At a Glance (50 words)
Redington Ltd has doubled revenues from ₹56,946 cr in FY21 to ₹99,334 cr in FY25, lifted PAT from ₹788 cr to ₹1,821 cr, and hiked dividends to 33% payout. Yet operating margins stubbornly hover near 2%. With ROCE at 18% and P/E ~20, is the distributor’s growth fully priced into ₹293 today?
1️⃣ TL;DR: Fast Track Edition 🚄
- Sales & Profit Surge: Revenues +39% and PAT +131% in 5 years
- Margins Squeeze: OPM stuck at ~2%; Other Income boom in FY25 (+₹854 cr)
- Returns Solid: ROCE 18%, ROE 14.5%, but working-capital cycle stretched to 36 days
- Dividend Yield 2.3%: Payout steady at ~33%
- Peer Positioning: Trades at P/E 19.5 vs median 32.6; P/B 2.6 vs 1.4
- Fair-Value Range: ₹240–₹340 based on P/B model
- Verdict: ★★★★☆ business, ★★☆ valuation, ★★☆ margins
2️⃣ What’s the Dealio? 📦 — Distributor’s Blueprint
| Aspect | Snapshot |
|---|---|
| Business | IT & mobility distribution + supply-chain services |
| Geography | India, Middle East, Turkey, Africa |
| Clients | OEMs, resellers, large enterprise accounts |
| Network | 3 Automated DCs (Chennai, Kolkata, Dubai); 70+ branches |
| Services | Logistics, after-sales, finance, 3PL |
| Edge | Vendor relationships (Apple, HP, Samsung), local compliance expertise |
Redington’s moat is its vendor-approved status: you can’t just waltz into Dubai’s free zone without certifications!
3️⃣ Five-Year Scorecard 📈
| ₹ crore / % | FY21 | FY22 | FY23 | FY24 | FY25 | 5-yr CAGR |
|---|---|---|---|---|---|---|
| Revenue | 56,946 | 62,644 | 79,377 | 89,346 | 99,334 | 16% |
| Op Profit | 1,392 | 1,839 | 2,203 | 2,009 | 2,029 | 9% |
| OPM | 2.4% | 2.9% | 2.8% | 2.2% | 2.0% | – |
| Other Income | 89 | 142 | 264 | 854 | 854 | 72% |
| PBT | 1,128 | 1,622 | 1,833 | 1,575 | 2,335 | 17% |
| PAT | 788 | 1,315 | 1,439 | 1,239 | 1,821 | 18% |
| EPS (₹) | 9.74 | 16.38 | 17.82 | 15.59 | 20.53 | 19% |
| ROCE | 20% | 28% | 25% | 19% | 18% | – |
| ROE | 17% | 18% | 17% | 14% | 14.5% | – |
| WC Days | 14 | 15 | 36 | 34 | 36 | – |
Flavor Text: Revenues nearly doubled, profits more than doubled—but margins eroded as distribution became a grocery-run with thin slivers of spread.
4️⃣ Meet the Tech Sherpas 🧑💼
- S. Nandakumar – Founder & Non-Exec Chairman, veteran of distribution wars since ’93
- Yogesh Maheshwari – MD & CEO, steering global ops and keen on margin rescue
- R. Chandrasekar – CFO, juggling foreign currency hits and working-capital blues
- Amit Sharma – CTO, leading digitalization of supply-chain platforms
No boardroom celebrities here—just logistics generals who know freight-forwarding like cricket.
5️⃣ Green Flags 🟢 vs Red Flags 🔴
🌱 Green Flags
- Scale & Reach: ₹1 lakh cr+ annual revenue, global network
- Strong ROCE: 18% beats many tech peers
- Diversified Vendor Portfolio: Apple to Xerox—low single-vendor risk
- Cash-Rich Modelo: ₹560 cr operating cash in FY25 despite WC headwind
🔥 Red Flags
- Margin Blood: OPM fell from 2.9% → 2.0% in 5 years
- Working Capital: Cycle at 36 days vs 15 days in FY22—funding pain
- Other Income Reliance: FY25 spike (+₹590 cr) may not recur
- Macro Exposure: Currency swings in MEA & Africa, supply-chain shocks
6️⃣ Peer Roast & Positioning 🌶️
| Company | P/E | P/B | ROE % | OPM % | WC Days |
|---|---|---|---|---|---|
| Redington | 19.5 | 2.6 | 14.5 | 2.0 | 36 |
| DMart (Avenue) | 45 | 12 | 18 | 6.0 | 3 |
| Dixon Tech | 25 | 5.5 | 15 | 3.5 | 30 |
| Ingram Micro | 22 | 1.8 | 8 | 2.2 | 28 |
| Median Distributor | 32.6 | 1.4 | 13 | 2.5 | 33 |
Redington trades at a discount to the distributor pack despite stronger ROCE. That win fades when you factor in stretched capital and wafer-thin margins.
7️⃣ Fair-Value (FV) Range Calculator 🧮
We’ll use a P/B model anchored by ROE, sustainable growth (g), and cost of equity (r): Justified P/B=ROE–gr–g\text{Justified P/B} = \frac{\text{ROE} – g}{r – g}Justified P/B=r–gROE–g
- ROE: 14.5%
- g (conservative): 6–10% (reflecting tempered margin recovery)
- r: 12% (emerging‐market equity)
| Scenario | g | Justified P/B | FV (× BV ₹112) |
|---|---|---|---|
| Bear | 6% | (14.5–6)/(12–6)=1.42 | ₹159 |
| Base | 8% | (14.5–8)/(12–8)=1.62 | ₹181 |
| Bull | 10% | (14.5–10)/(12–10)=2.25 | ₹252 |
Fair-Value Range: ₹160 – ₹252
At ₹293, the stock sits 16–80% above our bull-case—not exactly bargain basement.
🏁 EduInvesting Verdict
“Redington has the distribution muscle of a freight train but the margins of a pushcart. Heat up your exposure only if you bet on OPM rebounds and tighter working-capital management. Otherwise, enjoy the dividend dance—but pay up today for tomorrow’s margin miracle.”
Tags: Redington Ltd, IT distribution, supply chain, 5-year recap, P/B valuation, EduInvesting
✍️ Written by Prashant | 📅 22 June 2025
