devices | 699,791 | -8.7 | 732,287 | 4.6 |
Software | 913,334 | 12.4 | 1,029,421 | 12.7 |
IT Services | 1,381,832 | 5.8 | 1,501,365 | 8.7 |
Communications Services | 1,440,827 | 1.5 | 1,473,314 | 2.3 |
Overall IT | 4,678,847 | 3.3 | 4,997,718 | 6.8 |
Source: Gartner ( httDs://www.aartner.com/en/newsroom/Dress-releases/01-17-2024-aartner-forecasts-worldwide-it-sDendina-to-arow-six-Doint-eiaht-Dercent- in-2024#:~:text=SDendina%20on%20IT%20Services%20to.auarters%20forecast%20of%208%25%20arowth.)
Emerging Trends in the Global IT industry
MENA
According to the latest forecast by Gartner, Inc., IT spending in the Middle East and North Africa (MENA) region will witness an increase of 5.2% from 2023 - bringing the total forecast to US$193.7 Billion in 2024.
MENA IT services spending are also expected to record an increase of 9.6% in 2024. The primary focus for CIOs in the MENA region is on everyday lower cost use cases, and are expected to increase cloud services spending. Security continues to remain a key focus area. This includes purchases of products, services, and tools through the XaaS (Anything as a Service) consumption model.
MENA IT Spending Forecast, 2023-2024
(Millions of US$)
Category | 2023 Spending | 2023 Growth (%) | 2024 Spending | 2024 Growth (%) |
Data Centre Systems | 4,826 | 5.5 | 4,809 | (0.3) |
Devices | 28,379 | (1.8) | 27,092 | (4.5) |
Software | 13,555 | 8.0 | 15,229 | 12.3 |
IT Services | 17,338 | 4.6 | 19,016 | 9.6 |
Communications Services | 120,026 | 9.0 | 127,584 | 6.3 |
Overall IT | 184,124 | 6.6 | 193,731 | 5 |
INDIA
For India, Gartners latest forecast predicts significant growth in IT spending for 2024, with a projected increase of 10.7% from the previous year, reaching $124.6 Billion. This marks a return to positive growth following a decline in IT spending in 2023. Key drivers include investments in artificial intelligence (AI) and generative AI (GenAI), expected to increasingly influence IT spending by 2025. Indian organisations are likely to invest in AI and automation to enhance operational efficiency and address the ongoing shortage of IT talent.
The adoption of digital technologies such as AI, machine learning, and secure access service edge (SASE) is expected to drive increased spending on software and IT services. The scarcity of internal skills within Indian businesses will further fuel growth in IT services spending in 2024. Software spending is projected to increase by 18.5%, while IT services spending is forecasted to grow by 14.6%. Additionally, device spending is expected to witness a strong resurgence, growing by 10.1% Y-o-Y, driven by Indian consumers.
Category | 2022 Spending | 2022 Growth (%) | 2023 Spending | 2023 Growth (%) | 2024 Spending | 2024 Growth (%) |
Data Center Systems | 3,607 | 18.6 | 3,766 | 4.4 | 4,121 | 9.4 |
Devices | 49,853 | 2.0 | 46,309 | -7.1 | 51,000 | 10.1 |
Software | 13,115 | 15.1 | 14,931 | 13.8 | 17,689 | 18.5 |
IT Services | 21,837 | 13.3 | 23,262 | 6.5 | 26,651 | 14.6 |
Communications Svcs | 24,651 | 0.2 | 24,287 | -1.5 | 25,148 | 3.5 |
Overall IT | 113,063 | 5.5 | 112,554 | -0.5 | 124,609 | 10.7 |
Industry Overview - Global Perspectives
Consumer IT
In 2023, global PC shipments totalled 247 Million units, marking a 13% drop compared to 2022. Despite these challenges, the PC industry exhibited resilience, hinting at a positive future. The market witnessed a better holiday season than the previous year, supported by inventory corrections in earlier quarters. With improving economic conditions, both companies and individuals are expected to resume PC spending after delays. Looking forward to 2024, a surge in PC innovation is anticipated, especially in on-device AI capabilities. It is projected that one in five PCs shipped in 2024 will have AI capabilities, driven by dedicated chipsets like NPUs. The commercial sector is expected to rapidly adopt AI-capable PCs due to benefits in productivity, security, and cost management. Canalys forecasts that by 2027, over 170 Million AI-capable PCs will be shipped, with a majority deployed in commercial settings, accounting for nearly 60% of shipments.
