Redington Limited (REDINGTON) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Redington (India) Limited Q1 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raj Shankar, Managing Director, Redington (India) Limited. Thank you, and over to you, sir.

Thank you, Faisel. Good evening to one and all. Thank you for joining us on this Redington's earnings call presentation. This is for our Q1 FY '21. At the outset, I hope and I pray all of you joining on this call, you and your family are safe. And I would also like to share with you that as far as Redington and its families are concerned, to a large part, things have been under control. There have been some instances of COVID cases, but the good news is they are all under control and things are -- right now, the number of instances are also very less compared to what it was a couple of months ago. So with regard to our first quarter in spite of the fact that we had lockdown, as you would recall, in India, from the 25th of March to almost the 4th of May. And then there was a partial lockdown in different cities and through May and to some extent, also through June. So we didn't have a full quarter to play with. And the situation was no different as far as the overseas market were concerned. Just wanted to share with you that if you look at a few of the markets like Saudi Arabia, where out of the total 60 days, we had close to 51 days where there was a complete lockdown. And there was a partial easing of this lockdown from 21st of June. Similarly, when you look at UAE, out of the total 60 days, we had almost 25% of the time when there was complete lockdown, and then things started to ease a little bit starting 20th of June. So we have different challenges in different markets. And if you take Kuwait, for example, the total number of working days itself was just 23 for last quarter. And if you look at the total number of calendar days that was on lockdown was 39. So I'm only trying to share with you that we had extremely difficult and challenging circumstances, some of which I alluded to in my previous conversation, but I must tell you to the entire credit of the amazing Redingtonian team, they put in amazing work, they went beyond their call of duty and were able to deliver good set of results, which I'm going to share with you. Honestly, I want to really, really give some big kudos on this earnings call to our winning Redington team. On the consolidated basis, if you look at our revenue, we degrew by 8%. EBITDA degrew by 6%. Our profit before tax by 11% and profit after tax, degrew by 19%. But if for a minute, you just double-click only on the distribution part of the business. Globally, we degrew by 8%, but the EBITDA for distribution business actually grew by 1%. And the -- from a profit after tax perspective, it degrew by 5%. Now when you, again, focus on India. And again, look at the India distribution part of the business, our revenue degrowth was 16% in spite of the fact that effectively, we had 50, 55 days to really do our business, calendar days that is. And our distribution EBITDA degrew by 24% and our profit after tax by 25%. Now when you look at overseas, overall, which includes META, Middle East, Turkey, Africa and Singapore, South Asia, the revenue grew by -- sorry, degrew by 4%, but EBITDA grew 17%. PBT grew by 20%, while profit after tax degrew by 3%. This is essentially on account of the effective tax rate in Turkey being 43% as against, as you would know, a 20% income tax. And plus, the contribution and the performance of Turkey, particularly for last quarter, in terms of profit contribution was much higher than in the past. And hence, when you look at profit after tax, after NCI, the noncontrolling interest, hence, you are seeing PAT degrow by 3%. However, on a constant currency basis, the overseas revenue degrew by 11%, but EBITDA grew by 7%. Profit before tax grew by 10%, whereas on profit after tax for reasons that I just explained, which is to do with the higher effective tax rate in Turkey and the higher profit contribution from Arena in Turkey, therefore, the profit after tax degrew by 11%. Overall, when you look at in terms of the contribution of revenue and profit from overseas, it was 68% and 76%, respectively. Now when you look at business verticals, IT overall degrew by 7%. Mobility degrew by 11%. Services, which is essentially here ProConnect and Ensure, degrew by 20%. But I hasten to add here that Ensure services in India, we have divested that asset on the 31st of July, which is something that you would be aware. But for the quarter April, May, June, it was considered as a part of this P&L. In terms of the overall Mobility business, which was very strong in India, the degrowth in mobility business was 8%. Overseas degrew by 4%, resulting in a consolidated level, the degrowth was 11%. What is very, very gratifying is the fact that we were able to achieve an all-time lowest working capital in the history of Redington. We were able to contain the total working capital base at a consolidated level to 17 days, with India contributing to 12 days, whilst overseas contributing to 19 days. This has been the lowest ever in the history of Redington. This is also very largely on account of our ability to get extended supplier credit during this period and also the fact that we made sure that there was very smart ordering in that whatever was ordered was -- we were able to, therefore, receive it and sell it immediately rather than keeping it in inventory. What is again particularly extremely