Redington Limited — Q2 FY26 earnings call

Call held 6 Nov 2025

Management summary

Redington delivered its strongest-ever quarterly revenue and Q2 profit, driven by robust performance in India and the UAE. The company is successfully pivoting toward high-margin services through its newly formed Software Solutions Group (SSG), which saw accelerated growth. While the core business is performing well with significant operating leverage, the Turkey operations (Arena) remain a drag due to macroeconomic stress, prompting a strategic divestment of the Lira-based Connect Vodafone business to de-risk the balance sheet.

Highlights

  • Record quarterly revenue of ₹29,118 crores, representing 17% YoY growth.

  • Best-ever Q2 profitability with PAT of ₹388 crores.

  • Software Solutions Group (SSG) emerged as a high-growth engine, growing 48% YoY and contributing 16% to the top line.

  • Operating leverage improved as Opex grew only 9% YoY compared to 17% revenue growth.

  • Working capital days reduced to 31 days, driven by a higher mix of mobility products.

  • India and UAE geographies both recorded strong 23% YoY revenue growth.

  • Arena (Turkey subsidiary) reported a loss of ₹37 crores (Redington's share), impacted by high interest rates and one-off divestment costs.

  • AI PC penetration reached 22% of commercial PC sales in India during the quarter.

Concerns

  • Macroeconomic Stress in Turkey

Key financials

  1. Revenue ₹29,118 Cr +17%YoY
  2. PAT ₹388 Cr
  3. PAT Margin 1.3%
  4. Working Capital Days 31 days
  5. Opex Growth 9% +9%YoY

What they filed

Q1 FY27: revenue up 34.6%, net profit up 94.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue24,896 26,716 26,440 25,952 29,076 +17%30,922 +16%33,213 +26%34,922 +35%
EBITDA458 602 597 400 589 +29%626 +4%614 +3%708 +77%
Net profit283 403 918 233 350 +24%413 +2%288 −69%453 +94%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue ContributionRevenue Growth
Mobility35%18%
ESG (PCs)32%11%
Software Solutions Group (SSG)16%48%
Technology Solutions16%9%

Guidance & targets

Revenue

  • SSG Revenue Growth Revenue · next 6 to 12 quarters · High confidence 30-50%

    Previously 22-23% → 30-50%

    I think directionally, if I look at the next 6 to 12 quarters, clearly, this area we want to grow between 30% and 50%.

    — V.S. Hariharan, Managing Director and Group CEO

  • Arena Connect Divestment Revenue Impact Revenue · FY27 · High confidence $300 million
    Revenue will be in the range of about some $300 million.

    — S.V. Krishnan, Finance Director

Debt

  • Arena Debt Reduction Debt · FY26 · Medium confidence $50-55 million
    Debt, if all this gets fully closed, we could have an advantage of between $50 million to $55 million.

    — S.V. Krishnan, Finance Director

Profitability

  • Arena Recovery Timeline Profitability · by Q1 FY27 · Medium confidence 6 months
    Maybe in about 6 months, we should see some light at the end of the tunnel. That's where it stands.

    — S.V. Krishnan, Finance Director

Risks & concerns

  • Macroeconomic Stress in Turkey

    high

    High interest rates (43-44%) and a surge in concordat cases (4,400 reported YTD) are impacting Arena's profitability and collection timelines.

    Both acknowledged

  • Hardware Commoditization

    medium

    Hardware areas like Technology Solutions and PCs are facing margin pressure as they become more commoditized, necessitating a shift to services.

    Management acknowledged

  • Slow PC Refresh Cycle

    low

    The anticipated Windows 10 to 11 migration has been slower than expected, though AI PCs are showing early promise.

    Management acknowledged

Areas of evasion (2)

  • Specific EBITDA figures for the remaining Arena business after divestment.
  • Exact market share numbers for Apple distribution in India.

Q&A highlights

3 direct
Arena Connect Divestment and Financial Impact Direct
Revenue will be in the range of about some $300 million. Debt, if all this gets fully closed, we could have an advantage of between $50 million to $55 million.

Quantifies the scale of the de-risking exercise in Turkey and the expected reduction in high-cost debt.

Asked by Deepak Lalwani, Unifi Capital

Dividend Payout Policy vs. Growth Capital Direct
We don't want to leave growth on the table at the cost of dividend because our current dividend policy and profitability allows us to grow 10%, 12%... we will bring it for discussion to the Board.

Management signals a potential shift in capital allocation strategy to prioritize high-growth opportunities like SSG over the fixed 40% dividend payout.

Asked by Pratik Kothari, Unique PMS

Working Capital Intensity of SSG Direct
SSG, we have normally lower working capital, but not significantly lesser... SSG is around the company average.

Clarifies that while SSG is high-margin, it does not offer the same ultra-low working capital benefits as the Mobility segment (MSG).

Asked by Nitin Padmanabhan, Investec

2 min read 5 chapters

Detailed narrative

Record Financial Performance and Operating Leverage

Redington achieved its highest-ever quarterly revenue of ₹29,118 crores, a 17% YoY increase. Profitability also reached a record for Q2 at ₹388 crores. A key driver of this performance was strong operating leverage, as operating expenses grew by only 9%, significantly lagging revenue growth. This efficiency, combined with a reduction in working capital days to 31, underscores management's focus on high-velocity, profitable growth.

Strategic Pivot to Software Solutions Group (SSG)

The company is aggressively transitioning from a hardware distributor to a software and services provider. The newly consolidated SSG segment, comprising cloud, cybersecurity, and professional services, grew by 48% YoY. Management expects this segment to maintain a 30-50% growth trajectory over the next 6-12 quarters. SSG already contributes 16% to the top line and offers higher-than-average PAT margins, which helped bolster the overall group results.

De-risking Turkey Operations (Arena)

Turkey remains a challenging market due to interest rates exceeding 40% and a difficult credit environment. To mitigate this, Redington is divesting Arena's Connect Vodafone contract, which is 100% Lira-based. This move is expected to reduce revenue by approximately $300 million but will significantly lower debt by $50-55 million and reduce interest costs. Management expects to see a turnaround or 'light at the end of the tunnel' for the remaining USD-denominated Arena IT business within the next six months.

India Market Dynamics: Premiumization and AI PCs

India remains a standout performer with 23% YoY growth. The company is benefiting from the premiumization trend in smartphones, particularly through its direct-to-retail (D2R) channel serving over 5,000 outlets. In the computing space, while the general PC refresh cycle is slow, AI PCs are gaining traction, accounting for 22% of commercial PC sales this quarter. Management anticipates stronger growth in the second half of the year if these trends continue.

Capital Allocation and Dividend Flexibility

During the Q&A, management addressed the current 40% dividend payout policy. Given the high-growth opportunities in SSG and the potential for 20% ROCE reinvestment, management expressed openness to reviewing the payout ratio with the Board. This signals a potential shift toward retaining more capital to fund aggressive expansion in high-margin service segments rather than strictly adhering to historical payout levels.

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