Analyst Reports 2

Table of Contents
Rpt. 21419451 06-Feb-2013
REDINGTON INDIA LTD-INITIATING COVERAGE IIFL - SINGLA, MANOJ, ET AL
2 - 20
Rpt. 21398796 04-Feb-2013
REDINGTON INDIA LTD MOTILAL OSWAL SECURITIES, LTD - BOTHRA, SIDDHARTH, ET AL
21 - 28
Rpt. 21364061 28-Jan-2013
REDINGTON INDIA LTD-INITIATING COVERAGE MOTILAL OSWAL SECURITIES, LTD - BOTHRA, SIDDHARTH, ET AL
29 - 58
Rpt. 21273150 09-Jan-2013
REDINGTON INDIA LTD FIRST CALL INDIA EQUITY ADVISORS PVT LTD - KHABEER, ABDUL, ET AL
59 - 72
Rpt. 21107436 22-Nov-2012
REDINGTON INDIA LTD NOMURA INTERNATIONAL (HONG KONG) LTD. - AGARWAL, ANKUR, ET AL
73 - 84
Rpt. 20481923 05-Aug-2012
REDINGTON INDIA LTD WRIGHT INVESTORS SERVICE - WRIGHT REPORTS, ET AL
85 - 122
Rpt. 20598621 03-Aug-2012
REDINGTON INDIA LTD FIRST CALL INDIA EQUITY ADVISORS PVT LTD - KUSHWAHA, ASHISH, ET AL
123 - 135
These reports were compiled using a product of Thomson Reuters
www.thomsonreuters.com
Redington BUY
06 February 2013
Initiating coverage
Institutional Equities
Company update
CMP 12mthTP(Rs) Marketcap(US$m) Enterprisevalue(US$m) Bloomberg Sector
Play on increasing hardware consumption

We are initiating coverage on Redington with a BUY rating and a 12-month target price of Rs 125/share, implying 45% upside. Redington is the largest distributor of IT products in India, the Middle East, Africa, and second-largest in Turkey. We believe that Redington will continue to lead its peers underpinned by a strong and unparalleled distribution network, good track record of execution (on margins, ROE), and continued initiatives to leverage its distribution network (iPhone tie-up). Furthermore, positive top-down trends such as increasing hardware penetration in India and government spending on IT infrastructure strengthen our belief. We expect revenue /Ebitda/EPS Cagr of 13%/14%/20% over FY13-15 respectively, with risks on the upside. Redington is a play on increasing hardware consumption. The Indian IT hardware market is expected to grow at 15%+ over the next few years. Further, the Indian handset market is growing in doubledigits. In the international operations, IT spending in the Middle East should grow in high single digits. We believe, all these trends indicate secular double-digit revenue growth for Redington over the next 4-5 years. Leadership position: Redington is the largest IT distributor in India and the Middle East. Its wide distribution network and relationships with channel partners offer a competitive edge that continues to increase over time. Redington has leveraged this strength to get into newer products and service lines over time (for example: iPhone and consumer durables). This should sustain the higher-than-industry growth in our view. Strong execution track record: Execution is vital given wafer-thin margins. Redington has a strong track record of managing working capital and bad debts and has consistently delivered healthy 20% ROE. We expect profitability and return ratios to remain healthy as the company remains focused on reduction in working capital and moves to a more favourable product mix.
Manoj Singla | manoj.singla@iiflcap.com 91 22 4646 4655 |
Rs86 125(45%) 644 940 REDIIN Midcaps
Priceperformance(%)
1M Absolute(Rs) Absolute(US$) Rel.toSensex Cagr(%) EPS
3M 4.9 4.9 (0.4) 3yrs 21.5
1Y 10.4 0.7 (1.8) 5yrs 23.0
0.2 2.8 0.4
Shareholdingpattern(%) Promoter FII DII Others
Stockperformance 21.1 38.0 8.4 32.5 94/65 399 0.6 1.3 78.9 FY11A 174,585 2.6 2,260 2,260 5.7 21.6 15.1 20.0 0.9 10.0 2.9
Shares (000') 60,000 50,000 40,000 30,000 20,000 10,000 0 Volume (LHS) Price (RHS) (Rs) 120 100 80 60 40 20 0
52WkHigh/Low(Rs) Shareso/s(m) Dailyvolume(US$m) DividendyieldFY13ii(%) Freefloat(%) Financialsummary(Rsm) Y/e31Mar,Consolidated Revenues(Rsm) Ebitdamargins(%) PreexceptionalPAT(Rsm) ReportedPAT(Rsm) PreexceptionalEPS(Rs) Growth(%) IIFLvsconsensus(%) PER(x) ROE(%) Netdebt/equity(x) EV/Ebitda(x) Price/book(x)
Feb11 Apr11 Jun11 Aug11 Oct11 Dec 11 Feb12 Apr12 Jun12 Aug12 Oct12 Dec 12 Feb13
FY12A 216,485 2.8 2,928 2,928 7.3 28.9 11.7 23.3 1.2 8.3 2.6
FY13ii 234,022 2.8 3,165 3,165 7.9 7.9 (6.3) 10.8 21.4 1.1 8.1 2.1
FY14ii FY15ii 264,554 299,927 2.8 2.8 3,721 4,523 3,721 4,523 9.3 11.3 17.6 21.6 (7.0) (6.5) 9.2 7.6 20.8 21.1 0.9 0.7 7.0 6.0 1.8 1.5
Source:Company,IIFLResearch.Pricedason04February2013
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Redington BUY
Company Description
Redington is the largest IT distributor in India, the Middle East, Africa, and second largest in Turkey. The company commenced operations in 1993 and has graduated from a small IT distributor in India to an end-to-end supply chain provider across South Asia. Further, the company has diversified from purely IT products to nonIT products such as smartphones, gaming consoles, consumer appliances, and digital press. Redington buys the products from vendors for cash/credit and sells them to sub-distributors. Hence, the business model involves taking inventory and receivables risk. Thus, managing working capital becomes a key variable.
Figure1: Distributionsupplychain
15% 4~6% Retailer Retail Chain Dealer Manufacturer Overseas Supplies Corp. Reseller Market Risk System Integrator After Sales Services Corporate Government 9~11% End User SMB
Business
India forms ~47-48% of the total revenue for Redington, with Middle East, Africa, and Turkey accounting for the rest. In the international revenue, ~65-70% comes from the Middle East. In Africa, Redington distributes its products in more than 10 countries. Though Indias contribution is lower in terms of revenue, PAT contribution from India is higher at ~61-62% due to higher margins in India. This is because of a better product mix in India. IT products contribute the lions share of revenue (80%+), with nonIT products contributing ~16-18%, and services 2-3%. Shareholding Synnex, a leading global distributor, has 24% stake in Redington. Standard Chartered Private equity took 11.95% stake in the company in July 2011 at Rs91/share.
Brand Owner
Local Supplies
Inventory Risk
Figure2: Redington:Mixofrevenuesacrosssegments
IT 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FY07 FY08 FY09 FY10 FY11 FY12 1HFY13
Source:Company,IIFLResearch
NonIT
SupportServices
Procurement
Warehousing Logistics & Distribution
Credit to resellers
manoj.singla@iif lcap.com
Redington BUY
Figure3: Redington:Geographicrevenuemix
India International
100% 80% 60% 40% 20% 0% FY07 FY08 FY09 FY10 FY11 FY12 1HFY13
Figure4: Redington:Geographicnetprofitmix
India International
100% 80% 60% 40% 20% 0% FY07 FY08 FY09 FY10 FY11 FY12 1HFY13
Redington BUY Figure6: DomesticITrevenue:Breakupacrosssegments

(Rs bn) 700 600 500 400 300 200 100 0 Hardware
Source:Nasscom
Investment positives 1) Market Size and growth

Indian IT hardware Indian IT hardware sales at ~US$ 10-11billion form majority of the domestic IT spend, accounting for 4050% of the market. This includes desktops, notebooks, servers, printers, networking equipment, storage, and other peripherals. The market grew ~15% in FY12E, on the back of increasing investment from government in IT backbone, corporates, and SMEs adopting IT and low PC penetration. The Indian hardware industry is expected to maintain a strong mid-teens growth (~14-15%) over the next few years, as PC penetration continues to improve, in both retail and the corporates. This would directly benefit IT distributors such as Redington.
Figure5: DomesticITrevenues(US$inbillions)
(bn) 36 32 28 24 20 16 12 8 4 0 FY08
Source:Nasscom
FY11 (LHS)
FY12E(LHS)
Growth(RHS)
(%) 0.2 0.2 0.1 0.1 0.0
ITServices
Softwareproducts
BPO
Domestic IT(LHS)
Growth(RHS)
(%) 0.3 0.2 0.2 0.1 0.1 0.0
India handsets The Indian handset market is expected to grow at 15%+ over the next few years, driven by increasing penetration. According to Cyber Media, handset sales (shipments) in CY11 were 183m, of which 11.2m comprised smartphones. In CY10, this was 166.5m (6m smartphones). According to Gartner, mobile handset sales in India will increase from 221 million units in 2012 to 251 million units in 2013. With ~18% of revenue from handsets, Redington should benefit from this massive increase.
FY09
FY10
FY11
FY12E
Redington BUY Figure9: ITSpendingMiddleEast

(bn) 44 40 36 32 28 24 20 16 12 8 4 0 1HFY12 2008 2009 2010 2011 2012 2013 2014
Source:Industry,IIFLResearch
Figure7: India:MobilesubscribersandPCsinstalledbase
(m) 1000 800 600 400 200 0 FY08
Source:Nasscom
Mobilesubscribers
PCinstalledbase
Revenues (LHS)
Growth(RHS)
(%) 0.2 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 (0.0) (0.0)
FY09
FY10
FY11
Middle East IT spending and handsets Middle East IT spending has been growing in low double digits and is expected to maintain 8-10% growth in the next few years. Growth in handsets is in the 5-7% range, with smartphones growing at a much faster pace. We estimate ~30% of Redingtons consolidated revenue to come from Middle East. We expect growth in the Middle East IT market to help Redington maintain high-single-digit growth in this geography, over the next 2-3 years.
Figure8:MiddleEast:HandsetsandSmartphones MiddleEast&Africamobilephone 2008 2009 Handsets(mn) 176 202 Growth(%) 15% Smartphones(mn) 8 12 Growth(%) 50%
Source:Industry,IIFLResearch
2010 224 11% 16 33%
2011 240 7% 38 138%
2012 260 8% 78 105%
2013 272 5% 98 26%
Redington BUY
Investment positives- 2) Distribution network and size key edge

Redington has a strong and extensive distribution network that has been built and nurtured over years. We believe, this lends a commendable competitive advantage and is the key differentiator for the company. Redington sells products of over 100 manufacturers, with 80+ brands in India, and 50+ in international operations. Some brands and products include: IT products PCs, peripherals, UPS, networking products, packaged software, storage products, high-end servers Telecom devices, tablets, and smart-phones Consumer durables - LG Digital printing press - HP Gaming consoles - Xbox
Figure10: RedingtonSupplyChainReach Channelpartners Salesoffices Warehouses ServiceCentres PartnerCentres
bargaining power compared with other distributors. In fact, any new large OEM is left with little choice but to work with one of the top distributors.
Figure11: Redington:LargestITdistributorinIndia IndiarevenuesinRsmillion RedingtonIndia IngramMicro HCLInfosystems SavexComputers Compuage
FY11 10938 10547 7087 2972 1598
India 23337 56 66 70 292
MEA 9857 21 27 38 18
Figure12: Redington:LargestITdistributorinMiddleEastbyamargin MiddleEastrevenuesinUS$m 2011 Redington 2.024 MetraComputerFZCO 702 JumboItdistribution 443 AptecHoldings 431 FDCInternational 420
Staff 1200 100 630 180 150
We believe Redingtons reach provides a unique competitive edge that is tough to replicate. In addition to the logistic challenge of tying up with several channel partners, building relationships take time. Further, wafer-thin margins in the business mean that scale is essential for earning revenue and hence, a new entrant would need to incur losses for quite a few years. Redingtons size is its other key competitive advantage it is now Indias largest IT distributor and the largest in the Middle East by some margin. This provides the company a better reach and
manoj.singla@iif lcap.com 6
Redington BUY
Investment positive 3) Enhancing service offerings across the supply chain

Redington has tried several initiatives to enhance its offering and value proposition in the supply chain. These include:
Currently, two-thirds of NBFC business comes from Redington and the remaining from other players. Factoring of receivables from Redington to NBFC happens at ~10.5% borrowing rate. Lending to other distributors is at ~17% and borrowing costs are ~10-11%. From a financial perspective, the NBFC helps Redington taking over additional leverage, as it can go up to 6x (currently only at 1.28x). Leverage is low, as Redington has to capitalize a minimum of US$ 50 million, in line with the FDI guidelines for investment in NBFC. Banks/NCDs/CPs is typical source of funds. The management expects the leverage to increase over time. The company faced a minor challenge in 2QFY13, as one of its customers (a South Indian business group) to whom the NBFC had lent Rs 600 million, was facing difficult times. As a result, the NBFC acquired a building that was kept as collateral. EasyAccess has begun the process of selling the building immediately.
Figure13:EasyAccessFinancialServices:Detailedfinancials Rsinmillions FY08 FY09 FY10 Disbursals 4771 21278 25149 Networth 834 904 2378 Debt/equityratio 2.11 2.67 1.39 Grossrevenues 36 278 346 Profitbeforetax 23 107 198 Profitaftertax 12 70 129 PATmargin(%) 33% 25% 37%
Its unique offering of after sales services to customers. The
company has 70 owned service centres, supported by a franchisee network of 295 partners. Some customers in services are HP, Intel, Apple, Lenovo etc. Services contribute just 2% to revenue but have double-digit Ebitda margins and help facilitation of growth. Financing the channel through its NBFC called EasyAccess Financial Services (discussed in detail in a later section). Supply chain management services to vendors and channel partners, including import, warehousing, transportation, repacking, and delivery. The company can reach 1500 cities in less than 48 hours. Setting up ADCs (Automated distribution centres) that help in warehousing and third party logistics. The company already has ADCs in Dubai and Chennai, with Kolkata expected to be operational in FY13. The company has acquired land in New Delhi for ADC and looking to do so in Mumbai. These ADCs would provide a unique edge in case of implementation of GST.
FY11 36980 2525 1.63 522 286 190 36%
NBFC Redington started its own NBFC operations in February 2008 under the name EasyAccess Financial Services, a 100% owned subsidiary. The main objective was to finance the 23,000+ reseller community, in addition to equipment financing to end customers, and to extend need-based financing for distributors over the credit period. This helps Redington in providing another value added service to its partners and also helps in capturing more value in the chain. Further, the NBFC can also finance receivables from Redingtons competitors.
FY12 1HFY13 30976 7637 2637 2768 1.06 1.28 744 322 427 194 288 131 39% 41%
Redington BUY Figure15:Redington:GrowthofApplerevenues

(Rs m) 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1HFY10 2HFY10 1HFY11
Investment positive 4) Weakness in several segments might be behind

Apple ramping up and Blackberry stabilised
One of the key opportunities for Redington is utilising the distribution reach for newer products. This was evinced in Redingtons capturing of the Blackberry opportunity, deal signed in FY09, as Blackberry ramped up from Rs 162 million in FY09 to Rs 16,174 million in FY12. However, Blackberry started seeing a sharp drop in sales in 1HFY13, leading to a significant drop in growth rate in India revenue India revenue was down 1% Y/Y in 1HFY13. Though, Redington was selling most Apple products, it did not have iPhone (Apple was selling it in-house). Now, Redington has been able to get the iPhone distribution contract and revenue has started coming in from November 2013. Further, Blackberry sales have stabilised albeit at a lower level. This should drive a revival in India revenue. We expect 2HFY13 India revenue to grow 12% Y/Y, and FY14 to see 14% growth in India revenue.
Figure14:Redington:BlackberryandApplerevenues
(Rs m) 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 FY10
Revenues
2HFY11
1HFY12
2HFY12
1HFY13
Consumer durables doing well

Redington has tied up with several consumer durable players like LG, Whirlpool, and Godrej for distribution. Currently, Redington is distributing durables only in South India and is planning to extend it to West India. In terms of size, the durable business is still small at Rs 1,770 million in FY12, ~2% of India revenue. We believe that strong growth in this segment can add ~2% to the overall revenue growth of Redington in the next couple of years.
Blackberry
Apple
Weakness in Middle East should be over

Redington saw weak growth in international revenues in 1HCY12, with growth rebounding in 2QFY13. This has been driven by 1) Sharp market share loss for HP, the largest vendor for Redington, 2) Nokia breaking ties with Redington in Nigeria, Kenya, Ghana, and Uganda after it tied up with Samsung for phones. The management has begun to see stabilisation in PC revenues and the Nokia impact was fully absorbed in 2QFY13. We do not expect any further negative impact from the same, going forward.
FY11
FY12
1HFY13
Redington BUY Figure18:Redington:Revenueandmarginsforecasts FY09 FY10 FY11 FY12 FY13E FY14E FY15E Revenues India 61,063 64,861 83,667 100,784 106,264 121,501 139,726 International 66,248 73,130 91,190 116,307 128,913 144,382 161,708 Total 126,831 137,712 174,677 216,536 234,022 264,554 299,927 Y/Ygrowth India 6.2 29.0 20.5 5.4 14.3 15.0 International 10.4 24.7 27.5 10.8 12.0 12.0 Total 8.6 26.8 24.0 8.1 13.0 13.4
Figure16:Redington:VendorexposureinIndiarevenues
HP 100% 80% 60% 40% 20% 0% FY07 FY08 FY09 FY10 FY11 FY12 1HFY13
RIM
Apple
Others
Figure17:Redington:VendorExposureinInternationalRevenues
HP 100% 80% 60% 40% 20% 0% FY07 FY08 FY09 FY10 FY11 FY12 1HFY13
Nokia
Dell
Others
10
Redington BUY Figure20:Redington:Indiaandinternationalmargins

India International Total
Financials
Revenue growth to revive We expect Redingtons revenue to grow 13% Cagr over FY13-15E, driven by a sustained momentum across the India and overseas business. Also, ramp-up of Apple iPhone sales, stabilisation in Blackberry sales, and good traction in Samsung sales in Middle East/Africa would lead to a near-term uptick in growth in 2HFY13.
Figure19:Redington:IndiaandInternationalrevenuesandgrowth
India India grth International Intl grth Total Total grth
4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 2.38% 2.33% 2.45% 2.65% 2.60% 2.62% 2.65%
350000 300000 250000 200000 150000 100000 50000 0 FY09
35 30 25 20 15 10 5 0
0.0% FY09 FY10 FY11 FY12 FY13E FY14E FY15E

EPS growth to be strong With working capital improving gradually, we forecast a healthy 18%/22% EPS growth in FY14E/FY15E.
Figure21:Redington:NetprofitandgrowthY/Y
(Rs million) 5,000 4,000 3,000 2,000 1,000 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
Growth(RHS) (Y/Y) 35 30 25 20 15 10 5 0
FY10
FY11
FY12
FY13E
FY14E
FY15E
Netprofit(LHS)
Ebitda margins to show some expansion Redington should continue to see slight expansion in Ebitda margins, both on India and international business. This is due to: Higher contribution from services, which would drive margins up, as services business has double-digit Ebitda margin. Proportion of high value added products, which is on the rise, especially in international business. The management continues to explore efficiencies and has a good track record of showing an upward margin trajectory. Revival in sales growth would lead to some operating leverage.
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Redington BUY Figure24:Redington:Cashflowanddebtratios FY09 FY10 FY11 FY12 FY13E FY14E CFObeforeWCchanges 1,818 2,355 2,893 3,701 3,766 4,393 WCchanges (3,384) (2,490) (7,072) (2,892) (4,491) (2,175) CFO (1,566) (136) (4,179) 809 (725) 2,217 Capex (295) (323) (754) (617) (1,705) (640) FCF (1,861) (458) (4,932) 192 (2,430) 1,577 NetDebt 3,806 5,660 11,091 15,768 18,288 17,489 Equity 10,022 10,757 11,896 13,225 16,315 19,478 NetDebt/Equity 0.4 0.5 0.9 1.2 1.1 0.9
ROE/ROCE ROE of the business has continued to move up due to a sharp control on working capital.
Figure22:ROEandROCE
(%) 25 20 15 10 5 0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
ROE
ROCE
FY15E 5,268 (2,855) 2,413 (640) 1,773 16,592 23,395 0.7
Credit management and Bad debts Redington has a strong credit recovery mechanism that has allowed them to maintain bad debts at <0.07% of sales (last 8 year average). A dedicated credit team spread across the country, through integrated IT systems and tight systems (like credit against post-dated cheques), has helped the company maintain its bad debts at low levels.
Figure25:Redington:Provisions
Figure23:Redington:Workingcapitalmanagement
Cashconversioncycle 50 40 30 20 10 0 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
Receivabledays
Inventorydays
(%ofsales) 0 0 0 0 (0) (0) FY08
For receivables
For inventory
FY09
FY10
FY11
FY12
1HFY13
11
12
Redington BUY
Currency impact Redington makes 70% of purchases locally in Indian Rupees. For the remaining 30%, the company takes forward contracts on the day of purchase. The forward premium is part of the pricing (It is passed through). Hence, there is negligible impact of currency fluctuation on the margins on a medium-term basis. However, there can be quarterly fluctuations, as there is a lag effect of ~30 days from the product purchase to sale. 3QFY13 results signs of acceleration in growth Redington reported good 3QFY13 results with acceleration in revenue growth (11% Y/Y compared with 7% in 2QFY13) and a healthy expansion in margins. As a result, profit grew 21% Y/Y and 12% Q/Q.
Figure26: Redington:QuarterlyP&L Consolidated 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 Sales 51,990 54,340 55,004 55,152 53,716 58,597 61,255 GrossProfit 2,794 2,9903,130 3,668 3,214 3,355 3,620 Grossmargin(%) 5.37 5.505.696.65 5.98 5.72 5.91 Ebitda 1,348 1,3531,4591,8831,427 1,452 1,665 OPM(%) 2.59 2.492.653.41 2.66 2.48 2.72 PBT 985 9491,0951,475 960 1,0141,189 PAT 616 6136781,021 635 729 819 EPS 1.56 1.541.712.57 1.59 1.83 2.05 QoQ(%) Sales 4.60 4.52 1.22 0.27 2.60 9.09 4.54 Ebitda 13.3 0.3 7.8 29.1 24.2 1.8 14.6 PBT 20.2 3.6 15.3 34.7 34.9 5.7 17.3 PAT 19.2 0.5 10.7 50.6 37.9 14.9 12.3
Some key highlights of the results are:1) iPhone sales were ~Rs 4 billion in 3QFy13 as per expectations. Management continues to see healthy traction in Apple. Blackberry business has stabilised as per our analysis. 2) International business continues to see good traction from Samsung. With Nokia business having ramped down to zero, further traction in Samsung should lead to acceleration in international business in our view. 3) Redington has got a foothold in Samsung, the largest smartphone player in India. While the current contract is small and is for a bulk corporate sales, we believe that this could drive the next leg of growth in FY14 and beyond. 4) Arena, the Turkish subsidiary, has seen a sharp turnaround in profitability with net profit growing 30%+ Y/Y in 2012. We believe that this has the potential to add another ~2-3% to net profit of Redington over the next couple of years. 5) Redington generated an unprecended Rs 2.7 billion of free cash flow in 3QFY13 largely due to high iPhone sales. Given the robust demand, working capital in the product was negative. However we see this as one-off and believe that working capital should increase going forward. 6) Redington would be executing a UID project in 4QFY13 that should 2-3% to 4QFY13 revenues and provide a near-term growth trigger. 7) In terms of outlook, management indicated that consumer demand in India was soft and growth would be driven by specific contracts (like UID) and/or deals (like Samsung).
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Redington BUY
Valuation and risks

