Rashi Peripherals Limited (RPTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rashi Peripherals Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Vinay Menon from Monarch Capital. Thank you, and over to you, Mr. Menon.

Thank you. Good morning, everyone. Today on the call, we have Mr. Kapal Pansari, Managing Director and Promoter of the company; Mr. Rajesh Goenka, CEO; and Mr. Himanshu Shah, CFO of the company. I hand over the call to you, sir. Thank you.

Thank you, Vinay. Good morning, everyone, and a warm welcome to our earnings call for the first quarter of fiscal year 2026-'27. Thank you for your time and your continued interest in Rashi Peripherals Limited. I'll be covering 4 things today: the industry background, our performance for the quarter, the progress on our strategies and how we see the road ahead. We are in one of the most consequential periods our industry has seen in over a decade, unfolding almost exactly as we described in the previous calls. Three forces are converging at once. First, the multiyear PC refresh cycle. The move away from Windows 10 has triggered a sustained hardware replacement wave across enterprise and commercial users, a multiyear cycle, not a 1-quarter bump with real room still to run. The second is the AI PC inflection. AI-capable devices are a rising share of every shipment and carry higher average selling price as well. As AI spreads to the edge devices, the incentive to refresh towards these machines is only accelerating. And the third, the defining feature of this year, a fundamental shift in component economics. AI data center demand has relocated the world's memory capacity towards high-bandwidth memories, creating a sustained shortage of conventional DRAM and NAND flash along with firm rising prices, independent forecasts expected to persist -- sorry, independent forecasts expects this to persist through 2028 as well. What does this mean in practice? The unit shipments could be under some pressure, but the value of the market is rising because pricing is firm and moving up. The advantage flows decisively to players with scale, deep OEM relationships, disciplined inventory and balance sheet strength to secure the supply. The players who take share when others cannot get product. That is Rashi. And believe the cycle sets a far larger structural story. The Indian ITC (sic) [ ICT ] distribution opportunity is over INR 1.5 lakh crores with PES penetration still only in the mid-teens. As digitization deepens into Tier 2, 3 and 4 India, the runway is enormous. This is a multiyear opportunity, and we have built this company to capture it. Now let me turn how that translates into our numbers. This was on multi-measures, our strongest quarter yet. On a consolidated basis, revenue grew 61.9% year-on-year to INR 5,100 crores, with EBITDA growing 50% to INR 155 crores and PAT growing at 69.5% to INR 105 crores with diluted EPS of INR 15.25. But growth isn't alone the measure of a well-run business. So we would like you to note that we delivered the highest annualized ROCE and ROE since our listing at approximately 19.5% and 19.8%. That is the number to hold on to. We are not chasing top line in a good cycle. We are converting it into a profitable, capital-efficient growth. That rests on disciplined working capital staying tight at around 56 days, and our operating leverage is visible. Profits grew faster than revenue because as prices rise, our absolute margin grows while our cost base stays broadly stable. Now the part that I'm most energized to share. Over several quarters, we have laid out a vision built on 3 strategic pillars. This quarter, we moved decisively from intent to execution on everyone. Our pillar #1 is our core engine of personal computing, enterprise, lifestyle and component economics. This powerhouse funds everything else and it fired on all cylinders. The refresh cycle, robust enterprise demand and firm pricing all in our favor, visible in our near 62% top line growth. We are deepening it further by adding solutions to strengthen our AI and high-performance computing portfolio and opened 2 new branches in Udaipur and Dhule, extending our reach into the C and D class cities where penetration is the lowest. Reach, relationships and execution remains the bedrock on which everything else is built. Our pillar #2 is our ambition to evolve from a pure distributor into an integrated solution partner. And this quarter, we acted announcing a strategic acquisition of a majority stake in VDA Infosolutions, a well-established pan-India system integrator with a strong enterprise clientele. What makes it compelling is the shape of the business, the capabilities of service and renewals that it involves. The services that it provides are enterprise implementing, implementation, consulting, managed services, cybersecurity, cloud and data protection, the nature of revenue streams that are sticky and annuity like with long clientele tenures. This is forward integration in action. It moves us up the value chain and shifts the quality and durability of our earnings. And we've structured it so that the founders retain a meaningful stake through a stage mechanism protecting alignment and continuity. Our pillar #3, which is a high-growth vertical with semiconductor at its center. This is our single most important long-term value leveler. And this quarter, we took a defining step by announcing a joint venture with Restar Corporation. It is a leading Japanese semiconductor and technology company, structured at 74% Rashi and 26% Restar focused on advanced imaging -- image sensing solutions for industrial and automotive applications. It pairs Restar's semiconductor technology, supplier relationships and application know-how with our pan-India distribution reach and execution. It also includes direct skill transfer from Japanese design experts who will train our engineers backing our 50-plus local engineering hires over the next 2 years. Our first step in semiconductor back in 2021 is beginning to take shape. As India moves towards a $150 billion semiconductor market by 2030, this is a business that will structurally become a growing source of our future ROCE and ROEs. I would like to summarize that to bring it together, a record quarter of growth, a record quarter on returns and a decisive execution on all 3 strategic pillars. Our direction is clear and consistent: scale the core and build share, expand margins by integrating up the value chain, and build tomorrow's high-growth business today, leading with semiconductors. Step by step, we are moving Rashi from a distributor to a trusted integrated solution partner that enables technology adoption in India. We have to be realistic about the environment as well. Pricing is elevated, and there may be pockets of consumer affordability pressures in the second half. But our diversification across 2 strong verticals, our disciplined balance sheet and channel financing tool gives us real resilience to our share gains and richer mix will carry us through whenever the cycle normalizes. We'll always give you an honest read of the cycle in good times and challenging ones alike. With the industry in a genuine super cycle, stronger balance sheet, brand relationship and execution track record, we are confident of delivering not just continued above-industry growth, but a meaningful differentiated quality of earnings over the coming years. With that, I hand over to our CFO, Himanshu Shah, for detailed financials, after which we, along with our CEO, Rajesh Goenka, will be happy to take your questions. Thank you.

