dear stakeholders and friends of redington
Even as I gather myself to pen down this annual address to you which I consideramongst my great privileges the human populace is experiencing an existential crisis.
Over 13 million human beings have been directly infected so far and more than half amillion precious lives have been lost due to the deadly COVID-19 pandemic and thesenumbers are increasing every day. Please join me in my prayers for peace to the departedsouls and for the health and safety of every person on this planet that we call our home.I beseech the Almighty for his blessings towards complete safety and continuing goodhealth of the entire Redington family of which you and your loved ones form an integralpart.
The game of cricket being a religion of sorts for most Indians we have often seen acontest turning on its head within a couple of deliveries. As the fiscal 2019-20 wasdrawing towards its closure we witnessed our world changing beyond recognition in just afew weeks. Cities after cities across countries and continents were forced to confinetheir population at home almost overnight
The dreaded words "Lock Down" were embedded into our daily lexicon and ourlives under the severe restrictions became focused on ensuring availability ofdaily-need essentials - grocery milk fruits and vegetables-things that we take forgranted. Internet already another "essential" to our daily lives assumedcriticality as social distancing and isolation relegated all person-to-person contact tothe virtual medium. From Schools to Colleges and Universities from hobby classes tobirthday celebrations from family get-togethers to reunions from work collaborations tomeetings and conferences all forms of social and official activities were rendered to theether.
All of us are hoping and praying that like many a colossal challenge faced by mankindthis too shall pass soon and the world will get back to somewhere near normalcy. The humanspirit is already fighting back with resilience and ingenuity and is quickly adaptingitself to the changed normal.
Whatever form our lives take from hereon it is indisputable that Technology &Communication Devices already at the center-stage of our existence will become thefulcrum.
The pervasiveness and penetration of technology and internet will accelerate manifoldacross geographies and economic strata of the populace of every nation. This will callfor a massive investments towards products services and solutions that your Companyalready deals in.
During the first half of Calendar Year 2020 Covid-19 has had a significant impact onmany areas of business and operations and a severe impact on some of them. Global supplychains have been disrupted and we are witnessing demand contraction in several sectors ofthe economies across the world. Sharp increase in unemployment and reduction in earningshave resulted in an appreciable downturn in individual spends. The stress of reducedearning and liquidity crunch will test the resilience of most enterprises.
It is in this context that your company's strategy of "De-risking theContinuum" gains heightened importance.
It represents our long-standing commitment to safeguard your Company in perpetuity. Asthe crisis unfolded we moved with alacrity and nimbleness to protect our stakeholders'value. During lockdown the priority was to ensure the safety health and wellbeing of ouremployees while ensuring
business continuity. A well planned and coordinated exercise of enabling Work-from-Homefor all Redingtonians was completed quickly providing our employees with ITCommunication Collaboration & Connectivity tools that are essential for workingeffectively while away from office for long stretches of time. Our investments inenterprise-wide digitalization proved to be critical towards ensuring business continuity.
Keeping in mind the breadth and scope of your Company's multinational &multi-region operations involving hundreds of global brands on one hand and thousands oflocal channel partners on the other a tactical risk mitigation playbook putting sharpfocus on important "7Cs" was developed and immediately deployed. The frameworkre-defined the Standard operating Procedures (SoPs) across these "Cs" namelyCash flow Collection Cost Customers Contracts Control and Communication.
Practicing the highest level of transparency and stakeholder engagement the Companycommissioned a conference call with the investor fraternity to provide an update on thevarious measures taken by us to combat this crisis.
I am happy to inform you that the alertness and swift actions of our teams and thecontinued support of our vendors and channel partners have helped us successfully navigatethe challenges that your Company is facing due to the Pandemic crisis.