We are valuing the stock at 12-month forward P/E of 11x, slightly ahead of global peers. Redingtons metrics are superior to most of its global peers on margins, ROEs consistency of delivery, and growth. With Indias under-penetrated IT market promising a higher growth than most other markets, we believe that Redington would get some valuation premium compared with other global players. Our 12-month forward target price is Rs 125/share.
Figure27: ComparisonacrossGlobalDistributors 1HCY12 Redington Ingram RevenuesinUS$m 2091 17418 Grossmargin% 6.50% 5.30% EBIT% 3.10% 1.20% WCdays 42 25
international business. Any sharp drop in HP revenue would hit Redington in the short term Increase in bad debts or provisions, especially in the NBFC, remain a key area of risk. However, Redington has an impeccable track-record in managing the same so far. Working capital intensity of the business is high and remains a risk. Redington also takes on inventory risk and this can hurt in the short-term if a specific product inventory cannot be cleared. Sharp fluctuations in currency will have an impact, as Redington is able to pass on the same with lag of a quarter.
Techdata 11772 4.60% 0.50% 23
SynnexTech 4961 4.90% 2.60% 62
Figure29:Redington:12monthforwardPERrollingchart
250 210 170 130 90 50 10 (30) Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 (Rs/share) 25.0x 20.0x 15.0x 10.0x 5.0x
Figure28: ValuationcomparisonacrossGlobalDistributors Mcap Mcap(Mn) EPS PE (Mn) BBGTicker PriceCurr. LocalCurr. US$FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15 REDIINEquity 87.9 INR 35,066 658 7.2 8.4 10.0 12.1 12.3 10.4 8.8 7.3 IMUSEquity 18.1 USD 2,724 2,724 1.8 2.1 2.3 NA 10.0 8.6 7.8 NA TECDUSEquity 51.2 USD 1,935 1,935 5.1 5.1 5.8 6.0 10.1 10.1 8.8 8.5 2347TTEquity 62.3 TWD 98,238 3,322 3.8 4.5 4.9 NA 16.3 13.9 12.7 NA ARWUSEquity 39.3 USD 4,164 4,164 4.3 4.3 4.8 NA 9.2 9.2 8.3 NA
Source:Bloomberg
Risks to thesis Key risks to our thesis are: HP continues to be the largest vendor for Redington accounting for 21% of India and 34% of International revenue. HP has been facing difficult times in the recent past, especially in the
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Redington BUY
Annexure I: Redington Logistics Facilities
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Redington BUY
Annexure II
RedingtonIndiapresence Redington:InternationalPresence
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Redington BUY
Annexure III: Vendor Relationships
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Redington BUY
Annexure IV: Redington Company Holding Structure

REDINGTON (INDIA) LIMITED
Cadensworth (India) Limited, India 100%
Redington Distribution Pte Ltd, Singapore 100%
Redington International Mauritius Ltd Mauritius 100%
ProConnect Supply Chain Solutions Ltd., India 100%
Nook Nook Micro Micro Distribution Distribution Limited, Limited, India India 100% 100%
Redington (India) Investments Ltd India 47.6% Currents Retail Technology (India) Ltd 100%
Easyaccess Easyaccess Financial Financial Services Ltd, India 100%
Redington SL Pvt Limited (Sri Lanka) 100%
Redington International Holdings Ltd Cayman Island 100% Redington Turkey Holdings, Luxemburg 100% Ensure Gulf FZE, Dubai 100%
Arena ,Turkey 49.4% Ensure Technical Services (PTY) Ltd., South Africa 100%
Arena International FZE 100% Sensonet Technoloji, Turkey 99.78% Ensure Middle East Trading LLC 49%
Redington Gulf FZE, Dubai 100% Redington Bangladesh Ltd Bangladesh (Redington Singapore - 99%, Redington Gulf 1%)
Redington Nigeria Ltd, (Lagos) 100%
Redington Kenya Ltd (Nairobi) 100%
Redington Gulf & Co LLC (Muscat) 70%
Cadensw orth FZE (Dubai) 100%
Redington Egypt Ltd (Cairo) 99%
Redington IT Services (PTY) Ltd. (Johannesburg , South Africa)
Redington Arabia Ltd Ltd Arabia (Riyadh) 100%
Redington Middle Middle East East LLC (Dubai) 49%
Redington Africa Distribution FZE (Dubai) 100%
Redington Bahrain SPC 100% 100%
RGF Pvt Trust Company Ltd (Cayman Island) 100%
Redington Ltd Ltd (Ghana) 100%
Africa Joint Technical Services (Libya) 65%
Redington Uganda Ltd (Uganda) 100%
Redington Redington Kenya Kenya EPZ EPZ Ltd Ltd (Kenya) (Kenya) 100% 100%
Redington Redington Rwanda Rwanda Ltd. Ltd. 100% 100%
Cadensworth Cadensworth United United Arab Arab Emirates Emirates LLC LLC (Dubai) (Dubai) 49% 49%
Redington Redington Gulf Gulf FZE FZE CO, CO, Iraq Iraq 100% 100%
Redington Redington Qatar Qatar WLL WLL (Qatar) (Qatar) 49% 49%
Redington Qatar Distribution WLL 49%
Redington Redington Kazakhstan Kazakhstan LLP LLP 100% 100%
Redington Redington Tanzania Tanzania Ltd Ltd 99% 99% Cadensworth Cadensworth Fze Fze 1% 1%
Redington Redington Morroco Ltd Ltd Morroco 100% 100%
Redington Redington Angola Ltd Angola Ltd 99% 99% Cadensworth Cadensworth FZE FZE 1% 1%
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18
Redington BUY
Financial summary
Incomestatementsummary(Rsm) Y/e31Mar,Consolidated Revenues Ebitda Depreciationandamortisation Ebit Nonoperatingincome Financialexpense PBT Exceptionals ReportedPBT Taxexpense PAT Minorities,Associatesetc. AttributablePAT Ratioanalysis Y/e31Mar,Consolidated Persharedata(Rs) PreexceptionalEPS DPS BVPS Growthratios(%) Revenues Ebitda EPS Profitabilityratios(%) Ebitdamargin Ebitmargin Taxrate Netprofitmargin Returnratios(%) ROE ROCE Solvencyratios(x) Netdebtequity NetdebttoEbitda Interestcoverage
Source:Companydata,IIFLResearch
FY11A FY12A 174,585 216,485 4,521 6,042 (246) (310) 4,275 5,732 195 292 (961) (1,520) 3,510 4,504 0 0 3,510 4,504 (862) (1,113) 2,648 3,391 (388) (463) 2,260 2,928 FY11A 5.7 1.1 30.0 26.9 31.1 21.6 2.6 2.4 24.6 1.5 20.0 16.0 0.9 2.5 4.4 FY12A 7.3 0.4 33.2 24.0 33.7 28.9 2.8 2.6 24.7 1.6 23.3 18.2 1.2 2.6 3.8
FY13ii 234,022 6,478 (405) 6,074 328 (1,850) 4,552 0 4,552 (1,190) 3,361 (197) 3,165 FY13ii 7.9 1.1 40.9 8.1 7.2 7.9 2.8 2.6 26.2 1.4 21.4 16.9 1.1 2.8 3.3
FY14ii 264,554 7,395 (451) 6,944 208 (1,825) 5,327 0 5,327 (1,385) 3,942 (221) 3,721 FY14ii 9.3 1.2 48.8 13.0 14.1 17.6 2.8 2.6 26.0 1.5 20.8 17.0 0.9 2.4 3.8
FY15ii 299,927 8,439 (476) 7,963 338 (1,825) 6,476 0 6,476 (1,684) 4,792 (269) 4,523 FY15ii 11.3 1.3 58.6 13.4 14.1 21.6 2.8 2.7 26.0 1.6 21.1 18.2 0.7 2.0 4.4
Balancesheetsummary(Rsm) Y/e31Mar,Consolidated Cash&cashequivalents Inventories Receivables Othercurrentassets Creditors Othercurrentliabilities Netcurrentassets Fixedassets Intangibles Investments Otherlongtermassets Totalnetassets Borrowings Otherlongtermliabilities Shareholdersequity Totalliabilities
FY11A 4,806 15,833 25,483 2,422 18,815 0 29,729 1,476 0 0 0 31,206 15,897 3,413 11,896 31,206 FY11A 4,275 (862) 246 (7,072) 0 (3,413) (961) 195 (4,179) (754) 0 0 (4,932) (1,001) 5,421 (507) (1,020)
FY12A 4,834 17,000 27,920 2,916 20,020 0 32,650 1,783 0 0 657 35,091 20,603 1,263 13,225 35,091 FY12A 5,732 (1,113) 310 (2,892) 0 2,037 (1,520) 292 809 (617) 0 (657) (466) (1,877) 2,556 (186) 28
FY13ii 4,525 20,584 30,368 4,092 22,737 0 36,832 3,083 0 0 657 40,572 22,813 1,444 16,315 40,572 FY13ii 6,074 (1,190) 405 (4,491) 0 797 (1,850) 328 (725) (1,705) 0 0 (2,430) 241 2,391 (512) (309)
FY14ii 5,323 22,689 33,842 4,101 26,150 0 39,805 3,272 0 0 657 43,735 22,813 1,444 19,478 43,735 FY14ii 6,944 (1,385) 451 (2,175) 0 3,834 (1,825) 208 2,217 (640) 0 0 1,577 (221) 0 (558) 798
FY15ii 6,221 24,852 37,495 4,638 29,648 0 43,558 3,436 0 0 657 47,652 22,813 1,444 23,395 47,652 FY15ii 7,963 (1,684) 476 (2,855) 0 3,900 (1,825) 338 2,413 (640) 0 0 1,773 (269) 0 (607) 898 18
Cashflowsummary(Rsm) Y/e31Mar,Consolidated Ebit Taxpaid Depreciationandamortization Networkingcapitalchange Otheroperatingitems Operatingcashflowbeforeinterest Financialexpense Nonoperatingincome Operatingcashflowafterinterest Capitalexpenditure Longterminvestments Others Freecashflow Equityraising Borrowings Dividend Netchgincashandequivalents
Source:Companydata,IIFLResearch
19
Redington BUY
Key to our recommendation structure BUY - Absolute - Stock expected to give a positive return of over 20% over a 1-year horizon. SELL - Absolute - Stock expected to fall by more than 10% over a 1-year horizon. In addition, Add and Reduce recommendations are based on expected returns relative to a hurdle rate. Investment horizon for Add and Reduce recommendations is up to a year. We assume the current hurdle rate at 10%, this being the average return on a debt instrument available for investment. Add - Stock expected to give a return of 0-10% over the hurdle rate, i.e. a positive return of 10%+. Reduce - Stock expected to return less than the hurdle rate, i.e. return of less than 10%.
Analyst Certification (a) that the views expressed in the research report accurately reflect such research analyst's personal views about the subject securities and companies; and (b) that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in the research report.
Published in 2013, India Infoline Ltd 2013 This report is published by IIFLs Institutional Equities Research desk. IIFL has other business units with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets. This report is for the personal information of the authorized recipient and is not for public distribution. This should not be reproduced or redistributed to any other person or in any form. This report is for the general information of the clients of IIFL, a division of India Infoline, and should not be construed as an offer or solicitation of an offer to buy/sell any securities. MICA(P) 017/10/2012. We have exercised due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy or completeness. The opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. India Infoline or any persons connected with it do not accept any liability arising from the use of this document. The recipients of this material should rely on their own judgment and take their own professional advice before acting on this information. India Infoline or any of its connected persons including its directors or subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained, views and opinions expressed in this publication. India Infoline and/or its affiliate companies may deal in the securities mentioned herein as a broker or for any other transaction as a Market Maker, Investment Advisor, etc. to the issuer company or its connected persons. India Infoline generally prohibits its analysts from having financial interest in the securities of any of the companies that the analysts cover. In addition, the company prohibits its employees from conducting F&O transactions or holding any shares for a period of less than 30 days.
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2 February 2013
3QFY13 Results Update | Sector: Logistics
Redington India
BSE Sensex 19,781 Bloomberg Equity Shares (m) M.Cap. (INR b)/(USD b) 52-Week Range (INR) 1,6,12 Rel. Perf. (%) S&P CNX 5,999 REDI IN 398.6 35/0.6 94/65 0/10/-5
CMP: INR87
TP: INR102
Buy
Financials & Valuation (INR b)

Y/E March 2013E 2014E 2015E 277.4 8.1 4.1 10.4 26.0 49.4 23.1 19.4 15.7 7.6 1.6 6.5 1.8 0.2 324.4 9.6 5.0 12.5 20.4 59.8 22.9 20.3 16.8 6.3 1.3 5.7 2.3 0.2 Sales 238.3 EBITDA 6.6 NP 3.3 EPS (Rs) 8.3 EPS Gr. (%) 12.5 BV/Sh.(INR) 40.6 RoE (%) 22.4 RoCE (%) 18.1 Payout (%) 9.9 Valuations P/E (x) 9.6 P/BV (x) 2.0 EV/EBITDA (x) 7.8 Div Yield 0.9 EV/Sales (x) 0.2
Results marginally below expectations: REDI's 3QFY13 results were marginally below expectations, with revenue up 11% YoY at INR61.2b (v/s our estimate of INR63.5b), EBITDA up 14% YoY at INR1.7b (v/s our estimate of INR1.8b) and net profit up 21% YoY at INR819m (v/s our estimate of INR824m). Domestic revenue grew 15% YoY and 6% QoQ to INR28.2b, while international revenue was up 8% YoY and 2% QoQ at INR33.1b. Domestic revenue was boosted by strong growth in the non-IT segment, primarily due to Apple iPhone launch. Moderates growth expectations: The management moderated growth expectations and noted that consumer demand outlook remains weak; the anticipated recovery is not yet visible. Nonetheless, the management was optimistic of de-freezing of government project demand. It guided for IT growth rate of ~10% for the domestic and international markets. It even lowered its Apple iPhone guidance for FY13 from INR11b to INR8b. FCF generation of INR2.7b in 3QFY13: In 3QFY13, REDI generated FCF of ~INR2.7b (~INR2.3b for 9MFY13), primarily due to lower working capital requirements, on favorable working capital terms in case of Apple iPhone sales. REDI's net debt-equity stood at ~1x. Valuation and view: REDI is the leading IT SCM player in India and the Middle East and is a strategic partner to the world's leading technology companies. We expect REDI to post revenue CAGR of 17% and net profit CAGR of ~20% over FY12-15. Implementation of GST would unveil and increase new opportunities for the company, particularly in the non-IT vertical. We are revising our revenue estimates by -1.3%/-2.4%/-2.2% for FY13/FY14/FY15 and PAT estimates by -3.3%/-1.4%/-0.9% for FY13/FY14/FY15. REDI trades at 7.6x/ 6.3x its FY14/FY15E earnings and EV of 6.5x/5.7x FY14/FY15E EBITDA. We maintain Buy with a target price of INR102 (based on intrinsic P/E of 8x FY15E) - an upside of ~17%.
Siddharth Bothra (Siddharth.Bothra@MotilalOswal.com); +91 22 3029 5127

Investors are advised to refer through disclosures made at the end of the Research Report.
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Redington India
Results marginally below estimates

REDI's 3QFY13 results was marginally below estimate with Revenues up 11% YoY at INR61.2b vs. est. of INR63.5b, EBITDA up 14% YoY at INR1.7b vs. est. of INR1.8b and net profit up 21% YoY at INR819m vs. est. of INR824m. Domestic revenue stood at INR28.2b (up 15% YoY/ 6% QoQ), while international revenues stood at INR33.1b (up 8% YoY/ 2% QoQ). Domestic revenues were boosted by strong growth in the non-IT segment, primarily due to Apple iPhone launch. Moderates growth expectations: Management moderated growth expectations and noted that consumer demand outlook remained weak, as the anticipated recovery is not yet visible. Nonetheless, management was optimistic of de-freezing of Government project demand. Management guided for IT growth rate of ~10% for the domestic and international markets. It even lowered its Apple iPhone guidance for FY13 from INR11b to INR8b.
Segmental Analysis: Domestic demand rebounds; EBIT margins improve 22bp QoQ
Domestic revenue stood at INR28.2b (up 15% YoY/ 6% QoQ), while international revenues stood at INR33.1b (up 8% YoY/ 2% QoQ). The share of domestic revenues as percentage of overall revenues stood at 46% (44% in 2QFY12), while share of international revenues as percentage of overall revenues stood at 54% (56% in 3QFY12). Domestic revenues were boosted by strong growth in the non-IT segment, primarily due to Apple IPhone launch. EBIT margins stood at 3.4% for domestic operations and 2.1% for international operations, overall EBIT margins 2.5bp YoY and 22bp QoQ.
Consolidated Segment wise data (INR m)

1QFY12 Revenue India Overseas Total Inter-segment Net Sales EBIT India Overseas Total EBIT India International Total Capital Employed India Overseas Total 23,891 26,207 50,099 155 49,943 809 509 1,318 1QFY12 3.4% 1.9% 2.6% 6,132 10,453 16,585 2QFY12 27,052 24,983 52,035 145 51,890 864 441 1,305 2QFY12 3.2% 1.8% 2.5% 6,641 10,998 17,640 3QFY12 24,516 30,645 55,161 157 55,004 822 651 1,473 3QFY12 3.4% 2.1% 2.7% 7,051 12,385 19,436 4QFY12 FY12 1QFY13 25,190 28,702 53,892 176 53,716 885 515 1,399 1QFY13 3.5% 1.8% 2.6% 2QFY13 26,608 32,357 58,966 368 58,597 868 587 1,455 2QFY13 3.3% 1.8% 2.5% 3QFY13 28,152 33,153 61,305 50 61,255 943 712 1,656 3QFY13 3.4% 2.1% 2.70%
24,136 99,596 31,113 112,948 55,250 212,544 98 555 55,152 211,989 1,186 743 1,929 4QFY12 4.9% 2.4% 3.5% 6,878 7,296 14,174 3,680 2,344 6,024 FY12 3.7% 2.1% 2.8% 6,878 7,296 14,174
7,345 7,757 8,179 8,113 8,028 8,868 15,458 15,785 17,047 Source: Company, MOSL
2 February 2013
22
Redington India
EBIT margins QoQ
Revenue growth across domestic and international operations
Sales break-up geography-wise
Source: Company, MOSL
Key updates 3QFY13: Moderates expectations; RIM sales down 50% YoY
Management moderated growth expectations and noted that consumer demand outlook remained weak, as the anticipated recovery is not yet visible. Nonetheless, management was optimistic of de-freezing of Government project demand. In this regard, it expects to win a UID order of ~INR2b in 4QFY13. Management mentioned that in the domestic market it is close to achieving a limited break-through (for bulk corporate sales) with Samsung, the largest handset player in India (~50% market share). If this materializes than it could potentially open up a huge non-IT market for REDI in the domestic market (including consumer goods) as REDI currently has no distribution agreements with Samsung in India. Though currently the acope of agreement if it materializes is small management is hopeful of building up on the same. However, REI already distributes Samsung handsets in the African markets. Management guided for IT growth rate of ~10% for the domestic and international markets. It even lowered its Apple iPhone guidance for FY13 from INR11b to INR8b. RIM run rate has now come down to INR500m/month (RIM revenues in FY12 was 16b). The new BB10 line launched by RIM is slated to hit the domestic market by mid Feb and could potentially arrest this fall. REDI continued to de-risk its vendor risk with share of HP declining to 19% in the domestic market and ~32% in the international market, during 3QFY13. REDI is also eyeing a limited execution role in a 1.5m PC order that HP has won from the UP Government, as it does not want to take on the risk of delay in State Government disbursals.
3
2 February 2013
23
Redington India
REDI is close to disposing the IT real estate of ~INR1.5b, which it has been stuck with in its NBFC arm. Management is hopeful of concluding this deal sometime within FY13. Post which it plans to move fast with regard to its plans to sell minority stake in its NBFC arm to strategic and financial investors.
Apple iPhone guidance lowered

During 3QFY13, REDI started distribution of Apple iPhone towards the end of October'13 and clocked sales of ~INR4b, during the quarter. REDI's overall revenues from all Apple products stood at INR6.4b for 3QFY13. Nonetheless, given the weak consumer demand outlook, management has downgraded their FY13 revenue guidance from Apple iPhone from ~INR11b to INR8b. While the margins for Apple iPhone are lower, REDI currently enjoying very favorable working capital terms, with credit period of ~30days and receivable period of ~15days, which has allowed REDI to lower its working capital requirement in 3QFY13. Consequently, during 3QFY13, REDI generated FCF of ~INR2.7b (~INR2.3b for 9MFY13), primarily due to lower working capital requirements.
Trend of overall Apple sales over FY10-9MFY13 (INR m)
Valuations and view
REDI is the leading IT SCM player in India and the Middle East and is a strategic partner to the world's leading technology companies. We expect REDI to post revenue CAGR of 17% and net profit CAGR of ~20% over FY12-15E. Implementation of GST would unveil and increase new opportunities for the company, particularly in non-IT vertical. Its efforts to diversify across the supply chain industry are paying off, with non-IT segment as a percentage of revenues increasing from ~5% in FY07 to ~19% in FY12. During 3QFY13, REDI generated FCF of ~INR2.7b (~INR2.3b for 9MFY13), primarily due to lower working capital requirements. REDI's net debt equity stood at ~1x. We believe successful implementation of REDI's strategic initiatives could allay concerns on 1) its NBFC arm, 2) outlook for its subsidiary Arena and 3) asset-heavy capex plans for ADCs. We are revising our revenue estimates by -1.3%/-2.4%/ -2.2% for FY13/ FY14/ FY15 and PAT estimate by -3.3%/-1.4%/ -0.9% for FY13/14/15. REDI trades at P/E of 7.6x/ 6.3x its FY14/FY15 earnings and EV of 6.5x/ 5.7x its FY14/ FY15 EBITDA. We maintain Buy with a target price of INR102, based on intrinsic P/ E of 8x its FY15E earnings, an upside of ~17%.
4
2 February 2013
24
Redington India
Redington India: an investment profile

Company description
REDI is promoted by the Singapore-based Kewalram Chanrai Group that also owns OLAM and Jaslok Hospital in Mumbai, India. In 1993, it began as a component distributor and moved into completed products such as PCs, desktops etc and finally into value added products. It then positioned as a complete supply chain manager, with a focus on value-added IT products. In the past 3-4 years, REDI is slowly transitioning into a complete supply chain manager to include non-IT products too, with a presence in India, Middle East, Africa and Turkey. REDI plans to slowly extend its reach to CIS countries too. It aims to have a global footprint in developing countries.
Recent developments
Lowered iPhone sales guidance from INR11b in FY13 to INR8b RIM sales fell 50% YoY in 3QFY13 FCF generation of INR2.7b in 3QFY13 (INR2.3b in 9MFY13)
Valuation and view

We are revising our revenue estimates by -1.3%/2.4%/ -2.2% for FY13/ FY14/ FY15 and PAT estimate by -3.3%/-1.4%/ -0.9% for FY13/14/15. REDI trades at P/E of 7.6x/ 6.3x its FY14/FY15 earnings and EV of 6.5x/ 5.7x its FY14/ FY15 EBITDA. We maintain Buy with a target price of INR102, based on intrinsic P/E of 8x its FY15E earnings, an upside of ~17%.
Key investment arguments

An indispensable link in IT supply chain Pursuing successful four-pronged growth strategy Strategic diversifications aimed to de-risk model
Sector view
REDI is likely to be a key beneficiary from the robust growth outlook of Indian IT industry, which is forecasted to post a CAGR of 10% from ~USD66.4b in FY12 to ~USD95.9b by FY16. India's market offers significant opportunities to IT services providers due to increasing demand. REDI has good scope to add new products to its existing verticals and move up the value chain.
Key investment risk

Failure to adapt to IT industry changes Intense competition High risk of clients' concentration Exposed to risks of conducting business in multiple geographies
EPS: MOSL forecast v/s Consensus (INR)

MOSL Forecast 8.3 10.4 Consensus Forecast 8.5 10.1 Variation (%) -2.4
3.0
Target price and recommendation

Current Price (INR) 87 Target Price (INR) 102 Upside (%) 17.2 Reco. Buy
FY13 FY14
Stock performance (1 year)
Shareholding Pattern (%)

Dec-12 Promoter Domestic Inst Foreign Others 21.1 8.4 64.1 6.5 Sep-12 21.1 9.0 63.3 6.7 Dec-11 21.1 8.8 63.3 6.8
2 February 2013
25
Redington India
Financials and Valuation
2 February 2013
26
Redington India
N O T E S
2 February 2013
27
Disclosures
This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Group/Directors ownership of the stock 3. Broking relationship with company covered 4. Investment Banking relationship with company covered Redington India No No No No
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Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
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25 January 2013 Initiating Coverage | Sector: Logistics
Redington India
REDI to roll
Siddharth Bothra (Siddharth.Bothra@MotilalOswal.com); +91 22 3029 5127
29
Redington India
Redington India: REDI to roll

Page No. Summary ........................................................................................................ 3-4 An indispensable link in IT supply chain ...................................................... 5-9 Pursuing four-pronged growth strategy .................................................. 10-14 Strategic diversifications aimed to de-risk model ................................... 15-17 Strong revenue and earnings growth outlook ........................................ 18-21 Valuation and view .................................................................................... 22-24 Company background and key risks ......................................................... 25-26 Financials and valuation ........................................................................... 27-28
25 January 2013
30
25 January 2013 Initiating Coverage | Sector: Logistics
Redington India
BSE SENSEX S&P CNX
19,924
6,019
CMP: INR81 REDI to roll
TP: INR103
Buy
Diversification beyond IT supply chain - a shot in the arm

Bloomberg Equity Shares (m) 52-Week Range (INR) 1,6,12 Rel. Perf. (%) REDI IN 398.6

M.Cap. (INR b)/(USD b) 32.3/0.6 94/65 -11/-3/-16
Valuation summary (INR b)

