REDINGTON Prepared by – Nikhil Menon

Brief Overview of the Company
• The company has offices in the MENA region as well as in India and Singapore. Redington India was incorporated as early as 1961, but the Indian operations commenced only in 1993. The one in Dubai was established in 2001 under the name Redington Gulf Fze (it is 100% subsidiary of Redington India Ltd). In fact Redington India acquired Redington Gulf Fze from its promoter Redington Mauritius Ltd Redington Singapore was incorporated in 2005 as a 100% subsidiary of Redington India

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Limited Redington India is listed on the NSE and BSE. Number of employees in the MENA region: 455.

Business Solutions
Redington (India) Limited (Company), a company incorporated under the Indian Companies Act is the distributor for Information Technology products, Telecom products and Consumer durables for Indian market. The Company also renders after sales service. The Company has wholly owned subsidiaries in Middle East and Singapore viz. Redington Gulf FZE and Redington Distribution Private Ltd. The principal activity of Redington Gulf FZE and its subsidiaries is wholesale distribution of Information Technology products, their parts and their subsequent after sales service in Middle East and African markets. The principal activity of Redington Distribution Pte Limited and its subsidiary is wholesale distribution of Information Technology products and their parts in Singapore and Bangladesh. Redington through all its subsidiaries distributes products from over 40 Leading Manufacturers, services over 12000 channel partners in India and 2800+ channel partners in Middle East and Africa. The company is the second largest distributor of IT products in India and the largest in the Middle East and Africa. It is associated with brands like 3com, Acer, BenQ-Siemens, Canon, HP, LG, Cisco, IBM, Lenovo, McAfee, Microsoft, Nokia, Samsung, Intel, Toshiba, Western Digital, Imation, Seagate (in Singapore), Hitachi (in Singapore)

Redington Gulf is an Authorized Service Provider for brands like HP, Acer, Toshiba, IBM, Lenovo, Fujitsu-Siemens, Philips and Asus. It operates services as an independent business unit. Redington provides the full range of hardware and solution services for various IT brands. The range of services from Redington includes • • • • • Warranty Services Post Warranty Services Annual Maintenance Contracts Network & Security Solutions Parts and Accessories

Major Customers
The customers include large OEM's, Resellers, Assemblers, Call Center / BPO's and ISP's who qualify for duty free imports. Besides this the company also caters to large enterprises especially in the area of Threat Management systems.

Major Events in the company (M&A etc)
The company has acquired all of its subsidiaries across the various locations that it does its business. The details about the various acquisitions are as follows:

Redington India came out with an IPO this year to raise Rs. 150 crores which would be used in setting up new distributions centers in India (4 in all). The company also has plans of setting up a large distribution in Jebel Ali (in Dubai). One other objective which the company had in mind was to open a repair facility for LCD panels since the market for the same is growing quite fast and repairs at the moment is been done at Taiwan and Korea.

Financials
The following financial data shows a five year glance of the company revenue and profits.

Sources of Revenue
50% of the company revenues are from international business and 50% from the domestic business. Last year (2006) the company turnover was in the region of about Rs. 6,700 crores and approximately 50% of it is from the Middle East and Africa. The company’s service margins are much higher than that of the product distribution margins but in terms of the total revenue, the services do not constitute more than 4% at this point in time. The Indian Company primarily operates in the business segment of distribution of IT and related products and the turnover from sale of telecom products, consumer durables and other non IT products is less than 10% of the total turnover. The turnover from overseas operations is more than 10% of the total turnover, geographical segment has been considered as the primary segment.

Competitors
1) ALMASA: Founded in 1995, Almasa IT Distribution FZCO (Almasa ITD) is a member of Almasa / Omniyat group of companies, a multi-billion dollar conglomerate focusing on Technology Distribution and Real Estate Development in Middle East and North Africa region. Almasa ITD represents an array of world leading vendors such as Avaya, AMD, APW, Asus, Asrock, ATI, Blue Coast Systems, D-Link, Extreme Networks, GFI, Hitachi, Hewlett-Packard, HP Procurve, Intel, Juniper, Kingston, Molex, Nvidia, Proview, Samsung, Seagate, Sonic Wall, Symantec, Veritech, Juniper, Opti Ups, MIO, etc. It is a private company and not listed in any stock exchange. The firm, which was selected as distributor of the year for 2005 in the Middle East and Africa region by ATI Technologies, witnessed healthy revenue growth in 2005, with sales of US$410 million up from US$332 million. 2) EMITAC: Emirates Technology Company (Emitac) has been providing total systems solutions to customers for over 30 years, and represents industry leaders like HewlettPackard, Microsoft Great Plains Software, CITIL, Oracle, Cognos, etc. in the U.A.E. Since the company's formation in 1974, Emitac has been recognized as a major provider of quality, reliability, and excellence in services for Information Technology. Emitac’s product portfolio includes a range of solutions and services that cover technology-based IT solutions, computer and networking products, test and measurement instruments, computerized test systems, medical electronic equipment and instruments, and systems for chemical analysis.