The Evolution of AI Capable PCs
With the advent of AI-capable PCs, we propose a structured framework to categorise and monitor these innovative devices within the market. Initially, this framework establishes a hardware-based definition, necessitating dedicated chipsets or blocks, known as Neural Processing Units (NPUs), to manage on-device AI workloads effectively. As the industry evolves, we anticipate a significant rise in the prevalence of AI-capable PCs, with projections suggesting that nearly one in five PCs shipped in 2024 will be equipped with these capabilities. We expect developers to leverage on-device AI capabilities extensively, leading to the creation of new features and applications designed to maximise the potential of NPUs.
Our vision for the AI-capable PC definition is to adapt and stay relevant with evolving industry trends, such as the integration of mainstream processors with dedicated AI computing capabilities. Additional criteria may include minimum hardware specifications, such as NPU performance metrics and memory requirements, to ensure optimal user experiences for on-device AI tasks.
Moreover, as AI applications become more widespread, we foresee the implementation of a nuanced grading system to assess PCs based on their AI functionalities and capabilities. Future considerations may include the integration of large language models and benchmarking metrics to distinguish PCs that are best suited for specific AI-driven workloads.
Enterprise and Cloud
According to Gartner, Inc.s latest forecast, global end-user spending on public cloud services is expected to surge by 20.4% in 2024, reaching an impressive $678.8 Billion, up from $563.6 Billion the previous year. This substantial growth highlights the critical role that cloud technology plays in contemporary business operations.
A key driver of this accelerated cloud adoption is the deployment of generative AI (GenAI) services, which leverage the vast scale and flexibility of the public cloud infrastructure. However, the successful implementation of GenAI hinges on more than just technical capabilities; it also requires addressing various non-technical considerations such as cost, privacy, sovereignty, and sustainability. Cloud providers that can effectively navigate these challenges are poised to capture significant revenue opportunities as GenAI adoptions continue to rise.
Global end-user spending on public cloud, 2024 (projected).
In 2024, robust growth is anticipated across all segments of the cloud market. Infrastructure-as-a-Service (IaaS) is expected to see the highest end-user spending growth at 26.6%, closely followed by Platform-as-a-Service (PaaS) at 21.5%. This growth underscores the increasing reliance on cloud-based infrastructure and platforms to drive innovation, scalability, and agility in organisations globally.
Worldwide Public Cloud Services End-User Spending Forecast
Cloud Service Category | 2022 | 2023 | 2024 |
Cloud Application Infrastructure Services (PaaS) | 119,579 | 145,320 | 176,493 |
Cloud Application Services (SaaS) | 174,416 | 205,221 | 243,991 |
Cloud Business Process Services (BPaaS) | 61,557 | 66,339 | 72,923 |
Cloud Desktop-as-a-Service (DaaS) | 2,430 | 2,784 | 3,161 |
Cloud System Infrastructure Services (IaaS) | 120,333 | 143,927 | 182,222 |
Total Market | 478,315 | 563,592 | 678,790 |
Mobility
Gartner, Inc. forecasts significant growth and transformative shifts in the smartphone industry, driven by the proliferation of AI capabilities and the introduction of generative AI (GenAI) smartphones. By the end of 2024, worldwide shipments of GenAI smartphones are projected to reach 240 Million units, marking a substantial increase from 29 Million units in 2023.