With business during the month of March 2020 seriously impacted in all markets theFinancial Year 201920 (FY20) was effectively reduced to 11-months. Despite this handicapwith a topline growth of about 11%
your Company breached the landmark figure of ' 50000 Crores delivering aconsolidated Revenue of ' 51514 crore for FY'20. Our consolidated EBITDA grew by11% to reach ' 1071 Crores. Our PAT however was severely impacted on account ofcharges that we were compelled to take in our subsidiary ProConnect. Consequently thegrowth in your Company's consolidated PAT was a modest 1% at ' 515 Crores forFY20. Aided by a significant reduction in working capital the Company was however able todeliver a remarkable free cash flow of ' 967 Crores (' 792 Crores in India and '175 Crores in overseas).
From a geographical standpoint consolidated revenue from India operations grew by 10%while profit de-grew by 16% dragged down by the charge taken in ProConnect. However thecore Distribution business in India delivered an impressive EBITDA growth of 24% and a PATgrowth of 52%.
Your Company's Overseas business delivered double-digit growth of 11% in Revenue 17%in EBITDA and 10% in PAT. This growth was aided by a robust performance in your Company'sTurkey operations.
At a worldwide consolidated level the loss of business during March 2020 wassignificant and resulted in substantial loss of potential Revenue and Profits. Yourcompany lost Revenue opportunity estimated at approx. ' 1771 Crores and acorresponding loss in PAT opportunity.
Viewed through segmental lenses of IT Mobility and Services your Company deliveredgrowth across all three categories. While consolidated revenue growth in IT was a modest2% for Services it stood at a healthy 9%. It was the stellar revenue growth of 26% in theMobility segment that resulted in the commendable growth achieved in overall consolidatedrevenue.
Efficient working capital management a critical component of our business remainedhighest on the list of our operational priorities throughout FY 20. A slew of measures andcontinuous monitoring across markets and segments helped us improve our working capitalcycle at a consolidated level by 6 days to 31 days in FY20 (37 days in FY19). The Indiabusiness operations recorded a steep reduction of 16 days (31 days in FY20 from 47 days inFY19) while the Overseas business also improved it by one day from an already highlyefficient level (30 days in FY20 from 31 days in FY19).
As briefly mentioned above the charge to the P&L which dragged down the Profitsof your Company's India operations was caused due to regrettable circumstances atProConnect your Company's wholly owned subsidiary engaged in Third Party Logistics andSupply Chain Solutions. While ProConnect's revenue grew by 7% to reach ' 432 crorein FY20 it closed the year with a loss of ' 57 Crores.
The loss was largely on account of provisions made against non-recovery of tradeadvance impairment and some unviable transportation contracts in the asset acquired byProConnect in FY 16-17. Your Company has taken necessary corrective actions to ensure thatthis remains an isolated incidence while simultaneously taking steps to initiate businessrecovery in ProConnect's subsidiary Company. Your Company is committed to ensure thatProConnect overcomes this setback and reboots quickly to resume its growth trajectory.
During the course of FY 19-20 your Company took decisive steps in its pivot towardstransitioning itself into a Solution Oriented Distributor.
We have augmented our skills and capabilities in critical future-oriented and emergingtechnologies in the areas of Cloud Cybersecurity Internet of Things (ioT) artificialintelligence (a!) & Machine Learning (ML). Your Company is developing solutions &services offerings in these niche technology practices and this will help our partnerssolve their customers' business problems.
As we move into FY 20-21 and beyond the business and socio-economic landscape willremain permanently altered. Person-to-Person contact will remain largely curtailed for theforeseeable future with Health Safety Personal Hygiene & Social Distancing beingprimary concerns.
Your Company has adopted a measured and practical approach by putting in place asystematic Work- from-Home routine involving full partial & by-rotation attendanceto offices basis roles responsibilities and job-content.
We will accelerate our transition towards a fully Digitalized Organization withdigitization of most functions processes and systems. In the next 2-3 years I envisage avery large part of your Company's business to be conducted on a Fully AutomatedIntegrated Business Platform involving minimal human touch and intervention.