Thank you, Kapal, and good morning, everyone. It is my privilege to present our financial results for the quarter ended June 2026. And I want to begin by stating that -- state this plainly; we have just delivered the strongest quarter in the history of this company, not incrementally stronger, meaningfully decisive stronger across every metrics that matters to you. On a consolidated basis, revenue from operations stood at INR 5,102 crores, up 62% rounded off year-on-year. EBITDA grew 55% to INR 173 crores and EBITDA margins at 3.38%. Profit after tax surged 69% to INR 105 crores, delivering a PAT margin of 2.05%. Profit before tax grew 73% to INR 139 crores with PBT margins expanding to 2.72%. On a stand-alone basis, the performance is equally compelling. Revenue came in at INR 4,832 crores, up 58% year-on-year. EBITDA grew 50% to INR 164 crores with margins of 3.38%. PAT increased 65% to INR 97 crores at a margin of 2.01% and PBT grew 65% to INR 130 crores at a 2.69% margin. These are not numbers we stumbled into. They are the outcome of a strategy that is working, a team that is executing and a market that is responding. And this quarter marks new all-time highs on top line, EBITDA, PAT and annualized ROCE, all 4 simultaneously. What makes this quarter especially noteworthy is not just the scale of growth, it is the quality of growth. We grew the top line aggressively while simultaneously sharpening our balance sheet discipline. Inventory days tightened to 55 days, debtor days stood at 41, creditors days stood at 40 and overall working capital days improved year-on-year to 56 days. For a business growing at this pace, the kind of working capital efficiency is a real differentiator, and it reflects the maturity of our operations. To summarize, on a consolidated basis, INR 5,102 crores in revenue, INR 173 crores in EBITDA and INR 105 crores in PAT. On a stand-alone basis, INR 4,832 crores in revenue, INR 164 crores in EBITDA and INR 97 crores in PAT, all-time highs across every key metric. This is not a peak, it is a foundation. With that, I'm delighted to hand it back to the moderator and open the floor for your questions.

[Operator Instructions]. The first question comes from the line of Amit Khetan with Laburnum Capital.

Congratulations on a great quarter. So my first question is on the demand side, right? When we look at some of the global distributors who are listed abroad, all of them are reporting strong numbers. However, the growth in Asia Pacific is particularly strong, and they haven't raised the overall sort of guidance. So I'm just trying to understand, is there something that we are seeing different in India in terms of demand tailwinds? And how sort of sustainable is that?

So Amit, to give you perspective, third-party reports indicate that there will be a reduction of about -- I think my voice is echoing.

Yes. Speaker, just give me a moment. Yes, go ahead.

Yes. So I'll repeat my answer, Mr. Amit Khetan. So all third-party reports indicate that there will be a reduction in the total size of the market by about 10% unit-wise. However, prices continue to rise due to the shortage of particularly memory, hard drive and CPU. So the price trend continues to be up -- on the uptrend. As a result of which you can see that price increase is offsetting the quantity drop that is happening. So there -- and to answer your question, what is going to be the trend in near future, at least in Q2, this trend seems to be continuing. The price uptrend continues. We are expecting similar trend to continue in the entire -- this financial year, although the trajectory, there may be a little bit slowdown comparatively.