Y/E March 2013E 2014E 2015E Sales 241.6 284.2 331.9 EBITDA 6.9 8.3 9.8 NP 3.4 4.2 5.0 EPS (INR) 8.5 10.6 12.6 EPS Gr. (%) 16.3 23.6 19.8 BV/Sh. (INR) 40.9 49.7 60.2 RoE (%) 23.1 23.3 23.0 RoCE (%) 18.7 19.7 20.7 Payout (%) 9.6 16.6 16.7 Valuations P/E (x) 9.3 7.5 6.3 P/BV (x) 1.9 1.6 1.3 EV/EBITDA (x) 7.1 6.2 5.4 Div Yield 0.9 1.9 2.3 EV/Sales (x) 0.2 0.2 0.2
Redington India (REDI) is the leading IT SCM player in India and Middle East and a strategic partner to some of the worlds leading technology companies. Its efforts to diversify across the supply chain industry are paying off, with non-IT segment, as a percentage of revenues, increasing from ~5% in FY07 to ~19% in FY12. We estimate a further increase to ~22% by FY15E. During 1HFY13, REDIs revenue growth was muted at ~10% (2% in domestic and 19% in international). We expect the company to benefit from 1) pent up government demand, 2) implementation of Goods and Services Tax (GST), 3) iPhone distribution to boost domestic non-IT growth and has the potential to contribute ~INR24b to REDIs top line by FY14 and 4) revival in subsidiary Arenas operations. We believe execution of REDIs strategic initiatives could allay concerns on 1) its NBFC arm, 2) recovery in Arena and 3) asset-heavy capex plans for automatic distribution centers (ADCs). REDI trades at 7.5x/6.3x FY14E/FY15E EPS and EV of 6.2x/5.4x FY14E/FY15E EBITDA. We initiate coverage with a Buy and a target price of INR103, based on intrinsic P/E of 8x its FY15 earnings, an upside of ~27%.
An indispensable link in IT supply chain

Over the years, REDI has evolved as an end-to-end supply chain management (SCM) solutions and strategic partner to the worlds leading technology companies. As India has significant under-penetration in IT and consumer goods, increasing discretionary spending would change this and lead to more spending in IT related products and consumer durables. Company is not only the largest and leading IT SCM player in India but also leads in international markets like Middle East and Africa.
Shareholding pattern (%)

As on Sep-12 Promoter 21.1 Dom. Inst 9.0 Foreign 63.3 Others 6.7 Jun-12 Sep-11 21.1 21.1 9.4 8.9 63.3 63.4 6.3 6.6
Pursuing successful four-pronged growth strategy

REDI is pursuing a four-pronged strategy to achieve strong growth and sustain the competitive advantage in IT distribution industry: 1) growth in existing product lines, 2) foray into new verticals and business lines, 3) explore new regions and geography/inorganic acquisitions and 4) strategic initiatives. As Indias market offers significant opportunities to IT services providers due to increasing demand, company has scope to add new products to its existing verticals and move up the value chain. A diversified portfolio enables it to manage vendor risks and growth effectively. Also, REDIs global reach gives a competitive advantage, with suppliers eyeing worldwide market penetration.
Stock performance (1 year)
Strategic diversifications aimed to de-risk model

Investors are advised to refer through disclosures made at the end of the Research Report. 25 January 2013
To leverage existing strengths in IT logistics business and broadbase its product offerings, REDI forayed into distribution of consumer goods. Non-IT business has grown from ~5% of overall revenues in FY07 to ~19% in FY12. Given lack of quality third party logistics (3PL) players in India, REDI is well-placed to create a
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niche in this segment. We model its consumer goods business, consists of key clients like LG, Whirlpool, Voltas, Godrej, etc, to increase from ~INR1.8b in FY12 to ~INR8.5b by FY15E.
Initiate coverage with a Buy and target price of INR103

We expect REDI to post revenue CAGR of 17% and net profit CAGR of 20% respectively over FY12-15E. Implementation of GST would unveil and increase significant opportunities for the company, particularly in non-IT verticals. We believe execution of REDIs strategic initiatives could allay concerns on 1) its NBFC arm, 2) recovery in Arena and 3) asset-heavy capex plans for ADCs. REDI trades at 7.5x/6.3x FY14E/FY15E EPS and EV of 6.2x/5.4x FY14E/FY15E EBITDA. We initiate coverage with a Buy and a target price of INR103, based on intrinsic P/E of 8x its FY15 earnings, an upside of ~27%.
SCM players - an indispensable link in IT supply chain
Source: GTDC Research
3PL logistics to increase

As compared to developed nations, 3PL contribution remains at a nascent stage
REDI present in most attractive segments

Current 3PL penetration
HIGH
High
Neutral
Low
Retail
Infrastructure Equipment
Growth of Sector MEDIUM LOW
Chemicals and Industrial products
Pharmaceuticals
IT Hardware Telecom
LOW
Consumer products MEDIUM Profitability of 3PL
Automotive HIGH
Source: KPMG Analysis 25 January 2013 4
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An indispensable link in IT supply chain

Market leader in a fast growing industry

Over the years, REDI has evolved into an end-to-end supply chain management (SCM) solutions and strategic partner to the worlds leading technology companies. The outlook for Indian IT and telecom industry is promising, with IDC forecasting it to post a CAGR of 10% over FY12-16, from ~USD66b in FY12 to ~USD96b by FY16. As India has significant under-penetration in IT and consumer goods, increasing discretionary spending would change this and lead to more spending in IT related products and consumer durables. Company is not only the largest and leading IT SCM player in India but also leads in international markets like Middle East and Africa.
Emerging as a complete SCM player

REDI creates value in the market by extending the reach of its technology partners, capturing market share for resellers and suppliers, creating innovative solutions and offering credit. It is engaged in the business of selling high-volume, low-margin products like laptops, servers and smart phones to consumer resellers and retailers. REDI is not only the the largest IT distributor in India but also the leading SCM player in the Middle East and Africa. Over the years, REDI has evolved from a distributor to an end-to-end supply chain management (SCM) vendor and a strategic partner to the worlds leading technology companies. The scale of operations and business volume ensure tremendous bargaining power with various product manufacturers and resellers. The value added through integrated business model, vast geographic reach, efficient working capital management, deep-rooted relationships with vendors and channel partners and economies of scale create significant entry barriers for new players in this business.
REDI has transformed from a distributor to total SCM player
... To Supply Chain Management

From Distribution...

Distribution of only IT products in India Cash and carry model No inventory, only back-to-back orders
Distributor of IT, Telecom & consumer durables Third party logistics services Door-to-door delivery Credit to channel partners Channel relationship management Management of inventory After sales support service Source: Company, MOSL
Well-proven business model

The wholesale distribution model has proven to be well-suited for both manufacturers of technology products and resellers. The large number of resellers makes it costefficient for vendors to rely on wholesale distributors to serve this diverse and highly fragmented customer base. An SCM player like REDI adds value by 1) reducing manufacturers inventory and improving its time-to-market, 2) enhancing manufacturers go-to-market strategies and 3) providing efficient market engine for manufacturers.
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Similarly, the wide spectrum of products offered by multiple vendors helps the company achieve economies of scale and provide customers a single sourcing point. Due to many vendors and products, resellers often cannot establish direct purchasing relationships with them. Hence, they often rely on wholesale distributors such as REDI who can leverage purchasing costs across multiple vendors to satisfy a significant portion of their product procurement, logistics, financing, marketing and technical support needs.
SCM players - an indispensable link in IT supply chain
Source: GTDC Research
Role of SCM players like REDI to be critical, going forward

Given that India has significant under-penetration in IT and consumer goods, increasing discretionary spending could lead to more on IT and consumer related goods. Globally, majority of the supply chain is managed by dedicated 3PL players; currently, their share in India is ~9%, which is expected to increase sharply post the introduction of GST. Within 3PL services, IT distribution is one of the most attractive segments. Thus, REDI is well-placed to benefit from these emerging opportunities and increase its value-added sales, going forward.
3PL logistics to increase
As compared to developed nations, 3PL contribution remains at a nascent stage
REDI present in most attractive segments

Current 3PL penetration
HIGH
High
Neutral
Low
Retail
Infrastructure Equipment
Growth of Sector MEDIUM LOW
Chemicals and Industrial products
Pharmaceuticals
IT Hardware Telecom
LOW
Consumer products MEDIUM Profitability of 3PL
Automotive HIGH
25 January 2013
Source: KPMG Analysis 6
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Expect value-added services to increase sharply
The distributors model

The chart below shows that some distributors sell components to vendors and also buy finished IT products from manufacturers. Certain manufacturers and distributors sell directly to end-user businesses in addition to supplying resellers with their wares. As there is no demarcation to distinguish one part of the supply chain from another, a product could take multiple paths to the market. Since the industry has evolved from a linear to non-linear marketplace, partnership and collaboration are now more imperative. Successful manufacturers, distributors and resellers form and reform teams and partnerships responding to market trends.
The distributors model
MANUFACTURER DISTRIBUTOR 4-6% RESELLER 15% 9-11% Government Resellers Corporate Resellers IT Full-Line Distributors Direct Marketers VARs IT Specialty Distributors Retailers Online Resellers DIRECT (%) Source: Industry, MOSL 25 January 2013 7 Government / Education Fortune 1000 Businesses Small and Medium-sized Businesses END USER
Subsystems and Peripherals
Component and Material Suppliers
Electronic Component Distributors
Electronic Contract Manufacturers
IT Original Equipement Manufacturers (IT OBMs)
Software
Consumer
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Key risks and mitigation strategies

Key business model risks Low gross margins Business is characterized by narrow gross operating margins. These narrow margins magnify the impact of any change in operating results attributed to variations in sales and operating costs High vendor concentration HP accounts for ~35% of REDI's overall sales (20% of domestic and 44% of international) Receivable risk As REDI sells its goods on credit to several fragmented re-sellers, there is high receivable risk High working capital intensity Working capital intensity is high as distributors have to keep inventory and sell on credit Inventory risk REDI's business subjects it to the risk that the value of inventory could be adversely affected by suppliers' price reductions or by technological changes, thus affecting usefulness or desirability of products Mitigation strategies Increasing value portfolio; New initiatives
Broad-basing vendors; increasing depth of product lines
Historically bad debt, including provisions, as percentage of sales has been less than 0.07%. As company has a wide portfolio, re-sellers dependence is high Working capital management disciplines
Market knowledge; forecasting ability and robust IT system Obsolescence overcome by stock rotation policy supported by vendors Price erosion supported by vendor discounts Suppliers provide warranties on products that REDI distributes and allow return of defective products, including those by customers Source: MOSL
Leader in key markets

Domestic IT distribution industry is dominated by two players Ingram Micro and REDI and control ~70% of the market, with a presence in similar product categories. Ingram is the global leader in IT distribution industry with revenues of ~USD36b in FY12. However, leading international players like Tech Data and Synnex are not present in the Indian market. Other key players in the domestic market are Neoteric, Rashi Peripherals, Compuage and Savex. In the Middle East and Africa market too REDI is the market leader and has a higher share compared to the next two peers put together.
Competition and market mapping
Sales % -IT -Non-IT -Services PAT % Product range Domestic INR99b 47% 79% 19% 2% INR1.8b 62% IT peripherals: PCs, PC components, UPS, networking products, packaged software, storage products, high-end servers Non-IT: Telecom devices, consumer durables, digital printing press, tablets and gaming consoles HP -20%, RIM -18%, Microsoft - 7%, Acer/ Lenova -5% and Apple - 5%, Others -40% International INR112b 53% 81% 16% 3% INR1.1b 38% IT peripherals, PCs, PC components, UPS, networking products, packaged software, storage products, high-end servers Non-IT: Telecom and Tablets Consolidated INR212b 100%
INR2.9b 100%
Top vendors (FY12)
HP - 39%, Nokia - 14%, Dell - 9% and Others 38% Source: Company, MOSL
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Extensive distribution network

REDI has a strong distribution network and wide range of brands, with a presence across 25 countries. It has ~66 warehouses in India and 27 in the Middle East and Africa. With a view on impending introduction of GST in India, REDI is proactively building large ADCs in key business regions to capture emerging opportunities. It has two ADCs at Chennai and Dubai operational since July 2009 and September 2010 and is working on three ADCs, which would be functional soon.
REDIs domestic and global distribution network
India Channel partners Sales office Warehouses Service centers Partner centers Product range 23,337 56 66 70 292 80 plus Middle East & Africa 9,857 (present in 20 countries) 21 27 38 18 50 plus Source: Company, MOSL
REDI has a wide Pan India presence
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Pursuing four-pronged growth strategy

Strategic initiatives to yield results

REDI is pursuing a four-pronged strategy to achieve strong growth and sustain the competitive advantage in IT distribution industry. Indias market offers significant opportunities to IT services providers due to increasing demand. Company has scope to add new products to its existing verticals and move up the value chain. A diversified portfolio enables it to manage vendor risks and growth effectively. REDIs global reach provides competitive advantage as suppliers eye worldwide market penetration.
Four-pronged growth strategy

Growth in existing product lines Partnering with new vendors Adding new products Foray into new verticals and business lines ADC Nook Exploring new regions and geography/ inorganic acquisitions Entry into CIS countries Strategic initiatives Lower stake in NBFC Asset-light plans for the entity
Source: MOSL
A) Growth in existing product lines

REDI is likely to be a key beneficiary from the robust growth outlook of Indian IT industry, which is forecasted to post a CAGR of 10% from ~USD66.4b in FY12 to ~USD95.9b by FY16. Indias market offers significant opportunities to IT services providers due to increasing demand.
Indian IT and Telecom industry to post a CAGR of ~10% over FY12-16E (USD b)
2012 Hardware % of total % Change Software % of total % Change Services % of total % Change Telecom % of total % Change Total % Change 9.1 13.7 3.5 5.3 9.2 13.9 44.7 67.3 66.4 2013 9.5 14.3 4.4 4 6.0 14.3 10.3 15.5 12.0 47.8 72.0 6.9 71.5 7.7 2014E 10.9 16.4 14.7 4.5 6.8 12.5 11.9 17.9 15.5 51.5 77.6 7.7 78.9 10.3 2015E 12.5 18.8 14.7 5.2 7.8 15.6 13.8 20.8 16.0 54.6 82.2 6.0 86.2 9.3 2016E 14.3 21.5 14.4 6 9.0 15.4 16.1 24.2 16.7 59.5 89.6 9.0 95.9 11.3 CAGR (%) (2012-2016) 12.0
14.4
15.0
7.4
9.6 Source: IDC
Company has six separate business units (SBU) in IT business such as components, peripherals and consumer PC, system and commercial PC, software, networking and enterprise.
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Key initiatives across categories

Categories Components Peripherals and PCs System and commercial PC Software Networking Enterprise Initiatives/Triggers Increasing brand affiliations Has affiliations with all key players Revival of government spending Moving up the value chain New opportunities in the cloud space Revival of government spending Source: MOSL
Breakup of Indian IT industry FY13 (%)
REDI IT product-wise breakup
Source: IDC
REDI has good scope to add new products to its existing verticals and move up the value chain. A diversified portfolio enables it to manage vendor risks and growth effectively. A key example is the addition of Apple iPhone, which has the potential to contribute ~INR24b to REDIs top line by FY14.
Potential to move up value chain
Legacy Distribution Value Distribution Deepar Technical Aptitude Product Excellence Solutions-Based Distribution Partner Enablement and Development
Core Value Proposition
Pick, Pack, Ship
Expertise
Operations, Logistics, Scale
Selling into Target Markets
Differentiators
Line Card, Price, Availability
Technical Specialization
Analystics-Based Marketing, Technical & Sales Acumen Developing a Knowledge Base of Expertise
Key Services
Credit, Account Management, Logistics
Vertical Focus; Professional Services
Source: Industry, MOSL
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Apple sales in India set to mimic RIM success
Vendor de-risking: Reliance on HP in the domestic revenues has declined (%)

HP RIM Microsoft Acer Lenova Apple Others Total FY07 44 0 9 3 6 0 38 100 FY08 40 0 9 2 6 0 43 100 FY09 38 0 10 3 5 0 43 100 FY10 34 5 10 5 5 0 41 100 FY11 FY12 22 20 15 18 8 7 5 5 6 5 0 5 44 40 100 100 Source: Company, MOSL
B) Foray into new verticals and business lines

REDI is focusing on new revenue lines: 1) consumer durables, 2) ADC operations and 3) nook initiative. With a view to leverage its existing strengths in logistics business and also to broad-base product offerings, company forayed into distribution of consumer durable goods. It is mostly focused in South India and is increasing its presence in the West; key clients include LG, Whirlpool, Voltas, Godrej etc. Management expects this business to reach INR10b by FY15. Implementation of GST could increase demand for 3PL players, thus benefiting this segment in particular and REDI significantly.
C) Exploring new regions and geography

Geographical foray provides the company with a more balanced global portfolio to manage and mitigate risk. REDIs global reach enables it competitive advantage, with suppliers eyeing worldwide market penetration. It is the largest distribution company in the Middle East and also has significant presence in Africa and Turkey. Around 54% of revenues is derived from international operations, while 46% of revenues is from domestic operations. Similarly, ~38% of net profit is derived from international operations, while ~62% of net profit is from domestic operations.
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Growth of international business (INR m)
Source: MOSL
D) Successful strategic initiatives could be a key positive

We expect REDI to take strategic initiatives to 1) lower stake in the 100% NBFC by attracting strategic financial and operational partners and 2) possible corporate restructuring to make it asset light. We believe successful implementation of REDIs strategic plans could allay concerns on 1) its NBFC arm, 2) recovery in its subsidiary Arena and 3) asset-heavy capex plans for ADCs. NBFC contributes to REDIs success REDI has a wholly-owned non-banking finance company (NBFC), Easyaccess Financial Services Ltd (EFTL), which was set up in 2008 to cater to trade finance needs of domestic IT industry. EFTL enables REDIs channel partners to transact large volumes of business without being constrained for credit through a range of solutions like trade finance, enterprise finance and A/R management. The NBFC also provides need-based financing to channel partners beyond the distributor credit period. Till date it has no NPAs. Though currently it is a 100% subsidiary of REDI, management has plans to lower stake to ~51% by divesting to a strategic investor, PE fund etc. This we believe would be a key positive for REDI and allay investor concerns on the NBFC. ADCs to tap emerging opportunities With a view on impending introduction of GST in India, REDI is proactively building large automatic distribution centres (ADCs) in key business regions to capture emerging opportunities such as 3PL services, storage and warehousing etc. It has two ADCs at Chennai and Dubai operational since July 2009 and September 2010 and is working on three ADCs, which shall be functional soon.
Details of warehouses
Acres Acquired Land Chennai Kolkata New Delhi Mumbai Long term Lease Dubai 11.56 13.76 13.32 Status Operational since Jul'09 2HFY13 2HFY14 Yet to acquire land Operational since Sep'10 Source: Company, MOSL 13
5.16
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Chennai ADC
Dubai ADC
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Strategic diversifications aimed to de-risk model

Non-IT segment to be the key growth driver
To further leverage its existing strengths in the logistics business and to broadbase product offerings, REDI forayed into distribution of consumer goods. Its non-IT business has grown from ~5% of its overall revenues in FY07 to ~19% in FY12. Given lack of quality 3PL players in India, REDI is well-placed to create a niche in this segment. We expect its consumer goods business, which has key clients like LG, Whirlpool, Voltas, Godrej, etc to increase from ~INR1.8b in FY12 to ~INR8.5b by FY15E.
Non-IT business gains momentum

With a view to leverage strengths in the logistics business and de-risk its business, REDI forayed into distribution of consumer goods such as smart phones, tablets, washing machines, refrigerators and other electronic consumer durables. Given lack of quality 3PL players in India, it is well-placed to create a significant niche in this segment. REDIs non-IT business has grown from ~5% of its overall revenues in FY07 to ~19% in FY12. Increasing share of non-IT products as a percentage of overall revenues is a key positive for REDI as they have lower working capital requirements, enjoy better margins and also de-risk it from any potential slowdown in the IT segment.
Share of non-IT business increases (% of total revenues)
REDI set to mimic its Blackberry success with iPhone

To broaden the basket of new brands, REDI recently tied up with Apple to distribute iPhone range, which could be its next big success story. REDI had ventured into the smart phone category in FY09, with the launch of Blackberry smart phones. This was a huge success as within three years, Blackberry sales increased from ~INR162m in FY09
Projections for smart phone sales (m) Blackberry, a key success story
('000) (m)
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Source: Industry, MOSL 15
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to ~INR16b in FY12. Though growth rates for Blackberry have moderated, the strong growth in smart phone category continues. Industry estimates suggests the total iPhone market in India at ~1m. Currently, Apple has two distributors in India - Ingram Micron and REDI. Management is confident of garnering a market share of 60-70% in this category, implying a potential market of ~INR24b for REDI. Though margins provided by Apple are lower than Blackberry, working capital requirements are low-to-negative, given the high demand for Apple products in India.
Apple products sale in India over 1HFY10 to 1HFY13
Revenue of consumer durable goods to increase by ~5x over FY12-15E

With a view to leverage its existing strengths in the logistics business and to broadbase product offerings, REDI forayed into distribution of consumer goods. It is mostly focused in South India and is increasing its presence in the West. Key clients include LG, Whirlpool, Voltas, Godrej etc, and management expects the business to reach INR8.5b by FY15E. Implementation of GST could increase the demand for 3PL players and thus benefit the segment and REDI significantly.
Consumer goods sales to post strong growth (INR m)
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Services business - one of the most profitable vertical

Though services account for only ~2% of REDIs revenues, it enjoys high gross margins of ~30-40%. Almost 72% of services income is derived from international business and 28% from domestic. REDIs services vertical not only provides it a mean to expand the revenue stream, but also acts as a key differentiating factor compared to competitors. Company follows a unique model for its services business, whereby the centers are neutral and not exclusive to REDI or any particular brand. It has two business segments: 1) warranty period and 2) post warranty period. The table below depicts various revenue streams for REDI under both formats.
Redington Service Model
Redington Service Model
Warranty
Post-Warranty
Event Based Vendor pays for service provided to customer on request
Retainer Paid monthly by vendor to maintain agreed resources and service level agreements for their products
Annuity Vendor pays annual support charges per unit sold during the year
Event Based Customers pay as and when they use the services
Infrastructure Management Services Customer pays for round the clock support for hardware and application maintenance
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Strong revenue and earnings growth outlook

Expect revenue CAGR of 17% over FY12-15E
We estimate REDI to report revenue CAGR of ~17% over FY12-15E, which would be driven by ~18% CAGR in domestic revenues and 15% CAGR in international revenues. Domestic IT segment is likely to post ~16% CAGR, while non-IT segment is likely to register 24% CAGR. In the international vertical, we expect IT segment to clock a CAGR of 15.4%, while the non-IT segment would post a CAGR of 15%. The revenue mix among IT, non-IT and services would be ~77%, 22% and ~2% respectively by FY15E. The share of domestic revenues is likely to increase from ~46% in FY12 to ~48% by FY15E.
Breakup of sales and key assumptions (INR m)
Y/E March Domestic % Change % of net sales Non IT Value % Change % of sales IT Value % Change % of sales Service Value % Change International % Change Non IT Value % Change % of sales IT Value % Change % of sales Service Value % Change % of sales IT Non IT Services Net Sales Change (%) 2010 64,861 7 47 6,526 5 54,486 40 913 69,245 5 12,099 9 54,726 40 2,420 2 109,212 18,626 3,333 137,578 8.5 2011 81,778 26 49 17,633 170 11 61,782 13 37 723 -21 86,531 25 12,134 0 7 71,675 31 43 2,723 12 2 133,457 29,766 3,446 167,038 21.4 2012 96,665 18 46 26,474 50 12 69,175 12 33 1,017 41 112,976 31 14,216 17 7 96,087 34 45 2,674 -2 1 165,261 40,689 3,691 211,930 26.9 2013E 113,025 17 47 32,828 24 14 78,997 14 33 1,200 18 129,089 14 16,348 15 7 109,827 14 45 2,914 9 1 188,824 49,175 4,114 241,509 14.0 2014E 136,045 20 48 43,004 31 15 91,637 16 32 1,404 17 148,616 15 18,964 16 7 126,301 15 44 3,352 15 1 217,938 61,968 4,755 283,950 17.6 CAGR (FY12-15) 159,602 18.2 17 48 50,745 18 15 107,215 17 32 1,642 17 173,312 17 21,619 14 7 147,772 17 44 24.2 2015E
15.7
15.3
15.0
15.4
3,921 13.6 17 1 254,988 15.6 72,363 21.2 5,564 14.7 332,082 16.6 17.0 Source: MOSL
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Growth in domestic and international markets
Segment-wise revenue breakup
Breakup among domestic and global business
Expect margins to remain stable

We estimate EBITDA to increase from INR6.2b in FY12 to ~INR9.8b in FY15E, a CAGR of 16.5%. While EBITDA margins to improve marginally from 2.9% in FY12 to ~3% in FY15E. This would be driven by an increasing proportion of non-IT and services revenues, which enjoy higher margins. In FY15, we expect domestic operations to account for ~64% of EBIT, while the international operations is likely to account for ~36% of EBIT.
EBITDA to post a CAGR of 16.5% over FY12-15E
Source: MOSL 25 January 2013 19
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EBIT margins in domestic and international markets
Expect net profit growth of ~20% over FY12-15E

