Redington Limited (REDINGTON) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Redington India Limited Q4 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the 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. Rajiv Srivastava, Managing Director of Redington India Limited. Thank you, and over to you, sir.

Hi. Good morning, and a warm welcome to everyone on this call of Redington's earnings call for Q4 and the year gone by. Very happy to be with all of you today morning. And we are pleased to report another strong quarter of sales and operating margin growth. Redington achieved record revenue and operating margin for the year as our continued investments in technology capabilities, partner relationships and our comprehensive breadth of offerings begins to pay off. Growing demand for supply chain orchestration is driving strong financial performance across our global businesses. Looking ahead to this quarter, we continue to anticipate a reasonable demand environment and expect to sustain strong revenue and margins from our recently implemented operating improvements amid the backdrop of geopolitical uncertainty, which we all know is playing out in the world. But let me give you a color on our numbers. Our revenue for the quarter stands at INR 17,324 crores which is a 12% growth year-on-year and 13% in terms of absolutely on gross accounting basis. EBITDA growth has been 14%, which is higher than revenue, and PAT has seen 15% growth, which is again higher than EBITDA and revenue both. So that's on a consolidated basis for all the geographies we operate in. India grew 22% in revenue, 8% EBITDA and PAT up 8%, whereas overseas saw revenue growth of 4%, a very strong EBITDA growth of 18% and a PAT of 20%. So those are the numbers for the quarter gone by. And for the year, we said we crossed a revenue of INR 16,732 crores which is 12% growth on gross accounting basis and net is 10%. Very strong EBITDA growth for the year at 31% and PAT growing 69% for the year. I think in terms of quarter and year, we've had a very, very robust performance. Let me give you a bit of a color on as to what's going on in the world from the point of technology and from the geos and regions that we operate in to give you a sense of story behind the numbers. We know that the world markets and world businesses and individuals are seeing a very strong technology adoption. We operate in India, in Middle East, in Africa, in Turkey, pretty much across 37, 38-odd countries. And at one level, you will find that most of these economies for the last couple of quarters have been pretty positive. The prognosis, which is a future version for this economy growth is also positive, and we can talk about it in terms of near-term challenges, but largely, the GDP growth forecast for the year looks like quite positive for each of these countries. And all these countries are going through a very strong technology adoption. We have seen infrastructure push by governments in our region, India, Middle East, Africa, Turkey, everywhere, pretty much all locations. Organizations have rolled out years of technology projects into a few months, and that really has been a serious acceleration of digital transformation or digital adoption that we've seen. And this happens to be pretty much across all the sectors of the economy, manufacturing, retail, education, government policy support for all these technology products, projects, learn from home, work from home, acceleration of digital economy. So pretty much every single business is trying to leverage technology as the next lever of growth and also education, work from home and learn from home continue to accelerate. Now we know that there will be a shift in this as we go forward, but for the moment, it's been a very strong driver. All of this growth, you would find that is investment in consumption net so far, companies, organizations and governments have been making a huge amount of investments in each of the infrastructure push just to make sure that they can modernize, they can automate themselves. So the investment in consumption-led scenario is playing out to our advantage. The technology business consuming is in the domain of cloud subscription and then base level foundational applications like SAP and CRM, customer experience, a very strong focus on sales automation and customer analytics. Whatever companies can do to assess and reach out to their customers in a more productive manner is something we're just finding immense favor as we speak right now. And then there is always new technology of the nature of artificial intelligence, augmented reality, virtual reality, Internet of Things, IoT is getting more and more popular as we speak. 5G-based applications, you will find that the world going forward is going to be a lot more video and voice based, and we are trying to ride all of this. And then there is one very interesting thing which is happening is on the space of, very small for us yet, but very interesting space of 3D where you can pretty much manufacture in an additive manner a variety of products that customers and consumers can consume. And it is really a democratization of manufacturing as well. Those are the things that happen from technology perspective. But we, as a company, are also cognizant and conscious of the fact that there is a buying behavior shift in the market. What people buy, how they buy and who they buy from is completely shifting and shifting at a very fast clip. So there is a shift from product to services. So instead of buying everything in a very CapEx dominated way, people are shifting to as-a-service model. That's one big shift. The other thing is from an owned to a subscription model. So in trying to own everything and be paying for it upfront, people are trying to move towards the more subscription-oriented model which means you buy and consume when you want to and really don't have to be startled with and OpEx costs forever in your life. So I think those are the things which binds is taking place. We are also seeing very strong shifts in business model. And traditionally, we've always been accustomed to, used to a very brick-and-mortar method of buying and selling by people, but that brick-and-mortar is shifting towards a much more online-dominated world. And pretty much everything in between. So we are entering into a world which is a true omnichannel where the customer journeys are discontinuous and anybody who can predict or manage the customer journeys in this discontinuous world, will be an absolute clear winner. So I think there are business model shifts in the marketplace, omnichannel, everything as a service. And those are the elements that we are very conscious of, cognizant of and we will do everything as possible to make sure that we can ride this trail. With this initial commentary, let me stop over here and open it up for your comments and your observations, questions, and we will be more than happy to take everything on. I can also talk to you a bit about our strategy as we go forward. But for the moment, let me open it up for your interaction.

