| Redington Limited | ||||||
| Ratings reaffirmed at 'Crisil AA+/Stable/Crisil A1+' | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities and commercial paper of Redington Limited (REDIL; formerly, Redington (India) Ltd).
The ratings continue to reflect the strong business risk profile of REDIL, backed by its solid and established market position in the information technology (IT) and mobility products distribution business, improving product and geographical diversification in revenue from the domestic and international markets, and strong risk management practices. The ratings also factor in the company's healthy financial risk profile and strong liquidity. These strengths are partially offset by modest operating margin and large working capital requirement in the distribution business.
During fiscal 2026, REDIL registered healthy revenue growth of 20%, driven by healthy demand from the Mobility solutions group (MSG) and Software Solutions Group (SSG) which together contribute more than 50% to the company’s revenue. Growth in the MSG Segment was supported by market shift towards 5G adoption, premiumization and successful direct-to-retail distribution models along with steady addition of new vendors. On the other hand, growth in the SSG segment was driven by increasing demand for cloud, software, cybersecurity, artificial intelligence (AI)-led infrastructure, and value-added services. The Middle East and Africa (MEA) market, accounting for 30-40 %% of REDIL's fiscal 2026 sales, faced challenges in March 2026 due to supply chain disruptions and logistic issues stemming from ongoing geopolitical uncertainties in the region. However, the company effectively navigated the situation by implementing alternative arrangements, ensuring uninterrupted operations. Notably, key Middle East markets, including the United Arab Emirates (UAE) and Gulf Cooperation Council (GCC) countries which constituted more than half of the region’s sales, had sustained healthy growth momentum, driven by consistent government investments in digital transformation and infrastructure upgrades, which persisted for most of fiscal 2026.
MEA market is expected to experience soft demand during the first half of fiscal 2027, driven by ongoing geopolitical tensions, supply chain delays, and cautious spending. However, this will be partially offset by robust growth in Singapore, India, and South Asia (SISA) market across various segments. In the near to medium term, revenue is expected to grow at above 6% , fueled by favorable trends in the IT segment, premiumization in the mobile segment, increased investments in IT infrastructure from corporate and government sectors, as well as rising expenditures on cloud services, cybersecurity, and AI integration.
The company’s operating margin declined to 2.1% in fiscal 2026 from 2.5%in fiscal 2025, due to increased operating expenses in the fourth quarter of fiscal 2026, driven by factors such as higher war-related insurance premiums, elevated freight and associated costs due to ongoing geopolitical uncertainties in Middle East. This along with change in product mix, steady increase in investments to develop digital capabilities and other risk mitigation initiatives and increased employee costs to support capability building in line with scale-up of operations also impacted profitability. While soft demand expectations in the Middle East and higher operating expenses in coming quarters may impact REDIL's profitability, the same is expected to be partially offset by growing share of high-margin IT enterprise segments, cloud services, reducing business presence in Turkey, where operations are not very profitable, value-added services like networking and logistics, as well as benefits from operating leverage and cost efficiencies implemented over the past few years enabling REDIL to sustain profitability at ~2-2.2% levels.
REDIL has a strong financial risk profile, as reflected in sizeable net worth of over Rs 10,000 crore as on March 31, 2026, and a comfortable gearing ~0.3 times. To manage its significant working capital requirements, the company utilizes working capital facilities from banks and commercial paper, while also engaging in non-recourse factoring of receivables, particularly in its overseas markets in Turkey and the Middle East. Notably, REDIL's interest coverage ratio improved to 4.5 times in fiscal 2026, up from ~4 times in fiscal 2025, despite a decline in absolute operating profits due to lower interest costs, which in turn was account of a dip in factoring costs. The reduction in factoring costwas largely due to lower debt availed in Turkish Lira, which carried higher interest rates.
Debt reduction in Turkish associate along with gradual reduction in inflation and interest rates in Turkey is expected to result in further reduction in interest cost going forward ensuring sustenance of Interest cover of above ~4.5-5 times over the near to medium term. Furthermore, total outside liabilities to tangible networth (TOL/TNW) ratio is expected at 2.2-2.4 times. REDIL continues to focus on managing its working capital prudently, as reflected in net working capital (NWC) days improving to 34 days as on March 31, 2026 from 36 days as on March 31, 2025, despite overall increase in scale of operations. That said NWC is said to increase by few days in fiscal 2027due to certain orders requiring higher amount of working capital.
