1)Distribution:  Manufacturer/Vendor -----Distributor------Reseller-------End user/other resellers

In this the distributor holds title to and sells the product and so bears the market risk & inventory risk

2) Supply Chain Management : Point of Manufacturing --------Customer

This is a fee based specialized logistics activity and here the distributor does not take market risk & inventory risk.

The company provides this solution to 40 brands in India & 18 brands worldwide

3) After Sales Sevice : Provided by Distributor on behalf of vendor / manufacturer during Warranty period & directly to the customer during the post warranty period.

Products addressed:

1)      Entire range of IT products :  Brands represented include Intel, HP, Epson, IBM, Cisco, Xerox, Acer, Microsoft, Seagate, Linksys,APC,

2)       Non IT products like Telecom products,Gaming consoles & titles, Digital lifestyle products & consumer durable : brands represented include Microsoft, Motorola,Nokia, HP, Samsung, Kodak, 3COM, Whirlpool

Geographies:

1)      India: 39 Sales offices, 50 warehouses ,123 service centres & 12000 channel partners

2)      Overseas ( UAE, Singapore, Egypt, Bahrain, Jorda, Kenya, Saudi Arabia,Qatar, Tanzania, Kuwait, Lebanon, Yemen )  :  14 sales offices, 7 warehouses , 60 service centres & 2800 channel partners

Geographical segment revenue break up ( before internal eliminations) :

Consolidated Financials:

Equity : Rs.77.86 crores

Debt : Rs.601 crores

Revenue : Rs.9067 crores

PBT : Rs.127.24 crores

NP : Rs.101.69 crores

EPS : Rs.15.36

Since March 2003, revenue, PBT & NP have grown @ CAGR of 42%, 42% & 57% respectively.

ROCE is 17.3%.

The entire debt on the books is primarily short term (working capital finance).

The consolidated PAT margins are 1.12% and although a cause for concern, it is mitigated to a certain extent by the fact that the average Unit price / sale is Rs.4200.

3-year back Ingram Micro, the No.1 company worldwide in this space bought over Tech Pacific which was the leader in India at that point of time, through an international acquisition for around Rs.2300 crores. Tech Pacific worldwide had approx revenues of Rs.13000 crores.

Currently Redington is the no. 2 player in this space in India behind Ingram Micro-Tech Pacific. In Middle East it received  the No.1 distributor award 2 years in a row.

The company has transformed itself from ‘Box pushers’ to ‘Solution providers” and going ahead the Supply chain Management & Sevice business will boost margins & profitability  and differentiate it from competition. Servive income doubled in the last year to Rs.180 crores from  Rs.90 crores.

The company is setting up 5 Automated Distribution centres ( 4 in India & 1 in dubai ). These facilities will receive, sort & distribute products using Multi line character readers, Bar code sorters. They have purchased 11.56 acres in Chennai to set up the 1^st centre.

Redington has also set up subsidiaries in Bangladesh & Sri Lanka. If one notices its International operations, one notices that it is present in difficult but extremely potential areas like Middle East, Africa where the opportunity for  IT / Telecom products is huge.

The stock is trading @ Rs.275 .& a PE of around 18 & a PEG ratio of less than 0.5 even if one considers a sustainable 35-40% growth in NP going ahead for the next 3 years.

jayendra