Pressure on inventory liquidation across the industry impacted margins: Redington India

Redington is a leading technology and mobility distributor operating in across the products like PC, notebooks, tablets, servers, mobiles, security solutions, cloud, etc.

The company declared a mixed bag in its fourth quarter earnings, where revenues jumped 26 percent year on year to Rs 21,848 crore, the highest ever fourth quarter revenues. Earnings before interest, tax, depreciation and amortisation margin declined to 2.5 percent versus 2.8 percent in the same quarter of last year. The net profitability of the quarter declined 11 percent to Rs 310 crore.

In an interaction with CNBC-TV18, Rajiv Srivastava, Redington (India) said the company is witnessing pressure on inventory and liquidation of stock which led to reduction in margin. Although the pressure on inventory is likely to decline from second quarter of financial year 2023-24.

"Large IT Hardware players like Dell, Lenovo, HP built huge inventories but witnessed a sudden drop in the offtake of IT equipments". Srivastava expects this inventory to liquidate owing to withdrawal of work from home model in offices and opening of schools in coming quarter. "Second and third quarter of financial year 2023-24 will see volume uptick in IT hardware".

Although, the network, storage, servers, continue to do well. Srivastava expects margins for Redington to rise going forward. "We expect margins to improve to 2.6 to 2.9 percent, while revenues are expected to grow double digit in FY24".

Singapore, India and South Asia (SISA) business was nearly flat quarter to quarter at Rs 9,981 crore, while margins remained unchanged year on year at 2.5 percent. A similar trend was seen in the rest of the world business where revenues growth was nil at Rs 11,873 crore and margins declined to 2.9 percent versus 3.4 percent year on year.

Redington stock traded flat on the exchanges on May 22, however, rose 18 percent in past one year.