GenAI smartphones feature advanced hardware and software capabilities that enable seamless integration and efficient execution of AI-driven features and applications. However, despite this growth, GenAI smartphones are not expected to significantly bolster overall smartphone demand until 2027. Consumers are likely to await the development of groundbreaking applications that justify the premium prices associated with these advanced devices.
Industry Overview - Indian Perspectives Consumer IT
In 2023, the India Traditional PC market shipped 13.9 Million units, marking a 6.6% decline Y-o-Y. This downturn was largely due to mixed performances across different PC categories. Desktops saw a modest increase of 6.7% Y-o-Y, while notebooks and workstations recorded declines of 11.1% and 14%, respectively.
Shipments in 2023
A segment-wise breakdown highlights varied trends: the consumer segment experienced a 3.1% drop, driven by tepid demand amid economic uncertainties. The commercial sector, however, faced a sharper decline of 9.7% due to reduced enterprise demand. In contrast, the education and government sectors demonstrated robust growth, with increases of 80.5% and 18% respectively, acting as significant market drivers.
Despite initial challenges post-pandemic, the market showed resilience and adaptability, buoyed by regulatory changes, improved market sentiment, and strategic vendor initiatives. The fourth quarter saw a rebound in both consumer and commercial segments, suggesting a positive trajectory moving forward.
Outlook
Canalys projects substantial growth for the Indian PC market, with a forecast of 14% Y-o-Y growth in 2024, and 15% in 2025. This optimism is underpinned by anticipated strong commercial procurement, driven by digital transformation efforts, remote work adaptations, and pent-up demand following pandemic-related disruptions.
Two key trends are poised to influence the market in 2024. First, the integration of AI is expected to surge, especially as Windows 10 support concludes, driving demand for AI- enabled PCs to boost productivity and efficiency. Additionally, the revised Production Linked Incentive (PLI) scheme for IT hardware aims to boost local PC production, offering consumers a wider range of locally tailored products, thereby enhancing competition and innovation in the sector.
Mobility
In 2023, the Indian smartphone market experienced a nominal 1% Y-o-Y growth, shipping 146 Million units. The year was characterised by contrasting halves: a 10% decline in the first half followed by an 11% growth in the latter. Despite marketing efforts, consumer demand remained subdued, leading to high inventory levels. The average selling price (ASP) hit a record $255, up by 14% Y-o-Y, spurred by greater adoption in the premium segment ($600+) and a significant uptake in 5G smartphones, which now represent 55% of the market.
As 2024 approaches, cautious inventory management is anticipated, with stakeholders needing to address challenges like surplus stock and rising average selling prices, while capitalising on the opportunities in the premium and 5G segments to foster sustainable growth.
India Smartphone Market Share
Outlook
In the coming years, the Indian smartphone market is set to undergo transformative changes, driven by several key trends. OEMs are placing a heightened focus on Colour, Material, and Finish (CMF) to captivate consumers across various price segments. Additionally, advancements in audio-video technologies, such as Dolby Atmos and Dolby Vision, are expected to enhance multimedia experiences, allowing users to enjoy richer audio-visual content and share higher-quality media on platforms like Moj. The integration of GenAI technology will further revolutionise content creation and digital assistants, offering more personalised and intelligent functionalities.
Moreover, foldable smartphones are poised to gain traction within the premium market segment, with shipments anticipated to exceed one Million units in 2024, reflecting a growing preference for innovative smartphone designs.
Cloud
The Indian public cloud services (PCS) market is experiencing rapid growth and evolution, fuelled by a combination of factors including digital transformation initiatives, increasing reliance on cloud-native solutions, and the adoption of
emerging technologies like artificial intelligence (AI). In the first half of 2023, the market generated revenue of $3.8 Billion, with SaaS emerging as the largest segment, followed by IaaS and PaaS solutions. This growth trajectory is expected to continue, with the market projected to reach $17.8 Billion by 2027, growing at a compound annual growth rate (CAGR) of 22.9% between 2022 and 2027.