something that has helped and aided our cash flow is the fact our collections were at all-time best. It was one never expected. This is something that I also mentioned in a couple of my calls earlier, but trust me that the kind of effort and the kind of outcome that we have been able to achieve with regard to collection is absolutely mind-boggling. Our team, in some of the months, particularly the month of June, which was -- for us, which recorded the highest sale out of the 3 months of April, May and June across all the theaters of India, META and South Asia, we were able to collect more than what we sold in a full quarter in spite of the fact that we had a very solid sales in the month of June. But again, that was largely on the back of pent up demand and that may not be something that one should take that as something which is sustainable, particularly with regard to the month of June. Now when you look at some of the markets where I feel, again, extremely happy and proud is the fact that when you look at UAE, the PC market, from an industry standpoint, degrew by 10%, but we, as Redington, grew by 29%. Similarly in Saudi Arabia, where the industry grew by 8%, we were able to grow almost 25%. In Turkey, industry grew by 42%, whereas we grew by a whopping 78%. So in terms of the fact that as all of you would know, the work from home definitely gave a big impetus to the Mobility business, especially the laptops and so on. So that was something that we had an incredible performance in that quarter. Now as we move on to the next topic of cash flow. Again, this is one of those quarters where in one quarter because of our ability to manage working capital very well, the positive free cash flow at a consolidated level was INR 2,332 crores with about INR 1,132 crores coming from India and INR 1,200 crores from overseas. I cannot think of any other quarter in the history of Redington, where in 1 quarter, we were able to mop up so much of free cash. The other interesting aspect is given at this point in time, we were focused on making sure that we had adequacy of cash flow. And therefore, we had a lot of cash, which was kept in deposits, not knowing whether this liquidity problem could completely get squeezed and, therefore, our ability to borrow money will get constrained. In spite of all of that, I'm pleased to share with you that our return on capital employed for this quarter was 20.6%, with India contributing to 19.1% and overseas contributing to 21.4%. Now at gross debt to gross equity. If you look at the consolidated level, it was 0.44. However, when you look at net debt, net of cash to equity, it was negative 0.45. In fact, we felt this is again one of those quarters where we had literally negative debt, so which means we were sitting with cash, and our cash position was far greater than the borrowing that we had. In terms of provision, which is another important aspect to look at, some of us were concerned, whether -- during this period, whether the inventory will go into aging, and whether we'll be able to sell and realize our margins. I'm pleased to share with you that for April, May, June, our provision for inventory at a consolidated level was 5 bps, 10 bps coming from India, 3 bps from overseas. Likewise, when you look at the provision towards bad and doubtful debt, it was 7 bps, with 10 bps coming from India and 5 bps from overseas. So it's been a great quarter like many, many good things happened. I also must tell you as far as ProConnect is concerned, while at an operate -- at an EBITDA level, they have generated profit. At the PAT level, they have a loss of INR 4.5 crores. This is essentially on account of the fact that on one hand, we could only operate at 65% to 70% of the normal business because of the lockdown. And in spite of that, we managed to really cut down on our expenses. This is something that worked very well both for the distribution business as well as for ProConnect in particular that allowed us to be able to generate an operating profit, though, at the PAT level, like I said, we have made a loss in ProConnect that is largely on account of the interest cost having gone up. In terms of the overall performance or the overall feedback that I wish to give you in summary. We had a very good performance by Turkey, where they grew profits by -- revenue by 72%, and the EBITDA grew by a whopping 152%. Now the -- if one were to look at the trend in July and what we have been able to deliver across, I believe that a good part of this momentum is something that we are seeing. There are, of course, some headwinds because not all markets are operating without restrictions, there are still restrictions galore. But I think to the credit of our team, they have been able to handle this and navigate this particular pandemic. In fact, it has taught us a lot more things than before the pandemic. In some ways, it has been a great lesson to us in the way the team has been able to navigate. So in conclusion, I would say it was a good quarter where in spite of all odds, we managed to deliver decent set of numbers in terms of revenue, EBITDA and profit. Overseas did an incredible job. India did well. ProConnect, while it may have registered a loss, but we have done a lot of -- we are putting a lot of corrections in place. It is certainly on the path to recovery. And there has been a working capital reduction, which has been phenomenal. And there has been a lot of positive free cash flow. I will take a pause here and hand it over for any questions. Thank you.

