1

SYNOPSIS

Redington India Ltd has incorporated in 1961, commenced the operations in 1993 distributing information technology products.

Redington (India) has collaborated with Research in Motion (RIM) to establish a national retail distribution channels for their BlackBerry handsets.

During the quarter ended, the robust growth of Net Profit is increased by 33.94% to Rs.1020.90 million.

Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 20% over 2011 to 2014E respectively.

Redington (India) Ltd has recommended a dividend of Rs. 0.40 per Equity share of Rs. 2/- each (i.e., 20%) for the financial year ended March 31, 2012.

Redington (India) Ltd has considered and approved the allotment of 1, 86,500 equity shares of Rs. 2/- each at a premium of Rs. 24/- per share under Employee Stock Option Plan, 2008’.

Years Net sales (Rs.mn)

EBITDA (Rs.mn)

Net Profit (Rs.mn) EPS P/E

FY 12 211929.90 6334.00 2927.40 7.35 10.50

FY 13E 243719.39 7372.68 3509.88 8.81 8.75

FY 14E 268091.32 8231.80 4051.16 10.16 7.59

Stock Data:

Sector: Hardware Industry (IT)

Face Value Rs. 2.00

52 wk. High/Low (Rs.) 102.00/65.05

Volume (2 wk. Avg.) 71000

BSE Code 532805

Market Cap (Rs in mn) 30728.20

Share Holding Pattern

1 Year Comparative Graph

BSE SENSEX Redington India Ltd

C.M.P: Rs. 77.10 Target Price: Rs. 87.00 Date: June 30th 2012 BUY

Redington India Ltd

Result Update: Q4 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market Cap. (Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Redington India 77.10 30728.20 7.35 10.50 2.32 55.00

Modern India 29.00 1088.70 0.08 362.50 2.29 20.00

Sakuma Exports 15.40 253.00 4.30 3.58 0.39 10.00

Surana Corp 68.20 1490.80 30.97 2.20 0.49 18.00

Investment Highlights

Q4 FY12 Results Update

Redington India Ltd has reported net profit of Rs 1020.90 million for the quarter

ended on March.31, 2012 as against 762.20 million in the same quarter last year,

an increase of 33.94%. It has reported net sales of Rs 55151.60 million for the

quarter ended on March.31, 2012 as against Rs 52067.40 million in the same

quarter last year, a rise of 5.92%. Total income grew by 6.00% to Rs 55279.10

million from Rs.52149.60 million in the same quarter last year. During the quarter,

it reported earnings of Rs 2.56 a share.

Quarterly Results - Consolidated (Rs in mn)

As At Mar-12 Mar-11 %change

Net sales 55151.60 52067.40 5.92

PAT 1020.90 762.20 33.94

Basic EPS 2.56 1.92 33.20

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Break up of Expenditure

Recommended Dividend

Redington (India) Ltd has recommended a dividend of Rs. 0.40 per Equity share of

Rs. 2/- each (i.e., 20%) for the financial year ended March 31, 2012.

Allotment of Equity Share

Redington (India) Ltd has considered and approved the allotment of 1, 86,500

equity shares of Rs. 2/- each at a premium of Rs. 24/- per share under Employee

Stock Option Plan, 2008’.

Acquiring a Property

Purchase of property by M/s. Easyacces Financial Services a wholly owned

subsidiary of the Company has purchased a building "STERLING TECHNOPOLIS"

admeasuring 2, 30,000 sq. ft. located at Old Mahabalipuram Road, Chennai. The

new property purchased by the subsidiary Company is let out on lease and could

be utilized to meet the Company's plans to house the employees of the Redington

group under a single roof in the long run.

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Company Profile

Redington established in 1993 is today positioned as one of the leading Supply Chain

service provider in IT, Telecom, Consumer Electronics & Home Appliances Industries.

With its corporate office in Chennai, it has 49 Branch offices, 48 warehouses and 46

service centers across India. A team comprising of over 1100 highly skilled and

committed professionals helps the Company deliver its products and services to every

corner of the country. The team is supported by a robust IT & Communication

infrastructure connecting 115 physical locations of the company and a state of the art

ERP and e-commerce back bone. Redington has built its business on very strong

ethical and commercial fundamentals which has not only helped it to consistently

exceed the industry growth rate, but has also enabled to firmly establish it as the

"partner of choice" with most of its vendors and business partners. A compounded

annual growth rate of more than 50% over the past 15 years. underlining the very

strong foundation and prudent practices on which the company's business practices

have been built.