[Operator Instructions]

Yes. I just want to let you know, I also got my Chief -- Global Chief Financial Officer, as you S.V. Krishnan on the call with me, and Deepika, our finance leader and [ industrial ] analysts.

Hi, good morning. .

The first question is from the line of [ Jatin Shah ] from [ Abacus ] Asset Management.

Congratulations to the entire team for such a fabulous number and keeps surprising us in terms of, not just the business but also in terms of the way you are managing your working capital. I have 2 very specific questions. One in continuation of your opening remarks where you mentioned that we are now going for a change in the way customer buys the product and the entire business model and the market sizing is getting changed. So could you just a little bit elaborate in terms of how does this going to play out from our mix of business because we'll be more focused on B2B or within the B2B, the large client concentrated client. They not only expect from us just the product, but also the continuation of support of the product. One is that question. And sir, second, I wanted to understand how is the ProConnect as a business progressing? We are seeing a steady state growth in the numbers and also the margin. If you can give us some flavor of that business. Where we are? And what is our big picture look like here down the line. These are the 2 very specific questions. And once again, congratulations and all the best for your for your future, sir.

Jatin, thanks so much. Look, both your questions are very, very interesting. And let me give you a very -- very close to what we're doing right now. So let me give you a sense of what's happening in the customer buying behavior. And you mentioned clearly, I mean, the buying behavior is shifting, like I said. We use to go and buy from shops and retail and malls or wherever we used to. But we -- and now the pandemic and even before pandemic had started, the model started to pivot towards a convenient and customer choice model. You get the convenience of ordering from anywhere and everywhere, and you get a huge amount of choice when you sit behind and then just go and go through a site or a website or the options that are available on that site for you buying. So I think those are the 2 drivers, convenience and customer choice are the drivers of change in business model. We see this coming very strongly. It happened in our business, a lot of our products have started to go online, and people are shifting to buying from -- and so today, what you do is you walk into a shop, you go to a retail outlet, you check out the products then suddenly go to a website and do a research online. So check online and research offline or vice versa are the game. And so this is a discontinuous customer journey. There is no one customer which just follows one single pattern. Customers follow multiple routes and multiple patterns, and we got to be cognizant. So this is a very huge analytics and very huge customer track-and-trace technology-driven architecture that you need to create to be able to maximize this. And this is exactly what we do in both in our B2B world where customers can come and take a look at the products that we have on site and they can take a look at the choices that have got available from various brands and various vendors, and they can make the right choice, and we will also give them advisory services on what is absolutely right for the business. So that's a huge shift in a manner in which we are trying to fulfill the basic customer requirement of choice and convenience. So that's what we are trying to do on the -- and then whether you buy all in an offline products get supported. Because support warranty, long-term commitment to maintain the product and absolutely keep it working in the way we designed to work. These are product attributes of app, all brands. So we will -- that doesn't get compromised at all. So continuation of support for every customer and customer is absolutely and experience that we cannot and can never -- no brand can ever compromise on. So those are the things that are happening in the online and the omnichannel sort of a world. To your point about ProConnect, very interesting story on ProConnect. We've had such a satisfying year on ProConnect. We used to be always very -- the ProConnect always used to come up as a story, which was a little bit up and down a bit. Last year, we took a call that we will do every single thing possible in ProConnect business to make sure the business stabilizes before we launch ourselves for aggressive growth. And that is exactly the way it played out. ProConnect turnaround with revenue growth of 9% in last year. It did an EBITDA of 17% growth and a PAT of 46% growth. And these are the things that we put fundamentals in place in ProConnect business. whether it is the right sizing of the customers, going out to the right verticals in our customer, going after making sure that we have the right technology in place for fulfilling our logistics, supply chain, business for transportation and warehousing, making sure that we have the right sort of operational capability in place. So there's a lot of work which has gone in, in the ProConnect business to make sure that the business starts to look fundamentally very sound and secure. And that is precisely what you are seeing in results now. So our strategy of consolidating, getting foundationally strong from a capability perspective has played out very well.

Just one small question about the cloud business. If you can give us something about that, that's it from my side.

So look, I don't know what you mean by when you say I can give you something about cloud...

I just wanted to understand that how is the traction happening in that specific vertical. This is something which we started a couple of years back. We have a very big plan for next 5 years. So in the journey, where are we? Are we on track? Are we ahead of track? And because now seeing other verticals. I want to believe that we are ahead of curve in that side of the business also. So just trying to get a sense on that.

Yes. No, I think it's a great question. And I think you're absolutely [indiscernible] you say that when you compare it with the rest of the business, how does cloud stack up. And it stacks up extremely well Jatin. It sets up well because our growth in cloud in last year. And cloud is a combination of products and services. We are small in services. That is a muscle that we'll build up. But overall, product and services combination of cloud has grown 41% for us last year in FY '22. It's grown 41%, which is much faster than my overall business. My overall business is 10%, but for the year, but cloud has grown 41%. Now it rides on the back of exactly what I told you about the changing business models in the market, the way customers and consumers are buying everything as a service and as a subscription model. So they don't have to get saddled with investment, which is not paying off for the long run. They can make quick adjustments to their operating model to their cost structures and still get the best in technology, what the best in technology has to offer. So our cloud story is coming around very nicely, very quickly. We partner with all the hyperscalers, which is Amazon, Microsoft and Google. So we've got some very sound partnerships in place. These are the 3 biggest players in the world. And we are fortunate to be aligning with them to make sure that our cloud story continues to become stronger and stronger as we go forward.

