Redington Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record quarter, war-dented finish: Full-year revenue hit ~\$13.5 bn, +20% YoY, but the West Asia crisis that began February 28 pulled down March, the peak month, and the drag is expected to persist through Q1 and partly Q2 FY27.
• India delivered the growth engine: +50% top line, +41% PAT in Q4, powered by PC large deals, premium mobility, cloud and security, and a 45% surge in upcountry expansion.
• The Middle East is the central risk: Operations are under significant constraint from supply chain disruption, withdrawn war risk insurance, inventory challenges and delayed receivables, with UAE growth collapsing from ~20% to 6% and KSA posting a 12% Q4 degrowth.
• SSG is the margin story, now 17% of revenue: The solutions and services group grew 31% and carries higher gross margin and PAT than the group, though resell pressure keeps segment gross margin at ~5.5% and security growth needs to catch up.
• What to watch next quarter: Whether the Middle East trajectory stabilizes or worsens, the pace of premium smartphone supply normalization for overseas mobility, and any inorganic move in cloud or security professional services now that the dividend has been cut to conserve capital.

Middle East: The War Overhang

• Timing magnified the damage: The conflict onset on February 28 hit March, which is seasonally the peak month of the year, compressing revenue, gross margin and adding incremental costs all at once. The trajectory since has been flat: not getting worse, not getting better.
• Supply chain under siege: War risk insurance was withdrawn by insurers with seven days' notice, a unilateral decision that forced the logistics team to arrange alternative cover and move stock to new warehouses while missiles were active. Management says proper coverage is now in place.
• Cluster-level divergence tells the story: UAE, the biggest cluster and previously growing at ~20%, slowed to just 6% growth in Q4. KSA posted a 12% Q4 degrowth as government reprioritized initiatives, softening IT demand. By contrast, GCCL grew 51% in Q4, attributed to virgin territory and an improved SSG mix.
• Recovery is binary and undated: Management expects the first two quarters of FY27 to be soft. If the crisis resolves, the Middle East should return to its normal band, with government initiatives, consumer demand and delayed enterprise deals all waiting to come back. No recovery is priced into the outlook.

S. V. Krishnan: "As the war started, the insurance companies joined together with 7 day's notice removed this risk coverage, and it was a unilateral decision. So we had to manage... full kudos to the team, logistics team there inspite of the missiles going all around the place."

India: The Standout Geography

• Broad-based acceleration: India delivered 50% top line growth and 41% PAT growth in Q4, with every business unit contributing. The quarter benefited from PC demand pulled forward by anticipated component shortages and price increases, plus large deals worth ~INR 500 crores.
• Premium mobility and upcountry drove the mix: Strong demand in the premium smartphone segment and direct-to-retail execution lifted mobility, while upcountry expansion grew 45%, widening the geographic base.
• Enterprise infra spend is compounding: Cloud, security, cybersecurity and IT infrastructure investments all grew faster than the average, feeding both TSG (34% growth, its highest revenue ever) and SSG.
• Q1 softness flagged: Management expects a little bit of softness in Q1 FY27, consistent with normal seasonality, but commits to sustaining good momentum.

SSG & the Margin Mix Shift

• Now 17% of the top line, up from 15% in FY25, with 31% growth. SSG carries higher gross margin and PAT than the group, so its rising share is a structural margin tailwind, even though the segment-level gross margin is currently ~5.5% and the resell portion is under pressure.
• Cloud and software are the growth leaders, both growing over 30%. Security is growing slower and management explicitly flagged it as an area to drive harder. Professional services are expected to add stickiness and incremental gross margin over time.
• AI Exchange launched mid-March as a marketplace with over 200 AI agents, bringing ISVs, AI innovators and customers through the partner ecosystem. Revenue is expected to begin sometime during FY27.
• Inorganic ambitions are now explicit: Management is actively discussing targets in professional services around cloud and security, and the dividend was cut to INR 6 per share (30% of profits) specifically to conserve capital for these opportunities and for higher working capital needs from large deals and the RAM shortage.

V. S. Hariharan: "We are actively going through the discussion on types of targets, etcetera. So, we're clearly considering growth opportunities there that can embellish and complement what we're trying to do with regards to SSG and we will be directly in the area of professional services."

Supply Constraints & Large Deals

• Component shortage is a 12–18 month reality: Smartphones, PCs and GPUs are all supply-constrained, and management hears the gap will last 12–18 months. This is simultaneously a headwind (overseas mobility growth slowed because the Pro and Pro Max mix is higher in the Middle East and that segment is supply-constrained) and a tailwind (anticipated shortages pulled demand forward in India).
• Large deals are getting larger: TSG executed large deals exceeding INR 1,100 crores in Q4, with some closures that slipped from Q3. The data center market in India is projected to grow from 1.5 GW to 7.5 GW over a few years, and the pipeline is expected to keep rising through the first two quarters of FY27.
• Margin discipline on large deals is non-negotiable: Gross margin on large deals is much lower than on regular business, but management insists there is no compromise on return on capital employed. The framing is incremental business with incremental profit.
• ASP, not volume, is doing the work: A significant part of the revenue increase is on account of ASP, with only a marginal increase in units. Management expects this trend to sustain for the next few quarters.

S. V. Krishnan: "Maybe gross margin could be lower, working capital could be lower, higher, all those are fine. But no compromise on return on capital employed."

Arena, Opex & the Investment Posture

• Arena impairment was a clean-up moment: Redington took a significant impairment on its Turkey subsidiary, driven by continuous losses over several quarters, challenging economic conditions, and the Middle East war and oil price increase. The remaining book value is ~USD 0.8 crore, with further corrections possible if market value changes.
• The Lira business is being exited: Arena's revenue has halved from $1 bn to $0.5 bn as management consciously exited the Lira phone business and other Lira-mix businesses. The exit should be complete by the end of this fiscal year. The go-forward focus is IT (PCs, servers) and cloud, which are largely USD-based. Losses are expected to continue next year at a reduced level, with a real profitability turnaround only in the subsequent year.
• Opex is being framed as investment, not leakage: Employee costs are up due to capability building (especially for enterprise and SSG), FX moved from INR 88 to INR 94, Middle East costs rose on insurance and transportation, and technology investments are ongoing. Management is explicit that it will not be conservative on these investments given the opportunity, and expects elevated opex to continue for the next couple of quarters, maybe 1–2 years.
• Working capital improved to 30 days, driven by efficient management and a higher mix toward mobility solutions. However, management expects higher working capital requirements ahead from intended large deals and the RAM shortage, which is another reason cash is being conserved.

V. S. Hariharan: "That elevated opex for next couple of quarters, maybe 1 or 2 years would continue is our expectation... the capability building technology investment, in our view, we should not be conservative, amidst this opportunity, and this investment will continue."

Guidance & Commitments

Key Metrics