[Operator Instructions] The first question is from the line of Pavan Ahluwalia from Laburnum Capital.

Just a couple of questions. One, I think we've discussed on the last 1 or 2 calls, the competitive environment in India. So would love to get any sort of updates on that. Based on what we can tell from your competitors' balance sheet other than, obviously, Ingram and maybe one of the other large one, the mid-tier of competitors is highly stretched financially. And I'm not sure what a bank's appetite is to extend credit to these guys. Having said that, they exist for a reason, which is the app into a base of dealers that they extend credit to that for whatever reason, you guys and Ingram have not extended credit to so far. Is it fair to say then that the competitive structure of the industry is what it is because you and Ingram just don't want to deal with a certain set of people, so no matter what happens to these competitors, it's hard for you to increase share because you won't extend credit to the people they deal with? Or is it possible that there, in a tight situation financially, at a better price, you may be willing to extend credit. So I would love to get an update on that. The second question is, could you give us some sense of the impact of the Indian government's actions on Atmanirbhar Bharat and the equation with China, possible to pull out on Chinese mobile phone brand, how you see that playing out? What are the implications might be for our business? And any updates on -- I mean Samsung is obviously one big potential winner, which -- whom we haven't historically had a relationship. I was wondering if there is any sort of evolution on that front.

So Pavan, thank you for your question. So with regard to the credit part let me -- this is what I keep telling my sales team all the time. It is not that we don't offer credit. We do offer credit. And you know that typically, our credit period is anywhere around 45, 50 days, sometimes even more. So first, I just want to share with you that we do take credit risk. Now there are 2 aspects to us when we extend credit. One, we would like to, a large extent, as far as possible, to have it credit insured. Now we are -- we do not want to take an undue risk for a small return. And God forbid, if we are not able to -- if there is a -- delay is still acceptable. If there is a default, it puts us in a bad place. So our [ aim is to ] give credit, have credit insured, but very importantly for us, discipline with regard to payment is important. If we find that the customer has a behavior to delay payment, then we will definitely withhold or restrict credit giving to that partner, we will deal only in cash. So summary, we do extend credit. We are clear in terms of trying to make sure, to a large extent, get it credit insured. Three, we want to make sure that the discipline of the payment is not compromised. And if it is, we will only deal with cash. This is something that we have demonstrated over time. Otherwise, Pavan, please ask yourself, why is it that we are able to mobilize more collection than we can sell is only because we give credit, but partners know that they have to pay on time. Your second question...

The question was more saying and given that you have these standards, and these standards are there for good reason, and we've all seen how valuable they are in the last few months, right? Given that you have these standards, is it actually possible for you to increase market share? Or for you and Ingram, given the standards that you follow in terms of where you'll extend credit, is the market pretty much saturated where your revenue could possibly be. And whether or not, it's not possible to be given your standards.

Okay. So at this point in time, for us, it's very important that we take an approach. We are not necessarily driving market share. While that is something that we are focused, but that is not our end goal. What is important for us is to make sure now that our margin is something that we want to secure. So while on one hand, we extend credit, your point is very valid. We do that all the time. We have a concept of direct to retail, where we go and give credit to smaller dealers and partners. So do we do that? The answer is yes, but selectively. But for us, while doing that, we want to make sure we are earning more margin for the risk we are taking. If that is there, we would still take that risk. But if the margin is not commensurate for the risk we take, we would rather shy away and not be focused market share. If that explains, Pavan, and should I go to the next question?

Yes, just to understand what you're saying correctly, the long deal of competition is stressed financially, i.e., your competitors, and the hope would be that the people that are currently working with them will come and work with you on your terms.

Absolutely. And we would also go and work with them, provided for the risk that I'm taking on them. I'm making that additional margin that justifies giving them that additional credit risk. Because some of them, the insurance company may or may not be wanting to insure. So the risk is on our balance sheet, and we want to be, therefore, playing a better safe-than-sorry approach. Is that fine? Okay. Now with regard to your other question, I'll put it this way. The standoff or whatever tensions between India, China and all of that, has the impact to Redington has been minimal. This is essentially for 2, 3 reasons. One, you would be aware that close to 82% to 84% of the purchases that we do are rupee-denominated. So in other words, we are not importing the products from China or any other place. We are able to have the vendors, including all the big global names bill to us in the Indian Rupee. So in a way of speaking, the whole tension of having to mobilize the products and bring it into India is on the shoulders of the vendor, not us, point number one. Point number two, more and more of these vendors, as you would also know, have clearly shifted their production, production and manufacturing base into India, and they are trying to increase their capacity. So overtime, I'm only seeing this as a positive and not as a negative, with more and more manufacturing happening locally. The third at best, if there has been an impact, I would say it's more to do with a little bit of supply-related, where we could not get in sufficient quantities that we would have liked. To that extent, yes, it would have -- the supply chain disruption could have been there. But otherwise, honestly, it's very minimal. It's been for us, to a large part, business as usual. On the contrary, I would argue that for certain brands and products, it has been an advantage for us being -- dealing with some of the other global MNC brands and products, it has actually helped us to be able to accelerate our sales.