And just to complement to what Rajiv said, we have also invested in a very, very good cloud platform, which will enable no-touch or less-touch level of transaction, and that's also going to help us in terms of scaling the business and optimized costs.

The next question is from the line of Dhaval Shah from Svan Investments.

Great set of numbers in these challenging times. Sir, I have questions on our -- this comparing -- so we did around INR 17,300 crores top line. And if I would to just compare this with the December quarter -- December '20 quarter, the Q3 '21, we were roughly at the same number, like INR 17,000 crores approx. Now -- but if you look at the operating expenses, at that time, we were at around INR 260 crores, and now we're at INR 330 crores. So which element of this operating expenses have seen a big increase, which is getting from INR 260 crores to INR 332 crores? And secondly, our employee cost over the last couple of quarters is seeing a lot of up and down in terms of the absolute number. So any trend or how should we understand that how does this employee cost move with the top line? Like in December '20 quarter, same as INR 250 crore now it is to INR 238 crores. So yes, these are my 2 broad questions.

Okay. Let me give you a color on the expenses that we are doing and what we are doing in expenses. And I think you will relate this to what I said earlier about investments in technology and people and how the business is moving towards everything-as-a-service and a customer choice model. When you do all these things, we got to make sure that we pivot our business from a brick-and-mortar, off-line model to an omnichannel-enabled model. And so we've made a huge amount of investments, and we continue to make. You will see our investments continue to be high to convert our business to a much more responsive online model. So we are setting up an online platform, which will allow our customers a choice that I just talked about a bit ago. Krishnan also mentioned to you about the choice in the cloud platform. We have invested in a very strong cloud platform where any customer or any partner can come and configure the product solutions and services they want to buy and procure and then just provision for themselves. It's such an easy self-service sort of a model that we have launched now. And that's, again, a huge investment. We will continue to make sure we invest in that space to increase our technology capability to reach out to our customers and partners in a very meaningful way. And then when you pivot towards in the cloud area, when you pivot from products to a much more product and services combination, you would find that services is a very people-dominated business. It is a highly capability-oriented, people-dominated business. You need to acquire the best of capabilities in the market to make sure that you can serve your customers much more cleanly, much more closely and a much more integrated holistic fashion. That's what we are doing. That's the reason our OpEx cost on people. Employee cost has gone up. Our OpEx has gone up just because we have invested a lot of money in the cloud technology and the e-commerce technology platform. Plus, we are also investing a lot in our own internal tech capabilities so that we can get far more streamlined, far more optimized as we go forward. These are the best time to make the investments because if you make the investments now, you really can get the best of the investments that you make and the relations that we have for future -- continued, robust growth in the future. So we are, in a way, in a sense, we are future-proofing ourselves. This time is being utilized by us to make sure that we future-proof ourselves in a very robust manner and continue to ride the growth curve forever. And this is a shift we acknowledge, we recognize a shift in the marketplace and fortunately that we got it at the best time, and we are dialing up on those shifts.

Just there was one more point to your question. Just on the first point with respect to the comparison to Q3 of last financial year, see, you would have seen in the last couple of years, Q3 has always been on the higher end, mainly because of certain new launches that are being done in the mobility space to correspond to the festive season. So there will be some spike in revenue at that time, which will enable better profitability even in the current year, if you see for Q3, the EBITDA was much this thing much higher as well as the PAT. So that's very specific to Q3. But having said that, on the expenses, Rajiv clearly mentioned I mean, we are making some investments for the future. That will enable some increase in costs, but we are very positive in terms of that getting recovered in the form of higher margins in the future.

Yes. I think the revenue is just a seasonality thing.

[Operator Instructions] The next question is from the line of Krish Mehta from Enam Holdings.

Congratulations on a great set of numbers. I just...

Sorry to interrupt, Mr. Mehta, can you speak a little bit louder?

Am I clear?

Yes.

I just had 2 questions. One was on the cloud revenue for Q4 and the subscription revenue within cloud for Q4.

Yes. Look, all of our cloud revenue is actually subscription revenue only. It isn't -- so our cloud revenue for Q4 is INR 436 crores which is a 49% growth year-on-year. And all of it is subscription. That's how you measure cloud.

No, I'm sorry. I meant the services part of the cloud revenue for Q4.

Okay. Service is a small part. Services revenue in this is, I think, about INR 20 crores. Is that... .

About 4.4%.

Yes, about 4.4l%.

Okay. And just if I could follow up on that, how do you see the services scaling up as we go forward in this financial year?

Yes, look, services is the one which is meant to scale up. That's where I said we are making a ton of our investments in employees is all around services. Cloud will scale up and so would services. Services always starts small. And I'm so pleased. I can't even tell you how pleased I am right now that in a time, in a short time, we have gone to a service revenue of almost about 4.5% of our overall cloud business, which is -- which is a very, very healthy trajectory. What it is doing to us is many things, okay? It's not just about -- I don't just -- I don't want to get valued just on the size of the revenue. What it is doing to us is it is opening us up to many, many different kinds of very deep-rooted strategic partnerships. We are getting exposed to a lot more customers. We are getting exposed to a lot more partners whom we partner and take their services to customers. We're getting exposed to a lot more system integration partners, working us along with them to customers to make sure that we can deliver services there. So far more strategic at that level. So overall, hopefully, over time, right now, it still is about 4.5%. But over time, I see our services portfolio going in the near term to be at least about 10% of our overall cloud business.

