DQ Top 20:#10 Redington India

Fiscal 2013 was a year in which Redington's growth went south to 7%. But FY2014 turned out to be a much more benign year with growth going back again to double digits. That's good news-given that IT distribution as an industry still remains unsettled and faces various issues that calls for policy reforms. The company says that last year indeed was one of the most difficult periods for the entire distribution eco-systems.

Opportunities were very limited. Traditional growth areas remained depressed. Liquidity with end-customers and consequently with the channel was very tight. While telecom business grew on the back of rapid adoption of smartphones, the tablets did not take off as expected. As a category, adoption and growth of tablets continues to be a challenge. For traditional IT distribution business, it was a phase of consolidation and careful identification of viable opportunities.

Over the last couple of years the IT distribution industry has been yearning for parity in the tax regime. For instance, the IT distribution industry is also affected by the same policy and regulatory issues that impact businesses in other areas. Multipoint taxation, product classification issues leading to different VAT rates in different states, regulations that are subject to interpretation, revision of interpretation on a retrospective basis. In this backdrop, companies like Redington feel that if at all there is one single legislation-the implementation of which can substantially ease the pain of doing business across industry segments, improve efficiencies and cut down costs-it is a simple, straightforward, easy to understand, and transparent GST regime, that is not subject to multiple different interpretations.

As we look at the company's performance over FY14, Redington had a satisfactory year overall. While its growth was muted in some segments, but it took advantage of opportunities in segments like Infrastructure, Enterprise, Software, Consumer PC and the Mobility space. A relatively strong H2 on the back of a few project orders and momentum in smartphones sales, helped. Meanwhile the key products that were added into the portfolio over the year included: Palo Alto for security solutions, Vaultize and NEC for Saas offering, CntrS for IaaS and 3M for Bio-metric Solutions.

So how did Redington manage to pull out such a good performance? First off all it was able capture incremental revenue opportunities thrown up by most of the vendors that it signed on during the past 18-24 months. These fresh revenue streams are also expected to seed its revenues in future as well. Meanwhile the cost control and increase in productivity remained the central philosophy and the company tried to eliminate/reduce all avoidable expenses.

Last financial year was a period of consolidation and did not offer much room for fresh initiatives. While still in a very nascent stage, its presence in the ‘cloud' space will augur well in FY15. It's strategy of putting in place an integrated and coherent portfolio which would be relevant to both the company and its channel partners. It's rationalization of its components SBU to strike a better balance between revenue and profitability in this portfolio, will also help to strike better margins here is also good. The outlook for FY14 looks very buoyant for Redington.

Meanwhile its 3PL activities gathered momentum under its subsidiary Pro Connect and appears well poised to take advantage of the growing need for efficient and dependable supply chain solution providers. It now has several customers drawn from outside of IT and communication industries.