Redington completed 25 years of operations in 2018-19. This milestone is a validation of our uncompromising focus on delivering consistent growth and value creation. As I look back, I am filled with a sense of wonder at what your Company has achieved over a quarter of a century.
Your Company Redington India, is one of its kind. It would be difficult to identify a parallel in the Indian corporate scenario. It is amongst the true success stories as a purely home-grown, multinational organization.
Its journey in India started in tandem with the country’s embrace of Information Technology as a catalyst to haul itself into the mainstream of the late 20th century world order and jolt itself out of the cycle of sub-par economic growth. It would not be the slightest bit of exaggeration to say that the strong and confident India that we see today owes much of its transformation to the pioneers of its IT Industry. Redington can proudly count itself in that exclusive list.
The learnings from its India business allowed Redington to build its strategy for the Emerging Markets in Middle East, Africa & Turkey and establish itself as the pre-eminent technology distribution Company across the region.
Your Company has played a defining role in ensuring that technology driven innovations reach Consumers and Business Houses alike, by building a network of over 39,800 channel partners across our India and Overseas markets. Our distribution model has periodically evolved to allow us effectively address the differing dynamics of the huge range of products that we carry, covering IT & Mobility segments. Redington today distributes products from over 220 of the world’s leading technology brands, involving more than 17 product categories, covering over 45,000 SKUs and requiring different go-to-market solutions in more than 35 markets. Our ability to manage the different ways in which business is conducted across multiple geographies, with diverse channel ecosystems comprising of e-commerce companies, organized & unorganized retail chains, resellers, system integrators and new-age born-in-cloud partners, has emerged as our fundamental strength.
As I review the year just gone by, I take great satisfaction in reporting to you that at a consolidated level, your Company has delivered a Revenue Growth of 12%, an EBITDA Growth of 12% and a PAT Growth of 5%, while simultaneously generating Free Cash Flow of Rs. 732 crores. But for the one-off impairment charge that we had to incur on our investment in Turkish subsidiary Arena, our PAT growth would have been significantly higher at 15%. Your company has clearly demonstrated strength of character in overcoming the challenges it encountered during the period.
Just as a champion decathlete combines strength, stamina and agility for different events, your Company has combined its strengths in vendor and partner relationships with perseverance in challenging conditions and nimbleness in adapting to fast-changing technology practices, to maintain an unblemished record of business growth.
In India, overall demand for IT & Communications (ICT) products has reached USD 83.6 Billion as per Gartner. Government & PSUs remained the largest investors in technology products & solutions, as investments in infrastructure and social services continued. However, lingering impacts of demonetization and shift to GST regime, coupled with a serious liquidity crunch, dampened demand in the private sector. Recognizing the need to be vigilant on capital deployment, your Company focused on improving capital efficiency and this is reflected in the sharp decline of Working Capital (WC) from 55 days to 47 days. A systematic approach to cost reduction and improvement in collection greatly aided towards achieving our capital efficiency goals. This, in turn, helped keep interest cost under control in India - even when the effective interest rates have trended sharply upwards - resulting in Free Cash Flow of Rs. 103 crores. While this extra prudence resulted in selective business acquisition, the Indian operations still registered a Revenue growth of 13%. India contributed 37% of the consolidated revenue and 32% of the total profits. The credit rating agencies have recognized our fiscal prudence by once again reaffirming Redington’s rating at the highest level for short term borrowings.
The technology landscape is changing rapidly and your Company has invested in skills and infrastructure required to keep itself ahead of the curve and retain its relevance as a premier distribution partner. Adoption of Cloud gathered further momentum and Redington enhanced its position as the “Distributor-with-a-difference” in this space. Our Cloud business in India registered double digit growth quarter after quarter, with a steadily increasing Services component.
Your Company is the only distributor in India with a well-defined Cloud Managed Services Practice and FY 18-19 witnessed breakthrough wins in prestigious customer accounts.