The next question is from the line of [ Pushkar Jain ] from [ Sequent Investment ].

I just have one short question. I just need your viewpoint on how the go-to-market strategy from Apple will impact our business?

Unless Apple has got -- like any other brand, like any other vendor. Every vendor has got their own GTM approaches and strategy, where they try and dissect the market, they segment in the market a lot more. Apple made a very strong change to the go-to-market model beginning of last year, okay? And they shifted a lot of their business from partners like ours to going direct to retail, which is retail of Flipkart, Amazon, or [ IT ] in India, they didn't make the similar change in Middle East and Africa. They made a different change in Middle East and Africa. They took away some regional distributors in Middle East and Africa. So a similar theme played out that they wanted to be closer to their customers. They wanted to be closer to their partners and all of that. And look, what we did. In -- despite Apple going the way they did or any of the brands going the way they did, our revenues in India last year grew 19%, okay? So we were able to mitigate totally because what is happening is when a route to market is made different way of addresses, there are other things which open up. And Apple has a lot of products. Apple has products of the nature of Macbook. Apple has a product of iPad. They've got lots and lots of accessories and similar store and so forth for many other product categories. And all of those started to play out differently for us. So we reengineered, I mean, just we were talking of Apple GTM, I think what is more relevant for you and for us is how did Redington reengineers GTM to maximize the market opportunity? We reengineered GTM. We went in a variety of different ways to a lot more countries, not more geography, a lot more local presence. And I'm seeing a lot of capabilities at the ground in the field, close to customers and close to partners where they exist to make sure that we can continue the trajectory of growth. And the results have really, really been fantastic for us. They surprised us in a way, but they have been absolutely -- and in a pleasant way, their surprises, but we could remodel our GTM to make sure that we capitalize -- continue to capitalize on the growth that we deserve.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

Am I audible?

Yes.

Yes.

Okay. So 2 set of questions. One is on the revenue part. India business effectively grew faster given the high base of last year, if you can throw some light on which segment, whether it's IT product-driven growth or it was mobility-driven growth, which helped us to clock such a wonderful revenue growth for the quarter. And second, on the international part, again, in the revenue piece, that despite Brightstar's acquisition and getting full quarter benefit for this quarter, the revenue was softer. And the same question applies to the year as well that which segment was softer related to what we have been seeing in the past? If you can provide color on that? And second part of the question is on the working capital. If I look at the trajectory from last year to this year, our receivable days and inventory kind of inching back to the normal levels and the benefit which we are getting is driven by -- only driven by the payables being favorable to us. So -- and given that there is a supply issue, given that we are expecting a slightly better gross margin from the market, the payable being favorable to us looks very -- I need to try to understand this piece when your supply is tight, your margins are better in the market and yet you'll get better credit terms from your vendors. So if you can throw more color on that please? That's all for me.

Yes. Okay. Let me -- you've got -- Chintan, you've asked many, many, many questions, not just because each one of them is a simple strong question itself. But let us try and answer each one of them. I'll do a few and I'll lead to Krishnan our CFO to handle the rest. So just to give you a sense of revenue grew faster, which products grew faster than the others. Our IT products and IT business grew very fast. It grew at 24%. Our services business grew fast at 12%, and our mobility was a decline last year, it was a negative 11%, okay? And let me give you why mobility was declined and why -- and within the IT products, which grew. Mobility was a decline because last year, in 3 out of the 4 quarters, there has been a considerable pressure on supply. You know the supply chain in the world has been disrupted. There are a lot of commodity shortages. Because of which lots of brands have been struggling with supplies, Apple had struggled with supplies last quarter, they were $8 billion so in supplies. Samsung struggled on supplies. [indiscernible], Oppo, Vivo. In different geographies, you've got different mobility brands and all mobility brands last year went through a huge supply constraint. I'm hoping they'll come out of it this year, and let's keep our fingers crossed, but that led to a decline in the revenue of phones or smartphones or mobility business. It is borne by the fact that overall global market on smartphones, degrew 6% in Q3 and degrew -- in Q2, degrew 6% in Q3 and degrew 9% in Q4. So for the last 3 quarters, global smartphone market, global mobility market has been shrinking. And it's all because of supply-led constraints. So we had a drop in our mobility revenue, not surprisingly and absolutely aligned with what we're seeing in the market. Our IT business saw very, very strong growth our IT business, our enterprise grew faster than our consumer access product device. So enterprise IT grew 30% last year. On the back of the way you are seeing change in the cloud buying behavior, the change and the fact that enterprises are trying to run really, really large and complex projects as we go forward. So enterprise IT has grown extremely well. And that's been a very, very good story. Whereas the consumer IT has grown 21% for the full year. Again, a strong growth. But the [ heartening ] factor over here, and this is something which really, really pleases me is the fact that we outset the market by a factor. In India, for instance, in Q4, the PC market grew 31%. Redington grew 46%. PC market in Middle East and Africa grew 8% Q4, we grew 21%. I mean this is 2.5x the market. So I think our engines -- the way I talk to the earlier question on GTM, how we reengineered our GTM, that is, I think, playing to our advantage of making sure that we get the growth. I think our revenue growth faster and this is how the split of whole revenue growth looks like. To talk to you about the international business and then the Brightstar acquisition, despite the Brightstar acquisition, how the revenue has stayed pretty much flat or the overall overseas revenue -- actually overseas revenue has grown 5% in gross accounting terms, it's grown 5% despite Brightstar. Now, you have to understand 2 things happened. There was -- we grew much faster than the market, like I said, but the overall market came down. So holding on -- so our job in that place was how do you continue to grow or stability in a stable or a degrowing market. And that's exactly what we did. So we feel good about the fact that we were able to outset the market for such a factor and maintain our growth trajectory and Brightstar added a help to it. But other things that could have probably helped if we are at the right level of supplies of mobility all, I think we would have been a much, much, much faster growing business. But it just we outset the market, which is a great, great story from our perspective. Let me hand it over to Krishnan to answer the questions on receivables, favorability, supply issues.