Key drivers of this growth include enterprises investments in modernising applications, developing cloud-native solutions, and exploring AI-driven technologies. GenAI tools, including chatbots and conversational AI, are gaining traction for use cases such as cost optimisation, application development, and workload testing. Additionally, theres an increasing emphasis on GenAIs potential to enhance cloud security and infrastructure management.
Leading cloud service providers are making significant investments in India, underscoring their confidence in the potential of the market. Traditional segments like IaaS, collaborative applications, CRM, and ERM continue to drive growth, while there is also a surge in demand for AI and data management offerings, reflecting evolving customer needs in cloud services.
Digital and 3D printing
The Indian Digital and 3D printing market is set for impressive expansion, projected to reach $1.79 Billion by 2030, with a robust compound annual growth rate (CAGR) of 28.1% from 2023 to 2030.
Several drivers are propelling the growth of this market in India. The availability of a diverse range of materials suitable for additive manufacturing, combined with the presence of 3D printing service providers and manufacturing bureaus, offers easy access to additive manufacturing capabilities. Furthermore, a thriving additive manufacturing startup ecosystem is driving innovation and providing localised solutions. Advances in printer capabilities, materials, and post-processing techniques, further bolster the industry growth.
Despite these promising prospects, the Indian digital and 3D printing market faces challenges. The relatively high costs associated with additive manufacturing technologies, including printers, materials, and post-processing equipment, may restrict accessibility and adoption, especially for small and medium-sized enterprises.
Additive manufacturing is gaining traction across various industries in India, including automotive, aerospace, defence,
healthcare, consumer electronics, and power and energy. The technology is increasingly used for prototyping, tooling, and producing functional parts, highlighting its versatility and broad applicability.
In recognition of the potential of additive manufacturing, the Indian government has introduced the "National Strategy for Additive Manufacturing". This strategy aims to create a supportive environment for the development and deployment of AM technologies, with a vision to position India as a global hub for additive manufacturing. The government targets capturing a 5% share of the global AM market by 2025, demonstrating its commitment to fostering growth and innovation in this sector.
Solar Market
The Indian solar energy market is on an impressive growth trajectory, fuelled by ambitious targets, favourable government policies, and a growing environmental consciousness. It is projected to soar to around $238 Billion by 2030, exhibiting a staggering compound annual growth rate (CAGR) of approximately 40% between 2023 and 2032.
We are witnessing a significant shift in Indias energy landscape towards renewable, low-carbon sources, driven
by the imperative to meet our soaring energy demands sustainably. The nations commitment to achieving net zero carbon emissions by 2070, along with the target to fulfil 50% of electricity needs from renewable sources by 2030, underscores the pivotal role of solar energy in this transition.
Several factors contribute to the robust growth of our solar energy market. Favourable government policies, including subsidies, tax incentives, and renewable energy targets, stimulate investment and deployment in the sector. Additionally, technological advancements, declining costs of solar equipment, and increasing investor interest further propel market expansion.
Outlook
The projected growth trajectory of Indias solar energy market reflects the immense opportunities that lie ahead. As we continue our transition towards renewable energy, stakeholders in the solar sector can expect favourable market conditions, supported by government initiatives, increasing investments, and a growing awareness of the importance of sustainability. As the nation strives to meet its energy needs while addressing climate change concerns, the solar sector is poised for significant growth and will play a pivotal role in shaping our energy future.
Standalone financial performance
The standalone financial statements of the Group have been prepared 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), as amended from time to time.
The standalone financial statements are presented in Indian Rupees (H). Financial information has been rounded off to the nearest Crores unless otherwise indicated.
The financial year 2023-24 has been a year of normalisation post covid and growth. Robust growth in both revenue and profitability is due to favourable market conditions in mobility and enterprise segment, faster ramp up post supply constraint and covid, robust collections, and strong relationships with the partners.
This being an analysis of the standalone financial statements, dividend income from subsidiaries and gain on sale of Automated Distribution Centre (ADC) has not been reckoned since its a one-time income.
