Redington Limited — Q4 FY25 earnings call

Call held 20 May 2025

Management summary

Redington delivered its best-ever Q4 performance, characterized by strong double-digit growth in both revenue and profits. The company is successfully pivoting toward higher-margin software and cloud services, which now constitute over 15% of the portfolio. Despite margin erosion post-COVID, management is focused on stabilizing operating margins between 2.3% and 2.5% while aggressively pursuing AI-led digital transformation opportunities.

Highlights

  • Record quarterly revenue of ₹26,510 crores, representing 18% YoY growth.

  • Quarterly profit after tax (PAT) reached ₹400 crores, up 23% YoY.

  • Full-year FY25 revenue hit a record ₹99,562 crores, just shy of the ₹1 lakh crore milestone.

  • Cloud Solutions Group (CSG) led business unit growth with a stellar 41% top-line increase.

  • India and UAE geographies showed strong momentum with 26% and 24% revenue growth respectively.

  • Working capital managed efficiently at 34 days, consistent with the previous year.

  • Board declared a final dividend of ₹6.8 per share for FY25.

  • Completed Paynet divestment, receiving net proceeds of ₹626 crores (~$74 million) to reduce debt.

Concerns

  • Arena Subsidiary Performance

Key financials

  1. Revenue ₹26,510 Cr +18%YoY
  2. PAT ₹400 Cr +23%YoY
  3. PAT Margin 1.5%
  4. Working Capital 34 days 0%YoY
  5. ROCE 21%

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 ContributionGrowth
Endpoint Solutions Group (ESG)30%11%
Technology Solutions Group (TSG)28%28%
Mobility Solutions Group (MSG)35%18%
Cloud Solutions Group (CSG)5%41%

Guidance & targets

Margin

  • Operating Profit Margin Margin · Immediate Future · Medium confidence 2.3% to 2.5%
    We have been talking about between 2.3% to 2.5% of operating profit. We will be happy if we are able to stay in this consistently.

    — S.V. Krishnan, Finance Director

Other

  • Software Portfolio Mix Other · Next 2-3 years · Medium confidence >20%

    From 15% today

    We should be more than 20 and higher as a percentage of our total business.

    — V.S. Hariharan, MD & Group CEO

  • Effective Tax Rate Other · FY26 · High confidence 25% to 27%

    Previously 24% to 26% → 25% to 27%

    Next year, the global minimum tax is coming in impacting some of the economies including the UAE where from 9% it will move to 15%. So, we expect next year, the tax rate should range between 25% to 27%.

    — S.V. Krishnan, Finance Director

Capex

  • Quarterly Capex Capex · Upcoming Quarters · Medium confidence ₹40-60 crores
    it will range between Rs. 40 crores to Rs. 60 crores per quarter.

    — S.V. Krishnan, Finance Director

Revenue

  • Market Growth Potential (India/UAE/Saudi) Revenue · Medium Term · Medium confidence 15% to 20%
    So, there is a growth possibility available of 15% to 20% in these three markets alone.

    — V.S. Hariharan, MD & Group CEO

Risks & concerns

  • Arena Subsidiary Performance

    high

    High interest rates in Turkey (50%+) and sharp PC market declines have pressured Arena, though Paynet proceeds are being used to deleverage.

    Both acknowledged

  • Geopolitical Tensions and Tariff Changes

    medium

    Management is closely watching geopolitical tensions in Turkey and potential tariff changes that could disrupt supply chains or cause inventory losses.

    Management acknowledged

  • Tax Rate Inflation

    medium

    Global minimum tax implementation in UAE (moving from 9% to 15%) will push the group's effective tax rate toward 27%.

    Management acknowledged

  • Client Payment Delays in Large Deals

    medium

    Large enterprise deals in India often come with lower margins and more challenging payment terms, requiring careful working capital management.

    Management acknowledged

Areas of evasion (1)

  • Specific brand-level growth (e.g., Apple vs HP) was deflected to category-level commentary.