Sure. Thanks, Rajiv. We have maintained our working capital and you are absolutely right in terms of your analysis that the DSO has gone up, DAU has gone up and the increase in DPO is what has contributed to maintaining working capital, perfectly right. The reason why the payable days have gone up. It's also to do with mix of products. As Rajiv just explained, our IT division has done very well, within that enterprise is then even more better. And these were the cases where the -- I mean, the credit base from the vendor was significantly high. That has enabled us to increase our payable days. Having said that, there is a small portion, which may be due to the supply model that we have had towards the end of the quarter, we did see a lot of supplies happening towards the end of the quarter, which has enabled us to liquidate those inventories. Otherwise, a significant part of it is because of the mix the [indiscernible] negotiation that our business team has done with the vendors.

But any credit terms being turned several apart from what you mentioned the Mist-driven mix-driven effect on the BPO?.

No, no, no. I don't think we have a real reversion of reworking on the credit terms -- it's just that on a deal-by-deal basis, you rework the credit terms. The deal business at different. And since there is such a strong focus on enterprise, which is deal-oriented. So you'll see a better favorable AP in that sense.

See, in those business verticals, the credit days that we offer to the customer is also higher. And accordingly, the credit base that we get from the vendors are also higher.

The next question is from the line of Chirag Setalvad from HDFC.

Congratulations for a great year and for a great quarter as well. I had 2 questions. One was in terms of Apple, if you could highlight the performance for this quarter. And because of the change in GTM, what kind of performance could Apple deliver next year, also considering the supply constraints in the system? So that was my first question. And the second was in terms of profitability, I think the company has done a remarkable job. So I would like to understand what you think is sustainable overall consolidated profitability. Those are my 2 questions.

Okay. Let me give you a sense on both of them, yes? Okay. Clearly, Apple has been a great story. Apple grew very, very fast in last quarter. They grew 33%, growing 33% at revenue turnover of some $290 billion, which took them to $360 billion for the year last year was fantastic. But the last quarter was -- they had a slower growth just because -- it wasn't a launch quarter. The previous quarter was a launch quarter, and Krishnan mentioned about that. We also -- we saw a growth in our -- like as I said, our overall mobility business came down. So Apple also came down for us just because there were supply shortage situations in the quarter. Our contribution of Apple to overall revenues has -- is a little down from the earlier times. But we do see a very strong going forward because there will be new launches coming up in the next 2 quarters. We see the supply situation. And today as well -- yesterday, I was going through the news yesterday and very good announcement, Apple said that they would consider to increase the production volumes from the factory in India. You guys know that they do a manufacturing for Wistron in India, Bangalore. And that could be a very good story dial up the volumes, increase the manufacturing volumes from the India factory, I think we'll all be benefited immensely. And that can lead to a very strong positive supply chain gap being mitigated completely if that what will happen in a hurry. So I think Apple is in a very, very good space for us. It continues to be our largest plan and continues to be a very positive story as we are thinking about Apple last year, now and for the next year as well. So we'll continue to do everything right. We are obviously making sure that our rest of the brands and the rest of the business portfolio starts to look better and healthier all the time. That's the reason I mentioned to you about enterprise growth and the cloud growth and all of that. But all those portfolios are in a very good space. From a profitability perspective, the question that will the profitability of the last year continue for this year or not? I think, look, I think that's a question that we will uncover as we go forward. And I don't want to sound random on this because the world today is really in an uncertain space, I mean a lot of elements in the world are in an uncertain space right now. And we've got to be thoughtful that we have undergone and undertaken and whether in a very positive way, a lot of storms, we continue to do that, and we'll be very watchful to make sure that our trajectory of profitability and our trajectory of revenue growth continues. There are headwinds clearly in business, there are headwinds on the nature of inflation, of the nature of commodity prices and the nature of energy costs. A whole bunch of stuff which is creating headwinds. And there are also tailwinds. I mean fuel prices going up actually leads to a very good story from a Middle East perspective. A lot of countries are driven by that. So I think we are in a good space right now between netting it out all the geopolitical factors for ourselves. The shortest situation, which can hold up our gross margins extremely well. We will be extremely watchful and cautious, and we'll watch every single day, every single moment because we operate in an environment today, which is highly dynamic and highly volatile. And we got to make sure that we adjust and readjust our business priorities and our operating operations on an absolutely real-time dynamic basis. So we feel good about where we are right now. We feel good to had that in the near term in the interim, the gross margin should hold up and we'll continue to watch the space. As [indiscernible], I'm sure you would have [ GFCs ] watching what's going on in the financial markets around the world and in India. So I'm sure all of us will be par in this, but I feel good about where we are right now that everything should hold up.