Infrastructure

The company has continuously invested in Office, Warehousing and IT infrastructure

in order to ensure the highly scalable operation essential for delivering accelerated

revenue growth year on year. A judicious selection of locations and optimal sizing of

Offices and Warehouses, supported by an appropriate mode of network connectivity,

has provided the Company the right balance between optimizing current running costs

and the future growth requirements. All Branch Sales Offices, Warehouses, as well as

Service Centers are connected through a Wide Area Network that enables real-time,

online transaction processing and provides a seamless, continuous update on

Purchase, Sales, Stocks and Credit details. The network has in-built 100%

redundancy, including a Disaster Recovery Centre and a scalable architecture that

would continuously address business requirements necessitated by the accelerating

growth of the organization. Warehouse locations are decided by the requirement of

space and delivery TATs committed to customers as per best industry standards.

Service Center locations emphasize convenience and ease of approach for customers

requiring support for all the products serviced by Redington.

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Business relationship

The company still continues to enjoy excellent business relationship with its suppliers

like Acer, APC, Apple, Canon, Cisco, Computer Associates, EMC, Epson, Gigabyte,

HCL Infosystems, Hewlett Packard, Blackberry, LG, Luminous, Hitachi, IBM, Intel,

Kodak, Lenovo, Linksys, Microsoft, Nokia, Samsung, Seagate, Systemax, TVS

Electronics, Viewsonic, Western Digital, Whirlpool, Wipro, 3COM etc.

Company’s subsidiaries

The company operates subsidiaries namely

� Redington (India) Investments,

� Cadensworth (India),

Qatar and Easyaccess Financial Services, India

Products

� Components

� Digital lifestyle

� Enterprises

� Networking, storage and power

� Peripherals and Consumer PC

� Software Solutions

� Systems

Services

� Services Offered

� Warranty Support and post

warranty Support

� Infrastructure Management

Services

� Spare parts Warehousing

� Forward and Reserve

Logistics

� CRM and SCM Software

Development and Support

� Professional Services

� Repairs and Refurbishments

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� Core Business Units

� IT Services

� Contact Center and Call

Center Services

� 3PL for spares

� Smart and mobile phone

support

� High Level Repairs and

refurbishment

� Spare parts, Upgrades and

packs Distribution

� Enterprise services

Redington (India) Limited has informed the Exchange that M/s. Fortinet Inc, a

worldwide provider of network security appliances and a market leader in unified

threat management (UTM), has appointed the Company as a distributor for

distribution of complete range of their products and subscription services which

provide broad, integrated and high-performance protection against dynamic

security threats while simplifying the IT security infrastructure. This tie-up would

enable the Company to improve its strategic expansion in the Security Solution

business.

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Financial Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 174677.40 211929.90 243719.39 268091.32