[Operator Instructions] The next question is from the line of Riddhesh Gandhi from Discovery Capital.

Congratulations on the great set of numbers. I just had a couple of questions on -- look, in this lockdown, obviously, all of us were rushing to pick up extra laptops for employees and for our children because of school from home. So is there a degree of the pent-up demand impact, which you are seeing in this quarter? Or do you expect these trends to last on beyond that?

So for Q1, I would agree with you to a certain extent that the sales that we did was influenced -- particularly on products like PCs, was influenced the pent-up demand and the demand for -- when people are adopting the work from home as a business model. But as we now look into the way forward, some of this -- I would not say all of it, some of these is becoming now a sustainable demand. It is not something which is only peculiar or unique to Q1. So the point I'm really making is that we are seeing that on certain product categories, like PCs, et cetera, there is a continued momentum and traction. I do not know whether that pent-up demand is something that is getting fulfilled and served even now. But if I have to go by July and the first 2 weeks of August, I would like to believe, to some extent, the momentum is continuing. I also want to confess that there are some product categories, like printers, where the sales have definitely slowed down.

Got it. Understood. Understood. And the other question was in view of, effectively speaking, the global markets, Saudi Arabia, et cetera, which you were indicating were closed for most of the quarter, Dubai, et cetera. Did that imply online sales were also closed? Or it was, effectively speaking, on the off-line stores, so no further compensated for by online. That's how we should think about it.

Okay. Truth be told that a good part of that sale happened in the month that's when things opened up. And it certainly gave us -- I would think, a large part of it is the pent-up demand that was getting served in June, that was point number one. I also want to share with you that effective 1st of July, in Saudi Arabia, the VAT has got increased from 5% to 15%. And as you can imagine, the -- there was a huge, therefore, opportunity for us to be able to push the product as much as possible and maximize sales in the month of June. Because come 1st of July, the VAT is going to be up by 10%. So that also sort of gave a tailwind for us to be able to push up the numbers. So in spite of the fact that if you go by the number of days and the business that we have done, they don't seem to correlate well, but these are some additional reasons why we were able to pick up on the sales.

Got it. And, sir, last question was, as the cloud adoption has increased the pace actually significantly, do you foresee any potential headwinds for some of your hardware business, et cetera? Or are you also seeing some increased uptick in demand from kind of corporates corridors as they are adopting to the work for home?

So in terms of cloud, and in terms of security, cybersecurity software, these are very clear technology practices where we are seeing a good traction. In fact, on cloud and a few other product categories, we are growing every month. We are growing double digits. So -- in terms of revenue. So there is a good traction. But does it -- this growth in cloud and some of the other security, software and services, is that impacting the hardware business. Overall, I must mention that the -- there has been -- the enterprise part of the business and more importantly the SMB part of the business, it's looking a little soft. We tend to think that should improve over time. But for now, that is looking a little soft. The momentum and the real tailwind is coming out of the consumer, be it IT, be it Mobility. That's what's driving a good part of the sales as far as India is concerned. As far as overseas is concerned, our enterprise business, which continues doing well, also aided by the fact that our consumer IT business has done well. If at all, the Mobility business had slowed down a little bit.

The next question is from the line of Chirag Sureka from DSP Mutual Fund.

Sir, this is Vivek, actually. I have 2 questions. One is in this net working capital basis has been astoundingly low. As the business picks up and you start paying off your suppliers, would you expect it to go up and where will it normalize? Second is a business question. In terms of the resilience of this business, it seems to be pretty strong in the sense that there's always -- I mean there has been some demand slowdown in segments, which is pointed out. But it seems to be quite resilient, and you're seeing that there's a trend that's seen in even July and into August as well. So how do you see -- is this because it's mainly done by the electronic channel and the e-commerce channel, and that's making it safer to shop because we just come up calls of retail businesses have done really badly. So I wanted the answers for those.