And just a quick follow-up. What would have been the impact of the change in GTM for Apple for last year in terms of lost revenue?

We would have lost about INR 3,500 crores -- INR 3,200 crores, INR 3,300 crores.

And that impact is just in the second half? Or would you have seen that in the first half as well?

Started in Q3. Started in Q2 actually. First half Q1 and then Q3 and Q4.

Sure. So the loss in revenue is around INR 3,500 crores?

Yes, INR 3,200 crores, something like that. But we more than made up, like I said, despite that, we grew -- India grew 19%. So we could make up much more than that.

The next question is from the line of [ Mohit ] from Edelweiss Securities.

Congratulations for a good set of numbers. So my question is on the supply chain issues, which we have been seeing on the mobility side of business, right? So you said that we have been seeing this degrowth in the last 3 quarters because of the supply chain. So wanted to understand for how more -- how many quarters more you expect the situation to continue? What are you seeing on the ground at the current level? And the second question on working capital is a basic one, where we have the working capital of around 13 to 14 days, right? And it is driven by the increase in payable days. So can -- because I think we had mentioned in the previous earnings call that it would come down to around normalized level of 28 to 30 days. So it will be -- again, this payable days will come down from 63 to 47, 48 days. So the credit also get revised with the vendors from the IT segment as well. So those are my 2 questions.

Okay. I'm going to -- Krishnan, do you want to take the second question first, and I'll take the...

See, you are right, we have been saying that there will be normalization. So that's very clearly in place as the situation becomes normalized in the market, the working capital will get normalized. Which component of that will get normalized? Within all the 3 will get impacted. And in our view, there will be, I mean, a good increase in the inventory days and the AR days, which has been highly favorable for us in the last few quarters. So whenever this normalization happens, you will see the change across resulting an increase in working capital.

Yes. And more to your question about the supply chain issues on mobility and how long will they continue? I'm hoping they will end very soon. This quarter looks a little better than the previous quarter from a supply chain fixing perspective. Some locations in China, some factories in China continue to be under COVID-determined lockdown. So those are long-term implications that the world will continue to see. But despite that, I think this quarter, Q1, we have seen Q1 financials, we have seen better or little improvement in supplies. I'm hoping it continues. And this is not only mobility. I mean, there's also to do with -- because the components that go into the manufacturer of a mobile phone are similar to the components that go into the manufacturer of a lot of other technology or intelligent equipment like PC and chips and IoT and all of that, okay? So the -- and my discussions with the global leaders of companies like Lenovo and Dell and HP suggest that this shortage should get -- start to become a lot more easier by Q3 of this year. So it's from October onwards, you will see a much more eased out, a much more sort of relatively freer flowing supplies, but we'll have to watch and -- wait and watch because which way the war will sort of start to play out from that perspective, we'll have to very cautious. But as we speak, I think the phone supply has become a little better than last quarter.

The next question is from the line of Sandeep Dixit from Arjav Partners.

Can you give us a sense of the product concentration in your sales as in which are the top brands? And what's the share of the [indiscernible]?

You're saying the top brands, is it?

Yes. I mean a breakup of your sales by brand, just some [ plain sense ] of it.

Yes. Look, our product concentration mirrors pretty much the global brand or the global play out, and we've got very strong partnerships with 240, but only a handful of them obviously do much better or are contributing to the higher part of the revenue. So Apple is a big contributor to our revenue. So HP, then Dell -- Dell EMC, the whole portfolio of Dell EMC, then there is Lenovo and then there is Samsung. So these are the 5 brands which play out the maximum for us. We don't do Samsung in India. We do Samsung in Middle East and Africa. And we do Dell across some locations, not all again, HP in some locations, not all. Same with Apple, but that's the way the concentration looks like Apple, HP, Dell, Lenovo, Samsung become our top 5 brands. And this is similar to you will find the similar to the way the IT industry product-led revenues are. And so we mirror a lot of the world.

Fair enough. My actual question was about the risk of, let's say, Apple decided a different GTM strategy. And just -- I mean, I guess, managing risk is one of our one of your key concerns or now as we plan to go. So I just wanted a sense from that perspective.

Yes. Look, that risk is forever there. I mean this is the risk of -- not only Apple is the risk of larger distribution business that you can get disintermediated any following times. And all good companies, you would find that they would have to mitigate the risk of disintermediation, not only Apple, but it can be anything. A model change, for instance, when the world went from offline to online, that was the risk of disintermediation to vehicle. When companies like Apple decided to go in that panel or HP decides to go -- so look, we will do geography-based distribution, it's the risk to us. But I think all -- like all good companies, Redington has a very good way of trying to understand the risk, read them into the future and then apply your own mitigation approaches to minimize the risk and actually grow. And you saw it happen last year. Apple took away -- the change in the business model had an impact on us to the extent of that Apple's revenue. And everything for us still turned out to be at 19% growth. So I think we have to be mindful. And these are regular business cycles that keep happening. Sometimes a new product comes in disrupts you, sometimes a new business model disrupts you, sometimes a change in approach of some magnitude disrupts you. That is normal business. I'm not -- I'm never overly concerned about those. They all normal business happening. They happen all the time. As good companies, we got to be mindful of how we try to deal with it and make sure that we continue to grow in a market which is so favorable and so potential right.