Other Income 103.40 290.30 304.82 323.10

Total Income 174780.80 212220.20 244024.20 268414.43

Expenditure -170064.30 -205886.20 -236651.52 -260182.63

Operating Profit 4716.50 6334.00 7372.68 8231.80

Interest -960.90 -1520.40 -1672.44 -1772.79

Gross profit 3755.60 4813.60 5700.24 6459.01

Depreciation -245.60 -310.30 -353.74 -378.50

Profit Before Tax 3510.00 4503.30 5346.50 6080.51

Tax -862.30 -1112.90 -1327.53 -1489.72

Profit After Tax 2647.70 3390.40 4018.96 4590.78

Minority Interest -387.70 -462.80 -509.08 -539.62

Net Profit 2260.00 2927.40 3509.88 4051.16

Equity capital 792.70 797.10 797.10 797.10

Reserves 11103.30 12427.70 16446.66 21037.44

Face value 2.00 2.00 2.00 2.00

EPS 5.70 7.35 8.81 10.16

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E

Description 3m 3m 3m 3m

Net sales 54357.10 57378.80 55151.60 60115.24

Other income 15.60 9.50 127.50 89.25

Total Income 54372.70 57388.30 55279.10 60204.49

Expenditure -52987.10 -55838.50 -53268.80 -58492.13

Operating profit 1385.60 1549.80 2010.30 1712.36

Interest -355.50 -377.80 -454.20 -467.83

Gross profit 1030.10 1172.00 1556.10 1244.54

Depreciation -80.70 -77.10 -81.70 -89.87

Profit Before Tax 949.40 1094.90 1474.40 1154.67

Tax -266.60 -256.20 -334.50 -294.44

Profit After Tax 682.80 838.70 1139.90 860.23

Minority Interest -70 -160.40 -119.30 -125.27

Share of Profit & Loss of Asso -0.10 -0.20 0.30 0.00

Net Profit 612.70 678.10 1020.90 734.96

Equity capital 796.50 796.90 797.10 797.10

Face value 2.00 2.00 2.00 2.00

EPS 1.54 1.70 2.56 1.84

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

No. of Shares(in mn) 396.35 398.55 398.55 398.55

EBITDA Margin (%) 2.70% 2.99% 3.03% 3.07%

PBT Margin (%) 2.01% 2.12% 2.19% 2.27%

PAT Margin (%) 1.52% 1.60% 1.65% 1.71%

P/E Ratio (x) 13.52 10.50 8.75 7.59

ROE (%) 22.26% 25.64% 23.31% 21.03%

ROCE (%) 29.11% 35.66% 33.71% 30.98%

Debt Equity Ratio 0.43 0.41 0.33 0.27

EV/EBITDA (x) 6.48 4.85 4.17 3.73

Book Value (Rs.) 30.01 33.18 43.27 54.78

P/BV 2.57 2.32 1.78 1.41

Charts:

NetSales & PAT

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P/E Ratio (x)

Debt Equity Ratio

11

EV/EBITDA (x)

P/BV

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Outlook and Conclusion

At the current market price of Rs.77.10, the stock is trading at 8.75 x FY13E

and 7.59 x FY14E respectively.

Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs.8.81 and Rs.10.16 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 15% and

20% over 2011 to 2014E respectively.

On the basis of EV/EBITDA, the stock trades at 3.03 x for FY13E and 3.07 x for

FY14E.

Price to Book Value of the stock is expected to be at 1.78 x and 1.41 x

respectively for FY13E and FY14E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.87.00 for Medium to Long term investment.

Industry Overview

IT/ITeS industry has been one of the key driving forces fuelling India's economic

growth. As a proportion of national gross domestic product (GDP), IT/ITeS sector's

contribution has risen from 1.2 per cent in 1997-98 to an estimated 7.5 per cent in

2011-12.

Information Technology (IT) has evolved as a major contributor to India's GDP and

plays a vital role in driving growth of the economy in terms of employment, export

promotion, revenue generation and standards of living. The Indian IT-BPO sector is

estimated to aggregate revenues of US$ 88.1 billion in 2010-2011, with the IT software

and services sector (excluding hardware) accounting for US$ 76.2 billion of revenues.

The sector includes IT services, engineering design and R&D services, ITES (IT-enabled

services) or BPO and hardware.

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Market Size

As per NASSCOM estimates, IT/ITeS sector (excluding hardware) revenues are

estimated at US$ 87.6 billion in FY 2011-12. The IT/ITeS industry is expected to grow

by 19 per cent during FY 2012-13.

In 2011, the IT and ITeS industry had the market size of US$ 76 billion, according to

an industry report from NASSCOM and Aranca Research. Additionally, the market size

of the industry is expected to rise to US$ 225 billion by 2020 considering India's

competitive position, growing demand for exports, Government policy support, and

increasing global footprint.

In segments of the IT & ITeS sector, IT services accounted for the largest share of the

overall market size, with revenues of US$ 46 billion during FY2011, BPO had the

market size of US$ 17.3 billion, engineering design and product development

accounted for US$ 12.9 billion, and hardware had the lowest size of US$ 11.8 billion

in FY2011. In FY2011, total exports from the IT sector stood at US$ 59 billion and the

industry grew at a CAGR of 16.4 per cent during the five-year period of FY2007-2011

despite the global economic recession in 2008 and 2009. Exports from the IT sector

were the major contributor to the overall exports and accounted for over 57 per cent of

the total exports during FY2011. According to a study by management advisory firm

Zinnov, adoption of IT services in the Indian SME segment is growing at 15 per cent

and is expected to reach US$ 15 billion by 2015.