My question is more relating to why is the demand so much higher in India relative to the rest of the world? So the factors that you outlined are sort of common globally, right? But why is demand in India so much higher than, say, the West?

Yes. So I think the first and foremost in India because of the overall economic situation, which is extremely good. Second, high focus on digitization. Third, very high focus on education. These are the 3 fundamental reasons for higher PC demand and then related accessories and then related data centers, which is triggering the growth. So if you see our GDP and economic situation also is immune -- almost immune to the global shocks that are happening. So therefore, we will -- we have been continuing and we will continue to reap the benefits of growing demand on the overall perspective, along with consistent price increase as well.

If you look at our overall business, could you give some sense of the split between the consumer segment versus, say, the commercial and the enterprise segment? Just a rough split of how much is there, in terms of end customer, where the products go.

So Rashi Peripherals is a B2B company. So we do not sell directly to end customers. We always sell through partners. So we have a general sense of consumer versus commercial. So my general sense would be that about 30%, 35% of the business is consumer-centric, balance 60%, 65% is commercial, which is split between SMB and enterprise. But I must also add that consumer, there is still slowdown because of the affordability. The laptop prices, for example, has already become 2x as compared to the last year. But for commercial applications, they don't have an option. So they continue to buy. In fact, they are preponing the buying to mitigate the expected price gains. There are only some exceptions where some large companies have increased their refresh cycle from 3 years to 4 years or 4 years to 5 years, but that impact is not very much. So we are seeing a significant growth on the commercial segment.

[Operator Instructions]. Next question comes from the line of Bhavin Chheda with Enam Holdings.

Congratulations to the entire team for record numbers and also along with the record numbers, maintaining a very strong balance sheet. So that was a very positive outcome of despite strong numbers, the balance sheet has been under control. Sir, a couple of questions. First, on the growth part. Your results shows that there has been a sharp increase in inventory, which also indicates that we are heading for record quarter 2 or quarter 3 also because obviously, we will stock goods when there is a strong demand. So my question was how much of this quarter, the overall growth momentum is captured in 60%, 62% growth, how much is the volume price growth there? And as you mentioned in your opening comments, the prices of memory, [ high core ] CPUs are still increasing. So how much of the price growth got captured in this quarter? And how much is going to get captured in quarter 2?

So Bhavin bhai, I'll try to answer point to point. So first and foremost, if I look at the breakup of our 60% growth on April, May, June versus April, May, June, broadly speaking, 30%, 35% has come from the price increase. 5% to 10% has come because of addition of new products and new brands. And the balance 20%, 25% has come by increasing the quantity. Here, in the commercial segment, the market size also marginally has grown. So we have taken that advantage. But I must also add that because of our widest reach across 57 towns of India and because of our widest portfolio, we continue to gain market share. So we -- 10% business is accounted for improved market share as well. So this was the past quarter. In the expected quarter, the demand, I think, will continue the same way without too much of hiccups. July, August, September traditionally has been a very high quarter. In the previous calls, I have always mentioned that there is a fight between JAS and JFM quarters, which should be highest. Sometimes July, August, September is highest, sometimes JFM is highest. This time, consumer sentiments are pretty high and the feedback that we get, especially from LFR and online is that demand should be good. And the fear of further price increase also will trigger the buying. So we are very optimistic that similar trend will continue in July, August, September also. The only bit gap would be that price increase now is not going to be as fast as the previous quarter. So that delta will come. But otherwise, we are on a dream run for the coming quarter as well.

Yes. That's great to hear. And my second and last question. Obviously, as the -- Kapal also said, we are pivoting to integrated technology partner. And recently, you have done a couple of acquisitions plus JVs and all that. So can you give some insights on that how revenue contribution from these new ventures will flow in the rest second half, current year and next year? How we should look at this new pivot over the next 2 to 3 years?

So I'll answer that question, Bhavin. I think the way to look at it is that it's too early to comment, but to start with the acquisition that we have done, approximately 5% of our revenue portfolio will come from these integrated services and value-added solutions. To give you a precise outlook on how should we look at it, I think we'll still have to wait for another quarter. In Q2, we will have our numbers much more presentable and update on the direction that these acquisitions are going to take. Similarly, on the semiconductor side, again, this is a JV that we formed as a step-down subsidiary of Rashi Peripherals Limited. And that step-down subsidiary will form a JV with the organization -- with the Japanese Restar Corporation. The moment we do that, the numbers are also going to come back reporting in the -- with the quarter 2 financials. So you'll have a far better picture. The only point I can say is semiconductor is growing almost double digits, sometimes in excess also, and this will continue to accelerate. To give you a perspective, our semiconductor revenue has already crossed 70% of the entire year's revenue that we did last year. So there is significant momentum on that side as well.

