REDINGTON Q2 FY26 earnings call.
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Revenue
₹29,076 Cr
verified against source
Revenue YoY
17%
reported change
EBITDA
Pending
latest reported figure
Source
screener in
record provenance
Actual signal trajectory
Where this quarter sits.
Quarter read
What the record says.
Redington delivered its best Q2 on record with ₹2,918 crore revenue (+17% YoY) and ₹388 crore PAT, with profitability growing faster than revenues. All business segments contributed—Mobility (35% of revenue, +18%), ESC/PCs (32%, +11%), and the newly formed Software Solutions Group (16%, +48%) led growth. Geographic expansion was broad-based: India and UAE grew 23%, GCC+Levant 22%. Working capital improved to 31 days with OPEX growing only 9%, demonstrating strong operating leverage. SSG is a clear bright spot with 48% growth and higher-than-average margins; management targets 30-50% growth for this segment going forward. The Arena subsidiary remains a drag with ₹37 crore loss (including $3.4M one-off from Vodafone contract sale), but the TL business exit is expected to reduce Arena losses materially from Q4. Management flagged SSG and Mobility as ahead of plan while TSG/PCs remain behind due to delayed Windows 10 refresh cycle. Risks include persistent Arena losses, margin pressure from commoditizing hardware, and Turkish currency exposure.
Colored figures show movement against the previous available record.
Guidance to track
- Software Solutions Group (now reporting as combined entity) is expected to grow 30-50% over the next 6-12 quarters, building on the 48% growth seen this quarter. Cloud, cyber security, and software pieces are contributing roughly equally with professional services below 10% but set to grow.
- The Vodafone Connect sale (concluded this quarter) and ongoing TL business exit should materially reduce Arena losses from Q4 FY26, with full benefit flowing through from FY27. Interest cost savings expected at ~$23M annually.
- Management sees good outlook for India, UAE, and KSA for at least the next 2-3 quarters across all business units. Mobility momentum expected to continue; PC refresh could be stronger in H2 if India trend continues.
- Opex will increase incrementally to fund SSG capabilities—technical pre-sales, digital platform (CloudQuarks) enhancements, Red Academy training, and ecosystem development. Returns expected to justify investments given SSG's higher gross margins.
Risks flagged
- Despite Vodafone exit, Arena still carries ~$500M revenue IT business and ~130 crore debt. Management expects continued losses until the TL business is fully wound down over 6 months, with PBT remaining in loss territory. Turkish Lira volatility continues to create working capital and interest cost headwinds.
- Windows 10 to 11 migration has not materialized as expected; consumers and commercial buyers adopting a wait-and-watch approach with possible extended Windows 10 support. AI PC penetration at 22% in commercial is positive but has not driven the anticipated broad refresh cycle, particularly overseas.
- Enterprise and consumer hardware increasingly commoditizing, with brands and OEMs pressuring distributor margins. Large data center deals, while incremental to revenue, carry lower profit percentages. Management acknowledged this tradeoff explicitly.
- An analyst questioned whether the 40% dividend payout policy could constrain growth investment given strong market opportunities. Management acknowledged the point as 'bang on' but only committed to bringing it to the board—nothing concrete decided, suggesting potential capital misallocation if growth investments are constrained.
Key quotes
- This has been our best quarter so far from a revenue perspective recording nearly 2,918 crores of revenue with a quarterly profit of 388 crores. The profitability was the best Q2 ever.
- SSG will have normally lower working capital but not significantly lesser when compared to the company average. What you should note is the company average is mainly on account of MSG where the working capital is much lower.
- Software solutions group today has an ability to appropriate higher margin to drive higher than average profitability. That's one of the reasons we embarked on this journey to grow that piece of the business faster.
- If the gross margin is X percentage, operating profit is about half of that and PAT is about one quarter of that. What we had observed from the numbers is from the incremental gross margin what we have derived is almost half of that into the PAT.
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