Revenue
Revenue grew by 16.7% during the financial year 2023-24 with a CAGR of 17.2% for 5 years.
The growth was largely driven by enterprise, mobility and cloud segment which grew by 24%, 43% and 40% due to favourable market conditions and new product launches.
Consumer segment de-grew by 4% due to reduced demand.
Other income
Other income grew by 102.5%, due to income from short term investments, bank deposits, interest on income tax refund and recovery from bad debts previously written off.
Gross Margin
Gross margin remained constant at 4.2% due to growth in enterprise and cloud segment offset by growth in mobility segment.
Expenses
Employee benefit expenses
Employee cost increased by 9.5% and was at 0.6% of revenue (0.7% in previous year) for the financial year 2023-24.
Reduction in cost as a percentage of revenue was achieved by exercising caution on increase in employee cost and headcount. Increase in employee cost is primarily on account of:
Increments awarded during the normal course of business.
Capacity building in cloud and mobility segments.
Other expenses
Other expenses increased by 7.9% during the financial year 2023-24. This increase is lower than revenue growth of 16.7%. The increase is on account of:
Variable cost such as warehousing, freight & insurance which increased by 6% over previous year which is lower than corresponding increase in revenue (16.7%). This is primarily due to reduction in insurance costs.
Investment initiatives which increased by 14.6% over previous year towards automation and digitisation.
Factoring and bank charges which increased by 48% over previous year due to non-recourse factoring and LC discounting charges to mitigate receivable risk.
Company continues to perform periodic reviews and follow effective cost control measures including hybrid work policy to minimise the cost. These initiatives reduced other
expenses by 0.1% as a ratio to revenue. Notable cost savings are as below:
Sales promotion expense by 32% over previous year and these are majorly compensated by the vendors and hence does not affect the profitability of the Company.
Provision for Bad & Doubtful debts by 45% over previous year. Strict control on credit & receivables resulted in lower provisioning under "Expected Credit Loss" method.
Other expenses
EBITDA
EBITDA grew by 19.8% as against revenue growth of 16.7%. More than proportionate EBITDA growth is attributed to proportionately lower spend in employee benefit and other expenses.
The EBITDA CAGR over a 5-year period is healthy at 21.2% as against revenue CAGR of 17.2% which signifies effective leverage of expenses.
Finance costs
Finance costs substantially increased by H101.8 Crores on account of increase in interest rates and average working capital. Average interest rates increased from 6.8% to 7.4% in FY24 due to increase in repo rates by the Reserve Bank of India, however, increase in interest rate is lower than the increase in repo rate. Increase in average working capital is due to:
Increase in revenue by 16.7%.
Annualised impact of normalisation in market situation where supplies started chasing demand.
Stocking of inventory as per agreed terms and normalisation of credit terms to partners.
Average working capital days increased by 9 days in financial year 2024.
Interest cover ratio is at 5.7 times during the financial year 2023-24 as against 11.1 times during the previous financial year, due to higher interest cost driven by annualised impact of normalisation of working capital and increase in interest rate.
The closing borrowings chart is depicted below
Profit before tax (PBT)
PBT grew by 8.2% as against 16.7% in revenue and 19.8% in EBITDA. Less than proportionate growth in PBT is due substantial increase in finance cost, as explained above.
Profit After Tax (PAT)
PAT grew by 8.0% in line with PBT growth of 8.2%.
PAT
CAGR 26.1% (1 in Crores)
Cash flow statement Operating activity
Cash generated from operating activity during the financial year 2023-24 was H 271.9 Crores on account of profits and working capital reduction of 1 day in the financial year 2024.
(2,08/)
Financing activity
The Company had repaid the borrowings deployed in operating activities which resulted in out-flows of H 791.37 Crores under financing activity for the year.
Shareholders Funds
Shareholder funds increased from H 3,106.4 Crores as at March 31, 2023, to H 3,624.3 Crores as at March 31, 2024, on account of profit after tax of H 1081.2 Crores (including dividend income and gain on sale of ADC) earned during the year.