[Operator Instructions]. Next question comes from the line of [ Hitesh Goel with Awriga Capital ].

Just first of all, congratulations on a very good set of results and what was encouraging also that working capital days actually come down despite a very strong quarter. Sir, I wanted to get a sense on the VDA bit also, if you can give us some sense how is the quarter, how you see the outlook for next year? And what are the plans for next 2, 3 years, can you give some sense of it?

Yes. So on the VDA, it is a very strategic acquisition of 67% stake in the first year. Our core objective is to improve our capabilities in terms of design, presales, post sales and managed services. We are not looking at this moment on the top line. But just to give you previous financial year, they did INR 850 crores. In this current financial year, obviously, there will be a substantial growth plan. But VDA will bring value creation to all our stakeholders in next 2 to 3 years' time, and we are working in that direction at this moment.

And sir, my second question would be on the supply constraints, right? So we are hearing from the market that there are supply constraints in terms of the -- because of pricing and also global AI demand. There's supply constraint on the chips and all which is coming, which is -- do you think that can also impact volumes in the second half?

Yes. So there is a potential risk, yes. But at the same time, now Rashi Peripherals is in the industry for more than 30 years. We have good relationship and business agreements with all the global companies, including NVIDIA, Intel, AMD, all these companies. So far, we have been able to get good allocation. And coupled with the price increase, we are at an advantageous situation. So I do not see too much of a challenge. But yes, this is an orange alert for us. We track it on a weekly basis.

And sir, my final question, can you give the revenue from the Dell business in this quarter?

So roughly about 5% business has come from the new Dell commercial business in the past quarter, the previous quarter.

And can you remind me what was your target for FY '27 in Dell?

We are above the target as far as numbers are concerned. That's what I can say that.

Next question comes from the line of Ayush Chabria with Shravas Capital.

Congrats on a good set of numbers. If you could just give us some sense on how the inventory is on your channel partners, it would be great. Just trying to understand how things are going on that side of the business as well.

Okay. So I think Bhavin bhai also mentioned that we have a high inventory and which also means that July, August, September sales will be good, so which is exactly the right. But I just want to also clarify that our current inventory at our level also is actually not high. Basically, we take as a days of inventory vis-a-vis the sales. So when I compare to the sales versus the inventory, actually, the days of inventory are marginally going down. As far as T2 partners and our customers' inventory are concerned, definitely, there is a buildup in inventory across all the channels because all our T2 partners are trying to make double-digit margins. So they are selling slowly. But it is not a concern because if they decide not to earn extra margin and then sell, probably they can sell it very easily. So to give a fair opportunity because in IT industry, earning extra margin, especially at T2 level is not very common. This is an opportunity. So we think that as long as they are able to circulate the money properly and on time, let them earn money. So yes, inventory is high, but it is not a very big concern because there is a good demand currently and in the near future also, demand will continue.

Understood. Also, if you could just give us your thoughts on, let's say, the commercial side of the business, right? What do you think about refurbished as an opportunity? I know you guys definitely not go into that, but I'm just trying to understand, is that a threat in terms of prices going up because refurbished just cost 1/3 of the actual price. So do you think near term, do you see any kind of threat from that end as well because commercial would be readily available to shift to that kind of a thing? Just your thoughts on this.

So overall, PC TAM in India is about 15 million to 16 million PCs per year. So -- and refurbished, some people say it is 0.5 million, some people say 1 million. So even I assume that the PC TAM is about 1 million, it is not very significant. I will not say insignificant, it is not very significant to worry about. And second, to get refurbished products also within India is not easy. So I know a lot of refurbished players are there who are trying to source product that availability is also not easy because now the refresh cycle of most enterprise has increased from 3 to 4 or 4 to 5. So while yes, there definitely will be upswing on the refurbished PC, but it will not make too much of an impact on the larger scheme of things. So we are not too much worried of it -- about it.

Understood. And one last question, if you could just split the top line growth between volume and value, it would be great.

Yes. So in terms of unit-wise, we have grown by about 20%. Overall, actually, when the reported numbers, you see there is a dip in the numbers, but that is only because there is a memory brand called SanDisk, where we have a major unit dip. But if I keep that inside, the unit growth is 20% and balance growth is coming from the ASP increase. So that I mentioned in my first answer that we have increased -- improved our market share by also by about 10%.

Next question comes from the line of Nishita Shanklesha with Sapphire Capital.

