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Last Updated : Aug 01, 2016 04:19 PM IST | Source: CNBC-TV18

Redington confident of double-digit revenue growth in FY17

Apple Inc's plans to open single-brand stores in India may be facing a roadblock currently, but being the largest distributer of Apple products, Krishnan says Redington is still at an advantage as Apple plans to increase market share in the country.

Redington India saw a 27 percent growth in its revenues in the first quarter of FY17 as against the same period last year.

SV Krishnan, Chief Financial Officer of Redington India, says he expects a strong double-digit growth in revenues in the current fiscal.

Compared to the fourth quarter of FY16, last quarter's revenues declined 8 percent. This was due to the first quarter of every year being slower. 

Also, the products launched last year weren't successful for the company. But he is sure the operating margins for the year will revert to its FY16 levels of 2.6 percent. 

Apple Inc's plans to open single-brand stores in India may be facing a roadblock currently, but being the largest distributer of Apple products, Krishnan says Redington is still at an advantage as Apple plans to increase market share in the country.

Below is the verbatim transcript of SV Krishnan's interview to Reema Tendulkar and Mangalam Maloo on CNBC-TV18.

Reema: First let me start with your top line performance, another quarter where you manage to sustain a revenue growth of 27 percent year on year (YoY) is that going to be the likely revenue run rate?

A: Yes, as you said we have grown at a good pace as far as last quarter is concerned and this was true as far as India as well as overseas, while we are happy with that performance. We are also confident in terms of a strong double-digit growth as we move forward.

Mangalam: But if we look at it sequentially your revenues are actually down 8 percent and at the same the margins also took a beating of almost 20 basis points any which way they were at around that 2 percent mark, so when can we expect some sort of recovery as far as that is concerned quarter on quarter (QoQ) what is the trajectory your margins are likely to trade at?

A: If you look at on a QoQ basis that is not correct as far as this industry is concerned, all the quarters are not linear and incidentally Q4 is our biggest quarter and Q1 is more a softer quarter so to compare it vis-à-vis Q4, Q1 it may not be a proper situation but having said that in terms of margin one because of the Q1 being a softer quarter.

Second is because of the product mix that we have if you see the margins in the telecom space is generally lower compare to the IT spectrum that’s a more reason why the margins are down and the third aspect is the success of the new product launches, that has not been great in the last cycle we think as we move forward this should gets it right, so we are not highly concerned about the margins we should be able to hold on to the margins in future quarters.

Reema: Hold on to what level of margins?

A: Whatever margins that we have had last year which is about 2.6 percent for the full year.

Reema: So you are saying FY17 margin should trend back to FY16 margins of 2.6 percent. Give us more colour on how your product mix will change?

A: It should definitely be similar to that.

Reema: But how will your product mix change going forward, you indicated that the telecom products have a lower margin and that’s the reason why your margins were impacted this quarter. Currently what is the break up and how will it change going forward.

A: The break up today is about one-third the telecom products and about two-third the IT products. Within IT we have volume and value where in the case of value which is an attractive segment, the profit margins are much better. We think moving forward that’s one area where we will see a faster growth and then accordingly the margins should be interesting as we move forward in this space.

Mangalam: In your telecom business how much does Apple account for your revenues considering the overhang on the company Apple coming to India and opening its own stores, is that an overhang firstly?

A: Not really, in fact, we look at it in a positive frame of mind because if you see Apple’s market share today it is very less as far as Indian markets are concerned and they have great plans in terms of increasing it as we move forward and being a very large partner for Apple and I had been the largest distributor for Apple it is something which is actually an advantage for us. We think we will be able to grow much faster going forward with Apple doing successfully in India.

Reema: What about working capital you have managed to reduce it by 7 days year on year to 51 days. From here on can we expect a further improvement in your working capital?

A: Yes, I think so there will be improvement in working capital. We are very focussed on it. We think reducing the working capital and then throwing positive cash flow is something which is very important in this business and for your query whether working capital will come this steeply that may not be if you see last year we did had higher working capital then what is required in this business. We have brought down that and we think going forward this will keep coming down albeit marginally.
First Published on Aug 1, 2016 02:59 pm
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