Crisil Ratings notes that The Company's wholly owned subsidiary, Redington Gulf FZE (RGF) carried out an impairment of the trade name classified as an intangible asset arising from its investment in its subsidiary inTurkey, Arena Bilgisayar Sanayi Ve Ticaret A.S (Arena). Based on the assessment, taking into account challenging economic conditions in Turkey and revised future projections, an impairment loss of~ 152.31 Crores has been recognized and disclosed as an Exceptional item in the above financial results (impact on the Consolidated Profit After Tax (PAT) of the Company after Noncontrolling interests: ~ 75.24 Crores). In the previous year, Exceptional item represents gain on divestment of Paynet Odeme Hizmetler A.$ ("Paynet"), our step-down subsidiary.. Furthermore, in the first quarter of fiscal 2026, REDIL had made ~ $ 8Mn of account receivables provision in Arena as a proactive measure owing to tough economic conditions, |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of REDIL and REDIL’s subsidiaries due to similar business operations. REDIL has also provided need-based financial support to some of its subsidiaries. All these companies have been together referred to as REDIL.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers - Strengths Strong market position in the IT and mobility distribution business: REDIL and Ingram Micro Pvt Ltd (Ingram Micro, another major player in this industry) have garnered the major share of the market in domestic IT distribution. REDIL emerged as the leading player in the domestic IT distribution market by displacing Ingram Micro on account of steady increase in wallet share from existing clients, addition of brands, and various strategic initiatives.
REDIL is also the market leader in the Middle East and Africa (MEA) markets through its step-down subsidiary, Redington Gulf FZE, while another step-down subsidiary, Arena, is one of the largest players in Turkey. REDIL is one of the few supply chain solutions providers with presence in the major emerging markets around the world. It has strong relationships with leading vendors such as Hewlett Packard (HP), Dell, Samsung, Lenovo, Cisco, and Microsoft in the IT products business, and has consolidated its position as a leading distributor for these vendors over time.
In the mobility business, too, REDIL remains a significant distributor for smartphones. It has tie-ups with leading brands, including Apple, Google and Motorola. The company’s market position in both its business segments is underpinned by its ability to rapidly grow its vendor list, diverse product profile, strong distribution infrastructure, and well-entrenched relationships with channel partners. This has enabled it to grow revenue, supported by steady demand for IT products and services.
Diversified revenue mix with healthy geographical footprint: REDIL’s revenue stream is highly diversified in terms of the IT, mobility and services business verticals, as well as geographically with presence in 40 markets. The IT consumer segment handles the distribution of personal computers (PCs), laptops and other consumer lifestyle products; while the IT enterprise segment offers networking, software, server storage and cloud services. In the mobility vertical, REDIL focuses on smartphones. The company has gradually enhanced the proportion of mobility revenue in its overall revenue, supported by addition of new brands of smartphones in the domestic as well as overseas markets. Hence, the share of mobility revenue increased to 35% in fiscal 2026 from 27% in fiscal 2018. Notwithstanding one of major vendor's shift in go-to-market (GTM) approach, characterized by rapid retail rollouts in various metropolitan areas, its share of revenue has shown a steady increase during fiscal 2026.
While the threat of direct to retail models remains, REDIL is better placed to mitigate the situation due to its diverse product portfolio and presence in diverse geographies. Besides, the direct to retail/ecommerce model is unlikely to reduce offline market substantially, as seen in developing countries. REDIL ventured into the cloud business three years ago and offtake has been healthy, with the business recording on-year growth of 37% in fiscal 2026. While the share of the cloud business remains low at 17%, it is expected to grow at a faster rate than overall business, leading to an increase in its revenue share. The services business focusses on warehousing and logistics through subsidiary ProConnect Supply Chain Solutions Limited (PSCSPL; Crisil AA-/Stable/Crisil A1+) support, warranty, infrastructure and AMC services.
Strong risk management practices: REDIL has adopted strong risk management practices, which has enabled it to mitigate risks inherent in the distribution business. These include risks arising from vendor concentration, product obsolescence, volatility in exchange rates, and credit risks. The company has a diversified vendor base that reduces the revenue concentration risk from a single vendor. REDIL follows healthy foreign exchange risk mitigation practices, such as hedging on exchange rates that helps minimise foreign currency fluctuation risks. The quick conversion cycle and strong relationship with vendors ensure limited risk arising from product obsolescence. Most of the receivables are credit insured to mitigate default risk. The robust risk management practices have led to average receivables and inventory provision of less than ~0.3% of revenue for fiscal 2026
REDIL also has a robust management information system, which helps keep track of the credit history of its channel partners. This will be enhanced with implementation of SAP across all its business locations. Furthermore, the company maintains sizeable cash as a contingency measure to ensure continuation of operations in volatile international markets. The company makes prudent provisions for delayed receivables; 0.22% of revenues were provided for in fiscal 2026; a sizeable quantum of these, though, are expected to be recovered.