Just to supplement what Rajiv said, that's the advantage of being in multiple markets and with multiple brands. And some of these GTM changes, strategy changes by vendor will also be positive for us. That you are able to see a very consistent growth across various markets.

Can I just ask one last thing. These 5 brands, would you say that they were about 80%, 70%, 60%? How much of your revenues would these pipelines be? Just a ballpark number, just to get a sense of those.

Less than 2/3. Less than 2/3. 5 brands will be less than 2/3.

The next question is from the line of Ronak Vora from AUM Advisors.

Congratulations on a set of numbers. With Apple change in GTM, what was our reply our reengineered GTM strategy? Can you an elaborate?

Fairly [indiscernible]. I mean, look, I think we have given too much credit to Apple's GTM strategy. It is not acquired because think every brand will do -- every company does what they have to do for their right [indiscernible]. We reengineer GTM all the time. I mean how -- and why do you reengineer the GTMs Ronak? Because the -- like I said, the manner in which products are being bought and the manner in which products have been sold today and consumed is changing. The pipeline level is changing. So there's a bunch of customers who are trying to go direct and online. I think we have a legitimate right to go and say, look, how do we fulfill that requirement of customer choice. If there is a shift in the market towards a more service dominated model, we have a legitimate right to mix and say, how do we continue to provide service to our customers in a model which is shifting from capital expense to operating expense-driven model. So I think it's just that. We have to change our model all the time. We do it all the time. to make sure that -- and in this spec case, you will shift us. And I'm just giving a generic answer, you will shift your focus from 1 pillar. So assuming there's a one route, assuming Flipkart is doing something different. We have no reason or concern to really take them on. We have to figure out what we do to address that requirement. And so we figure out a way of trying to go more to customers, to expand our geography is, to make sure we are exciting to our partners. The typical things that our distribution engine has to do, the whole supply chain efficiency, getting closer to customers and partners, bringing more and more value adds, and we've done a ton of them. And that's the reason you are seeing that nothing impacted us. It actually helped us -- and everybody grew. The brands which went a change in the -- and it's not only Apple. Lenovo had a change in the model last year, okay? They also went to retail directly, to online directly. So did Azure -- so -- and so on and so forth, many, many brands have that. And the collective outcome of all this is that we reengineered ourselves and grew 19% last year. That's something which is -- and I think it's a healthy business thing because it allows you, enables you to be sharper about your approaches. It allows you to be focused on yourselves and make sure you're doing all the right things to provide customers a choice they deserve, provide customers the range of services they need and be close to that and continue to grow. That really is the whole net of this.

Okay. And secondly, I had this question on cloud services. You said that we have ties with all the hyperscalers. So what kind of services do we provide for them? So what kind of benefits we have with them to our clients? And what is the exact business that we do it in [indiscernible].

Look, I obviously can't share with you the kind of benefits they have with us since we have with them. That is not appropriate. I can't share that. But I can let you know that we have a -- these guys have all of them have cloud products like Microsoft has got Cloud CSP, Office 365, Azure services, Amazon has got Amazon Web services and packages, which can be rolled out to any customer, any SMB, any large enterprise, any customers, any individual for that matter. I'm sure you use Office 365 on the web like I do, you buy Offices in INR 6,499, six people get enabled because of that one procurement buy, and this is a wonderful model. And that's what is happening. So there are a whole set of products that you sell as cloud-enabled products because there are subscription services. And second is for mid to large enterprises, there are other range of services that need to be done. And there are many services. The services or nature of transition services, infrastructure services, migration services, Platform-as-a-Service, implementation, whole range of -- analytics. So I think there is a the whole model of cloud is so sort of potential and dynamic and so part is just because it provides customers choice, it provides customers ease and it provides customers ability to deploy models. So I think you've got a whole range of services and a way of products on these hyperscalers to sell to our customers.

The next question is from the line of Anuj Jain from ValueQuest Capital.

I have one question. [indiscernible] details on Turkey operations in terms of gross profitability for the entire year...

Sorry to interrupt you, Mr. Jain but your voice is breaking, sir. Can you please check?

Am I audible now?

Yes. Please go ahead.

So my question is with regards to Turkey operations, if we can provide more details regarding growth and profitability for the full year. And our expectations going forward considering the macro environment in Turkey?