So I just wanted some clarification. You mentioned that our semicon revenue has already crossed 70% of the entire revenues that we did for FY '26. So like does that mean that in semicon segment, we have a revenue of around INR 11,000 crores?

So let me please clarify that it has the revenue of semiconductor portfolio compared to FY '26 in first quarter has grown by 70%. It is not that our overall revenue, 70% is semicon now.

Okay. Understood. And you mentioned that Q2 is generally very good for us. So can we expect a similar growth like 60% growth or better growth in Q2 year-on-year?

Yes. So as I said, I've already indicated that Q1, we have grown by 60%. Q2 also similar trend will be there. The only correction will happen on the speed of the price increase. Price increase speed should be half. So that much detrimental growth could happen. But we are on a very strong footing as far as Q2 is concerned.

Next question comes from the line of Raman K.V. with Sequent Investments.

Congratulations on a good set of numbers. I have 2 questions. One is on the semicon JV part, semiconductor JV with the Japanese company. Can you explain what are we trying to -- like under this JV, what are we trying to sell? And what kind of product are we planning to create with the business of this JV?

Yes. So Raman, I will explain to you. So basically, we have -- we are forming a joint venture company, which will be named as Rashi Restar Semiconductor Solutions Private Limited. This is a joint venture company with Restar Japan. Restar is a $4 billion Tokyo Exchange listed semiconductor distribution company. They are basically into design, distribution of semiconductor solutions. So this -- our existing embedded business, which Kapal just mentioned, will move to this joint venture company. And then Restar will buy 26% stake in this company for JV. By virtue of this JV, the advantage that will come to Rashi are mainly 2. One, we will get all the products and solutions that are distributed by Restar in Japan and world over. So -- but that is always subject to the OEM manufacturer contracts. And second, we will get access to all the Japanese manufacturers in India. So far, in our embedded vertical, we have all the Indian manufacturers as our customers, but we don't have a single Japanese manufacturer as a customer. So it's a dual benefit for Rashi Peripherals. One, we get newer products and lines from various suppliers, which will expand our offerings. And second, we will get Japanese customers. And third is Restar is heavily focused on design services, they have more than 200 engineers on their rolls. So by virtue of that, they will appoint a design engineer who will help us train our people. And if required, we will send them to Tokyo as well. So these are the 3 advantages of having this joint venture company.

Just a follow-up here. When you say design solution with respect to semiconductor, can you just elaborate what do you mean by that?

So for example, I'll give you our example because it will be premature for me to give Restar example. Right now, the electric cars that are made in India by the Indian automobile companies, I'm not at the liberty to name them. The headlights they use, use chips and the basic initial design done in our laboratory in Bangalore. So similar kind of design for automobile applications for robotic applications, et cetera, they will help us to design those in India for local manufacturing. So this will also trigger and help us to penetrate more into the Indian manufacturing sector and also help accelerate Make in India initiative of the government.

Understood, sir. And sir, my second question is with respect to the refurbishment business. Can you just point out what percent of our total revenue is a refurbishment business?

Currently, it is none. Currently, refurbished business is none. But yes, someone already asked earlier, I think Shanklesha already asked and there are a lot of people asking when will you start refurbished business. So fingers crossed at this moment.

So is there any timeline wherein you are aiming to start the refurbished business?

That's why I said fingers crossed.

Next question comes from the line of Aejas Lakhani with Unifi AMC.

Yes. Congratulations to the management team on a stellar performance, the real credit goes to all of you. Sir, my question -- and I missed the opening, so forgive me if I'm repeating this question. But sir, the Yotta deal really demonstrated your ability to execute a large AI infrastructure development, right -- the deployment, sorry. So how are you thinking about similar opportunities going forward? Is the pipeline for large deals expanding? Do you intend to actively pursue them as a strategic lever or driver? Should we expect more of large deals in '27 and onwards?

So Aejas, I think very good question, very close to my heart, and thank you for acknowledging that Rashi Peripherals, RP tech created that capability of delivering and executing such large kind of AI data center projects. So yes, it is there in our radar. The current pipeline, as you must be also seeing in the newspapers, there are so many AI data center projects announced by the big groups across the length and breadth of the country. We are all there in those projects also. However, at this moment, particularly in April, May, June quarter, I would say that we did not go all out on this front because we were already having a 60% growth. We were in the need of working capital, building up inventory as well. So we did not go aggressively for this. But if need be, we decide, then in the coming quarters, we can always win basis our credentials and reach. Last but not the least, yes, there is a good pipeline of these projects, which will continue to be there for the next 3 quarters at least.