Healthy financial risk profile: REDIL has strong cash-generating ability and prudent working capital management. Sizeable net worth of over Rs 10,000 crore as on March 31, 2026, ensures healthy capital structure despite working capital-intensive operations. Adjusted gearing was comfortable at ~0.3 times. The gearing is expected to remain at comfortable levels, despite higher working capital spend, in keeping with nature of some business segments, which are seeing healthy growth. TOL/TNW ratio which increased to 2.2 times at March 31, 2026 from 2.1 times at March 31, 2025, is expected to range between 2.2-2.4 times over the near term.
Interest coverage ratio improved to ~4.5 times during fiscal 2026 from ~4 times in fiscal 2025 despite decline in absolute earnings before interest, taxes, depreciation, and amortisation (EBITDA or operating profits) mainly due to fall in interest cost supported by dip in factoring (~ Rs.114 crore costs from Rs.200 crore). This was due to lower debt availed in local currency (Turkish Lira) which were priced at higher interest rates of 30-35%. Strategically REDIL has been exiting local currency (Turkish Lira) business which mandates borrowing in local currency business thereby translating to overall reduction in factoring costs.
As part of Management strategy to gradually minimise the local currency exposure , Redington’s Turkish step-down subsidiary, Arena Bilgisayar, divested its Vodafone connect business by assigning its device distribution and supply agreement to Datagate Bilgisayar.
Debt reduction in Turkish subsidiary, along with gradual reduction in inflation and interest rates in Turkey is likely to be partly offset by higher debt at India and Middle East operations; interest cover is still expected to remain above 4.25 times over the near to medium term. Earlier during fiscal 2025, ARENA has divested its fintech payment business - Paynet Odeme Hizmetler A.S (“Paynet”) and utilized the proceeds for retiring debt at Arena.
Return on capital employed was healthy at ~20% in fiscal 2026 and should sustain at over 20% over the medium term. |
Key Rating Drivers - Weaknesses Modest, but stable, profitability: The distribution business has low profitability, as reflected in operating margin of 1.9-2.2% during fiscals 2017-2020. Improvement in operating profitability was limited by the increasing share of business from mobility products, which had lower margins, compared with traditional IT products. The operating profitability improved to 2.4% in fiscal 2025 (better than pre-Covid levels) driven by higher share of IT products in the revenue mix and better gross margins. The company’s operating margin declined to 2.1% in fiscal 2026 from 2.4% in fiscal 2025, due to increased operating expenses in the fourth of fiscal 2026, driven by factors such as higher war-related insurance premiums, freight and associated costs due to ongoing geopolitical uncertainties in Middle East. This along with change in product mix, steady increase in investments to develop digital capabilities and other risk mitigation initiatives and increased employee costs to support capability building in line with scale-up of operations has impacted overall profitability. The operating profitability is expected to stabilise at ~2-2.2% over the near to medium term, with product mix determining direction of margins.
Working capital-intensive distribution business: The company’s enterprise and consumer division (including software sales, storage, servers, networking) within the IT products segment is working capital intensive. Given the limited number of established competitors in the domestic IT business, REDIL, based on mutual understanding with its vendors, agrees the credit period considering the high lead time involved in such enterprise transactions. This leads to larger working capital requirement in line with ramp-up in operations. However, the impact is partially alleviated as its vendors allow credit to the company on a case-to-case basis. Also, with the share of the low-margin and low working capital intensive mobility business increasing over time, net working capital days have gradually lowered.
Over fiscals 2021 and 2022, the net working capital remained at 14 days due to demand chasing supply. The net working capital increased to 36 days in fiscal 2023 with normalisation of working capital cycle and improved marginally to 34 days in fiscal 2024 and 36 days in fiscal 2025. Subsequently, net working capital days improved to 34 days during fiscal 2026 despite the overall increase in scale of operations, due to prudent working capital management. Going forward, NWC is expected to range ~36-40 days. |
Liquidity Strong REDIL enjoys strong liquidity, with cash surplus of about Rs 1,122 crore as on March 31, 2026. However, it may be noted that majority of cash is scattered across the subsidiaries with cash largely available at subsidiaries in Singapore, the Middle East, Africa and Arena (Turkey). This will be utilised for the subsidiaries’ own operations as there is no support among the entities in the form of Intercorporate Deposits as per Group Policy; and the treasury operations are managed by respective overseas subsidiaries. Hence, the cash available in the subsidiaries is not normally utilised by Redington India.