Sales figures for Emitac stood at US$203 million for 2005 with a target of US$300 million for 2006. Offices of Emitac: UAE, Qatar, Jordan, Syria and Iran. 3) TECHDATA: Founded in 1974, Tech Data Corporation (NASDAQ: TECD) is a leading distributor of IT products, with more than 90,000 customers in over 100 countries. The company's business model enables technology solution providers, manufacturers and publishers to cost-effectively sell to and support end users ranging from small-tomidsize businesses (SMB) to large enterprises. Ranked 109th on the FORTUNE 500, Tech Data generated $21.4 billion in sales for its fiscal year ended January 31, 2007.
Net sales COGS Gross Profit Operating expenses Operating income Net Income EPS (Basic) 2007 (in thousand US$) 21,044,445 20,433,674 1,006,771 1,010,954 (4,183) (96,981) 1.76 2006 (in thousand US$) 20,482,851 19,460,332 1,022,519 859,224 163,295 26,586 0.46

NOTE: The net income is obtained after factoring in Other Expenses as well as provisions for income tax. The losses for the company this year is due to a sizable amount going out for Goodwill Impairment. Impairment indicators included significantly lower than expected revenues in Europe during the quarter, further deceleration in IT demand during the quarter and a heightened level of pricing pressure in Europe during the quarter. The Company’s impairment testing included the determination of the European reporting unit’s fair value using market multiples and discounted cash flows modelling. 4) SYNNEX: Synnex Corporation is a leading global information technology (IT) supply chain services company, servicing resellers and original equipment manufacturers (OEMs) in regions around the world. They provide outsourcing services in IT distribution, contract assembly, logistics management and business process outsourcing. SYNNEX distributes technology products from more than 100 world-leading IT OEM suppliers to more than 15,000 resellers throughout the United States, Canada and Mexico. Product categories include IT systems, peripherals, system components, software and networking products. Key suppliers include HP, IBM, Intel, Seagate, Microsoft and Lenovo. In 2006, their consolidated worldwide revenue was $6.34 billion.

Net sales COGS Gross Profit Operating expenses Net Income EPS (Basic)

2006 (in thousand US$) 6,343,514 6,058,155 285,359 189,117 51,385 1.73

2005 (in thousand US$) 5,640,769 5,402,211 238,558 159,621 52,825 1.39

Company Strategy
• The company is looking at new markets especially in the African regions. These are according to the Deputy MD areas where larger companies/ multinationals fear to tread and so by setting up a distribution network within the African region the company could then sell products to interested customers by making use of its existing vendors who are interested in selling their wares. Another strategy the company follows is to set up a service center wherever they start their operations. This gives them the opportunity to improve the sort of services (even expand on them for that matter) that they provide paving the way for future sales.

Summary - Take away
• The company stock seems to be doing well. There have been major fluctuations in stock price over the last year. It is currently at Rs. 320.70 (NSE, dated 20/10/2007). In the BSE its value is at Rs. 308 (dated 20/10/2007). (Graph courtesy moneycontrol.com). This climb in the stock price could be due to the increase in the volume of transactions that the company is seeing leading to increased revenues.

Overall the company seems to be doing pretty well. Sales show a year on year growth of over 30%. In fact was a substantial jump from 2003 to 2004 (over 110%) and the company has not looked back since. The company is focusing now on the supply chain solutions business. With this in mind the company has purchased 11.56 acres of land in Chennai to build Automated Distribution Centers (4 in India and 1 in Dubai) to exploit the opportunities available. The key differentiator for Redington is in its ability to support products during warranty and post warranty period. In fact the company is investing in new service centers and major repair facilities.

Insider Information
The company is looking for people in the areas of Sales and Marketing, for Product management and Supply Chain Management. The salary the company is willing to offer is according to the Deputy MD, Mr. Raj Shankar and I quote “Higher than industry standards”. The training period is for 1 year during which time the candidate will be in Dubai for 50% of that time and will be travelling the rest 50% (most probably to Africa). The growth for a candidate within the organization looks good. Candidates are usually kept at one post for only 3 years at a time. Taking the case of a Product Management candidate, he/she would start out as a Management Trainee. The progress is as follows:

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