With a stable political regime and the promise of further economic reforms and accelerated investments towards Digital India and Smart City projects, we expect revival of technology refresh & upgrades in the Corporate sector also. While retaining its focus on business hygiene, your Company is well positioned to participate in all growth opportunities in the year to come.
The business landscape in India during FY 19-20 through to FY 21 -22 appears promising, with growth anticipated across IT, Mobility and Services portfolios.
The Overseas subsidiaries continued to excel. As ever, the overseas markets are fraught with geo-political uncertainties, severe currency fluctuations and a high degree of sensitivity to Oil prices. Your Company has developed an innate ability to successfully navigate these challenges and this is once again evident in the business performance for the year gone by. The Overseas operation has delivered strong performances in every line of business, cutting across all geographies, including Turkey, where the challenges due to severe currency devaluation were especially daunting. The Overseas business has delivered strong double digit growth in both IT and Mobility portfolios. Mobility has contributed handsomely to the overall growth, as your Company won contracts for key brands in a few major markets.
A Revenue growth of 11 % and PAT growth of 19% in our Overseas operation has been underpinned by a clear focus on Working Capital deployment which was reduced from 37 days to 31 days, generating a Free Cash Flow ofRs. 629 crores. The Overseas operations contributed 63% of the Consolidated Revenue and 68% of the Consolidated PAT.
As we look at the industry landscape, we realize that the Technology Distribution business is undergoing a tectonic shift. The eco-system, in its formative years was served well by what can be called Distribution 1.0. Here, the ability to extend Credit & the robustness of Supply Chain infrastructure determined the success of a distributor. Redington’s approach during this phase was Partner Centric and Product driven. It paid rich dividends, transforming the Organization into one of the leading Distributors in India.
As investments in IT Infrastructure increased, other dimensions were added to the role of a Distributor. Emergence of the Value Added Distributor (VAD) concept required an ability to consolidate multiple products and solutions, involving complex commercial structuring, combined with Market development and Channel enablement responsibilities. VAD was the genesis of Distribution 2.0.
Your Company was the pioneer and the leader during both stages of above evolutions of Technology Distribution business.
The way businesses buy and deploy technology is undergoing rapid changes. Rather than considering it as a mere infrastructure necessity, Customers are increasingly looking at Technology as an enabler for delivering Business Outcomes. Emerging technologies like Artificial Intelligence (Al), Machine Learning (ML), Internet of Things (loT) and Analytics are fast becoming integral parts of IT Solutions. The Distributor of the future is an Organization which quickly builds infrastructure & skills that leverage these technologies to offer appropriate solutions and services. Recognizing this, your Company has started its pivot to Distribution 3.0, in order to evolve into an Organization that is strongly Partner engaged but Customer centric. Retaining our core competencies and strengths in distribution business, we will also become highly focused towards offering Solutions and Services to SMB, Mid-market and Enterprise customers.
This transformation requires significant changes in the way your Company runs its operations and conducts its business and critical investments that we are committed to putting in place. Redington is transitioning into a fully Digital organization. In India, with a new generation ERP Software as its IT infrastructure back-bone, your company plans to build a “Technology Experience Centre” which will enable its partners showcase various solutions and services to their customers. We are building a “Master Digital Platform” which will converge Consumer IT, Mobility, Enterprise and Cloud verticals while offering partners unparalleled ease of doing business and great customer experience. A collaborative approach will combine our contractual distribution capabilities with that of an “eco-system integrator”, offering partners a “one-stop-shop” for a comprehensive suite of products, solutions & services.
FY 18-19 was the first full year of operation of your Company as a Promoter-less, Board led and Professionally managed organization. Your Board has tremendous diversity of age, gender, culture, qualification, and skills.