Dividend
The Company has been consistently declaring dividend over the years. The Board of Directors at their meeting held on June 4, 2024, has recommended a dividend of H 6.2 per equity share (310 % of face value) subject to the approval of shareholders in the ensuing Annual General Meeting.
Book value per share
The book value per share increased to H 46.4 from H 39.8, due to growth in profits.
Earnings per share
The Earnings Per Share (EPS) grew by 0.8% for the year ended March 31,2024. EPS increased to H 13.83 from H 13.72 due to growth in profits including dividend income and gain on sale of ADC.
Earnings per share
Particulars | FY 2023-24 | FY 2022-23 |
Return on average capital employed (Gross) (%) | 25.4 | 29.3 |
Return on average capital employed (Net of cash) (%) | 26.4 | 35.8 |
Return on average equity (%) | 17.7 | 21.8 |
Debtor turnover ratio (no. of times) | 6.7 | 7.5 |
Inventory turnover ratio (no. of times) | 15.8 | 15.5 |
Creditor turnover ratio (no. of times) | 8.3 | 7.3 |
Current ratio (no. of times) | 1.4 | 1.3 |
Net debt equity ratio (no. of times) | 0.5 | 0.6 |
Operating profit margin (%) | 2.6 | 2.4 |
Net profit margin (%) | 1.6 | 1.6 |
Consolidated Financial Performance
The consolidated financial statements of the Group have been prepared 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, as amended from time to time.
The consolidated financial statements are presented in Indian Rupees (H) which is the functional or presentation currency. Financial information has been rounded off to the nearest Crores unless otherwise indicated.
Segment wise Performance
The Group has identified "SISA (Singapore, India & South Asia)" and "ROW"( (Rest of the World) 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 on the Consolidated Financial Performance
In the financial year 2023-24, the Group registered growth in revenue in all the major markets due to favourable market condition and strong relationships with the partners.
Revenue
Consolidated revenue grew by 12.7% during the financial year 2023-24 with a CAGR of 14% for 5 years. Revenue growth at constant exchange rate (not attributable to depreciation in Indian Rupee) was at 10.8%.
The Group registered a double-digit growth in this financial year due to strong growth of 23% in Mobility ,36% in Cloud and 11% in Enterprise, suggestive of market potential in these segments. Consumer segment grew by 4% due to reduced demand post-covid period. Services business registered moderate growth of 12%.
During the year, revenue in both the geographies of SISA and ROW registered a growth of 14.7% and 10.9% respectively. ROW revenue growth at constant exchange rate is 7.5%.
Gross Margin
Gross margin grew by 9.1% (5.9% of revenue) during the financial year 2023-24 over financial year 2022-23 (6.1% of revenue). Gross margin at constant exchange rate grew by 7% (5.9% of revenue).
Gross margin % dropped in both SISA & ROW segment. SISA segment gross margin dropped to 5.2% over previous financial year 2022-23 (5.5%) & ROW segment gross margin dropped to 6.6% over previous financial year (6.7%) The drop is primarily due to revenue mix and competitive pricing due to normalcy of supply constraints.
Overheads
The consolidated overheads increased by 21.2% in the financial year 2023-24. Overheads increase at constant exchange rate is 18.6%.
Employee Costs
Employee cost increased by 10.4% (7.9% at constant exchange rate) and was at 1.4% of revenue (1.5% in previous year) during the financial year 2023-24.
Reduction in cost as a percentage of revenue was achieved by exercising caution on increase in employee cost and headcount.
The increase at the group level is due to:
Capacity building in mobility & cloud segments
Increments awarded during the normal course of business
Other Expenses
Other expenses increased by 30.3% in the financial year
2023-24 (27.8% at constant exchange rate) with a CAGR of
11.5% vis a viz Revenue CAGR of 14%.
Increase is on account of:
Factoring & Bank charges increased by 96% over previous year due to non-recourse receivable factoring majorly in Turkey.