REDIL India has additional cushion in the form of bank limit of ~Rs 3,000 crore, which has been utilised at 81% on average (including utilisation of commercial paper and Non-Fund Based limits),) over the 12 months through March 2026. Cash accrual is estimated at Rs. 900 - 1,100 crore (post-adjustments for dividend outflow) and is expected to remain healthy and sufficient with no term loan obligations, modest incremental capex and increasing working capital requirement. |
ESG Profile of REDIL Crisil Ratings believes the environment, social, and governance (ESG) profile of REDIL supports its already strong credit risk profile. The IT distribution sector has low impact on the environment owing to its low emission and comparatively low waste generation due to the low energy intensive nature of operations. The sector also has minimal social impact.
REDIL is developing a detailed ESG framework that will mitigate environmental and social risks.
Key ESG highlights:
There is growing importance of ESG among investors and lenders. The commitment of REDIL to ESG principles will play a key role in enhancing stakeholder confidence, given the high share of market borrowing in its overall debt and access to both domestic and foreign capital markets. |
Outlook Stable Crisil Ratings believes that REDIL’s business risk profile will continue to benefit over the medium term from the diversity in its revenue, established relationship with global IT vendors, sustenance of improving operating margin, and high cash generating ability. Further, the company is expected to sustain its healthy financial risk profile, supported by prudent working capital management and minimal capital spending. |
Rating sensitivity factors Upward factors:
Downward factors:
|
About the Company Set up in 1993, REDIL is a leading distributor of IT hardware and mobility products. The company made its initial public offering in early 2007. It has a diversified holding structure with the largest shareholder, Synnex Technology International Corp, holding 24.1% through its investment arm Synnex Mauritius Ltd, Taiwan as on 31st March 2026. During September 2019, REDIL was classified as a listed entity with no promoters.
REDIL operates in 40 markets across India and META region with a base of ~ 5100 employees. It distributes ~440+brands through a network of 70,000+ channel partners. While distribution of IT and mobility products accounts for a bulk of its revenue, REDIL is enhancing its presence in the cloud solutions space and logistics business in India and the Gulf region. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
& - Facilities are interchangeable between fund and non fund based limits |
Annexure – List of entities consolidated - Fully consolidated entities (as of March 2025 ) Direct subsidiaries
Step-down subsidiaries
Note The below mentioned companies were incorporated during the year.: Proconnect Supply Chain Logistics, Qatar^ Redington Azerbaijan Technology^ Redington Malaysia SDN Bhd^ The below mentioned companies ceased operations: Africa Joint Technical Services Redington Angola Ltd. Redington Gulf FZE Co, Iraq Redington Kazakhstan LLP Redington Qatar WLL The below mentioned companies were sold during the year: Citrus Consulting Services FZ LLC Paynet Ödeme Hizmetleri A.S.^ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Annexure: List of instruments and names of regulators of the instruments As required by SEBI CRA Circular dated Feb 10, 2026, a list of activities or instruments falling under the purview of various FSRs, along with the names of respective FSRs, is being disclosed below:
* Includes securitisation transactions involving assignee payout, acquirer's payout. ~ The rated instrument may involve issuance of different instruments such as debt securities (listed or otherwise), bank loans, commercial paper (listed or otherwise), etc. The regulator of the instrument may accordingly be SEBI, RBI or MCA and can only be determined upon issuance. In PRs subsequent to issuance(s), Crisil Ratings Limited shall separately capture the rated quantum details along with names of respective regulators. ^ Includes bank facilities such as liquidity facility, second loss facility that are part of securitisation transactions. # There is no instrument being rated and hence, Regulator of the Instrument is not applicable. The rating scale and definitions are being followed as stipulated in SEBI Master Circular for CRAs. @ These ratings were assigned during regulatory regime prior to introduction of SEBI CRA Circular dated Feb 10, 2026 and the investor side regulators have accordingly been included.
Note: Kindly note that for activities or instruments falling under the purview of FSRs other than SEBI, the grievance/dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available. |
Criteria Details
|