Thank you, Vivek, for your questions. So on the first point regarding working capital. 17 days of net working capital is a dream figure. But you're right that this was certainly aided by getting good supplier credit period. So just to give you, at a consolidated level, it was 69 days for April, May, June in terms of creditor days, which, when you compare it with Q1 of FY '20, was 39 days. So you can imagine a 30-day increase in supplier credit, it's a big boon to keeping your working capital under check and control. Now to your point, whether this is something that would normalize itself once the suppliers start to pull back on the extended credit, and they also give the normal credit. The answer is yes. And therefore, starting towards the -- towards starting this quarter, it should normalize itself. And you would recall that in one of my earlier calls, I had also mentioned that what one should expect as what we believe is a good working capital days in our business is somewhere in the vicinity of about 5, 5.5 weeks. So we are talking about something in the range of about 37 to 40 days, we believe is good. So over time, you would see that it will start to settle down at those kinds of range. If that answers your question on working capital, to your other point about go to market. Contrary to what people think, the -- while the online business has definitely aided our sales in India and to a limited extent overseas, it has been the traditional dealer channel as well as the retail channel, which has really done well for us. What really happened in some of these markets is that even some of the large retailers, they have their own online portal. So what they were doing is they were able to offer to their customers a shopping experience if the customer would walk into that shop. But if the customer was not willing to walk to that shop, but has always purchased from them in the past, then they were able to give them some kind of online portal where the customer could go and place the order and the delivery would happen at their doorstep. So this is something that more and more -- the off-line companies, in addition to their own retail, the brick-and-mortar retail, have also started the e-tail, which allows them to be able to do this. So this is a trend that we are seeing that more and more of the retailers are offering this as a SOP for consumers to be able -- who are not able to come to them instead of going to some of the other traditional online companies, to come to them to do the business. So that is what is helping us. I don't know, Vivek, if that answers your question.

The next question is from the line of Nitin Padmanabhan from Investec.

Congratulations on a very, very strong quarter. Sir, a couple of questions. So one is, I think beginning sometime Q3, Q4 -- Q4, you basically expected that there will be a very sharp drop in India. And I think before the last quarter results, you had assumed, I think, almost a 40% drop in India. And then I think you felt, it would be lower. But I think it's been far, far lower than what you had anticipated. And if we were to summarize the reason for the surprise, I think, a strong June quarter led by PC and laptop sales, would that be a fair sort of assumption, higher than expected?

I would put Mobility on the top. In fact, what has really helped us in India was the Mobility business across the entire -- yes, the Mobility business and followed by also the PC business.

And the laptop is in Mobility, right?

Sorry?

The laptop is in Mobility?

Here, I meant smartphones. I'm sorry, I should have clarified. So I would put smartphones as right on the top, which is the one that has really grown quite nicely for us. That also helped us to manage our working capital very well. And of course, following that, we had the laptop business as well do well for us.

Sure. And, sir, if you look at the trends that are getting into July and August, do you see that the trend that you have seen in June sort of holds in terms of continued spend by consumers? Or are you seeing an uptick from the enterprise side as well?

So the consumer part of the business, yes, the momentum is on. And we are seeing traction on the enterprise, but gradually. But it's on the uptick, I mean, to answer your question.

Sure. And I think -- I just have 2 more questions. One, conceptually, with a lot of Make in India happening. Obviously, the customs duty goes away. And would that be -- do you think the increase in volumes will sort of offset the revenue drop there relatively? Or do you think the portfolio that's being made out of India is still just a fraction of the overall pie, and thereby, it's not a headwind to growth at least for some time?

So if I -- let me break this up into 2 parts. If it's Mobility, there are a number of models that are currently manufactured in India. And my own sense tells me that when you manufacture in India, you would be price competitive. And when the prices tend to be very complicative, this should make the product more affordable, and this should definitely help to increase sales. So that is my take on that. As far as IT consumer is concerned, to the extent products are again manufactured locally, it's again a big advantage to be able to have a faster turnaround time. It also definitely makes the price that much more competitive. So overall, I would say, price competitiveness, and hence, that would lead into increase in sales would be the key point. And to your last point, whether it is a traction and all of that, I believe that it will start to become significant. Maybe today, I wouldn't say it's a traction. Today, it may not be significant. But over time, I'm expecting this to become significant.

Sure. And, sir, my last question was around Ensure. So obviously, we have divested the India business. And we do have Middle East and an overseas part of Ensure well. So I was just wondering what your thoughts were on that business and what the revenue and margin profile there is as of today?