With rich experience in the areas of Corporate Strategy, IT Brand development, Distribution business, Financial services and Corporate Audit functions, members bring wide-ranging expertise to advice and guide to the Management team. The Board has been further strengthened with the induction of Ms Anita P Belani during April 2019. Ms Belani is an outstanding business leader with expertise in the area of Human Capital Development. With her experience in leadership roles at several leading organizations, she brings tremendous value at a time when your Company is making the transition to a more skill-oriented business model.
The Company is committed to delivering the best possible value to your investment. In line with this intent and in commemoration of the 25th year of the Company’s existence in India, the Board has declared a final dividend for FY 18-19, amounting to 25% of the consolidated profits for the period.
At Rs. 3.30 per share this is 165% of its face value. During the course of the last fiscal, exhibiting its confidence in the future of the Company, the Board had approved a buy-back of shares at a price of Rs. 125/- per share, resulting in buy-back of shares totalling to Rs. 139 crores.
As we look into the future, by end of year 2021 Redington would have evolved into a fully Digital Organization, leading with Services. This will not only allow your Company capture future growth opportunities by remaining “current” and “relevant”, but will also move it up the earning value-chain with enhanced ROCE and high capital efficiency.
One of the great success stories of your Company is ProConnect Supply Chain Solutions, a fully-owned subsidiary, offering end-to-end Logistics and Warehousing solutions to a number of customers cutting across several industry verticals. Starting its journey 7 years ago with only Redington as its customer; today, while Redington retains the status of an anchor, ProConnect draws only 16% of its business from its parent organization. Its remaining business comes from more than 200 customers across 12 industries; including IT, Telecom, e-Commerce, Pharmaceutical, Consumer Durable, Paint and Manufacturing. With 180 warehouses covering a total of 6.8 million square feet of space, a 26% growth in Revenue and a 13% growth in PAT during FY2018-19, ProConnect is poised for rapid scaling over the next 2-3 years. Retaining its focus on organic growth, ProConnect would also look to invest in inorganic opportunities with the aim of augmenting its business and geographical footprint, technology adoptions and Intellectual Property.
In order to provide the required leadership and focus to ProConnect, Mr. E H Kasturi Rangan has withdrawn from his position as the Whole Time Director of Redington and has assumed the responsibilities as the Managing Director of ProConnect Supply Chain Solutions Ltd. Simultaneously, Redington’s Board has been augmented by the induction of Mr. S V Krishnan, the long standing Chief Financial Officer of India operations, as its Whole Time Director. Please join me in welcoming both of them to their new responsibilities and wishing them all success.
The Company is acutely conscious of the responsibilities that it carries towards the society which has allowed it to flourish and prosper. While practicing equal opportunity policies within the organization, the Redington CSR Trust works towards betterment and upliftment of the economically challenged constituents of our society, through investments which promote education, skill development, employability and health & wellness. As I contemplate the future of your Company, I am excited by the multitude of opportunities that lay ahead. We will work hard and we will work very smart to ensure that we continue to add luster to the legacy of what is known as Redington.
Your Company has ambitious goals. The support of all our stake holders makes it possible for us to think big. I wish to thank you, our shareholders, for reposing faith in our Board and enriching the Company with your advice and inputs. I also take this opportunity to thank our valued Vendors and Channel partners, whose continued support has been and will remain critical to our success. Our sincere thanks to our Bankers whose unstinted support has always been a cherished asset.
I also wish to thank our Auditors and all other stakeholders who have contributed meaningfully to our progress. My big Vote of thanks to our Board of Directors; I deeply appreciate the valuable support and guidance that I continuously receive from the richly experienced and highly knowledgeable members of our Board. Last but not the least,
I take this opportunity to express my deepest appreciation to my team - the Redingtonians who make the Company what it is today. This team of wonderfully talented and committed professionals is the Company’s greatest strength and their sense of ownership and relentless pursuit of excellence makes Redington such a great organization.
I look forward to your continued support and encouragement as we embark on our journey to take advantage of the exciting opportunities that present themselves during the course of the coming year.
With warm regards,