Okay. Look, Turkey has been a very good operation for us. And we operate in Turkey under 2. We have a direct operations in Turkey which is Redington Turkey. And then we have Turkey operation, which is through our company, which we acquired in Turkey called Redington Arena, okay? And the revenue has been flattish in Turkey. And you understand Turkey has gone through a huge amount of geopolitical economic considerations over the last couple of years now, okay? The inflation in Turkey this year happens to be at around 70%, pretty much the highest inflation country in the world at this moment. But despite all that, our revenue in Turkey has been doing reasonably well. We know we've been growing faster than the market across pretty much all categories. Arena plays largely in the volume space, which is mobility and the access products, PC and printers, and surveillance security equipment and Redington Turkey, which is our -- the 100% subsidiary operates largely in the value space. So they do cloud and other kinds of value services. So I think in both of these spaces, we've had a very strong sort of positioning in Turkey. Our prognosis for Turkey, which is what the import of your question looks like. We stay invested in Turkey. It's a huge market. It's a market that provides us with many, many leverage. It's a gateway to the West. It's a gateway of huge amount of innovation. I was surprised. I went to Turkey recently. I was surprised with the level of innovation that Turkey is trying to engage with on high technology, on services, on cost of service delivery. So Turkey is extremely strategic for Redington, and we will make sure that they continue to grow faster than the market, which is what they've been doing over the last so many years, despite a very difficult economic environment. And we will leverage Turkey for a variety of other innovations that they are capable of bringing.

So sir, in FY '22, did we had losses in Turkey operations or it was profitable?

It's profitable. Our Turkey operations, the profitability of Turkey operations in FY '22 has been -- Turkey operations grew 15.5% in profit impact last year, just in FY '22 or FY '21. So Turkey has been obviously profitable. Extremely quite profitable. And I really compliment my team in Turkey for the ability to manage the most volatile region of the world right now from an economic perspective.

The next question is from the line of Aasim Bharde from DAM Capital Advisors.

So just wanted a clarification on the GTM Apple change. So this one was specific to smartphones in India, right?

Yes.

Okay. Then the INR 3,500 crore loss of revenue, that would be purely on the India mobility business? And although you have mentioned that despite the Apple India revenue loss, you have grown India business by 19%. So I assume that is for the consol India business. So just on the India mobility side, have there been any mitigating strategies put in place for the loss in Apple revenue?

Look, we are obviously contemplating what we can do. It's not necessarily -- mitigation is not a brand-specific mitigation and mitigation is overall business asset mitigation. And so just a typical concern typical mitigation would be what you do with more brands where you can provide more services, how can you reach out to more customers and consumers, what GTMs can you improve and improve upon to reach out to more partners, more cities, more towns, all of that. So I think all of that is there. So diversification in terms of partners that we have, diversification or addition of number of towns and locations that we do businesses, diversification a number of additional brands that we can do more services that we can provide and become a more holistic company to become a more holistic provider. That's what we're trying to do. All of the answers on this. I know there's been a lot of questions on this topic. All of my question answers have been consistent. We are trying to make sure that we do what is right from expansion of our business and geo and partner and all that coverage. So we reinvent our GTM to make sure we grow.

Basically, the loss of mobile -- Apple mobility revenue would probably be covered not just on mobility business, but from your other IT business as well, that's the point, right?

Yes. It always happens, right?

And just fair to assume that since the India -- rather the Apple GTM issue was a Q3, Q4 phenomena last year, so fair to assume that even Q1 and Q2 of this year, the -- there should be an impact in India mobility business regardless of supply chain issue?

Much less, Much less. Not Q2 because like I said, Q2, Q3, Q4 were impacted last year. Okay? So that Y-o-Y compare will start to become positive from this year. Just the Q1 will be, and we'll obviously manage that.

Having said that, I just want to say, see normally for these businesses -- I mean, the festive season is a peak period. So that's something that we had seen in the previous period itself. So I don't think there needs to be any extra concern.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Rajiv Srivastava for closing comments. .

Yes, thanks so much. Really enjoy this interaction. I think there were a wide variety of questions. So and it went through the business situation, it went through the customer buying, how we are trying to see the way in which the world is evolving from a technology buying as well as debt perspective, all of that. And I just want to let you know, so first of all, thanks so much for a very engaging interaction. We continue to do what we do best, which is we continue to make sure we are investing in our business to make it far more streamlined, smooth and efficient, close to customers and partners. A business that continues to create the highest levels of experience for every single stakeholder we deal with, our employees, our customers, our partners, our vendors, whoever else comes to our website to get a sneak into the products and services that we deliver. So our digitalization of business will continue, absolutely at a very fast pace, and I'm happy that somebody asked the question on why the OpEx is going up. It will go up just because we want to make sure that we are continuing on the trajectory of implementing and investing in -- that's the way the world moves. It will increase because we are investing in customer outreach programs on the digital platform. That's the way the world is moving, and we are in a way moving ahead of the curve in some areas. We will continue our portfolio expansion. We will continue our partnership alliances, operational excellence, and we will continue to recruit the best people in the business to make sure we, again, are able to differentiate ourselves. And we will continue, as a company, and this is something which I didn't talk about it. But as a company, we have a very, very strong community conscience. We do -- we try and do everything from the perspective of environment, from the perspective of governance, holding ourselves to the highest standards of corporate governance and also from the perspective of social initiatives that we do. And we've got a very, very strong social program, which I can't talk about, but you guys should visit our website and take a look at that, very strong social program, very strong governance and FX and compliance, all of that. We want to make sure that we hold ourselves to the highest global standards on this topic. So thank you so much for joining. I really appreciate the interaction and the level of details that you guys have on the questions. Any more questions, I'll be more than happy to answer. If you can mail them to us to Deepika or to [ AGA ] partners, and we'll be more than happy to take them on. Great, and have a great day.

Thank you.

Thank you.

Thank you. On behalf of Redington India Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.