We expect REDI's net profit to post a CAGR of ~20% over FY12-15E. This would primarily be led by strong revenue growth, marginal improvement in EBIT margins and benefits from lower leverage. We expect net profit margin to increase marginally from 1.4% in FY12 to ~1.5% by FY15E. We expect domestic operations to contribute ~62% of profits and the international operations to contribute ~38% of profits.
Net profit CAGR of ~20% over FY12-15E RoCE, RoE to remain strong
Working capital intensity to remain stable

IT product and services distribution industry is intensive in working capital and requires significant levels in receivables and inventory, which to some extent is offset by vendor trade account payables. Based on the timing of customer receipt and payment to vendor, the actual level of net debt could vary significantly compared to actual debt at a period's end. We expect REDI's net working capital to decline from ~46 days in FY13 to ~44 days by FY15E. Typically working capital requirement for a distribution company like REDI gets negatively impacted during economic downturn and improves on the back of economic upturn.
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Muted 1HFY13 performance, sharp recovery expected in 2HFY13

During 1HFY13, REDIs revenue growth was muted at ~10% (2% in domestic and 19.3% in international). We expect REDI to benefit from 1) pent up government demand based on implementation of Goods and Services Tax (GST), 2) iPhone distribution to boost domestic non-IT growth and has the potential to contribute ~INR24b to REDIs top line by FY14 and 3) revival in subsidiary Arenas operations thus driving international growth.
Share of international revenues has been increasing
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Valuation and view

REDI is the leading IT SCM player in India and the Middle East and is a strategic partner to the world's leading technology companies. We expect REDI to post revenue CAGR of 17% and net profit CAGR of ~20% over FY12-15E. Implementation of GST would unveil and increase new opportunities for the company, particularly in non-IT vertical. Its efforts to diversify across the supply chain industry are paying off, with non-IT segment as a percentage of revenues increasing from ~5% in FY07 to ~19% in FY12. REDI recently tied up with Apple to distribute iPhone range. We estimate the iPhone market in India at ~1m and expect REDI to garner ~60% market share, which implies a potential new product category of ~INR24b for it in FY14E. We believe successful implementation of REDI's strategic initiatives could allay concerns on 1) its NBFC arm, 2) outlook for its subsidiary Arena and 3) asset-heavy capex plans for ADCs. REDI trades at 7.5x/6.3x FY14E/FY15E EPS and EV of 6.2x/5.4x FY14E/FY15E EBITDA. We initiate coverage with a Buy and a target price of INR103, based on intrinsic P/E of 8x its FY15E earnings, an upside of ~27%.
Intrinsic P/E calculation for REDI
Current Earnings Book value of equity Revenues Growth Period Length of growth period (Years) Growth rate during period (g) Payout ratio during period (%) Cost of Equity during period Stable/ Terminal Growth Period Growth rate in steady state Payout ratio in steady state Cost of Equity in steady state Target Price (Based on FY15E EPS) Current Price Target Price % Upside PER (x) 3,404 16,303 209,086 10 15.4% 27% 14.55% 4.6% 50% 15.3% 81 103 27.0 8.1 RoE = 21%
Expected RoE =
21%
Expected RoE =
18%
Cost of Equity: Growth Period Rf Rmp Beta COE
7.8% 7.5% 0.9 14.6%
Cost of Equity: Stable Period Rf Rmp Beta COE
7.8% 7.5% 1.0 15.3%
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Sensitivity to Cost of Equity

Impact of change in growth COE (INR)
Impact of change in terminal COE (INR)
Impact of change in both growth and terminal COE (INR)
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Redington India
Comparative Valuations
CMP Avnet INC (USD) Arrow Electronics (USD) Ingram Micro INC-CL A (USD) Synnex Corp (USD) Tech Data Cor (USD) Synnex Technology (TWD) Redington India (INR) Digital China (HKD) 34 39 18 36 49 59 81 13 MCap (M) 4,721 4,156 2,758 1,359 1,867 91,616 33,283 13,733 EPS Gr. (%) CY13 CY14 -25.7 0.4 17.4 6.2 0.9 16.7 FY14 18.7 19.8 18.5 11.2 9.7 10.3 15.2 11.3 FY15 17.7 16.8 P/E (x) CY13 CY14 11.1 9.2 8.7 8.8 9.8 13.4 FY14 8.0 8.7 9.4 8.2 7.9 8.0 8.5 12.1 FY15 6.8 7.5 P/BV (x) CY13 CY14 1.2 1.0 0.7 1.0 1.2 FY14 1.7 1.5 1.1 0.9 0.7 0.8 1.1 FY15 1.4 1.3 EV/EBIDTA CY13 CY14 6.9 6.6 3.5 5.0 4.6 10.0 FY14 6.8 6.1 6.0 6.1 3.4 4.5 4.1 FY15 5.9 5.2 RoE (%) CY13 CY14 10.5 11.0 8.6 11.2 10.2 15.4 FY14 22.6 18.7 Source: 14.1 10.6 8.8 11.9 11.1 FY15 22.2 19.2 MOSL
Redington India PE band
Redington India PB band
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Redington India
Company background
REDI is promoted by the Singapore-based Kewalram Chanrai Group that also owns OLAM and Jaslok Hospital in Mumbai, India. In 1993, it began as a component distributor and moved into completed products such as PCs, desktops etc and finally into valueadded products. It then positioned as a complete supply chain manager, with a focus on value-added IT products. In the past 3-4 years, REDI is slowly transitioning into a complete supply chain manager to include non-IT products too, with a presence in India, Middle East, Africa and Turkey. Company has organically grown its business to be the largest IT distributor in India and the Middle East and Africa (MEA). REDI plans to slowly extend its reach to CIS countries too. It aims to have a global footprint in developing countries.
Group structure
Source: Company
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Redington India
Key risks
Failure to adapt to IT industry changes
IT products industry is subject to rapid technological changes, new and enhanced product specifications, evolving industry standards and changes in the manner technology products are distributed and managed. If REDI fails to adopt these changing dynamics, it may incur inventory loss or fail to sustain its leadership position.
Intense competition
Key competitors include local, regional, national and international distributors and suppliers that employ a direct-sales model. Thus, competition is intense and often price-based. Currently, some of the leading global distribution companies like Tech Data and Synnex Taiwan are not present both in India and the Middle East. Hence, their entry could increase competition.
High risk of clients concentration

A significant percentage of REDIs revenues relates to products sold by few suppliers. Due to such concentration risk, terminations of supply or services agreements or a significant change in the terms of business could adversely impact it. REDIs key clients in the domestic market are HP (~20%) and RIM (~18%), while HP (~39%) and Nokia (~14%) account for key international clients. However, the dependence on these vendors is constantly reducing, given additions of new verticals and product categories. HP accounted for 44% of its domestic sales in FY07 and 20% in FY12; globally, HP was ~60% of sales in FY07 and ~39% in FY12.
Exposed to risks of conducting business in multiple geographies

Company is exposed to the impact of foreign currency fluctuations, interest rate changes and other macro risks due to its exposure to international markets.
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Redington India

Income Statement
Y/E March Net Sales Change (%) Total Expenditure % of Sales EBITDA Margin (%) Depreciation EBIT Int. and Finance Charges Other Income - Rec. PBT bef. EO Exp. EO Expense/(Income) PBT after EO Exp. Current Tax Deferred Tax Tax Rate (%) Reported PAT PAT Adj for EO items Change (%) Margin (%) Less: Mionrity Interest Profit for the Year 2010 137,578 8.6 134,118 97.5 3,459 2.5 234 3,225 664 198 2,759 0 2,759 639 0 23.2 2,120 1,843 15.5 1.3 276.9 1,843 2011 167,038 21.4 162,294 97.2 4,744 2.8 246 4,499 1,177 189 3,510 4 3,506 893 -31 24.6 2,644 2,259 22.6 1.4 387.7 2,259 2012 211,930 26.9 205,718 97.1 6,212 2.9 310 5,902 1,689 290 4,503 -1 4,505 1,131 -18 24.7 3,392 2,928 29.6 1.4 463 2,928 2013E 241,595 14.0 234,678 97.1 6,916 2.9 387 6,530 1,837 266 4,958 0 4,958 1,339 0 27.0 3,619 3,404 16.3 1.4 215 3,404
(INR Million)
2014E 284,189 17.6 275,852 97.1 8,336 2.9 467 7,869 1,931 285 6,223 0 6,223 1,755 0 28.2 4,468 4,208 23.6 1.5 260 4,208 2015E 331,873 16.8 322,050 97.0 9,823 3.0 553 9,269 1,982 339 7,627 0 7,627 2,288 0 30.0 5,339 5,040 19.8 1.5 299 5,040
Balance Sheet
Y/E March Equity Share Capital Total Reserves Net Worth Deferred Liabilities Total Loans Minority Interest Capital Employed Gross Block Less: Accum. Deprn. Net Fixed Assets Capital WIP Curr. Assets, Loans&Adv. Inventory Account Receivables Cash and Bank Balance Loans and Advances Curr. Liability & Prov. Account Payables Provisions Net Current Assets Appl. of Funds E: MOSL Estimates; * Adjusted 25 January 2013 2010 786 9,971 10,757 0 11,486 2,403 24,646 1,271 424 847 121 2011 793 11,761 12,553 36 16,128 3,413 32,130 3,309 1,192 2,118 14 2012 797 12,428 13,225 11 20,917 949 35,102 3,858 1,505 2,353 87 51,885 17,000 22,190 4,834 7,860 20,020 19,707 313 31,865 35,102 2013E 797 15,505 16,303 11 22,317 1,164 39,795 4,708 1,892 2,816 0 59,494 20,519 25,152 5,218 8,605 23,129 22,767 362 36,365 39,795 2014E 797 19,014 19,811 11 24,217 1,424 45,463 5,603 2,359 3,244 0 68,793 24,137 29,587 4,948 10,122 27,187 26,760 426 41,606 45,463 2015E 797 23,214 24,011 11 24,717 1,723 50,462 6,558 2,912 3,646 0 77,943 28,186 34,551 4,295 10,911 31,739 31,242 498 46,204 50,463
35,337 47,983 9,829 15,833 18,164 18,703 5,826 4,806 1,519 8,642 11,694 18,594 11,090 17,973 604 621 23,644 29,389 24,646 32,130 for treasury stocks
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Redington India

Ratios
Y/E March Basic (INR) * EPS Cash EPS BV/Share DPS Payout (%) Valuation (x) * P/E Cash P/E P/BV EV/Sales EV/EBITDA Dividend Yield (%) Return Ratios (%) RoE RoCE Working Capital Ratios Asset Turnover (x) Inventory (Days) Debtor (Days) Leverage Ratio (x) Current Ratio Debt/Equity * Adjusted for treasury stocks 2010 4.7 5.3 27.4 1.0 21.9 2011 5.7 6.3 31.7 1.1 19.3 2012 7.3 8.1 33.2 0.4 6.0 2013E 8.5 9.5 40.9 0.7 9.0 2014E 10.6 11.7 49.7 1.5 15.7 2015E 12.6 14.0 60.2 1.8 15.7
10.8 9.8 2.4 0.2 7.8 0.5
9.3 8.4 1.9 0.2 7.1 0.9
7.5 6.8 1.6 0.2 6.2 1.9
6.3 5.7 1.3 0.2 5.4 2.3
17.7 16.3
19.4 18.4
22.7 19.7
23.1 18.7
23.3 19.7
23.0 20.7
5.6 26.1 48
5.2 34.6 41
6.0 29.3 38
6.1 31.0 38
6.3 31.0 38
6.6 31.0 38
3.0 1.1
2.6 1.3
2.6 1.6
2.6 1.4
2.5 1.2
2.5 1.0
Cash Flow Statement

Y/E March Oper. Profit/(Loss) before Tax Interest/Dividends Recd. Depreciation Direct Taxes Paid (Inc)/Dec in WC CF from Operations EO expense CF from Operating incl EO (inc)/dec in FA (Pur)/Sale of Investments CF from investments Issue of Shares (Inc)/Dec in Debt Interest Paid Dividend Paid CF from Fin. Activity Inc/Dec of Cash Add: Beginning Balance Closing Balance 2010 3,225 664 234 590 -2,460 409 0 409 -323 0 -174 -961 1,656 -664 -465 -433 -198 6,024 5,826 2011 4,499 1,177 246 815 -7,275 -3,346 -4 -3,351 -1,409 0 -1,267 642 4,642 -1,177 -509 3,598 -1,020 5,826 4,806 2012 5,902 1,689 310 1,041 -2,642 2,529 1 2,530 -619 0 -401 -4,998 4,789 -1,689 -204 -2,101 28 4,806 4,834 2013E 6,530 1,837 387 1,273 -4,117 1,527 184 1,711 -763 0 -563 0 1,400 -1,837 -326 -764 384 4,834 5,218
(INR Million)
2014E 7,869 1,931 467 1,684 -5,511 1,141 0 1,141 -895 0 -681 0 1,900 -1,931 -700 -731 -270 5,218 4,948 2015E 9,269 1,982 553 2,204 -5,250 2,368 0 2,368 -955 0 -700 0 500 -1,982 -839 -2,321 -839 4,948 4,108
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N O T E S
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REDINGTON (INDIA) LTD

Result Update: Q2 FY13
BUY
Stock Data
CMP Target Price
86.00 97.00 Jan 8th, 2013

ISIN: INE891D01026
SYNOPSIS
Redington India Ltd is leading Supply Chain service provider in IT, Telecom, Consumer Electronics & Home Appliances Industries in India. During the Second quarter ended, the robust growth of Net Profit is increased by 19.01% to Rs.729.20 million. The company revenue for the quarter rose 7.80% to Rs.58597.10 million from Rs.54357.10 million, when compared with the prior year period. Redington has tied up with Rising Star Games Ltd as exclusive National distributor for distribution of gaming titles for Xbox 360 & PS 3. The Company partnerships with VMWare, Nivio Technologies and Microsoft in Virtualization & Cloud Computing space form foundation for building a strong portfolio in the space. Redington has transferred supply chain management business to newly incorporated subsidiary ProConnect Supply Chain Solutions Ltd from Oct 1, 2012. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 20% over 2011 to 2014E respectively.
Sector IT & Diversified BSE Code 532805 Face Value 2.00 52wk. High / Low (Rs.) 94.00/65.00 Volume (2wk. Avg ) 28231.00 Market Cap ( Rs in mn ) 34318.30 Annual Estimated Results (A*: Actual / E*: Estimated)
Years
Net Sales EBITDA Net Profit EPS
FY12A
FY13E
FY14E
P/E Shareholding Pattern (%)
211929.90 243719.39 270528.52 6334.00 7387.19 8325.47 2927.40 3511.33 4060.83 7.35 8.80 10.18 11.71 9.77 8.45
1 Year Comparative Graph
BSE SENSEX
REDINGTON (INDIA) LTD
Peer Groups Company Name Redington India Ltd MMTC Ltd STC Ltd Adani Enterprises Ltd
CMP (Rs.) 86.00 638.50 233.65 274.90
Market Cap Rs. in mn. 34318.30 642000.00 14049.00 304592.40
EPS (Rs.) 7.35 0.00 2.59 7.13
P/E (x) Ratio 11.71 0.00 90.41 38.84
P/BV(x) Ratio 2.59 45.18 2.07 3.05
Dividend (%) 20.00 25.00 20.00 100.00
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Investment Highlights Results updates- Q2 FY13, Redington India Ltd is positioned as the largest Supply Chain Solution Provider in emerging markets, reported its financial results for quarter ended 30th Sep, 2012. The Second quarter witnesses a healthy increase in overall sales as well as profitability of the company.
Months
Net Sales PAT EPS EBITDA
Sep-12
Sep-11
% Change
58597.10 729.20 1.83 1553.30
54357.10 612.70 1.54 1385.60
7.80% 19.01% 18.78% 12.10%
The company net profit jumps to Rs.729.20 million against Rs.612.70 million in the corresponding quarter ending of previous year, an increase of 19.01%. Revenue for the quarter rose 7.80% to Rs.58597.10 million from Rs.54357.10 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.83 a share during the quarter, registering 18.78% increase over previous year period. Profit before interest, depreciation and tax is Rs.1553.30 millions as against Rs.1385.60 millions in the corresponding period of the previous year.
Expenditure :
During the quarter Total Expenditure rose by 13 per cent mainly on account of Increase in Purchase of Traded Goods along with consideration of Employee Benefit in the rupee impact. Total expenditure in Q2 FY13 was at 57243.60 million as against
Rs.50620.90 million in Q2FY12.Employee Benefits Rs.891.80 against Rs.697.60 millions in the
corresponding period of the previous year. Other Expenses was at Rs. 1010.90 million & Depreciation is Rs. 98.40 million in Q2FY13 are the primarily attributable to growth of expenditure.
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Latest Updates Employee Stock Option plan 2008 The company granted 2,335,973 options out of 505,789 options lapsed of which 485,355 options were reissued & 366,521options outstanding as on Sep 30, 2012. During the quarter 83,125 equity shares of Rs.2/- each fully paid up were issued & allotted with total premium of Rs.22.13 Lakhs and includes 31,250 shares allotted to a Non-Executive Independent Director. Subsidiary Company The Company has transferred supply chain management business to a newly incorporated wholly owned subsidiary ProConnect Supply Chain Solutions Limited from October 1, 2012 to explore further business opportunities. Incorpotation of overseas step down subsidiaries Ensure Gulf FZE, Jebel Ali Free Zone, Dubai Ensure Technical Services (PTY) LTD, South Africa. Appointment as National Distributor by Smart link Network Systems Ltd Redington (India) Ltd that Smart link Network Systems Limited (Smart link) has appointed as National Distributor for Motherboards. It has introduced a new mother board under a brand name "DIGILITE". The distribution tie up will strengthen the company's foot-hold in the Mother Board segment on the IT arena. Addition of Apple iPhone and its Accessories for distribution Redington has commenced billing of iPhones to the trade channel has been distributing Apple products viz. iPads, Macbooks and iPods. Recently, iPhone has added to the distribution agreement. Tie-up with Rising Star Games Redington (India) Ltd has tie-up with Rising Star Games as a Distributor for gaming products. It has tied up with Rising Star Games Limited (Rising Star) as exclusive National distributor for distribution of gaming titles for Xbox 360 & PS 3.
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Partnerships The Company new partnerships with VMWare, Nivio Technologies and Microsoft in the Virtualization & Cloud Computing space form the foundation for building strong portfolio in this space.
Company Profile Redington established in 1993 is positioned as one of the leading Supply Chain service provider in IT, Telecom, Consumer Electronics & Home Appliances Industries with corporate office in Chennai has 49 Branch offices, 48 warehouses and 46 service centers across India. The team is supported by a robust IT & Communication infrastructure connecting 115 physical locations and a state of the art ERP and e-commerce back bone. Redington has built business on very strong ethical and commercial fundamentals has not only helped to consistently exceed the industry growth rate but also enabled to firmly establish it as the "partner of choice" with most of vendors and business partners. A compounded annual growth rate of more than 50% over the past 15 years underlining the very strong foundation and prudent practices on which business practices has built. Infrastructure The company has continuously invested in Office, Warehousing and IT infrastructure in order to ensure the highly scalable operation essential for delivering accelerated revenue growth year on year. A judicious selection of locations and optimal sizing of Offices and Warehouses, supported by an appropriate mode of network connectivity has provided the right balance between optimizing current running costs and the future growth requirements.
The network has in-built 100% redundancy, including a Disaster Recovery Centre and a scalable architecture that continuously address business requirements necessitated by accelerating growth of the organization. Warehouse locations are decided by requirement of space and delivery TATs committed to customers as per best industry standards. Service Center locations emphasize convenience and ease of approach for customers requiring support for all the products serviced by Redington.
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Business relationship The company continues to enjoy excellent business relationship with its suppliers like Acer, APC, Apple, Canon, Cisco, Computer Associates, EMC, Epson, Gigabyte, HCL Infosystems, Hewlett Packard, Blackberry, LG, Luminous, Hitachi, IBM, Intel, Kodak, Lenovo, Linksys, Microsoft, Nokia, Samsung, Seagate, Systemax, TVS Electronics, Viewsonic, Western Digital, Whirlpool, Wipro, 3COM etc.
Subsidiaries Redington (India) Investments, Cadensworth (India),
Qatar and Easyaccess Financial Services, India.
Products Components Digital lifestyle Enterprises Networking, storage and power Peripherals and Consumer PC Software Solutions Systems.
Services Warranty Support and post warranty Support Infrastructure Management Services Spare parts Warehousing Forward and Reserve Logistics CRM and SCM Software Development and Support Professional Services Repairs and Refurbishments.
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Core Business Units IT Services Contact Center and Call Center Services 3PL for spares Smart and mobile phone support High Level Repairs and refurbishment Spare parts, Upgrades and packs Distribution Enterprise services
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Financial Highlight
Balance sheet as at March31st, 2012 (A*- Actual, E* -Estimations & Rs. In Millions) Particulars March (Rs.in.mn) 1.Shareholders Funds a) Capital b) Reserves & Surplus Total Net worth 2.Loan Fund a) Secured loans b) Unsecured loans c) Minority Interest Total Liabilities (1+2)
1.Fixed Assets a) Gross block b) Depreciation c) Net Block d) Capital Advance Total Fixed Assets 2. Investments 3.Deferred Tax Assets 4.Current Assets, Loans & Advances a) Inventories b) Sundry Debtor c) Cash & Bank Balance d) Loans & Advances Total Current Assets Less: Current Liabilities & Provisions a) Liabilities b) Provisions Net Current Assets
FY12A
FY13E
FY14E
797.10 12427.70 13224.80
797.10 15939.03 16736.13
797.10 19999.86 20796.96
18794.10 1808.50 948.80 34776.20
20673.51 1898.93 1005.73 40314.29
21707.19 1955.89 1045.97 45505.99
3200.50 1504.70 1695.80 744.20 2440.00 0.31 80.8 17000.00 22190.20 4834.40 8564.88 52589.48 19786.71 547.68 32255.09 34776.20
4073.11 1579.94 2493.18 967.46 3460.64 0.34 88.88 18020.00 23521.61 5027.78 11562.59 58131.98 20776.05 591.49 36764.44 40314.29
4988.08 1627.33 3360.75 1160.95 4521.70 0.38 94.21 18921.00 24580.08 5279.16 14337.61 63117.86 21607.09 621.07 40889.70 45505.99
Total Assets( 1+2+3+4)
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Annual Profit & Loss Statement for the period of 2011 to 2014E Value(Rs.in.mn)
Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit after tax Minority Interest Share of P&L of Assoc Net Profit Equity capital Reserves Face value EPS
FY11 12m 174677.40 103.40 174780.80 -170064.30 4716.50 -960.90 3755.60 -245.60 3510.00 -862.30 2647.70 -387.70 0.00 2260.00 792.70 11103.30 2.00 5.70
FY12 12m 211929.90 290.30 212220.20 -205886.20 6334.00 -1520.40 4813.60 -310.30 4503.30 -1112.90 3390.40 -462.80 -0.20 2927.40 797.10 12427.70 2.00 7.35
FY13E 12m 243719.39 319.33 244038.72 -236651.52 7387.19 -1702.85 5684.34 -347.54 5336.81 -1339.54 3997.27 -485.94 0.00 3511.33 798.10 15939.03 2.00 8.80
FY14E 12m 270528.52 344.88 270873.39 -262547.93 8325.47 -1839.08 6486.39 -375.34 6111.05 -1539.99 4571.07 -510.24 0.00 4060.83 798.10 19999.86 2.00 10.18
Quarterly Profit & Loss Statement for the period of 31st Mar, 2012 to 31st Dec, 12E Value(Rs.in.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Minority Interest Share of P&L of Asso Net Profit Equity capital Face value EPS 31-Mar-12 3m 55151.60 127.50 55279.10 -53268.80 2010.30 -454.20 1556.10 -81.70 1474.40 -334.50 1139.90 -119.30 0.30 1020.90 797.10 2.00 2.56 30-Jun-12 3m 53716.30 61.20 53777.50 -52289.80 1487.70 -439.40 1048.30 -88.70 959.60 -278.60 681.00 -46.20 -0.30 634.50 798.00 2.00 1.59 30-Sep-12 3m 58597.10 101.40 58698.50 -57145.20 1553.30 -440.90 1112.40 -98.40 1014.00 -241.50 772.50 -43.30 0.00 729.20 798.10 2.00 1.83 31-Dec-12E 3m 60940.98 104.44 61045.43 -59356.52 1688.91 -462.95 1225.96 -101.35 1124.61 -282.28 842.33 -44.17 0.00 798.17 798.10 2.00 2.00
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Ratio Analysis Particulars

EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV
FY11 5.70 2.70% 2.01% 1.52% 15.08 22.26% 29.11% 0.43 4806.02 30.01 2.87
FY12 7.35 2.99% 2.12% 1.60% 11.71 25.64% 19.64% 1.56 4834.40 33.18 2.59
FY13E 8.80 3.03% 2.19% 1.64% 9.77 23.88% 20.16% 1.29 5027.78 41.94 2.05
FY14E 10.18 3.08% 2.26% 1.69% 8.45 21.98% 20.00% 1.09 5279.16 52.12 1.65
Charts
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Outlook and Conclusion At the current market price of Rs.86.00, the stock P/E ratio is at 9.77 x FY13E and 8.45 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.8.80 and Rs.10.18 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 20% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 8.96 x for FY13E and 7.98 x for FY14E. Price to Book Value of the stock is expected to be at 2.05 x and 1.65 x respectively for FY13E and FY14E. We recommend BUY in this particular scrip with a target price of Rs.97.00 for Medium to Long term investment.
Industry Overview IT/ITeS industry has been one of the key driving forces fuelling India's economic growth. As a proportion of national gross domestic product (GDP), IT/ITeS sector's contribution has risen from 1.2 per cent in 1997-98 to an estimated 7.5 per cent in 2011-12.
Information Technology (IT) has evolved as a major contributor to India's GDP and plays a vital role in driving growth of the economy in terms of employment, export promotion, revenue generation and standards of living. The Indian IT-BPO sector is estimated to aggregate revenues of US$ 88.1 billion in 2010-2011, with the IT software and services sector (excluding hardware) accounting for US$ 76.2 billion of revenues.
The sector includes IT services, engineering design and R&D services, ITES (IT-enabled services) or BPO and hardware.
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Market Size
As per NASSCOM estimates, IT/ITeS sector (excluding hardware) revenues are estimated at US$ 87.6 billion in FY 2011-12. IT/ITeS industry is expected to grow by 19 per cent during FY 2012-13.
In 2011, the IT and ITeS industry had the market size of US$ 76 bililon, according to an industry report from NASSCOM and Aranca Research. Additionally, the market size of the industry is expected to rise to US$ 225 billion by 2020 considering India's competitive position, growing demand for exports, Government policy support, and increasing global footprint.
In segments of the IT & ITeS sector, IT services accounted for the largest share of the overall market size, with revenues of US$ 46 billion during FY2011, BPO had the market size of US$ 17.3 billion, engineering design and product development accounted for US$ 12.9 billion, and hardware had the lowest size of US$ 11.8 billion in FY2011. In FY2011, total exports from the IT sector stood at US$ 59 billion and the industry grew at a CAGR of 16.4 per cent during the five-year period of FY2007-2011 despite the global economic recession in 2008 and 2009. Exports from the IT sector were the major contributor to the overall exports and accounted for over 57 per cent of the total exports during FY2011. According to a study by management advisory firm Zinnov, adoption of IT services in the Indian SME segment is growing at 15 per cent and is expected to reach US$ 15 billion by 2015.
Growth Drivers Strong competitive position with high market share Huge talent pool Well established delivery centres across the world Cost and tax advantages Encouraging Government policies Strong growth in export demand from new verticals and the non-traditional sectors such as public sector, media and utilities According to Nasscom, domestic revenue from IT and BPO services is expected to rise to US$ 50 billion by 2020 from US$ 15.7billion in 2011 Use of new and emerging technologies such as cloud computing Increased IT adoption in key sectors such as Telecom, Manufacturing and BFSI SEZs will drive growth in the Indian IT sector as more of SEZs are now being set up in Tier II cities and about 43 new tier II/III cities are emerging as IT delivery locations
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Recent trends/Investments
More recently, online retailing, cloud computing and e-commerce are the major driving forces behind the rapidly increasing growth in the IT industry. Online shopping has increased with the emergence of internet retailing and e-commerce.
India's IT-BPO revenues are also driven by a rapid increase in rural BPO units, which accounted for more than US$ 10 million in the total sector revenues. According to NASSCOM, employee base in the rural areas is expected to increase by over 10 times by 2013-14, compared to 5000 in 2009-10 The IT/ITeS industries have added 7.96 lakh jobs in the Indian economy during the one year period ending September 2011, according to the Economic Survey 2011-12 Increasing internet penetration and affordability for personal computers has led to a rapid increase in the number of Internet users in the country to reach more than 121 million, out of which 17 million are online shoppers, according to the Internet and Mobile Association of India (IAMAI). The number of Internet users in India is further projected to triple by 2015 According to a customer poll conducted by Booz and Co, India is the most preferred destination for engineering offshoring, which are encouraging foreign companies to offshore complete product responsibility to Indian ITeS companies Not only are new players looking at setting up shop in the state of Hyderabad, existing IT/ITeS players are continuing with their hiring spree in the state. Large companies such as Infosys, TCS, Genpact, Deloitte, Facebook, Bank of America, Thomson Reuters, Amazon, Google, Cognizant, Franklin Templeton among others are all growing their presence in the state. According to Andhra Pradesh Government's estimates, the total IT/ITeS sector hiring for 2012-13 could be of the order of around 50,000 professionals Quickr, the internet and mobile based classified company, has announced that its parent received investment of US$ 32 million from a group of private equity investors. Warburg Pincus has led this round of fund raising, fifth and the largest for Quickr, with participation from existing investors such as Matrix Partners India, Nowest Venture Partners and ebay Inc. According to IAMAI, online sales of branded apparel almost doubled in volume to 4.99 million pieces during April 2012, as against 2.54 million in the same month a year ago. Also, E-ticketing continued to grow with irctc.com recording 5.56 million bookings in April, 2012, as compared to 2.26 million bookings in April 2011
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Government Support/Initiatives
According to industry experts, the Government of India is expected to increase its spending on the e-governance projects, which would contribute towards growth in the IT & ITeS sector. The Government has launched a project to provide high quality broadband access to village Panchayats through National Optical fibre network by 2014. The project would benefit small and medium enterprises (SMEs) in the country.
In the twelfth Five Year Plan (2012-17), the Department of Information Technology proposes to strengthen and extend the existing core infrastructure projects to provide more horizontal connectivity, build redundancy connectivity, undertaken energy audits of State Data Centers (SDCs) etc. The core infrastructure including fibre optic based connectivity will be leveraged and additional 150,000 Common Service Centres (CSCs) will be setup to create the right Governance and service delivery ecosystem at the Panchayats. The high penetration of mobiles will be leveraged to deliver both informational as well as transactional Government services on mobile phones.
Road Ahead
IT/ITeS sector has also created tremendous entrepreneurial and job opportunities, generating direct and indirect employment of nearly 2.8 million and around 8.9 million respectively. Estimates reflect the growth to be more than 14 million (directly and indirectly) by 2015 and around 30 million by 2030.
Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.
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Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods A.Nagaraju Cement, Reality & Infra, Oil & Gas Ashish.Kushwaha IT, Consumer Durable & Banking K. Jagadhishwari Devi Diversified Abdul Khabeer Diversified Anil Kumar Diversified A.Ravi Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com
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Redington India
ENGINEERING & CONSTRUCTION
REDI.NS REDI IN
EQUITY RESEARCH
Raising target price to INR115 (Erratum)
November 22, 2012 Rating Remains Target price Increased from 101 Closing price November 21, 2012 Potential upside
Strong pick-up in 2H driven by iPhone and recovery of IT business

Action: Raising TP to INR115; reiterate Buy We raise our TP to INR115 as we roll-forward to FY14-15F average EPS estimates and raise our FY13-14F EPS estimates by an average of ~4%. iPhone sign-up with Apple to be a significant growth driver Redingtons recent deal with Apple to also distribute iPhones in India is likely to contribute an additional INR11bn of sales in FY13F (five months) even as Apples other products continue to do well in India. Hence, we expect Apples sales contribution to increase from ~5% in FY12F to ~23% in FY14F in the domestic business. Robust growth in the IT business on back of the UID-Aadhar project Management indicated that the company has a large UID-Aadhar project in 3Q, expected to be executed over the next two to three quarters, which along with an increase in other IT-related enquiries from the government should benefit its IT business. We expect the IT business to grow 15% plus in the second half. Valuation attractive, expect ROCE to increase to 18.5% by FY14F Increasing contribution from Apple products would reduce working capital days. This, along with improving FCF (INR-3.4bn in 1HFY13F vs. INR24.9bn in 1HFY12) would result in net debt stabilising at ~INR18bn, as per our estimate. We expect ROCE (average 15.2% over the past 5 years) to improve from 17.3% (FY12) to 18.5% by FY14F. The stock currently trades at 6.7x FY14F EPS, ~34% average discount to its regional peers appears compelling. Our TP is based on 9x one-year forward P/E. Erratum: This note replaces an earlier published report which included SG&A numbers that were linked incorrectly. We apologise for any confusion this may have caused.
31 Mar Currency (INR) FY12 Actual Old FY13F New Old FY14F New Old FY15F New
Buy
INR 115 INR 79 +45.6%
Anchor themes Redington is the largest distributor in India and is set, in our view, to be a beneficiary of increase in IT & non-IT spending in India due to under penetration of personal computers (PC), servers, networking equipment, lifestyle electronics and consumer durables Nomura vs consensus Our FY14F revenue is ~5% ahead of consensus as we are more optimistic about sales from Apple products and IT purchase by government.
Research analysts India Mid-Caps Ankur Agarwal, CFA - NFASL ankur.agarwal@nomura.com +91 22 4037 4489 Lalit Kumar - NFASL lalit.kumar@nomura.com +91 22 4037 4511
Revenue (mn) Reported net profit (mn) Normalised net profit (mn) FD normalised EPS FD norm. EPS growth (%) FD normalised P/E (x) EV/EBITDA (x) Price/book (x) Dividend yield (%) ROE (%) Net debt/equity (%)
211,930 237,113 242,401 280,892 285,954 2,927 2,927 7.35 28.5 10.7 7.8 2.4 2.7 19.4 119.2 3,561 3,561 8.93 21.6 N/A N/A N/A N/A 23.9 91.2 3,689 3,689 9.25 25.8 8.5 6.9 1.9 0.6 23.2 99.3 4,487 4,487 11.25 26.0 N/A N/A N/A N/A 23.9 77.5 4,675 4,675 11.72 26.7 6.7 6.1 1.5 0.6 23.5 88.8 N/A N/A N/A N/A
321,745 5,535 5,535 13.88 18.4 5.7 5.3 1.2 0.6 22.3 68.3
Source: Company data, Nomura estimates
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Key company data: See page 2 for company data and detailed price/index chart.
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Nomura | Redington India
November 22, 2012
Key data on Redington India

Incomestatement(INRmn)
Year-end 31 Mar Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis Reported P/E (x) Normalised P/E (x) FD normalised P/E (x) FD normalised P/E at price target (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (INR) Norm EPS (INR) Fully diluted norm EPS (INR) Book value per share (INR) DPS (INR)
Relative performance chart (one year)

FY11 174,677 -165,210 9,467 -3,034 -2,066 4,368 4,613 -246 4,368 -961 0 103 3,510 -862 2,648 -388 FY12 211,930 -199,348 12,582 -4,045 -2,804 5,733 6,044 -310 5,733 -1,520 0 290 4,503 -1,113 3,390 -463 FY13F 242,401 -227,976 14,425 -4,399 -3,466 6,559 6,936 -377 6,559 -1,836 0 436 5,159 -1,290 3,869 -180 FY14F 285,954 -268,795 17,159 -5,288 -4,003 7,868 8,298 -430 7,868 -1,964 0 600 6,504 -1,626 4,878 -203 FY15F 321,745 -302,439 19,307 -5,981 -4,408 8,918 9,402 -484 8,918 -2,006 0 772 7,684 -1,921 5,763 -228
Source: ThomsonReuters, Nomura research

(%) Absolute (INR) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (INR) 3-mth avg daily turnover (USDmn) Major shareholders (%) Promoters 1M 3M 12M -5.4
1.4 10.5 2.0 571.1 53.0 94/65 0.58
-1.0 11.2 -10.6 6.7 -21.9
28.9
2,260 2,260 -509 1,751
2,927 2,927 -865 2,063
3,689 3,689 -191 3,497
4,675 4,675 -191 4,483
5,535 5,535 -191 5,344
Source: Thomson Reuters, Nomura research
Notes
13.8 13.8 13.8 18.2 1.6 na 2.5 9.2 9.8 5.4 2.6 2.5 1.3 24.6 22.5 0.3 2.3 15.5 11.4
10.7 10.7 10.7 14.1 2.7 12.2 2.4 7.8 8.2 5.9 2.9 2.7 1.4 24.7 29.5 0.2 1.7 19.4 11.9
8.5 8.5 8.5 11.2 0.6 14.5 1.9 6.9 7.3 6.0 2.9 2.7 1.5 25.0 5.2 0.3 2.1 23.2 12.2
6.7 6.7 6.7 8.9 0.6 33.5 1.5 6.1 6.4 6.0 2.9 2.8 1.6 25.0 4.1 0.3 1.9 23.5 12.8
5.7 5.7 5.7 7.5 0.6 8.0 1.2 5.3 5.6 6.0 2.9 2.8 1.7 25.0 3.5 0.2 1.7 22.3 12.8
Strong growth in FY14F driven by increase in Apple sales and IT purchase by government
26.9 30.7 32.5 21.7 21.7
21.3 31.0 31.3 28.5 28.5
14.4 14.8 14.4 25.8 25.8
18.0 19.6 20.0 26.7 26.7
12.5 13.3 13.3 18.4 18.4
5.72 5.72 5.72 31.77 1.29
7.35 7.35 7.35 33.20 2.17
9.25 9.25 9.25 41.93 0.48
11.72 11.72 11.72 53.17 0.48
13.88 13.88 13.88 66.57 0.48
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November 22, 2012
Cashflow(INRmn)
Year-end 31 Mar EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Reduction in investments Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt
FY11 4,613 -7,113 1,791 -709 -564 -1,273 -1,816 0 9 81 -3,000 -456 83 3,155 -801 1,980 -1,020 5,826 4,806 11,091 FY12 6,044 -2,570 -890 2,584 -521 2,063 0 -5,955 12 1,091 -2,789 -503 67 4,706 -1,453 2,817 28 4,806 4,834 15,768 FY13F 6,936 -3,916 -853 2,167 -800 1,367 0 0 0 0 1,367 -191 0 2,000 -2,017 -208 1,159 4,834 5,993 16,610 FY14F 8,298 -6,334 -1,026 939 -800 139 0 0 0 0 139 -191 0 1,000 -2,167 -1,359 -1,220 5,993 4,773 18,829 FY15F 9,402 -4,334 -1,149 3,919 -800 3,119 0 0 0 0 3,119 -191 0 0 -2,234 -2,426 694 4,773 5,467 18,136 Notes
We expect the company to preserve cash to reduce its debt
Balancesheet(INRmn)
As at 31 Mar Cash & equivalents Marketable securities Accounts receivable Inventories Other current assets Total current assets LT investments Fixed assets Goodwill Other intangible assets Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Total shareholders' equity Total equity & liabilities Liquidity (x) Current ratio Interest cover Leverage Net debt/EBITDA (x) Net debt/equity (%) Activity (days) Days receivable Days inventory Days payable Cash cycle
FY11 4,806 0 25,483 15,833 2,371 48,493 0 1,379 657 95 63 50,688 15,897 14,842 3,914 34,653 0 69 34,722 3,413 793 11,761
FY12 4,834 0 27,920 17,000 2,835 52,589 0 1,679 657 103 81 55,111 15,482 16,072 4,183 35,737 5,121 80 40,937 949 797 12,428
FY13F 5,993 0 31,934 18,817 3,119 59,863 0 2,102 657 103 81 62,807 17,482 18,271 4,183 39,936 5,121 80 45,136 949 797 15,925
FY14F 4,773 0 37,672 21,449 3,431 67,325 0 2,472 657 103 81 70,639 18,482 20,620 4,183 43,284 5,121 80 48,485 949 797 20,408
FY15F 5,467 0 42,387 23,306 3,774 74,933 0 2,788 657 103 81 78,564 18,482 23,201 4,183 45,865 5,121 80 51,066 949 797 25,752
Notes
We expect working capital days to improve as contribution from non-IT products particularly Apple increases
12,553 50,688
13,225 55,111
16,722 62,807
21,205 70,639
26,549 78,564
1.40 4.5
1.47 3.8
1.50 3.6
1.56 4.0
1.63 4.4
2.40 88.4
2.61 119.2
2.39 99.3
2.27 88.8
1.93 68.3
45.6 28.3 26.0 47.9
46.1 30.1 28.4 47.9
45.1 28.7 27.5 46.2
44.4 27.3 26.4 45.4
45.4 27.0 26.4 46.0
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November 22, 2012
iPhone sign-up with Apple to drive growth in 2HFY13F and beyond

Apple has nominated Redington as an iPhone distributor (iPhone 5, iPhone 4 and 4S) in India, which implies that Redington will be distributing the entire range of products in India now. The company expects to record sales of ~INR11bn in FY13F (five months) from the iPhone, which we expect should double in FY14F in a year, when the full impact of the incremental product will be visible. Redingtons revenue from Apple products (ex iPhone) has also been growing at above 50%; this growth should remain strong in FY14F. Overall, we expect sales from Apple in FY14F to increase close to 7x the FY12 level, thus increasing Apples contribution to Redingtons domestic business from 5% in FY12 to 23% in FY14F, on our estimates.
Fig. 1: Apples contribution to domestic sales iPhone to be major driver

25% 23% 25%
Fig. 2: India revenue mix by top vendors

HP Microsoft RIM ACER Lenovo Apple Others
100%
20% 16% 15%
80%
38%
43%
43%
41%
44%
40%
60% 9% 9% 5% 10% 15% 8%

5%
5%
10%
40%
10%
18% 7% 20%
5% 2% 0% FY10 FY11 FY12 FY13F FY14F FY15F 2%
20%
44%
40%
38%
34% 22%
0% 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Source: Company data, Nomura research
Given that Apple products have lower margins (but a high inventory turnover), vis--vis the non-IT business, we have adjusted our gross margin estimated downward by 5/10bps for FY13F/FY14F. Strong demand for Apple products results in lower inventory days, thus having a positive impact on the working capital cycle for Redington.
Expect a robust pick-up in government IT purchases

One of the main reasons for the low growth of Redingtons domestic IT business was a slowdown in government purchases. However, the company has indicated that there was an increase in the number of government queries, of late, and expects government purchases to pick up in 2HFY13. In addition, the company has received a large UIDAadhar project, which we expect to be executed over the next 2-3 quarters, thus benefiting its IT business. Hence, we estimate the IT business to grow at 15%+ in 2HFY13F.
Blackberry sales to pick up from 2H, BB10 launch can benefit

Blackberry has been a major growth contributor to Redingtons non-IT business over the last three years. Blackberry sales slowed in 1HFY13, with Redington reporting a sales decline of ~40% in 2QFY13 (volume run-rate declined from 0.1mn/month in FY12 to 6070K/month in 2QFY13). This was because the company also consciously scaled back its inventory to assess the plans and prospects of Blackberry. However, Blackberry sales volumes picked up in October (~80-90K units sold in Oct 12) and we expect this run-rate to continue in the remaining months of 2H. We expect Blackberry sales to improve sequentially in 2HFY13. Blackberry has announced the launch of BB10 in Jan 13 which should reflect in FY14 numbers, in our view where we are building in 9% y-y growth.
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November 22, 2012
Fig. 3: Blackberry sales Volumes to pick up in 2H

'000 Units
1,250
Fig. 4: Blackberry sales contribution to India business

18% 16% 15%
1,000
14%
12% 750 9% 500 6% 5%
11% 10%
7%
250 3%
-FY10 FY11 FY12 FY13F FY14F FY15F
0% FY10 FY11 FY12 FY13F FY14F FY15F
Summary of our estimate changes

We revise our estimates on account of the following reasons: We raise our FY13F and FY14F sales estimates to reflect Redingtons recent tie-up with Apple for the distribution of iPhone. We also assume increased growth of its India business on account of strong growth in Apple Mac and iPad. We factor in relatively weak Blackberry performance in 2Q, along with a pick-up in 2HFY13, in our estimates. Apple products have lower margins, given the high demand and high inventory turnover. Thus, we lower our gross margin estimate by 5bps/10bps for FY13F/FY14F to capture the increasing sales contribution from Apple (as Redington will now be selling the iPhone as well). We have accordingly reduced Redingtons India business EBIT margin by ~8bps/16bps for FY13F/FY14F. We raise our margin estimates for the overseas business by 8bps for FY14F to reflect the turnaround in performance of Arena (Turkey). We also raise our other income forecast to reflect the current discounts which Redington gets from its vendors as its sales increase. The decrease in working capital on account of increasing sales from Apple (has negative working capital days) would result in improved cash flows and will positively impact Redingtons balance sheet; the company expects net debt to stabilise at ~INR18bn by FY13F and accordingly we reduce our interest estimate for FY14F.
Fig. 5: Changes to our estimates

INR mn
Revenue
- growth
Old FY13F 237,113

11.9%
FY14F 280,892
18.5%
New FY13F 242,401

14.4%
FY14F 285,954
18.0%
% Change FY13F 2.2%

2.5%
FY14F 1.8%
-0.5%
EBITDA
- margin
6,939
2.93%
8,388
2.99%
6,936
2.86%
8,298
2.90%
0.0%
-0.07%
-1.1%
-0.08%
EBITDA inc other income

- margin
7,176
3.03%
8,669
3.09%
7,372
3.04%
8,899
3.11%
2.7%
0.01%
2.6%
0.03%
Profit EPS (INR)

Source: Nomura estimates
3,561 8.9
4,487 11.3
3,689 9.2
4,675 11.7
3.6% 3.6%
4.2% 4.2%
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November 22, 2012
Addition of new vendors continues key growth drivers

Redington continues to add new vendors to its portfolio, continues to expand geographies as well as its product portfolio which, in our view, are the long-term growth drivers. Redington has tied-up with Rising Star Games Limited as an exclusive distributor of their gaming titles for Xbox 360 and PS 3. It has also tied up with Coral, Fortinet, Parallels, VMware and others in CY12.
Valuation methodology trading at a 34% average discount to regional peers

Our revised TP of INR115 is based on a one-year forward multiple of 9.0x (23% discount to its six-year average of 11.7x given a slower growth environment and higher net debt/equity gearing) applied to our average FY14F & FY15F estimates (vs. FY14 earlier). We highlight that the stock currently trades at FY13F and FY14F EPS of 8.5x and 6.7x, respectively, which is at a 27% (42% to FY14F multiple) discount to its historical average. The stock appears to us as one of the least expensive IT distributor globally in terms of the PEG ratio, based on our estimates. Amongst its Asian peers, it trades at an average 43% discount to Synnex (2347 TT, Buy, TP: TWD72) on FY13-14F EPS multiples (compared with CY12-13 multiples for Synnex) and at a 21% discount to Digital China (861 HK, Buy,TP: HKD18).
Fig. 6: Redington valuation offers very attractive risk-rewards at current levels