The rapidly changing environment offers unique business opportunities to your Company.As organizations and individuals increasingly adopt a Digital way of life we expectsignificant investments in IT enablement and upgrade in the areas of Banking &Financial Services Education Government Services and Social Engagement &Communication. This will involve adoption of solutions encompassing CybersecurityEnterprise Software & Applications Cloud Ai & ML. As the premier technologydistributor in all the markets that it operates in your Company is uniquely positioned tocapture the opportunities that these investments will throw up.
While ensuring that we address the evolving business landscape aggressively in order tocapture all possible Revenue opportunities our strategy will continue to be guided by thefundamental tenets of delivering Profitable Growth generating Free Cash Flow and ensuringa healthy ROCE.
Your Company has always attempted to pay back its valued investors as best it can andwe will continue with our attempts to maximize the returns to you. Keeping this in mindwe plan to review our Dividend Policy to make the dividend payout more interesting for ourshareholders.
As a responsible Corporate aware of its obligations beyond Business Metrics yourCompany takes its responsibilities towards Environment Social & Governance (ESG)with a great degree of seriousness.
Mindful of the impact we may have on the Environment your Company makes every effortto minimize its carbon footprint. Consumption of electrical energy and water at all our
offices is closely monitored to eliminate any wasteful usage. Deployment of IT assetsis designed for maximum possible re-use. Your Company also ensures that it meets theguidelines for recycling and disposable of E-waste mandated for Importer-on-Recordorganizations.
All Organizations operate leveraging the infrastructure and conveniences offered by thesocieties they exist in.
At Redington we are highly sensitive of the obligation that this privilege imposes onus and we recognize the role we must play in improving the Social Environment around us.Your Company stepped up to help the economically challenged social strata during thepandemic through its CSR activities. Redington's CSR team has worked tirelesslythroughout fiscal 19-20 to provide Educational & Vocational training to targetedsections of our society. A detailed note of their activities is available in a later partof this annual Report and i am confident that you would derive immense pride in yourCompany's efforts in this area.
A high level of corporate Governance is amongst your Company's topmost priority. Thetenets of Transparency & Trust that are enshrined in our Corporate values reflectthis philosophy and we believe in following them in letter and in spirit in ourinteractions with both internal as well as external stakeholders. It is but a naturalcorollary that ethical business practices and attention to internal and externalcompliance requirements are the bedrock on which the foundations of Redington's operationsand processes are erected.
Safety and well-being of the highly committed and talented team of individuals whichmakes Redington the Company it is will remain our highest priority. Even during thehighly stressful and severely restricted times of lockdown Redingtonians have traversedeven beyond that proverbial extra mile to remain connected with our Vendors and ourPartners. Redingtonians kept their focus on available business opportunities execution ofthe business acquired and collection of
Accounts Receivables. Along with Team ProConnect our employees across all functionsworked towards fulfilling deliveries to sectors declared Critical by the governmentovercoming the constraints of highly regulated and restricted operations both in themarket as well as in the warehouses. I wish to take this opportunity to thank my team fora stupendous job done.
We take immense pride in the fact that we are the Distributor of choice for all ourVendors who entrust us with the responsibility of taking their products and technology tocustomers spread across the length and breadth of the markets that we operate in. We feelenergized by the confidence that they show in us and I would like to take this opportunityto thank them for their support and guidance.
Redington does all its business through its thousands of channel partners and itrecognizes the fact that they have alternatives to us. That they choose to do businesswith us is a privilege we enjoy. We exist because of our partners and it would be amissif I do not acknowledge our gratitude and thank them for their support.
I wish to express my appreciation of the support that we continue to receive from ourBankers. They are an important stakeholder in our continued success. Our Auditors provideus with invaluable advice and I thank them for their support. our diversified and highlyqualified Board of Directors are a source of great strength for us and I deeply appreciatethe support and guidance that I receive from the richly experienced and knowledgeablemembers of our Board.
Last but not the least on behalf of my Board and my team members I wish to thankyou our shareholders for the trust and confidence that you continue to repose in us.
I look forward to your continued support as we attempt to deliver increasing value toall stake holders in the new fiscal.
|With warm regards |
|Raj Shankar |
|Managing Director |
|July 10 2020 |