Investment Initiatives increased by 23% over previous year towards automation and digitisation.
Sales promotion expenses increased by 85% largely compensated by the vendors and hence does not affect the profitability of the Group.
Miscellaneous expenses increased by 102% majorly on account of new fintech initiative carried out in Uganda & Kenya which is built into the pricing to the customers and hence does not affect the profitability of the Group.
EBITDA
EBITDA de-grew by 5.3% (6.7% at constant exchange rate) compared to revenue growth of 14% (10.8% at constant exchange rate) during the financial year 2023-24 with a CAGR of 17.4% over the past 5 years. De-growth is primarily due to drop in GM% in certain markets & increase in cost as explained above.
Finance Costs
Finance costs increased by H113.4 Crores on account of increase in working capital and interest rates majorly in India segment. Working capital requirement increased due to:
Increased in revenue by 12.7%.
Normalisation of market post-covid and easing of supply constraint wherein supplies started chasing demand and consequently average working capital days increased to 42 days in financial year 2023-24 from 36 days in previous year.
Stocking of inventory as per agreed terms and normalisation of credit terms to partners.
Finance costs increased by 41.7% (39.5% at constant exchange rate) during the financial year 2023-24
The closing borrowings chart is depicted below
Interest cover ratio is at 5.1 times during the financial year 2023-24 as against 7.7 times during the previous financial year, due to higher finance cost & de-growth in EBITDA as explained above.
Profit before tax (PBT)
PBT de-grew by 14.1% during the financial year (15.3% at constant exchange rate) with a CAGR of 20.4% over the past 5 years. PBT de-growth is on account of reasons explained above.
Other expenses CAGR of 11.5% is lower than revenue CAGR of 14.0% due to operational efficiencies achieved by the Group, resulting in a healthy PBT CAGR of 20.4%.
PAT
PAT de-grew by 12.5% during the financial year 2023-24 (13.8% at constant exchange rate) in line with PBT de-growth of 14.1%.
Cash flow
Free cash flow (post dividend payout) was positive at H163.6 Crores.
Operating activity
Cash generated from operating activity was H1079.4 Crores. Cash was generated by reduction in working capital days (2 days) during the year. Comparative working capital days is given below:
Investing activity
Cash generated from investment activity was H145.2 Crores. Cash generation was primarily from:
Interest from deposits (H83.9 Crores).
Maturity of deposits in ROW segment (H83.2 Crores).
Financing activity
Cash flow from financing activity was negative at H1380.9 Crores due to repayment of borrowings, finance cost & dividend payout.
Key Ratios
Particulars | FY 2023-24 | FY 2022-23 |
Return of average capital | 18.7 | 24.7 |
employed (Gross) (%) * | ||
Return of average capital | 22.5 | 36.9 |
employed (Net of cash) (%) * | ||
Return on average equity (%) * | 17.0 | 22.2 |
Book Value/ Share (in H) | 95.5 | 87.5 |
EPS (in H) | 15.6 | 17.8 |
Interest Cover (Times) | 5.1 | 7.7 |
Net Debt equity ratio (Times) ** | 0.2 | 0.2 |
* Goodwill has been excluded and Capital reserve has been included for computations.
** Equity represents equity attributable to the shareholders of the Group. Goodwill has been excluded and Capital reserve has been included for computation of Net debt equity ratio.
ROCE (Return on Capital Employed)
Reduction in ROCE is on account of increased working capital and de-growth in operating profit.
Book Value per share (BVPS)
Book value per share increased by H7.9 due to higher EPS (Earnings per share) of H15.6.
Dividend:
The Board of Directors of the Redington Limited (Holding company) at their meeting held on June 4, 2024, considered and recommended dividend of H6.2 per equity share (310% of face value) for the financial year 2023-24, subject to the approval of shareholders at the ensuing Annual General Meeting (AGM).
Below is the Dividend Payout % on Group Profits over the last 5 years.
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