Okay. So fundamentally, the break fix business or the repair services business or what you call the warranty and extended warranty business is not something which is core, and it is not something which is strategic to Redington. So we will, therefore, find ways and means to either find ways to unlock value like we have done in India or we will try and redefine, reconfigure the business, so that I think as I've mentioned in the past, we will then want to move up the services value chain rather than limiting ourselves only to the repair services. So that's what we intend to do.

The next question is from the line of Aditya Bagul from Axis Capital.

First of all, a heartiest congratulations for a great set of numbers. I think you've outperformed all our expectations. So 2 quick questions. First is, in terms of brand. What is the -- is there a change in the narrative from some of the key brands that you have talked about, I mean, Apple, et cetera. What are they seeing? Are they still as optimistic as they were 3 months ago? Or has there been a change in terms of narrative? How are they looking at the upcoming festival season? Something on those lines would be helpful. That's part A of the question. The second part of the question is I noticed that there is a small change in terms of your portfolio mix and others has increased by about 3% from 40% to 43%. So I'd like to understand something on that.

Okay. Sorry, your first question, Aditya, my sincere apologies. Your first question was...

My first question was to try and understand how are the brands -- what is your narrative with the brand?

Yes, yes. The narrative with the brand. Okay. So for most of the brands, barring very few, the April, May, June quarter was definitely one-off degrowth. But interestingly, every one of them strongly believes that this quarter, there will be some catch up, and they are expecting like what we had mentioned in the past, that Q3 will be a very strong recovery getting into Q4, being more or less business as usual and so on. So there, the whole narrative is, hey, guys, what has happened in April, May, June, I don't think we can try and make that up. But they are definitely expecting recovery this quarter and things to start to slowly get back to normal between Q3, Q4 and so on. So nothing much has changed in terms of our narrative. But one thing is very clear. We are buying only what we are confident to sell. Maybe in the past, there was a little more optimism that we can somehow sell that may end up being an inventory a little longer. Vendors are also now very clearly understanding that no longer can they also push our distributors to stop the product because everyone wants to manage and deploy their capital wisely. So I would think that is a very big change, and they're also cognizant of the fact that since everyone, the -- currently, the revenue drop is there, people want to make a higher margin, to the extent, yes, one would optimize on cost, but we are also making sure that the margin should go up. So a few things are happening. One, vendors are not pushing unreasonably for distributors to stock up. And that is, therefore, helping us because we buy what we can sell. Number two, we are also making sure and vendors have realized that our margins have to be better than what it was in the past. So to me, it appears it's a change for the positive, though, at the moment, revenue is less than what one would like it to be. That answers your question, Aditya?

Yes, that's quite helpful. The part B of the question was I think your data point. When I look at one of the slides in your PPT, Slide 15, if I'm not mistaken. It talks about the revenue contribution from top 5 vendors. The contribution of others has changed meaningfully. And I went back over the past few quarters, and we've not had a change there. So I just wanted to understand a bit there.

Aditya, you would have to -- you've got me foxed on that point. I don't have a good sharp answer for you. Can I have this checked, and can we come back to you, if that is fine with you?

Absolutely, sir. The first question that I had was on ProConnect. So we've seen a reasonable amount of recovery. Just wanted to understand what are the steps that we're taking or we've taken in the last maybe 4 months or so to ensure that we're coming back to the earlier path.

So I will put it into 3 broad buckets: one, organization restructure; focus on improving operational efficiency; three, only pick up contracts where you are confident of making money. Earlier, we were driven a little more by top line, thinking that we will be able to secure bottom line. So that's not something that we are allowing. So organization structure, just one of the many changes. We have brought in a new COO. Absolutely someone from the industry, who has been in the logistics space for a very long time and absolutely seasoned and experienced individual. He has come on board. So hoping that would make a big difference and bring about technology changes. Operational efficiency, this is something very important to us, and we want to make sure at a time like this, how do we try and get more with less. And the third aspect is focus on being frugal on cost. Trust me, we have managed. We set out a target, just to be upfront with you. We call that as a project agility, which is all about trying to take cost optimization initiatives. We commit... [Technical Difficulty]

Ladies and gentlemen, the line for Mr. Raj Shankar has been disconnected. Please hold while we reconnect him. Thank you.

Thank you, Faisel. And since your apologies, Aditya, I think exactly after 1 hour, it just got disconnected. So any which way? To answer that question, the third point, I was talking about we being very frugal as far as cost is concerned. For instance, we committed that we will try and reduce cost by INR 4 crores in April, May, June, and I'm pleased to share with you that we delivered on that, for example. So a lot of such initiatives are being taken. And I'm basically feeling good that from where we were this last couple of quarters in ProConnect to where we are now. At an operating level, we are in the money, even though we have been able to operate at 30% less revenue compared to the same quarter last year. So I think a lot of corrective steps are in place. I don't want to count the chickens as they say before they are hatched. But trust me, we are headed in the right direction.