Least expensive distributor globally on PEG ratio
Com pany US peers Avnet Arrow Electronics Ingram Micro Tech Data Synnex Corp Average Market Cap w eighted average Asian peers Synnex Taiw an 2347 TT Buy TWD 56 3,006 AVT US ARW US IM US TECD US SNX US NA NA NA NA NA USD USD USD USD USD 29 36 16 45 32 3,945 3,856 2,339 1,685 1,186 2,602 Bloom berg Ticker Rating Local Currency (LC) Stock Price in LC Market Cap (Mn USD) P/E CY12E 9.0 8.2 8.5 8.4 8.1 8.4 8.5 CY12E 14.9 FY13E Redington India Digital China REDI IN 861 HK BUY BUY INR HKD 79 13 572 1,831 8.5 10.4 CY13E 7.5 8.2 7.2 7.4 7.6 7.6 7.6 CY13E 11.9 FY14E 6.7 9.0 EV/EBITDA CY12E 6.4 6.2 3.7 4.3 4.8 5.1 5.4 CY12E 20.6 FY13E 6.9 7.5 CY13E 5.5 6.1 3.0 3.9 4.5 4.6 4.9 CY13E 17.4 FY14E 6.1 6.5 EV/Sales CY12E 0.22 0.27 0.05 0.06 0.13 0.15 0.17 CY12E 0.34 FY13E 0.20 0.18 CY13E 0.21 0.26 0.05 0.06 0.12 0.14 0.17 CY13E 0.30 FY14E 0.18 0.15 ROE CY11 13.4 13.8 9.2 9.7 13.1 11.8 12.2 CY11 14.7 FY12 19.4 19.4 ROCE CY11 9.8 10.2 8.7 8.8 11.0 9.7 9.7 CY11 10.9 FY12 17.3 16.0 Sales USD CY11 25,708 21,390 36,329 26,488 10,410 24,065 25,045 CY11 2,015 FY12 3,845 9,073 EBITDA Margin CY11 4.1 5.1 1.4 1.6 2.7 3.0 3.5 CY11 1.9 FY12 2.9 2.1 EBITDA CAGR CY11-14 -2.1 -4.4 9.5 0.3 5.5 1.8 0.3
CY1114
10.9
FY1215
15.9 18.8
Source: Bloomberg estimates for all names, except Redington, Digital China and Synnex Tech where we have used Nomura estimates. Pricing as of 21 Nov 2012.
Investment risks
Higher-than-anticipated slowdown in the IT segment in India Middle East. Redington derives c.79% of its revenue from the IT sector. Any higher-than-modelled slowdown in the IT sector is likely to impact Redington and our estimates. Interest rate risk a key element for a working-capital intensive distribution business. Redington is involved in a working capital-intensive business and has significant debt of INR20.6bn (75% of which is short term) on its balance sheet. The companys current net debt/equity ratio is 1.19x. Every 1% increase in interest can reduce our EPS estimates by an average of ~4.0% (conversely, an interest decline would have a positive impact on EPS). Currency Risk. Redington has a presence across 18 countries, mainly in the Middle East and Africa. Overseas business contributes close to 53% of the revenues and constitutes ~ 38% of total earnings. Any deviation in currency, particularly USD/INR
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(where we currently assume an average rate of INR54.1/USD for the remaining FY13 and FY14 based on the YTD average) will impact our forecasts. Impact of GST in India. India has complicated rules and regulations on sales tax on the movement of goods between states. GST implementation in India at any stage may encourage other distribution models such as direct distribution. However, the presence of so many IT distributors in the US (which has limited red tape in terms of interstate movement) could indicate that Redingtons business model might be here to stay. Management believes it can turn around the companys inventory (and assets better) if GST is implemented. Loss of a major vendor or deteriorating market share of a key vendor. Redington derived ~50% of total revenues from its top four vendors in FY12, which included HP (30%); Research in Motion/RIM (8.5%); Nokia (7.5% but its swapped the vendor for Samsung in FY12-end) and Dell (~4%). Any deterioration in relationship with these major vendors or adverse market impact on the market share of these vendors could impact earnings. HP is the single-largest IT products company globally, with an emphasis on an indirect direct distribution model and it contributes the major share of revenue (27-39%) of other Indian distribution players, including Ingram, Tech Data and Synnex. HP does a significant percentage of its global sales through Redington and the two companies been associated with each other for the past 21 years. Redingtons dependence on HP has been steadily coming down every year (it has come down from 44% of revenues in India in 2006-07 to 20% in 2011-12 and from 60% in the overseas business to 39% in the same period) as it expands its vendor/product base. As we have indicated earlier, RIM is still doing well in India, but Redington is also exploring a tie with other smartphone vendors.
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Appendix A-1
I, Ankur Agarwal, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures

The term "Nomura Group Company" used herein refers to Nomura Holdings, Inc. or any affiliate or subsidiary of Nomura Holdings, Inc. Nomura Group Companies involved in the production of Research are detailed in the disclaimer below.
Issuer name Synnex Technology Digital China Redington India
Ticker 2347 TT 861 HK REDI IN
Price TWD 55.5 HKD 12.98 INR 79
Price date 21-Nov-2012 21-Nov-2012 21-Nov-2012
Stock rating Buy Buy Buy
Sector rating Not rated Not rated Not rated
Disclosures A4,A5
A4 A5
A Nomura Group Company had an investment banking services client relationship with the issuer during the past 12 months. A Nomura Group Company has received compensation for investment banking services from the issuer in the past 12 months.
Previous Rating
Issuer name Synnex Technology Digital China Redington India Previous Rating Neutral Neutral Not Rated Date of change 10-Feb-2009 29-Jul-2011 08-Feb-2011
Redington India (REDI IN)

Rating and target price chart (three year history)
INR 79 (21-Nov-2012) Buy (Sector rating: Not rated)

Date 02-Jul-12 08-Feb-11 08-Feb-11 Rating Target price 101.00 Buy 104.00 Closing price 77.05 71.55 71.55
For explanation of ratings refer to the stock rating keys located after chart(s)
Valuation Methodology Our target price of INR101 is based on 9x one-year forward P/E (applied to our FY14 estimates), which is at a 25% discount to its historical average. Risks that may impede the achievement of the target price Slowdown in IT sector as Redington derives around 80% of its revenue from the IT sector. The company also has Currency risk as it has a presence across 18 countries, mainly in the Middle East and Africa. It is working capital intensive and so it also faces Interest rate risk. Loss of relationships with major vendors as company derives ~55% of total revenue from its top five vendors.
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Synnex Technology (2347 TT)

Rating and target price chart (three year history)
TWD 55.5 (21-Nov-2012) Buy (Sector rating: Not rated)

Date 01-Nov-12 08-Oct-12 20-Apr-12 01-Dec-10 Rating Target price 72.00 78.00 82.00 90.00 Closing price 58.50 66.40 67.60 76.60
Valuation Methodology We use a DCF-based valuation to reflect channel distributors capability to generate stable cash inflows. Our DCF assumes revenues growth will maintain at 1% in 2020F as growth in the global PC/handset market might gradually saturate. We apply a cost of equity of 8.78%, which assumes a risk-free rate of 2.6%, a market risk premium of 6.0%, and an equity beta of 1.03. Our DCF-based TP is TWD72. Risks that may impede the achievement of the target price Downside risks that may cause the shares to fail to reach our target price include: 1) weaker-than-expected PC and smartphone demand; 2) worse-than-expected operating margin performance due to irrational price competition; 3) inventory write-down if end demand turns out to be much worse than expected; 4) higher-than-expected operating expenses; 5) unexpected bad debt write-offs on tight credit conditions; and 6) smaller than expected earnings contribution from L-T investments (e.g. Redington and Synnex USA).
Digital China (861 HK)
Rating and target price chart (three year history) Date 24-Feb-12 29-Jul-11 24-Jan-11 24-Jan-11 Rating Buy Neutral 17.00 Target price 18.00 Closing price 15.54 13.30 15.42 15.42
HKD 12.98 (21-Nov-2012) Buy (Sector rating: Not rated)
Valuation Methodology Our target price of HKD18 is based on a sum-of-the-parts methodology. We apply 20x FY13 P/E for the service business, the historical average for offshore Chinese IT software vendors, and 12x FY13F P/E for Digital China's distribution-related business. Risks that may impede the achievement of the target price We see the following risk factors for the distribution businesses: 1) margin erosion due to a switch to lower-margin distribution models by key clients, and 2) excess inventory due to a sudden decline in IT demand in China. On the other hand, we see service business units facing the following risks: 1) delays in IT
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spending due to management changes in the government, telecom, and financial sectors, and 2) additional costs due to the delay in software development.
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Important Disclosures
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The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to target price defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc. STOCKS A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including, but not limited to, when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company. Benchmarks are as follows: United States/Europe: please see valuation methodologies for explanations of relevant benchmarks for stocks, which can be accessed at: http://go.nomuranow.com/research/globalresearchportal/pages/disclosures/disclosures.aspx; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.
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STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%. A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company. Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.
Target Price
A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.
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Company FundamentalsCompany Fundamentals\Company Profile
A Wright Investors' Service Research Report:
Redington (India) Limited

COMPANY PROFILE
440 Wheelers Farms Road Milford, CT 06461 U.S.A.
Figures in Indian Rupees

Wright Quality Rating:CBB16 Redington (India) Limited, along with its subsidiaries, is engaged in the business of end-to-end supply chain management of information technology (IT) and non-IT products in various geographies of South Asia, Middle East and Africa. Redington also provides warranty and post warranty services. Redington is a supply chain solution providers to over 75 manufacturers of information technology, telecom, lifestyle and consumer electronics products. As of October 17, 2011, the Company had connected distribution network of more than 23,600 channel partners. In June 2012, the Company's wholly owned subsidiary, M/s. Easyaccess Financial Services Limited, purchased a building STERLING TECHNOPOLIS admeasuring 2,30,000 sq. ft. located at Old Mahabalipuram Road, Chennai. Stock Chart Officers Non Executive Chairman Prof. J. Ramachandran Chief Financial Officer S. V. Krishnan Key Data Ticker: REDINGTON 2012 Sales: 211,929,873,000 Major Industry: Miscellaneous Sub Industry: Wholesalers Country: India
Currency: Executive Managing Director Indian Rupees R. Srinivasan Secretary & Chief Compliance Officer M. Muthukumarasamy Fiscal Year Ends: March Employees N/A Exchanges: BOM Share Type: Ordinary Stock Price (7/27/2012): 68.40 Recent stock performance 1 Week -5.7% 4 Weeks -11.0% 13 Weeks -23.7% 52 Weeks -29.8% Earnings / Dividends (as of 3/31/2012) Earnings Dividends Most Recent Qtr 2.56 Last 12 Months 7.35 Ratio Analysis Price / Earnings Ratio 9.31 Dividend Yield 0.58% Price / Sales Ratio 0.13 Payout Ratio 5.44% Market Capitalization: 27,295,580,538 Total Shares Outstanding: 399,058,195 0.40 Closely Held Shares: 0.40 114,507,975
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Price / Book Ratio
2.06 % Held by Insiders 28.69% Address Phone +91 44 4224-3353 Home Page http://www.redingtonindia.com
Thiru-Vi-Ka Industrial Estate CHENNAI 600032 INDIA
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Company Fundamentals\Comparative Business Analysis
Comparative Business Analysis: Redington

Report Date: August 04, 2012
(India) Limited
Company Description Redington (India) Limited, along with its subsidiaries, is engaged in the business of end-to-end supply chain management of information technology (IT) and non-IT products in various geographies of South Asia, Middle East and Africa. Redington also provides warranty and post warranty services. Redington is a supply chain solution providers to over 75 manufacturers of information technology, telecom, lifestyle and consumer electronics products. As of October 17, 2011, the Company had connected distribution network of more than 23,600 channel partners. In June 2012, the Company's wholly owned subsidiary, M/s. Easyaccess Financial Services Limited, purchased a building STERLING TECHNOPOLIS admeasuring 2,30,000 sq. ft. located at Old Mahabalipuram Road, Chennai. Competitor Analysis Redington (India) Limited operates in the Computers, peripherals & software sector. This analysis compares Redington (India) Limited with three other companies: Adani Enterprises Limited (2012 sales of 392.26 billion Indian Rupees [US$7.00 billion] of which 47% was Trading), ALSO-Actebis Holding AG of Switzerland (2011 sales: 6.21 billion Swiss Francs [US$6.28 billion] of which 76% was Central Europe), and Esprinet SpA which is based in Italy (2011 sales of 2.10 billion Euro [US$2.55 billion] of which 97% was IT & CE B to B Dtrn). Note: not all of these companies have the same fiscal year: the most recent data for each company are being used. Sales Analysis Redington (India) Limited reported sales of 211.93 billion Indian Rupees (US$3.78 billion) for the fiscal year ending March of 2012. This represents an increase of 21.4% versus 2011, when the company's sales were 174.59 billion Indian Rupees. Sales at Redington (India) Limited have increased during each of the previous five years (and since 2007, sales have increased a total of 134%).
Recent Sales at Redington (India) Limited 212 175 109 127 138
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2007 2008 2009 2010 2011 2012 (Figures in Billions of Indian Rupees)
Sales Comparisons (Most Recent Fiscal Year) Company Year Ended Sales
(US$blns)
Sales Sales/ Growth Emp (US$) Largest Region 21.4% 47.4% -4.9% N/A N/A 2,039,176 Germany (52.4%) 2,650,749 Italy (75.2%) 49.0% 11,728,446 Outside India (65.9%)
Redington (India) Limited Mar 2012 Adani Enterprises Limited Mar 2012 ALSO-Actebis Holding AG Dec 2011 Esprinet SpA Dec 2011
3.783 7.002 6.285 2.547
Recent Stock Performance During each of the previous 3 fiscal years, this stock has increased in value (at the end of March of 2009, the stock was at 21.90 Indian Rupees). For the 52 weeks ending 7/27/2012, the stock of this company was down 29.8% to 68.40 Indian Rupees. During the past 13 weeks, the stock has fallen 23.7%. During the 12 months ending 3/31/2012, earnings per share totalled 7.35 Indian Rupees per share. Thus, the Price / Earnings ratio is
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9.31. Earnings per share rose 28.5% in 2012 from 2011. The P/E ratio of 9.3 is lower than the P/E ratios of all three comparable companies, which are currently trading between 10.4 and 24.6 times earnings. This company is currently trading at 0.13 times sales. Redington (India) Limited is trading at 2.06 times book value. The company's price to book ratio is higher than that of all three comparable companies, which are trading between 0.74 and 1.63 times book value. Summary of company valuations (as of 7/27/2012). Company Redington (India) Limited Adani Enterprises Limited ALSO-Actebis Holding AG Esprinet SpA P/E 9.3 10.4 14.7 24.6 Price/ Price/ Book Sales 2.06 0.98 1.63 0.74 52 Wk Pr Chg
0.13 -29.80% 0.49 -70.41% 0.09 -6.67% 0.08 -13.73%
The market capitalization of this company is 27.30 billion Indian Rupees (US$487.23 million) . The capitalization of the floating stock (i.e., that which is not closely held) is 19.46 billion Indian Rupees (US$347.42 million) . Dividend Analysis During the 12 months ending 3/31/2012, Redington (India) Limited paid dividends totalling 0.40 Indian Rupees per share. Since the stock is currently trading at 68.40 Indian Rupees, this implies a dividend yield of 0.6%. The company has paid a dividend for 6 straight years. During the same 12 month period ended 3/31/2012, the Company reported earnings of 7.35 Indian Rupees per share. Thus, the company paid 5.4% of its profits as dividends. Since the company is paying less than 10% of its earnings out in dividends, it is likely that this company believes that it has significant growth prospects, and has decided to pay only a modest dividend. Profitability Analysis On the 211.93 billion Indian Rupees in sales reported by the company in 2012, the cost of goods sold totalled 205.31 billion Indian Rupees, or 96.9% of sales (i.e., the gross profit was 3.1% of sales). This gross profit margin is slightly lower than the company achieved in 2011, when cost of goods sold totalled 96.3% of sales. The gross margin in 2012 was the lowest of the previous five years (in 2011, the gross margin had been as high as 3.7%). Redington (India) Limited's 2012 gross profit margin of 3.1% was lower than all three comparable companies (which had gross profits in 2012 between 5.9% and 13.0% of sales). In 2012, earnings before extraordinary items at Redington (India) Limited were 2.93 billion Indian Rupees, or 1.4% of sales. This profit margin is an improvement over the level the company achieved in 2011, when the profit margin was 1.3% of sales. Earnings before extraordinary items have grown for each of the past 5 years (and since 2008, earnings before extraordinary items have grown a total of 115%). The company's return on equity in 2012 was 24.6%. This was an improvement over the 21.0% return the company achieved in 2011. (Extraordinary items have been excluded). Profitability Comparison Gross Earnings Profit EBITDA before Year Margin Margin extras 3.1% 3.7% 13.0% 6.4% 5.9% N/A 2.6% 12.5% 1.2% 2.3% 1.4% 1.3% 4.7% 0.4% 0.4%
Company
Redington (India) Limited 2012 Redington (India) Limited 2011 Adani Enterprises Limited 2012 ALSO-Actebis Holding AG 2011 Esprinet SpA 2011
Inventory Analysis As of March 2012, the value of the company's inventory totalled 18.12 billion Indian Rupees. Since the cost of goods sold was 205.31 billion Indian Rupees for the year, the company had 32 days of inventory on hand (another way to look at this is to say that the company turned over its inventory 11.3 times per year). In terms of inventory turnover, this is a slight improvement over March 2011, when the company's inventory was 15.83 billion Indian Rupees, equivalent to 34 days in inventory.
88
Financial Position As of March 2012, the company's long term debt was 5.12 billion Indian Rupees and total liabilities (i.e., all monies owed) were 40.86 billion Indian Rupees. The long term debt to equity ratio of the company is 0.36. This is significantly lower than the long term debt to equity ratio as of in March 2011, when the long term debt to equity ratio stood at 1.04. As of March 2012, the accounts receivable for the company were 27.69 billion Indian Rupees, which is equivalent to 48 days of sales. This is an improvement over the end of 2011, when Redington (India) Limited had 58 days of sales in accounts receivable. Financial Positions Company LT Debt/ Days Days Year Equity AR Inv. 0.36 2.51 0.24 0.16 48 118 32 50 32 56 27 40
Redington (India) Limited 2012 Adani Enterprises Limited 2012 ALSO-Actebis Holding AG 2011 Esprinet SpA 2011
89
Company Fundamentals\Summary Analysis
SUMMARY ANALYSIS:
Per Share- Indian Rupees

Price Market Price Last 27.40
DE E E

Equity Capital % % Profit Book Earned Rate Value Growth (ROE) Begin Yr 18.7% 17.4% 17.8% 14.4% 16.9% 23.2% n/a 22.4% 21.8% 22.1% 18.3% 20.9% 24.5% n/a n/a 16.07 18.53 25.74 27.36 30.02 33.18 Earnings 12 Month Earnings % Per Share Change
CF F F F F
Year Fiscal Yr Ends: March 2007 2008 2009 2010 2011 2012 7/27/2012
Value Ratios Price/ Price/ Earnings Book Dividend Ratio Ratio Yield 8.9 21.1 5.3 15.8 14.0 12.0 9.3 n/c 4.6 1.2 2.9 2.9 2.9 2.1 1.8% 0.9% 3.7% 1.3% 1.4% 0.5% 0.6%
Dividends % 12 Month Payout Dividends Ratio Per Share 16.3% 20.0% 19.5% 21.3% 19.2% 5.4% 5.4%
A
3.07 3.50 4.10 4.70 5.72 7.35 7.35
25.6% 13.8% 17.3% 14.7% 21.7% 28.5% n/c
0.50 0.70 0.80 1.00 1.10 0.40 0.40
73.87 21.90 74.36 80.05 88.25 68.40
(A): ALL ITEMS ADJUSTED FOR STOCK SPLITS OR DIVIDENDS - 5:1 ON 08/20/2010 (B): INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT - INCLS 0.39 PRETAX CR IN FIS 2006, INCLS 0.06 PRETAX CHG IN FIS 2005 (C ): INCLUDES THE EFFECTS OF A CHANGE IN ACCOUNTING POLICIES OR TAX LAWS - - ADOPTED AS 15 (R) FOR EMPLOYEE BENEFIT IN FIS 2007, EARNINGS IMPACT NOT SPECIFIED (D): ACQ'D - EASYACCESS FINANCIAL SERVICES PVT LTD IN FIS 2008 (E): ABRIDGED STATEMENTS, ABRIDGED STATEMENTS, ABRIDGED STATEMENTS (F ): BASED ON AVERAGE SHARES OUTSTANDING, (U ): BASED ON AVERAGE SHARES OUTSTANDING, INFORMATION UPDATED FROM 2006 ANNUAL, AS 2005 ANNUAL NOT AVAILABLE, INFORMATION UPDATED FROM 2007 PROSPECTUS, AS 2004 ANNUAL NOT AVAILABLE
90
Company Fundamentals\Sales Analysis
SALES ANALYSIS:
Figures in millions of Indian Rupees

Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) Amount in millions 370 806 1,327 1,977 2,590 3,296 3,657 4,717 6,334
Sales Amount in millions 19,635 40,480 67,906 90,614 Year-toyear Growth n/c 106.2% 67.8% 33.4% 20.0% 16.5% 8.6% 26.9% 21.4%
Cost of Goods Sold Amount in % of millions Sales 19,321 98.4% 39,654 98.0% 66,563 98.0% 88,517 97.7% 105,029 96.6% 121,980 96.3% 132,516 96.3% 168,085 96.3% 205,308 96.9%
After Tax Income before Extraordinary Charges and Credits Amount in millions 149 424 743 1,017 1,361 1,597 1,843 2,260 2,927
Employees Sales Per Number Employee n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a After Tax Income Per Employee n/a n/a n/a n/a n/a n/a n/a n/a n/a
Year 2004 2005 2006 2007
% of Sales 1.9% 2.0% 2.0% 2.2% 2.4% 2.6% 2.7% 2.7% 3.0%
% of Sales 0.8% 1.0% 1.1% 1.1% 1.3% 1.3% 1.3% 1.3% 1.4%
2008 108,701 2009 126,683 2010 137,578 2011 174,585 2012 211,930
91
Company Fundamentals\Price Analysis
PRICE ANALYSIS:
Per Share- Indian Rupees

12 Closing Quarterly months Price %Change %Change 27.400 47.640 67.530 86.340 73.870 61.350 46.060 23.480 21.900 48.350 52.700 62.530 74.360 75.330 90.550 82.350 80.050 86.600 92.000 81.650 88.250 76.850 68.400 n/a 73.9% 41.8% 27.9% -14.4% -16.9% -24.9% -49.0% -6.7% 120.8% 9.0% 18.7% 18.9% 1.3% 20.2% -9.1% -2.8% 8.2% 6.2% -11.3% 8.1% -12.9% -23.7% n/a n/a n/a n/a 169.6% 28.8% -31.8% -72.8% -70.4% -21.2% 14.4% 166.3% 239.5% 55.8% 71.8% 31.7% 7.7% 15.0% 1.6% -0.9% 10.2% -11.3% -29.8%
Quarter 2007 Jan - Mar Apr - Jun Jul - Sep Oct - Dec 2008 Jan - Mar Apr - Jun Jul - Sep Oct - Dec 2009 Jan - Mar Apr - Jun Jul - Sep Oct - Dec 2010 Jan - Mar Apr - Jun Jul - Sep Oct - Dec 2011 Jan - Mar Apr - Jun Jul - Sep Oct - Dec 2012 Jan - Mar Apr - Jun 7/27/2012
High Price
Low Price
38.260 22.600 51.380 25.000 68.360 46.600 89.210 60.000 91.800 51.330 77.580 56.000 65.400 42.200 55.180 19.200 27.200 15.930 55.600 21.600 56.480 37.760 66.760 43.680 75.600 54.310 89.560 70.960 98.400 71.050 93.500 73.100 83.500 66.350 92.050 76.400 102.150 85.600 98.800 65.600 94.000 75.250 94.000 75.000
92
Company Fundamentals\Earnings & Dividends Analysis
EARNINGS AND DIVIDENDS ANALYSIS:

Per Share- Indian Rupees Fiscal Year Ends in March
Earnings Per Share 12 Months Fiscal % Years Earnings Change 2004
F
Dividends Per Share 12 Months % Dividends Change n/a n/a n/a 0.50 0.70 0.80 A 1.00 1.10 n/c n/c n/c n/c 40.0% 14.3% 25.0% 10.0% Quarterly Reported Dividends Q1 Jun. n/a n/a n/a n/a n/a n/a n/a n/a n/a Q2 Sep. n/a n/a n/a n/a n/a n/a n/a n/a n/a Q3 Dec. n/a n/a n/a n/a n/a n/a n/a n/a n/a Q4 Mar. n/a n/a n/a 0.50 % Payout 0.0% 0.0% 0.0% 0.0%
Quarterly Reported Earnings Q1 Jun. n/a n/a n/a n/a n/a 0.87 0.95 1.21 1.55 Q2 Sep. n/a n/a n/a n/a 1.52 0.88 1.04 1.25 1.54 Q3 Dec. n/a n/a n/a n/a 0.77 0.91 1.14 1.33 1.70 Q4 Mar. n/a n/a n/a n/a 1.21 1.43 1.57 1.93 2.56
F 1.02
n/c
2005
F
BF 2.11 108.1% BF 2.45 CF 3.07 F 3.50 F 4.10 F 4.70 F 5.72 7.35 15.7% 25.6% 13.8% 17.3% 14.7% 21.7% 28.5%
2006 2007 2008

DE
0.70 16.7% 0.80 20.0% 1.00 19.9% 1.10 20.2% 0.40 17.2%
2009
E
2010
E
2011 2012 (A): (B):
0.40 -63.6%
ALL ITEMS ADJUSTED FOR STOCK SPLITS OR DIVIDENDS - 5:1 ON 08/20/2010
INCLUDES OR EXCLUDES EXTRAORDINARY CHARGE OR CREDIT - INCLS 0.39 PRETAX CR IN FIS 2006, INCLS 0.06 PRETAX CHG IN FIS 2005
(C ):
INCLUDES THE EFFECTS OF A CHANGE IN ACCOUNTING POLICIES OR TAX LAWS - - ADOPTED AS 15 (R) FOR EMPLOYEE BENEFIT IN FIS 2007, EARNINGS IMPACT NOT SPECIFIED
(D): (E): (F ):
ACQ'D - EASYACCESS FINANCIAL SERVICES PVT LTD IN FIS 2008 ABRIDGED STATEMENTS, ABRIDGED STATEMENTS, ABRIDGED STATEMENTS
BASED ON AVERAGE SHARES OUTSTANDING, (U ): BASED ON AVERAGE SHARES OUTSTANDING, INFORMATION UPDATED FROM 2006 ANNUAL, AS 2005 ANNUAL NOT AVAILABLE, INFORMATION UPDATED FROM 2007 PROSPECTUS, AS 2004 ANNUAL NOT AVAILABLE
93
Financial Statement AnalysesFinancial Statement Analyses\Balance Sheet - Common Size
Balance Sheet - (Common Size): Redington

