For many years, the Chennai-based Redington in the market was known as 1 percentage company. The reason is its net profit was always at 1 per cent.
However, things have changed as the 30-year-old company has improved its profitability and is aiming to reach the 2 per cent target at the earliest from the current 1.7 per cent to 1.8 per cent.
The company’s CEO Ramesh Natarajan discussed with businessline the reasons for the record financial performance in the second quarter; the company’s transformation in the last 30 years to a $8.4 billion distribution and supply chain solutions provider and doubling of profitability.
Excerpts from the interview:
What reasons do you attribute to the record performance in the second quarter?
Redington Ltd reported a 26 per cent increase in net profit to ₹387 crore for the second quarter that ended September 30. The company registered its highest-ever global revenues, which grew by 25 per cent year-on-year to ₹19,080 crore.
With learning happening from home and remote locations, lots of endpoint devices like notebooks and desktops proliferated. We supplied them to every nook and corner of the country.
In the last couple of quarters, working from the office has returned and companies are going for a technology refresh of infrastructure and devices. There was growth in smartphones priced at over $300 and Apple was one of the key elements for us.
Is the growth sustainable?
Yes. There has been a dampness in consumer PC growth as many offices and schools reopened. This trend will continue for another two quarters. However, post-June 2023, we expect the consumer market to revive because during Covid times in 2020 people invested in devices, and after three years there could be a technology refresh.
The commercial business has grown well and will grow as SMEs and mid-market clients are investing in IT in a big way. Would the growth be at a robust percentage of over 20 per cent? I think, if not as it is, we still see good double-digit growth.
What sort of trend are you seeing in the technology refresh among commercial clients?
Customers are moving from capex to opex to service and subscription-based, and Cloud models. Many clients are keeping IT outside to reduce cost with elasticity to expand or contract depending upon the IT needs.
As Redington celebrates its 30th year anniversary in 2023, how has it transformed in the last three decades?
Established in 1993 with a single product (Hewlett Packard), and a single location, today we have around 300 international brands, including HP India, Microsoft, Dell, Apple, IBM, Amazon, and Google, in IT and mobility spaces across India, South Asia, Middle East, Turkey, and Africa.
Product, reach, coverage and credit fuel our growth. New-age technologies like artificial intelligence, robotics, big data analytics, the Internet of Things, and 5G communications are opening new opportunities for us.
You are jokingly known as 1 percentage company in the market? Will this perception change?
Our business works on working capital rotation. At some point in time, the market used to smile at us saying we are a 1 percentage company as our PAT was always at 1 per cent.
But, with technology being the differentiator and foraying in to managed services, cloud, and security services, we are gradually upping our margins — that was 1 per cent for a very long time to 1.7 per cent to 1.8 per cent. We wanted to see if we could move closer to 2 percentage at the earliest.
How far is Redington being a $10 billion company?
In 2007, we were about ₹3,000 crore to around $8.4 billion. Statistically, since we went public in 2007, every five years, we would double our revenue, and come closer to doubling our profits. We hope to keep up that objective as the landscape changes.