The next question is from the line of Pranav Kshatriya from Edelweiss Securities.

Congratulations for a good quarter. I have 3 questions. Firstly, can you comment on EBITDA? Basically, there is a very strong beat in the overseas business, what exactly has contributed this beat? Is the contribution of Turkey and this is significant? Or what has led to this cost decline? And how should we see this going forward? Second question is more to do with the trajectory of the revenue. I mean the COVID call, you said that H1 will be like down 15% to 20%. Last quarter, we were talking about the Q1 down almost 40%, but the results have come far differently than that. So can we say that almost from Q2, we should start possibly seeing recovery in a meaningful when Q3 could be a quarter possibly as usual? And lastly, on the ProConnect business, you answered my question partly, but can we say that the worst is behind and we should be headed for a higher revenue EBITDA path from the next quarter?

So I'll take the last one first. The ProConnect, absolutely, you're right, the worst is behind us. Trust me, it will never ever happen again. In terms of the way forward, yes, we will need at least one more quarter because lots of improvements and developments are in place. So it will take one, maximum 2 quarters to really put ProConnect, set the fundamental -- get the fundamentals right and put the company on a -- back on a growth trajectory, on a high-performance trajectory. So we are headed in the right direction. So trust me, the worst is behind us for sure, and we are on a path to recovery. Give it another quarter or 2, and you will see that ProConnect once again becomes a very valuable business and an asset. To your -- I think your first question, the overseas, yes, you are very right that Turkey, actually, if you see over the last 5 quarters, have been very consistently performing well. And if you think April, May, June, in particular, as I mentioned to you, not only did they grow their top line significantly, they grew bottom line, I mean EBITDA by a triple digit. So that company is on a roll. And every single parameter that we are focused on, working capital substantially improved. Revenue, we are on a growth path. Market share, we are, today, from being a third player, a close third player to today, we are the #1 player on a number of product categories. Our cost has been further optimized. Our working capital is under control. Our growth rate, particularly for last quarter, has improved to over 20%. So every parameter is looking good, and this is not a 1 quarter wonder. If you look at over the last few quarters, you can see a steady progress and a very clear, consistent performance. So a good part of what you saw in overseas. I mean there's some part is coming from Turkey. But on the other hand, our traditional IT volume business, all your PCs and the rest of the peripherals, et cetera, that did particularly well during this last quarter and where the operating profit and everything else was in good shape. So overall, if you have seen the overseas has been doing well. And in terms of Mobility business, where this is onetime or this is 1 quarter where we did see a conspicuous slowdown, but that was more than offset by the IT part of the business. And we are expecting that the Mobility should fall in place, and the momentum should build in the coming quarters.

If I can just probe a bit there. I mean my question is basically how sustainable is the EBITDA for the overseas business going forward? And what should be the trajectory? Because we have seen the cost decline as well as fairly decent revenue traction. So just trying to understand that, that EBITDA for the overseas business, can it remain at the current level? Or -- I mean, how exactly it is panning out? Have you done cost cutting, which are likely to sustain or the costs are going to come back? So that is what I'm trying to understand.

Sure. So amongst both India and overseas, I say with a little element of pride, that in overseas, the cost optimization, cost reduction was more pronounced than India, point number one. Point number two, how much out of that is onetime? How much out of that is sustainable? My tummy tells me that close to 2/3 of that is sustainable. There will be some which could be onetime or for a shorter interval, but almost 2/3 is something that would play out for a longer time. So to that extent, we are becoming cost-efficient in some of the markets. So that's number two. In terms of the sustainability of the current operating profit or EBITDA, the answer is very highly likely that's how it will be. And we are focused on that. Like I was saying to another question, we are focused on margin. We are definitely putting our cost optimization and driving that crazy. And we are also managing our working capital well. To me, I see some of these play out consistently, but to what extent, I'm not able to tell you, but these are not onetime measures. These are -- a good part of that will play out for the rest of the quarter and the year. Your second question, I'm sorry.

So I'll list that -- I'm saying that if you look at the growth in the revenue has clearly been much stronger. I mean degrowth has been a lot lesser than what was anticipated. Be it the COVID update call or even the Q1 -- sorry, Q4 results call. So how should one see which is what I -- I think you partly answered that, saying that from third quarter?