Q&A highlights

2 direct
EBITDA Margin Deterioration in Arena Direct
See, in Arena, there is an impairment loss of about 2.9 million in the current quarter... this relates to an investment that was done in a VDF, I mean, Vodafone agreement there. That is a significant impact about Rs. 25 crores.

Explains the sequential drop in Arena's EBITDA margin from 1.9% to 0.36% as a one-off non-cash item.

Asked by Sahil Doshi, Thinqwise

Inventory Risk from Potential Tariff Reductions Direct
Normally tariffs are not part of the, I mean, the back-to-back contractual arrangements with the vendor. If I need to answer you simply, the answer is yes, we have to take it [inventory loss].

Highlights a significant supply chain risk where the company lacks vendor protection against government-mandated tariff cuts.

Asked by Vivek Ramakrishnan, DSP Mutual Funds

Working Capital Spike in Trade Receivables Partial
AR days had gone up and we are working on it and that's the market scenario... what we had done uniquely is we had reduced our inventory quite sizably and increased our payable days to compensate for it.

Reveals that while overall working capital days are stable, there is underlying stress in collections (AR) being offset by stretching payables and lean inventory.

Asked by Rucha Somaiya, Old Bridge Capital

2 min read 5 chapters

Detailed narrative

Strategic Pivot to Software and Cloud

Redington is aggressively shifting its portfolio toward high-growth software and cloud services, which now account for over 15% of total business. The Cloud Solutions Group (CSG) delivered a standout 41% YoY growth in Q4, driven by success in hyperscaler business and subscription software. Management aims to increase the software mix to over 20% in the next 2-3 years, targeting market growth rates of 40-50% in these specific sub-segments. This shift is expected to improve long-term return on capital employed (ROCE) due to lower inventory requirements and better margins compared to traditional hardware distribution.

Arena Deleveraging via Paynet Divestment

The company successfully closed the divestment of Paynet, receiving net proceeds of ₹626 crores (~$74 million). A significant portion of these proceeds has been deployed to repay debt in the Arena subsidiary, which faced headwinds from 50%+ interest rates in Turkey. Arena's debt levels are expected to drop from $170 million to approximately $100 million, which management believes will significantly reduce finance costs and improve the subsidiary's bottom-line performance in upcoming quarters. Despite a one-off ₹25 crore impairment in Q4, management believes the worst of the decline in the Turkish market is over.

Geographic Momentum in India and Middle East

India and the UAE remain the primary growth engines, recording 26% and 24% revenue growth respectively in Q4. Saudi Arabia is showing signs of recovery with 7% growth after a period of government investment re-prioritization. Management is particularly optimistic about Saudi Arabia's mid-market potential, noting that PC penetration remains low (5 million PCs for a 36 million population). The company is also expanding its 'ProConnect' integrated logistics business in these regions, which currently generates ₹957 crores in annual revenue with healthy 10-12% operating margins.

Working Capital and Margin Discipline

Despite the scale of operations, Redington maintained a disciplined working capital cycle of 34 days. While trade receivables saw a spike of ₹1,500 crores, management offset this by reducing inventory levels and optimizing payable days. Operating margins are being guided at a sustainable range of 2.3% to 2.5%, as the company balances high-volume 'big deals' in the enterprise segment with higher-margin software services. Management emphasized 'balance sheet hygiene' as a core insight gained over the last few years to navigate volatile interest rate environments.

AI Strategy and Future Outlook

Redington is building a comprehensive AI strategy focused on three pillars: bringing brand-enabled AI solutions to customers, AI-enabling its digital B2B platform, and using AI internally for predictive analytics and productivity. While the 'AI PC' refresh cycle is expected to gain momentum in the second half of the coming year, the company is already seeing stepped-up discussions regarding AI infrastructure investments in Saudi Arabia and the UAE. Management remains optimistic about FY26, targeting 15-20% growth across its three largest geographies.

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