Figures are expressed as Percent of Total Assets. Total Assets are in millions of Indian Rupees.
(India) Limited
2010 2009 2008 2007
Fiscal Year Fiscal Year End Date Assets Total Assets Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Inventories -Total Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investment in Associated Companies Other Investments Property Plant and Equipment Gross Accumulated Depreciation Property Plant and Equipment Net Other Assets Deferred Charges Tangible Other Assets
2011
3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007
49,957.2 9.6% 9.6%
36,305.5 16.0% 16.0%
30,208.8 19.9% 19.9%
22,123.3 8.3% 8.3%
18,208.5 11.0% 5.2% 5.8%
55.7% 31.7%
54.2% 27.1%
51.3% 25.8%
53.6% 32.5%
45.4% 35.6%
35.3% 0.3% 2.9% 0.0% 97.0% 0.0% 97.3% 0.0% 97.1% 0.0% 94.4% 0.6% 95.4%
0.0% 0.0% 3.0%
0.0% 0.0%
0.0% 0.0%
0.0% 0.0% 3.9% 1.5%
3.0% 0.0% 0.0% 0.0%
2.7% 0.0% 0.0% 0.0%
2.9% 0.0% 0.0%
3.2% 2.4% 0.0%
2.4% 2.1%
0.0%
94
Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest Preferred Stock Preferred Stock Issued for ESOP
0.0% 100.0%
0.0% 100.0%
0.0% 100.0%
2.4% 100.0%
2.1% 100.0%
49,957.2 0.0% 0.0%
36,305.5 0.0% 0.0%
30,208.8
22,123.3
18,208.5 20.8%
0.0%
0.0%
33.0% 0.1% 2.8% 1.1% 7.6%
37.7% 31.8% 31.8% 0.0%
32.2% 31.6% 31.6% 0.0%
26.3% 32.5% 32.5% 0.0%
32.0% 35.4% 35.4% 0.0%
65.4% 0.0% 0.0% 0.0% 0.2%
0.0% -0.1%
0.0% -0.1%
0.0% -0.0%
0.0% -0.0% 0.0% 0.2%
0.1%
0.1%
0.0%
0.0%
0.1%
-0.0% 69.4% 0.0% 6.8% 0.0%
0.0% 63.8% 0.0% 6.6% 0.0%
0.0% 58.8% 0.0% 8.0% 0.0%
0.0% 67.4% 0.0% 0.0% 0.0%
0.0% 65.6% 0.0%
95
ESOP Guarantees - Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 23.8% 100.0% 29.6% 100.0% 33.2% 100.0% 32.6% 100.0% 34.4% 100.0%
96
Financial Statement Analyses\Balance Sheet - Year-Year % Change
Balance Sheet - (Year to Year Percent Change): Redington

Figures are the Percent Changes from the Prior Year.
(India) Limited
2008 3/31/2008 2007 3/31/2007
2011
2010
2009
3/31/2011 3/31/2010 3/31/2009
37.6% -17.5% -17.5%
20.2% -3.3% -3.3%
36.5% 229.3% 229.3%
21.5% -8.3% 94.0%
33.1% 106.4% 5.6% 1,337.4%
41.5% 61.1%
26.9% 26.1%
30.8% 8.4%
43.5% 10.9%
27.7% 34.6%
37.1% -60.3% 17.6% -100.0% 37.2% 20.5% 40.5% 20.1% 110.7% 36.2%
43.7% 25.3% 52.5% 10.0% 23.5% -100.0% 61.0% 38.2% 58.0% -39.5%
97
Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest Preferred Stock 42.0% -0.4% -139.4% 49.7% 30.2% 87.6% 834.1% 60.9% 38.4% 38.4% 47.1% 16.8% 16.8% 37.6% 20.2% 37.6% 20.2%
-100.0% 36.5%
38.2% 21.5%
-39.5% 33.1%
36.5%
21.5%
33.1% 21.0%
-100.0%
25.7% 22.2% 17.0%
46.5% 12.4% -40.6% 27.9% -79.3%
25.4% 1,888,944.8% 25.4% -100.0%
-79.3% 55.0%
-105.1%
-30.9% 21.8%
690.8%
-97.8%
83.3%
19.2%
24.7%
27.9%
98
Preferred Stock Issued for ESOP ESOP Guarantees Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 10.6% 37.6% 7.3% 20.2% 38.9% 36.5% 15.3% 21.5% 44.5% 33.1%
99
Financial Statement Analyses\Balance Sheet - Five-Year Averages
Balance Sheet - (5 Year Averages): Redington

Figures in millions of Indian Rupees.
(India) Limited
2009 2008 2007
2011
2010
3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007
31,360.7 4,096.0 3,885.7
24,104.4 3,328.0 3,103.2
18,367.3 2,205.1 1,977.6
12,927.0 1,049.9 822.3
16,631.8 9,424.5
12,358.0 7,220.7
9,268.5 5,651.6
6,531.9 4,250.6
22.4 30,280.4
33.0 23,135.4
42.0 17,418.6
42.0 12,125.7
895.9 184.4
656.7 312.3
499.4 449.3
351.7 449.5
100
Intangible Other Assets Total Assets Liabilities & Shareholders' Equity Total Liabilities & Shareholders' Equity Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Dividends Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Provision for Risks and Charges Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Deferred Tax Liability in Untaxed Reserves Other Liabilities Total Liabilities Non-Equity Reserves Minority Interest Preferred Stock Preferred Stock Issued for ESOP
184.4 31,360.7
312.3 24,104.4
449.3 18,367.3
449.5 12,927.0
31,360.7
24,104.4
18,367.3
12,927.0
1,202.5
2,159.3
2,608.2
2,746.8
11,486.1 9,010.5 9,010.4 0.1
9,584.8 5,831.5 5,831.1 0.5
8,083.1 3,545.5 3,543.9 1.6
6,882.3 1,579.5 1,577.9
-18.4
-3.2
7.0
11.0
24.3
13.8
8.1
0.0 20,485.7 0.0
0.0 15,425.5 0.0
0.0 11,650.7 0.0
0.0 8,487.9 0.0
101
ESOP Guarantees - Preferred Issued Common Equity Total Liabilities & Shareholders' Equity 9,229.2 31,360.7 7,715.8 24,104.4 6,229.3 18,367.3 4,434.4 12,927.0
102
Financial Statement Analyses\Income Statement - Common Size
Income Statement - (Common Size): Redington
(India) Limited
2009 2008 2007
Figures are expressed as Percent of Net Sales or Revenues. Net Sales or Revenues are in millions of Indian Rupees.
Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Credit - Pretax Extraordinary Charge - Pretax Non-Operating Interest Income Reserves - Increase/Decrease Pretax Equity in Earnings Other Income/Expense - Net Earnings before Interest, Taxes, Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes (EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense
2011
2010
174,585.4 137,577.5 126,682.7 108,700.6 90,613.9 96.3% 0.1% 3.6% 96.3% 0.2% 3.5% 96.3% 0.1% 3.6% 96.6% 0.1% 3.3% 97.7% 0.1% 2.2%
1.1% 97.6% 2.4% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 2.7%
1.2% 97.7% 2.3% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 2.7%
1.2% 97.6% 2.4% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 2.6%
1.1% 97.8% 2.2% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 2.4%
0.2% 98.0% 2.0% 0.0% 0.0% 0.0%
0.0% -0.0% 2.2%
2.6% 0.6% 0.0% 2.0% 0.5% 0.2% 0.0% 0.0%
2.5% 0.5% 0.0% 2.0% 0.5% 0.2% 0.0% 0.0%
2.5% 0.8% 0.0% 1.7% 0.4% 0.1% 0.0% 0.0%
2.3% 0.7% 0.0% 1.6% 0.4% 0.0% 0.0% 0.0%
2.0% 0.6% 0.0% 1.4% 0.3% 0.0% 0.0% 0.0%

103
Discontinued Operations Net Income before Extraordinary Items/Preferred Dividends Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends - available to Common
0.0% 1.3% 0.0% 0.0% 1.3%
0.0% 1.3% 0.0% 0.0% 1.3%
0.0% 1.3% 0.0% 0.0% 1.3%
0.0% 1.3% 0.0% 0.0% 1.3%
0.0% 1.1% 0.0% 0.0% 1.1%
104
Financial Statement Analyses\Income Statement - Year-Year % Change
Income Statement - (Year to Year Percent Change): Redington

Figures are the Percent Changes from the Prior Year.
(India) Limited
2008 20.0% 18.7% 2007 33.4% 33.0%
Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Credit - Pretax Extraordinary Charge - Pretax Non-Operating Interest Income Reserves - Increase/Decrease Pretax Equity in Earnings Other Income/Expense - Net Earnings before Interest, Taxes, Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations
2011 26.9% 26.8% 4.8% 29.6%
2010
2009
8.6% 16.5% 8.6% 16.1%
84.0% 27.7% -24.9% 169.2% 5.5% 28.1% 81.9% 51.8%
22.7% 26.8% 33.0%
3.7% 27.7% 709.0% 8.7% 16.3% 6.4% 28.3% 19.8% 29.8%
73.0% 33.1% 50.3% 100.0%
17.0%
41.8% 19.8% 196.2%
51.4%
69.8% 29.0% 30.6%
32.1%
35.1% 31.1% 35.1% 24.3%
125.9% 48.9% 44.3% 60.3%
11.0% 27.2% 8.0% 27.2%
44.8% -32.1% 35.9%
27.2% 35.0%
26.0% 23.7% 27.8% 21.9%
40.0% 65.7%
38.0% 42.9%
40.0% 195.3%
105
Net Income before Extraordinary Items/Preferred Dividends Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends - available to Common
22.6%
15.5% 17.3%
33.8%
36.8%
22.6%
15.5% 17.3%
33.8%
36.8%
106
Financial Statement Analyses\Income Statement - Five-Year Averages
Income Statement - (5 Year Averages): Redington

Figures in millions of Indian Rupees.
(India) Limited
2010 2009 2008 2007
Fiscal Year Net Sales or Revenues Cost of Goods Sold Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Credit - Pretax Extraordinary Charge - Pretax Non-Operating Interest Income Reserves - Increase/Decrease Pretax Equity in Earnings Other Income/Expense - Net Earnings before Interest, Taxes, Depreciation & Amortization (EBITDA) Earnings before Interest & Taxes(EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Minority Interest Equity in Earnings After Tax Other Income/Expense Discontinued Operations Net Income before Extraordinary Items/Preferred Dividends
2011
127,632.0 106,296.1 86,876.5 65,467.0 123,225.3 102,921.0 84,348.6 63,816.9 168.0 4,238.7 128.7 3,246.4 89.3 2,438.6 69.5 1,580.6
1,303.6
925.1
617.4
306.2
124,696.9 103,974.8 85,055.3 64,192.6 2,935.1 0.0 0.0 122.1 2,321.3 4.7 0.0 96.4 1,821.2 4.7 0.5 65.4 1,274.4 4.7 0.5
0.0 22.1 3,247.3 3,079.3 780.5 0.0 2,298.9 531.7 151.7 0.0 0.0 0.0 1,615.5
0.0 18.2 2,569.4 2,440.7 660.5 0.0 1,780.1 393.8 74.1 0.0 0.0 0.0 1,312.2
0.0 19.0 1,999.2 1,909.9 574.3 0.0 1,335.6 286.0 21.3 0.0 0.0 0.0 1,028.3
0.0 26.4 1,414.0 1,344.6 400.2 0.0 944.4 203.0 2.6 0.0 0.0 0.0 738.8
107
Extraordinary Items & Gain/Loss Sale of Assets Preferred Dividend Requirements Net Income after Preferred Dividends available to Common
0.0 0.0 1,615.5
0.0 0.0 1,312.2
0.0 0.0 1,028.3
0.0 0.0 738.8
108
Financial Statement Analyses\Sources of Capital - Net Change
Sources of Capital: Redington
(India) Limited
2011 2010 2009 2008 3/31/2008 15,054.4 2007 3/31/2007 6,256.5
Currency figures are in millions of Indian Rupees. Year to year % changes pertain to reported Balance Sheet values.
Fiscal Year Fiscal Year End Date Total Capital Percent of Total Capital Short Term Debt Long Term Debt Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Year to Year Net Changes Short Term Debt Long Term Debt Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Year to Year Percent Changes Short Term Debt Long Term Debt
3/31/2011 3/31/2010 3/31/2009 31,205.5 24,645.7 22,265.1
0.0% 50.9% -0.0% 111.0% 10.9% 0.0%
0.0% 46.6% 0.0% 93.9% 9.7% 0.0%
0.0% 44.1% 0.0% 79.8% 10.8% 0.0%
0.0% 52.1% 0.0% 99.0% 0.0% 0.0%
96.1% 0.0% 0.0% 191.0%
38.1% 100.0%
43.6% 100.0%
45.0% 100.0%
47.9% 100.0%
100.0% 100.0%
0.0 441.1 -0.0 1,150.3 101.0 0.0
0.0 165.6 0.0 537.2 -1.1 0.0
0.0 199.0 0.0 286.5 241.3 0.0
-601.3 783.9 0.0 295.6
122.9 -0.2 0.0 260.5
113.9 656.0
73.5 238.1
280.7 721.1
95.9 879.8
192.8 192.6
-100.0% 38.4% 16.8% 25.4% 1,888,944.8%
25.7% -79.3%
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Other Liabilities Total Liabilities Minority Interest Preferred Stock Retained Earnings Common Equity Total Capital Total Liabilities & Common Equity Total Liabilities Net Change in Liabilities as % of Total Liabilities Common Equity Net Change in Common Equity as % of Common Equity Cash Flow Operating Activities Financing Activities Investing Activities
-139.4% 49.7% 42.0% 30.2% -0.4% 19.2% 24.7% 27.9%
10.6% 26.6%
7.3% 10.7%
38.9% 47.9%
15.3% 140.6%
44.5% 44.5%
34,648.6 33.2% 11,895.9 9.6%
23,145.7 23.2% 10,757.2 6.8%
17,773.5 16.1% 10,022.0 28.0%
14,908.4 19.8% 7,214.9 13.3%
11,952.4 21.8% 6,256.1 30.8%
-1,310.1 2,730.7 2,511.8
-258.5 1,405.9 726.9
-1,701.1 5,111.8 262.9
-1,178.0 1,599.2 395.0
-1,368.7 2,780.7 304.0
110
Financial Ratio AnalysesFinancial Ratio Analyses\Accounting Ratios
Accounting Ratios: Redington Fiscal Year Fiscal Year End Date Receivables Turnover Receivables - Number of Days Inventory Turnover Inventory - Number of Days Gross Property, Plant & Equipment Turnover Net Property, Plant & Equipment Turnover Depreciation, Depletion & Amortization % of Gross Property, Plant & Equipment Depreciation, Depletion & Amortization Year to Year Change Depreciation, Depletion & Amortization Year to Year % Change
(India) Limited
2011 2010 2009 2008 2007 3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007 6.3 49.7 13.1 27.9 118.3 118.3 142.1 144.0 152.5 7.0 46.7 15.0 24.3 8.2 39.4 16.3 22.4 9.2 33.9 15.4 23.7 11.0 29.7 15.7 23.3 127.0 204.7
16.6%
18.6%
1.1
10.7
2.8
-3.3
8.3
4.8%
84.0%
27.7%
-24.9%
169.2%
111
Financial Ratio Analyses\Asset Utilization
Asset Utilization: Redington
(India) Limited
2011 2010 2009 2008 2007
Figures are expressed as the ratio of Net Sales. Net Sales are in millions of Indian Rupees.
Fiscal Year Fiscal Year End Date Net Sales Cash & Cash Equivalents Short-Term Investments Accounts Receivable Inventories Other Current Assets Total Current Assets Total Long Term Receivables & Investments Long Term Receivables Investments in Associated Companies Other Investments Property, Plant & Equipment Gross Accumulated Depreciation Property Plant & Equipment - Net Other Assets Total Assets
3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007 174,585.4 137,577.5 126,682.7 108,700.6 2.8% 4.2% 4.8% 1.7% 90,613.9 2.2% 1.2% 15.9% 9.1% 0.0% 27.8% 0.0% 14.3% 7.1% 0.0% 25.7% 0.0% 12.2% 6.2% 0.0% 23.2% 0.0% 10.9% 6.6% 0.0% 19.2% 0.0% 9.1% 7.2% 0.1% 19.2% 0.0%
0.0% 0.0% 0.8%
0.0% 0.0%
0.0% 0.0%
0.0% 0.0% 0.8% 0.3%
0.8% 0.0% 28.6%
0.7% 0.0% 26.4%
0.7% 0.0% 23.8%
0.7% 0.5% 20.4%
0.5% 0.4% 20.1%
112
Financial Ratio Analyses\Fixed Charges Coverage
Fixed Charges Coverage: Redington Fiscal Year Fiscal Year End Date EBIT/Total Interest Expense EBIT/Net Interest EBIT/(Total Interest Exp + Pfd Div) EBIT/Dividends on Common Shares EBIT/(Dividends on Common + Pfd) EBITDA/Total Interest Expense EBITDA/Net Interest EBITDA/(Total Interest Exp + Pfd Div) EBITDA/Dividends on Com Shares EBITDA/(Dividends on Com + Pfd)
(India) Limited
2010 2009 2008 2007
2011
3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007 4.7 5.5 4.7 9.8 9.8 4.9 5.8 4.9 10.3 10.3 5.2 7.1 5.2 9.3 9.3 5.5 7.6 5.5 10.0 10.0 3.2 3.7 3.2 9.9 9.9 3.4 3.9 3.4 10.3 10.3 3.5 4.1 3.5 10.9 10.9 3.6 4.2 3.6 11.4 11.4 3.4 3.6 3.4 3.2 3.4 3.2
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Financial Ratio Analyses\Leverage Analysis
Leverage Analysis: Redington Fiscal Year Fiscal Year End Date Long Term Debt % of EBIT Long Term Debt % of EBITDA Long Term Debt % of Total Assets Long Term Debt % of Total Capital Long Term Debt % of Com Equity Total Debt % of EBIT Total Debt % of EBITDA Total Debt % of Total Assets Total Debt % of Total Capital Total Debt % of Total Capital & Short Term Debt Total Debt % of Common Equity Minority Interest % of EBIT Minority Interest % of EBITDA Minority Interest % of Total Assets Minority Interest % of Total Capital Minority Interest % of Com Equity Preferred Stock % of EBIT Preferred Stock % of EDITDA Preferred Stock % of Total Assets Preferred Stock % of Total Capital Preferred Stock % of Total Equity Common Equity % of Total Assets Common Equity % of Total Capital Total Capital % of Total Assets Capital Expenditure % of Sales
(India) Limited
2011 2010 2009 2008 2007 3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007 355.6% 337.0% 31.8% 50.9% 133.6% 355.6% 337.0% 31.8% 50.9% 50.9% 133.6% 76.3% 72.4% 6.8% 10.9% 28.7% 0.0% 0.0% 0.0% 0.0% 0.0% 23.8% 38.1% 62.5% 0.3% 335.6% 314.1% 31.6% 46.6% 106.8% 335.6% 314.1% 31.6% 46.6% 46.6% 106.8% 70.2% 65.7% 6.6% 9.7% 22.3% 0.0% 0.0% 0.0% 0.0% 0.0% 29.6% 43.6% 67.9% 0.3% 310.2% 298.3% 32.5% 44.1% 98.1% 310.2% 298.3% 32.5% 44.1% 44.1% 98.1% 76.2% 73.2% 8.0% 10.8% 24.1% 0.0% 0.0% 0.0% 0.0% 0.0% 33.2% 45.0% 73.7% 0.2% 314.8% 302.6% 35.4% 52.1% 108.7% 314.8% 302.6% 35.4% 52.1% 52.1% 108.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 32.6% 47.9% 68.0% 0.3% 34.4% 100.0% 34.4% 0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 326.1% 304.2% 33.0% 96.1% 49.0% 96.1%
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Fixed Assets % of Common Equity Working Capital % of Total Capital Dividend Payout Funds From Operations % of Total Debt
12.4% 95.1% 20.2% 20.1%
9.0% 95.9% 19.9% 22.4%
8.8% 96.0% 20.0% 19.4%
9.9% 91.7% 16.7% 21.9%
7.1% 87.5% 0.0% 20.7%
115
Financial Ratio Analyses\Liquidity Analysis
Liquidity Analysis: Redington Fiscal Year Fiscal Year End Date Total Current Assets % Net Sales Cash % of Current Assets Cash & Equivalents % of Current Assets Quick Ratio Receivables % of Current Assets Receivable Turnover - number of days Inventories % of Current Assets Inventory Turnover - number of days Inventory to Cash & Equivalents number of days Receivables % of Total Assets Current Ratio Total Debt % of Total Capital Funds from Operations % of Current Liabilities Funds from Operations % of Long Term Debt Funds from Operations % of Total Debt Funds from Operations % of Total Capital Cash Flow (in milllions of Indian Rupees) Operating Activities Financing Activities Investing Activities
(India) Limited
2011 2010 2009 2008 2007 3/31/2007 19.2% 5.4% 11.5% 0.9 47.6% 29.7 37.3% 23.3 110.8 45.4% 1.5 49.0% 10.4% 3/31/2011 3/31/2010 3/31/2009 3/31/2008 27.8% 9.9% 9.9% 1.7 57.4% 49.7 32.7% 27.9 109.3 55.7% 2.6 50.9% 17.0% 20.1% 20.1% 10.3% 25.7% 16.5% 16.5% 2.2 55.7% 46.7 27.8% 24.3 213.4 54.2% 3.0 46.6% 22.0% 22.4% 22.4% 10.4% 23.2% 20.5% 20.5% 2.7 52.9% 39.4 26.6% 22.4 278.3 51.3% 3.7 44.1% 23.9% 19.4% 19.4% 8.5% 19.2% 8.8% 8.8% 1.9 56.8% 33.9 34.4% 23.7 91.6 53.6% 3.0 52.1% 24.3%
21.9% 299,523.6% 21.9% 11.4% 20.7% 19.9%
-1,310.1 2,730.7 2,511.8
-258.5 1,405.9 726.9
-1,701.1 5,111.8 262.9
-1,178.0 1,599.2 395.0
-1,368.7 2,780.7 304.0
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Financial Ratio Analyses\Per-Share Ratios
Per Share Data: Redington
(India) Limited
2011 2010 2009 2008 2007
Figures are expressed as per unit of respective shares. Figures are in Indian Rupees.
Fiscal Year Fiscal Year End Date Sales Operating Income Pre-tax Income Net Income (Continuing Operations) Net Income Before Extra Items Extraordinary Items Net Income After Extraordinary Items Net Income Available to Common Shares Fully Diluted Earnings Common Dividends Cash Earnings Book Value Retained Earnings Assets
3/31/2011 3/31/2010 3/31/2009 3/31/2008 3/31/2007 440.50 10.79 8.86 8.86 5.70 0.00 5.70 5.72 5.68 1.10 8.10 30.02 349.91 8.17 7.02 7.02 4.69 0.00 4.69 4.70 4.65 1.00 6.57 27.36 325.39 7.76 5.63 5.63 4.10 0.00 4.10 4.10 4.10 0.80 4.89 25.74 279.20 6.04 4.55 4.55 3.50 0.00 3.50 3.50 3.49 0.70 4.42 18.53 232.74 4.66 3.25 3.25 2.61 0.00 2.61 3.07 3.07 0.50 3.76 16.07
126.05
92.34
77.59
56.82
46.77
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Financial Ratio Analyses\Profitability Growth
Profitability Analysis: Redington

Currency figures are in Indian Rupees.
(India) Limited
2010 3/31/2010 3.5% 2.3% 2.0% 2.5% 1.3% 17.7% 10.0% 7.1% 3.8 106.8% 2009 3/31/2009 3.6% 2.4% 1.7% 2.5% 1.3% 18.5% 12.6% 9.0% 4.2 98.1% 2008 3/31/2008 3.3% 2.2% 1.6% 2.3% 1.3% 20.2% 14.0% 9.6% 4.9 108.7% 2007 3/31/2007 2.2% 2.0% 1.4% 2.0% 1.1% 19.2% 13.9% 9.3% 5.0 96.1%
Fiscal Year Fiscal Year End Date Gross Income Margin Operating Income Margin Pretax Income Margin EBIT Margin Net Income Margin Return on Equity Total Return on Invested Capital Return on Assets Asset Turnover Financial Leverage Interest Expense on Debt Effective Tax Rate Cash Flow % Sales Selling, General & Administrative Expenses % of Sales Research & Development Expense Operating Income Return On Total Capital
2011 3/31/2011 3.6% 2.4% 2.0% 2.6% 1.3% 20.0% 10.7% 6.9% 3.5 133.6%
960,867,000 663,762,000 978,197,000 720,020,000 579,404,000 24.6% 1.8% 23.2% 1.9% 22.8% 1.5% 23.1% 1.6% 19.6% 1.4%
26.6%
10.7%
47.9%
140.6%
44.5%
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Wright Quality Rating AnalysesWright Quality Rating Analyses\Investment Acceptance
Wright Quality Rating - Investment Acceptance: Redington