No. I want to be a little upfront and be as candid as I can. When all of this COVID happened and with all the lockdown, honestly, one could never even make an estimate. Everything was just we had to live by the day. So I didn't want to say something and then look very silly saying that how come you did not even realize that you're going to have a setback. So the way we were telling ourselves, I'll be candid. We developed 3 scenarios, optimistic, pessimistic, probabilistic. And each had a particular performance metric. And we then said, we don't know what is going to play out. But you know what, we are going to be focused in terms of cost and in terms of capital from a probabilistic point of view. But in terms of sales and margin, we are going to drive it like an optimistic scenario. Honestly, I didn't expect that we could execute it so well that cost, we managed to bring it to be as frugal as we could. And in terms of the top line and margin, I was reasonably happy with what we have been able to do. So don't take me too hard on the 40%, because you would agree with me, it's a difficult call for the first quarter. Now to the other point that I mentioned come by Q2, it will be 15%, 20% and so on. Let me answer it this way. I still believe that Q3 onwards, it will be business as usual, things should start to -- there should be a good part of the recovery that should have set in, and we are on a growth mode. And of course, Q4, I don't know, I forgot -- I used -- we are definitely -- it's heydays back, if I remember, is the expression we used.

Ladies and gentlemen, we'll take the next last question from the line of Shreesti Rastogi from ICICI Prudential Life Insurance.

Hello, am I audible?

Yes, you're audible.

Congratulations on the good set of numbers. Most of my questions are actually answered. I just want to ask 1 question to you. So recently, one of the telecom providers said that the smartphone subset was actually not available. And while [ you are saying] that what was good for us was the Mobility or the smartphone segment. So I just wondering whether it was -- whether April, it was bad and June saw a sudden movement. Or how was that for us…

So if I understand your question well, you're saying, please explain how your Mobility business turned out to be a good business last quarter? Is that the question?

Yes, roughly [ it was ], sir.

Okay. Sorry. Yes, you want to clarify?

What was the trend, like month-wise, if you could give some color?

Okay. So here is what happened. Through the month of April, it was a complete lockdown. And honestly, we just couldn't sell. So it is not even worth talking about how much we sold because it was pittance. But come 4th of May when things started to open up, we could definitely see momentum and honestly, as it moved into June, we had an excellent June. We grew leaps and bounds, and we could serve all GTMs. This is not to say there were no constraints. There were definitely lots of constraints on account of lockdown and what have you. But I think to the credit of the team, our logistics team, particularly ProConnect, they did a commendable job in making sure that every single order that we could pick up was executed in spite of all parts. So to answer your question, June was absolutely a big month for us when we were able to really serve the market very well. To your next logical question, we are seeing a good part of that momentum, it cannot be as spectacular as June, but a good part of the momentum continued into June and so far into August as well. Does that give you some clarity?

Yes, sir. That's fairly helpful. And just one last question. I don't know if you already answered this. Sir, did you say the government has not [indiscernible] incentive for manufacturing smartphones in India. Directionally, I know we don't level set that, but do you see any benefit coming to us?

The -- look, I was answering to someone else in a different context. My view is that the manufacturing in India, if you take smartphones, this is something that is going to make the product that much more competitive because the price will be lower. It is going to, therefore, drive a lot of sales. And therefore, manufacturing in India is going to become, for us, a big boon or a big sort of -- it will definitely help us to be able to scale up our business. So we see it as a big positive.

Ladies and gentlemen, due to time constraint, we'll take that as the last question. I would now like to hand the conference over to Mr. Raj Shankar for closing comments.

Thank you, Faisel. Once again, thanks to everyone for participating on this earnings call. In spite of the fact that COVID definitely put a lot of constraints on our business. For most part of the quarter, we were not able to transact and conduct commerce. To the entire credit of our Redington team, we were able to execute extremely well. Our -- we were able to, particularly on working capital, on free cash flow, et cetera, I think we did incredibly well. We are very bullish and optimistic with regard to the way forward. We think the one sector or one industry, which is definitely going to see a brighter side on account of COVID is the technology part of the business. And since we -- we are in the technology distribution space, we see good base ahead for us. We would like to believe that what happened in Q1 is not a flash in the pan. We believe that Q2, the momentum should continue. And of course, starting Q3 and Q4, it should be more business as usual. Thank you, once again. Good day to -- and good night to all of you.

Thank you. On behalf of Redington (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.