Growth Drivers

� Strong competitive position with high market share

� Huge talent pool

� Well established delivery centers across the world

� Cost and tax advantages

� Encouraging Government policies

� Strong growth in export demand from new verticals and the non-traditional

sectors such as public sector, media and utilities

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� According to Nasscom, domestic revenue from IT and BPO services is expected

to rise to US$ 50 billion by 2020 from US$ 15.7billion in 2011

� Use of new and emerging technologies such as cloud computing

� Increased IT adoption in key sectors such as Telecom, Manufacturing and BFSI

� SEZs will drive growth in the Indian IT sector as more of SEZs are now being set

up in Tier II cities and about 43 new tier II/III cities are emerging as IT delivery

locations

Recent trends/Investments

More recently, online retailing, cloud computing and e-commerce are the major driving

forces behind the rapidly increasing growth in the IT industry. Online shopping has

increased with the emergence of internet retailing and e-commerce.

� India's IT-BPO revenues are also driven by a rapid increase in rural BPO units,

which accounted for more than US$ 10 million in the total sector revenues.

According to NASSCOM, employee base in the rural areas is expected to

increase by over 10 times by 2013-14, compared to 5000 in 2009-10

� The IT/ITeS industries have added 7.96 lakh jobs in the Indian economy during

the one year period ending September 2011, according to the Economic Survey

2011-12

� Increasing internet penetration and affordability for personal computers has led

to a rapid increase in the number of Internet users in the country to reach more

than 121 million, out of which 17 million are online shoppers, according to the

Internet and Mobile Association of India (IAMAI). The number of Internet users

in India is further projected to triple by 2015

� According to a customer poll conducted by Booz and Co, India is the most

preferred destination for engineering off shoring, which are encouraging foreign

companies to offshore complete product responsibility to Indian ITeS companies

� Not only are new players looking at setting up shop in the state of Hyderabad,

existing IT/ITeS players are continuing with their hiring spree in the state.

Large companies such as Infosys, TCS, Genpact, Deloitte, Facebook, Bank of

America, Thomson Reuters, Amazon, Google, Cognizant & Franklin Templeton

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among others are all growing their presence in the state. According to Andhra

Pradesh Government's estimates, the total IT/ITeS sector hiring for 2012-13

could be of the order of around 50,000 professionals

� Quicker, the internet and mobile based classified company, has announced that

its parent received investment of US$ 32 million from a group of private equity

investors. Warburg Pincus has led this round of fund raising, fifth and the

largest for Quicker, with participation from existing investors such as Matrix

Partners India, Newest Venture Partners and ebay Inc.

� According to IAMAI, online sales of branded apparel almost doubled in volume

to 4.99 million pieces during April 2012, as against 2.54 million in the same

month a year ago. Also, E-ticketing continued to grow with irctc.com recording

5.56 million bookings in April, 2012, as compared to 2.26 million bookings in

April 2011

Government Support/Initiatives

According to industry experts, the Government of India is expected to increase its

spending on the e-governance projects, which would contribute towards growth in the

IT & ITeS sector. The Government has launched a project to provide high quality

broadband access to village Panchayats through National Optical fiber network by

2014. The project would benefit small and medium enterprises (SMEs) in the country.

In the twelfth Five Year Plan (2012-17), the Department of Information Technology

proposes to strengthen and extend the existing core infrastructure projects to provide

more horizontal connectivity, build redundancy connectivity, undertaken energy

audits of State Data Centers (SDCs) etc. The core infrastructure including fiber optic

based connectivity will be leveraged and additional 150,000 Common Service Centers

(CSCs) will be setup to create the right Governance and service delivery ecosystem at

the Panchayats. The high penetration of mobiles will be leveraged to deliver both

informational as well as transactional Government services on mobile phones.

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Road Ahead

IT/ITeS sector has also created tremendous entrepreneurial and job opportunities,

generating direct and indirect employment of nearly 2.8 million and around 8.9 million

respectively. Estimates reflect the growth to be more than 14 million (directly and

indirectly) by 2015 and around 30 million by 2030.

______________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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