Currency figures are in millions of U.S. Dollars.
Wright Quality Rating
(India) Limited
CBB16 CBB16
524 494 374 352 0 0 0.0% 0.0% BOM 0 13,783 28.7%
Investment Acceptance Rating Total Market Value of Shares Outstanding - Three Year Average - Current Year Public Market Value (Excludes Closely Held) - Three Year Average - Current Year Trading Volume - Three Year Average - Current Year Turnover Rate - Three Year Average - Current Year Stock Exchange Listings Number of Institutional Investors Number of Shareholders Closely Held Shares as % of Total Shares Outstanding
119
Wright Quality Rating Analyses\Financial Strength
Wright Quality Rating - Financial Strength: Redington Wright Quality Rating Financial Strength Rating Total Shareholders' Equity (Millions of U.S. Dollars) Total Shareholders' Equity as % Total Capital Preferred Stock as % of Total Capital Long Term Debt as % of Total Capital Long Term Debt (Millions of Indian Rupees) Lease Obligations (Millions of Indian Rupees)
(India) Limited
C C
BB16 BB16
260 68.5% 0.0% 26.5% 5,121 0 5,121 59.2% 4.0 4.4 0.9 1.5
Long Term Debt including Leases (Millions of Indian Rupees) Total Debt as % of Total Capital Fixed Charge Coverage Ratio: Pretax Income to Interest Expense & Preferred Dividends Fixed Charge Coverage Ratio: Pretax Income to Net Interest Income & Preferred Dividends Quick Ratio (Cash & Receivables / Current Liabilities) Current Ratio (Current Assets / Current Liabilities)
120
Wright Quality Rating Analyses\Profitability & Stability
Wright Quality Rating - Profitability & Stability: Redington Wright Quality Rating Profitability & Stability Rating Profit Rate of Earnings on Equity Capital - Time-Weighted Normal - Basic Trend Cash Earnings Return on Equity - Time-Weighted Average - Basic Trend Cash Earnings Return on Equity - Stability Index Return On Assets (Time-Weighted Average) Pre-Tax Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Capital (Adjusted Rate) Pre-Tax Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Assets (Time-Weighted Average) Operating Income as % of Total Capital (Adjusted Rate)
(India) Limited
CB CB
B16 B16
16.9% 0.4% 26.5% 1.4% 78.3% 9.8% 7.5% 9.7% 23.0% 7.5% 9.7% 23.0%
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Wright Quality Rating Analyses\Corporate Growth
Wright Quality Rating - Corporate Growth: Redington

Figures are expressed on a Per Share Basis.
(India) Limited
CBB CBB
Wright Quality Rating Growth Rating Normal Earnings Growth Cash Earnings Growth Cash Earnings Stability Index Earned Equity Growth Dividend Growth Operating Income Growth Assets Growth Sales/Revenues Growth
Copyright Notice
16 16
18.7% 20.1% 94.1% 13.7% -0.8% 19.3% 20.1% 14.1%
Copyright 2000-2012 Distributed by Wright Investors' Service, Inc. All Rights Reserved. Except for quotations by established news media, no pages in this report may be reproduced, stored in a retrieval system, or transmitted for commercial purposes, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Information is believed reliable, but accuracy, completeness and opinions are not guaranteed. This report is provided for general information only. This report is not to be considered as investment advice and should not be relied upon for investment decisions. This report is provided "as is", without warranty of any kind, express or implied, including but not limited to warranties of merchantability, fitness for a particular purpose or non-infringement.
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REDINGTON (INDIA) LIMITED

Result Update: Q1 FY 13
BUY
Stock Data
CMP Target Price
73.00 84.00 August 02nd, 2012

ISIN: INE891D01026
SYNOPSIS
Redington India Ltd has incorporated in 1961, commenced the operations in 1993 distributing information technology products. Redington (India) has collaborated with Research in Motion (RIM) to establish a national retail distribution channels for their BlackBerry handsets. During the quarter ended, the robust growth of Net Profit is increased by 3.02% to Rs.634.50 million. Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2011 to 2014E respectively. Redington (India) Ltd has the allotment of 49,375 equity shares of Rs. 2/- each 31,250 equity shares at a premium of Rs. 31/- per share and 18,125 equity shares at a premium of Rs. 24/- per share. The company declared dividend of Rs. 0.40 per equity share i.e. 20% on the fully paid up equity shares of Rs. 2/- for the FY 2012.
Sector IT BSE Code 532805 Face Value / Div. Per Share 2.00/20% 52wk. High / Low (Rs.) 100.00/65.05 Volume (2wk. Avg ) 142869.00 Market Cap ( Rs in mn ) 29094.15 Annual Estimated Results (A*: Actual / E*: Estimated)
Years
Net Sales EBITDA Net Profit EPS
FY12A
FY13E
FY14E
P/E Shareholding Pattern (%)
211929.90 239480.79 261034.06 6334.00 7264.27 8175.90 2927.40 3496.13 4010.25 7.35 8.77 10.06 9.94 8.32 7.25
1 Year Comparative Graph
BSE SENSEX
Redington India Ltd
Peer Groups Company Name Redington India Ltd Ador Fontec Ltd Amani Trading Ltd Surana Corp Ltd
CMP (Rs.) 73.00 82.85 163.20 68.25
Market Cap Rs. in mn. 29094.15 1449.90 114.20 1491.90
EPS (Rs.) 7.35 10.17 0.71 31.31
P/E (x) Ratio 9.94 8.15 229.86 2.18
P/BV(x) Ratio 2.20 2.26 9.22 0.49
Dividend (%) 20.00 150.00 0.00 10.00
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Investment Highlights Results updates- Q1 FY13, Redington India Ltd is a leading Supply Chain service provider in IT, Telecom, Consumer
Months
Net Sales PAT EPS EBITDA
Jun-12
Jun-11
% Change
Electronics & Home Appliances Industries in India, reported its financial results for the quarter ended 30 June, 2012. The first quarter witness a healthy increase in overall sales as well as profitability on account, an enhanced Dealers network and robust infrastructural Support system.
53716.30 634.50 1.59 1487.70
52023.50 615.90 1.55 1388.50
3.25 3.02 2.66 7.14
The companys net profit jumps to Rs.634.50 million against Rs.615.90 million in the corresponding quarter ending of previous year, an increase of 3.02%. Revenue for the quarter rose 3.25% to Rs.53716.30 million from Rs.52023.50 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.59 a share during the quarter, registering 2.66% increase over previous year period. Profit before interest, depreciation and tax is Rs.1487.70 millions as against Rs.1388.50 millions in the corresponding period of the previous year.
Expenditure :
During the quarter variable cost rose by 11 per cent mainly on account of increase in Purchase of stock in trade along with consideration of depreciation in the rupee impact. Total expenditure in Q1 FY13 was at 57544.40 million as against Rs.51733.50 million in Q1 FY 12. Other Expenditure was at Rs. 982.60 million and Depreciation & Amortization is Rs. 88.70 million in Q1FY13 are the primarily attributable to growth of expenditure.
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Latest Updates Redington (India) Ltd has the allotment of 49,375 equity shares of Rs. 2/- each 31,250 equity shares at a premium of Rs. 31/- per share and 18,125 equity shares at a premium of Rs. 24/- per share. M/s. Easy access Financial Services Limited, a wholly owned subsidiary of the Company has purchased a building "STERLING TECHNOPOLIS" admeasuring 2,30,000 sq. ft. located at Old Mahabalipuram Road, Chennai. The ESOP the allotment of 1,86,500 equity shares of Rs. 2/- each at a premium of Rs. 24/- per share pursuant to exercise of options granted under Redington (India) Limited - Employee Stock Option Plan, 2008. Company Profile Redington established in 1993 is today positioned as one of the leading Supply Chain service provider in IT, Telecom, Consumer Electronics & Home Appliances Industries. With its corporate office in Chennai, it has 49 Branch offices, 48 warehouses and 46 service centers across India. A team comprising of over 1100 highly skilled and committed professionals helps the Company deliver its products and services to every corner of the country. The team is supported by a robust IT & Communication infrastructure connecting 115 physical locations of the company and a state of the art ERP and e-commerce back bone. Redington has built its business on very strong ethical and commercial fundamentals which has not only helped it to consistently exceed the industry growth rate, but has also enabled to firmly establish it as the "partner of choice" with most of its vendors and business partners. A compounded annual growth rate of more than 50% over the past 15 years underlining the very strong foundation and prudent practices on which the company's business practices have been built. Infrastructure The company has continuously invested in Office, Warehousing and IT infrastructure in order to ensure the highly scalable operation essential for delivering accelerated revenue growth year on year. A judicious selection of locations and optimal sizing of Offices and Warehouses, supported by an appropriate mode of network connectivity, has provided the Company the right balance between optimizing current running costs and the future growth requirements. All Branch Sales Offices, Warehouses, as well as Service Centers are connected through a Wide Area Network that enables real-time, online transaction processing and provides a seamless, continuous update on Purchase, Sales, Stocks and Credit details. The network has in-built 100%
125
redundancy, including a Disaster Recovery Centre and a scalable architecture that would continuously address business requirements necessitated by the accelerating growth of the organization. Warehouse locations are decided by the requirement of space and delivery TATs committed to customers as per best industry standards. Service Center locations emphasize convenience and ease of approach for customers requiring support for all the products serviced by Redington. Business relationship
The company still continues to enjoy excellent business relationship with its suppliers like Acer, APC, Apple, Canon, Cisco, Computer Associates, EMC, Epson, Gigabyte, HCL Infosystems, Hewlett Packard, Blackberry, LG, Luminous, Hitachi, IBM, Intel, Kodak, Lenovo, Linksys, Microsoft, Nokia, Samsung, Seagate, Systemax, TVS Electronics, Viewsonic, Western Digital, Whirlpool, Wipro, 3COM etc.
Subsidiaries The company operates subsidiaries namely Redington (India) Investments, Cadensworth (India),
Qatar and Easyaccess Financial Services, India

Products Components Digital lifestyle Enterprises Services Services Offered Warranty Support and post warranty Support Infrastructure Management Services Spare parts Warehousing Forward and Reserve Logistics CRM and SCM Software Development and Support Professional Services Repairs and Refurbishments Networking, storage and power Peripherals and Consumer PC Software Solutions Systems
126
Core Business Units IT Services Contact Center and Call Center Services 3PL for spares Smart and mobile phone support High Level Repairs and refurbishment Spare parts, Upgrades and packs Distribution Enterprise services
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Financial Highlight
Balance sheet as at March31, 2012 (A*- Actual, E* -Estimations & Rs. In Millions) Particulars March (Rs.in.mn) 1.Shareholders Funds a) Capital b) Reserves & Surplus Total Net worth 2.Loan Fund a) Secured loans b) Unsecured loans c) Minority Interest Total Liabilities (1+2)
1.Fixed Assets a) Gross block b) Depreciation c) Net Block d) Capital Advance Total Fixed Assets 2. Investments 3.Current Assets, Loans & Advances a) Inventories b) Sundry Debtor c) Cash & Bank Balance d) Loans & Advances Total Current Assets Less: Current Liabilities & Provisions a) Liabilities b) Provisions Net Current Assets 4. Deferred Tax Assets Total
FY12A
FY13E
FY14E
797.10 12427.70 13224.80
797.10 15923.83 16720.93
797.10 19934.08 20731.18
18794.10 1888.90 948.80 34856.60 1695.80 1695.80 744.20 2440.00
23116.74 1548.90 778.04 42164.61 1916.25 1916.25 1004.67 2920.92
26584.25 1595.36 708.06 49618.86 2071.09 2071.09 1236.55 3307.64
17000.00 22190.20 4834.40 8645.70 52670.30 19786.80 547.70 32335.80 80.80 80.80 34856.60
18530.00 23317.46 4983.30 14273.19 61103.95 21369.74 591.52 39142.69 101.00 101.00 42164.61
19843.78 24035.64 5087.45 20708.97 69675.83 22865.63 621.09 46189.12 122.11 122.11 49618.86
Total Assets( 1+2+3+4)
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Annual Profit & Loss Statement for the period of 2011 to 2014E. Value(Rs.in.mn)
Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit after tax Minority Interest Share of P&L of Assoc Net Profit Equity capital Reserves Face value EPS
FY11 12m 174677.40 103.40 174780.80 -170064.30 4716.50 -960.90 3755.60 -245.60 3510.00 -862.30 2647.70 -387.70 0.00 2260.00 792.70 11103.30 2.00 5.70
FY12 12m 211929.90 290.30 212220.20 -205886.20 6334.00 -1520.40 4813.60 -310.30 4503.30 -1112.90 3390.40 -462.80 -0.20 2927.40 797.10 12427.70 2.00 7.35
FY13E 12m 239480.79 319.33 239800.12 -232535.84 7264.27 -1733.26 5531.02 -356.85 5174.17 -1293.54 3880.63 -384.50 0.00 3496.13 797.10 15923.83 2.00 8.77
FY14E 12m 261034.06 344.88 261378.93 -253203.04 8175.90 -1906.58 6269.32 -399.67 5869.65 -1455.67 4413.98 -403.73 0.00 4010.25 797.10 19934.08 2.00 10.06
Quarterly Profit & Loss Statement for the period of 31Dec, 2011 to 30Sep, 12E Value(Rs.in.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Minority Interest Share of P&L of Asso Net Profit Equity capital Face value EPS 31-Dec-11 3m 57378.80 9.50 57388.30 -55838.50 1549.80 -377.80 1172.00 -77.10 1094.90 -256.20 838.70 -160.40 -0.20 678.10 796.90 2.00 1.70 31-Mar-12 3m 55151.60 127.50 55279.10 -53268.80 2010.30 -454.20 1556.10 -81.70 1474.40 -334.50 1139.90 -119.30 0.30 1020.90 797.10 2.00 2.56 30-Jun-12 3m 53716.30 61.20 53777.50 -52289.80 1487.70 -439.40 1048.30 -88.70 959.60 -278.60 681.00 -46.20 -0.30 634.50 798.00 2.00 1.59 30-Sep-12E 3m 56402.12 45.90 56448.02 -54867.98 1580.04 -417.43 1162.61 -93.14 1069.47 -267.37 802.10 -50.82 0.00 751.28 798.00 2.00 1.88
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Ratio Analysis Particulars

EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV
FY11 5.70 2.70% 2.01% 1.52% 12.80 22.26% 29.11% 0.43 6.13 30.01 2.43
FY12 7.35 2.99% 2.12% 1.60% 9.94 25.64% 19.64% 1.56 4.59 33.18 2.20
FY13E 8.77 3.03% 2.16% 1.62% 8.32 23.21% 19.87% 1.29 4.01 41.95 1.74
FY14E 10.06 3.13% 2.25% 1.69% 7.25 21.29% 19.74% 1.10 3.56 52.02 1.40
Charts
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Outlook and Conclusion At the current market price of Rs.73.00, the stock P/E ratio is at 8.32 x FY13E and 7.25 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.8.77 and Rs.10.06 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 4.01 x for FY13E and 3.56 x for FY14E. Price to Book Value of the stock is expected to be at 1.74 x and 1.40 x respectively for FY13E and FY14E.
The first quarter witness a healthy increase in overall sales as well as profitability on account of powerful combination of exciting products. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.84.00 for Medium to Long term investment.
Industry Overview IT/ITeS industry has been one of the key driving forces fuelling India's economic growth. As a proportion of national gross domestic product (GDP), IT/ITeS sector's contribution has risen from 1.2 per cent in 1997-98 to an estimated 7.5 per cent in 2011-12.
Information Technology (IT) has evolved as a major contributor to India's GDP and plays a vital role in driving growth of the economy in terms of employment, export promotion, revenue generation and standards of living. The Indian IT-BPO sector is estimated to aggregate revenues of US$ 88.1 billion in 2010-2011, with the IT software and services sector (excluding hardware) accounting for US$ 76.2 billion of revenues.
The sector includes IT services, engineering design and R&D services, ITES (IT-enabled services) or BPO and hardware.
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Market Size
As per NASSCOM estimates, IT/ITeS sector (excluding hardware) revenues are estimated at US$ 87.6 billion in FY 2011-12. The IT/ITeS industry is expected to grow by 19 per cent during FY 2012-13.
In 2011, the IT and ITeS industry had the market size of US$ 76 bililon, according to an industry report from NASSCOM and Aranca Research. Additionally, the market size of the industry is expected to rise to US$ 225 billion by 2020 considering India's competitive position, growing demand for exports, Government policy support, and increasing global footprint.
In segments of the IT & ITeS sector, IT services accounted for the largest share of the overall market size, with revenues of US$ 46 billion during FY2011, BPO had the market size of US$ 17.3 billion, engineering design and product development accounted for US$ 12.9 billion, and hardware had the lowest size of US$ 11.8 billion in FY2011. In FY2011, total exports from the IT sector stood at US$ 59 billion and the industry grew at a CAGR of 16.4 per cent during the five-year period of FY2007-2011 despite the global economic recession in 2008 and 2009. Exports from the IT sector were the major contributor to the overall exports and accounted for over 57 per cent of the total exports during FY2011. According to a study by management advisory firm Zinnov, adoption of IT services in the Indian SME segment is growing at 15 per cent and is expected to reach US$ 15 billion by 2015.
Growth Drivers Strong competitive position with high market share Huge talent pool Well established delivery centres across the world Cost and tax advantages Encouraging Government policies Strong growth in export demand from new verticals and the non-traditional sectors such as public sector, media and utilities According to Nasscom, domestic revenue from IT and BPO services is expected to rise to US$ 50 billion by 2020 from US$ 15.7billion in 2011 Use of new and emerging technologies such as cloud computing Increased IT adoption in key sectors such as Telecom, Manufacturing and BFSI SEZs will drive growth in the Indian IT sector as more of SEZs are now being set up in Tier II cities and about 43 new tier II/III cities are emerging as IT delivery locations
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Recent trends/Investments
More recently, online retailing, cloud computing and e-commerce are the major driving forces behind the rapidly increasing growth in the IT industry. Online shopping has increased with the emergence of internet retailing and e-commerce.
India's IT-BPO revenues are also driven by a rapid increase in rural BPO units, which accounted for more than US$ 10 million in the total sector revenues. According to NASSCOM, employee base in the rural areas is expected to increase by over 10 times by 2013-14, compared to 5000 in 2009-10 The IT/ITeS industries have added 7.96 lakh jobs in the Indian economy during the one year period ending September 2011, according to the Economic Survey 2011-12 Increasing internet penetration and affordability for personal computers has led to a rapid increase in the number of Internet users in the country to reach more than 121 million, out of which 17 million are online shoppers, according to the Internet and Mobile Association of India (IAMAI). The number of Internet users in India is further projected to triple by 2015 According to a customer poll conducted by Booz and Co, India is the most preferred destination for engineering offshoring, which are encouraging foreign companies to offshore complete product responsibility to Indian ITeS companies Not only are new players looking at setting up shop in the state of Hyderabad, existing IT/ITeS players are continuing with their hiring spree in the state. Large companies such as Infosys, TCS, Genpact, Deloitte, Facebook, Bank of America, Thomson Reuters, Amazon, Google, Cognizant, Franklin Templeton among others are all growing their presence in the state. According to Andhra Pradesh Government's estimates, the total IT/ITeS sector hiring for 2012-13 could be of the order of around 50,000 professionals Quickr, the internet and mobile based classified company, has announced that its parent received investment of US$ 32 million from a group of private equity investors. Warburg Pincus has led this round of fund raising, fifth and the largest for Quickr, with participation from existing investors such as Matrix Partners India, Nowest Venture Partners and ebay Inc. According to IAMAI, online sales of branded apparel almost doubled in volume to 4.99 million pieces during April 2012, as against 2.54 million in the same month a year ago. Also, E-ticketing continued to grow with irctc.com recording 5.56 million bookings in April, 2012, as compared to 2.26 million bookings in April 2011
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Government Support/Initiatives
According to industry experts, the Government of India is expected to increase its spending on the e-governance projects, which would contribute towards growth in the IT & ITeS sector. The Government has launched a project to provide high quality broadband access to village Panchayats through National Optical fibre network by 2014. The project would benefit small and medium enterprises (SMEs) in the country.
In the twelfth Five Year Plan (2012-17), the Department of Information Technology proposes to strengthen and extend the existing core infrastructure projects to provide more horizontal connectivity, build redundancy connectivity, undertaken energy audits of State Data Centers (SDCs) etc. The core infrastructure including fibre optic based connectivity will be leveraged and additional 150,000 Common Service Centres (CSCs) will be setup to create the right Governance and service delivery ecosystem at the Panchayats. The high penetration of mobiles will be leveraged to deliver both informational as well as transactional Government services on mobile phones.
Road Ahead
The IT/ITeS sector has also created tremendous entrepreneurial and job opportunities, generating direct and indirect employment of nearly 2.8 million and around 8.9 million respectively. Estimates reflect the growth to be more than 14 million (directly and indirectly) by 2015 and around 30 million by 2030.
Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.
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Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods A.Nagaraju Cement, Reality & Infra, Oil & Gas Ashish.Kushwaha IT, Consumer Durable & Banking K. Jagadhishwari Devi Diversified Abdul Khabeer Diversified Anil Kumar Diversified A.Ravi Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com
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Table of Contents

Rpt. 21419451 06-Feb-2013

REDINGTON INDIA LTD-INITIATING COVERAGE IIFL - SINGLA, MANOJ, ET AL

Rpt. 21398796 04-Feb-2013

REDINGTON INDIA LTD MOTILAL OSWAL SECURITIES, LTD - BOTHRA, SIDDHARTH, ET AL

Rpt. 21364061 28-Jan-2013

Rpt. 21273150 09-Jan-2013

Rpt. 21107436 22-Nov-2012

Rpt. 20481923 05-Aug-2012

REDINGTON INDIA LTD WRIGHT INVESTORS SERVICE - WRIGHT REPORTS, ET AL

Rpt. 20598621 03-Aug-2012

These reports were compiled using a product of Thomson Reuters

Play on increasing hardware consumption

Rs86 125(45%) 644 940 REDIIN Midcaps

1M Absolute(Rs) Absolute(US$) Rel.toSensex Cagr(%) EPS

3M 4.9 4.9 (0.4) 3yrs 21.5

1Y 10.4 0.7 (1.8) 5yrs 23.0

0.2 2.8 0.4

Shareholdingpattern(%) Promoter FII DII Others

Warehousing Logistics & Distribution

Redington BUY Figure6: DomesticITrevenue:Breakupacrosssegments

Investment positives 1) Market Size and growth

(%) 0.2 0.2 0.1 0.1 0.0

(%) 0.3 0.2 0.2 0.1 0.1 0.0

Redington BUY Figure9: ITSpendingMiddleEast

2010 224 11% 16 33%

2011 240 7% 38 138%

2012 260 8% 78 105%

2013 272 5% 98 26%

Investment positives- 2) Distribution network and size key edge

FY11 10938 10547 7087 2972 1598

India 23337 56 66 70 292

Staff 1200 100 630 180 150

Investment positive 3) Enhancing service offerings across the supply chain

Its unique offering of after sales services to customers. The

FY11 36980 2525 1.63 522 286 190 36%

Redington BUY Figure15:Redington:GrowthofApplerevenues

Investment positive 4) Weakness in several segments might be behind

Consumer durables doing well

Weakness in Middle East should be over

Redington BUY Figure20:Redington:Indiaandinternationalmargins

350000 300000 250000 200000 150000 100000 50000 0 FY09

0.0% FY09 FY10 FY11 FY12 FY13E FY14E FY15E

FY15E 5,268 (2,855) 2,413 (640) 1,773 16,592 23,395 0.7

(%ofsales) 0 0 0 0 (0) (0) FY08

Valuation and risks

Techdata 11772 4.60% 0.50% 23

SynnexTech 4961 4.90% 2.60% 62

Annexure I: Redington Logistics Facilities

Annexure III: Vendor Relationships

Annexure IV: Redington Company Holding Structure

Cadensworth (India) Limited, India 100%

Redington Distribution Pte Ltd, Singapore 100%

Redington International Mauritius Ltd Mauritius 100%

ProConnect Supply Chain Solutions Ltd., India 100%

Easyaccess Easyaccess Financial Financial Services Ltd, India 100%

Redington SL Pvt Limited (Sri Lanka) 100%

Redington Nigeria Ltd, (Lagos) 100%

Redington Kenya Ltd (Nairobi) 100%

Redington Gulf & Co LLC (Muscat) 70%

Cadensw orth FZE (Dubai) 100%

Redington Egypt Ltd (Cairo) 99%

Redington IT Services (PTY) Ltd. (Johannesburg , South Africa)

Redington Arabia Ltd Ltd Arabia (Riyadh) 100%