Redington Ltd — Q4 FY26

Redington Ltd Q4 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=lhRx2o_mmJ4 Published: 3 hours ago

0:01 1 second Ladies and gentlemen, good day and welcome to Readington Limited Q4 FI26 0:08 8 seconds earnings conference call. As a reminder, this conference call may contain forum statements about the company which are 0:17 17 seconds based on the beliefs, opinions and expectations of the company as on date of this call. 0:23 23 seconds These statements are not the guarantees of future performance and involve risk and uncertainty that are difficult to predict. 0:31 31 seconds All participant lines are in the listen only mode and there'll be an opportunity for you to ask questions after the presentation concludes. 0:40 40 seconds Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. 0:49 49 seconds Please note that this conference is being recorded. 0:53 53 seconds I now end the conference to Mr. VS Hariharan MD and group CEO. Thank you and over to you sir. 1:03 1 minute, 3 seconds Thank you. A very good morning everyone. 1:05 1 minute, 5 seconds I'm pleased to share with you our results for Q426 and full year FI26. 1:12 1 minute, 12 seconds This has been our best quarter so far from both revenue and profit perspective. We recorded uh 33,269 1:19 1 minute, 19 seconds crores of revenue, a growth of 25% year-on-year. 1:23 1 minute, 23 seconds A quarterly profit at console level excluding exceptional items was 467 crores at 1.4%. 1:31 1 minute, 31 seconds Our best profit performance so far. We closed the year at 119,347 crores, nearly $13.5 billion, 1:40 1 minute, 40 seconds marking a YI growth of 20% on revenue. A full year PAT growth excluding 1:47 1 minute, 47 seconds exceptional items was 17% and PAT margin at 1.3%. 1:53 1 minute, 53 seconds This has been a strong year for Readington, reflecting sustained momentum across our core markets and continued progress progress on our strategic priorities. 2:03 2 minutes, 3 seconds It is a continuing story of profitable growth across business segments and geographies. It is also a performance 2:10 2 minutes, 10 seconds coming on back of several geopolitical challenges like the West Asia crisis that we saw during the quarter. Our 2:16 2 minutes, 16 seconds performance was driven by resilience and defined by discipline. 2:22 2 minutes, 22 seconds I'll get into a bit of geography and business unit uh perspective. From a geography perspective, India had a fantastic quarter. The business grew 2:30 2 minutes, 30 seconds topline by 50% and the profit after tax by 41% during the quarter. The growth in India reflects our ability to conquer and execute in our largest market. 2:41 2 minutes, 41 seconds Within India, we had growth across all business units. There was a good uptick in the PC business driven by demand due 2:48 2 minutes, 48 seconds to anticipated component shortage uh as well as large deals. There was a strong demand in mobility with continued momentum in the premium segment. 2:59 2 minutes, 59 seconds Um and uh with the cloud security, cyber security and IT infra investments in India paved way for higher growth in the 3:07 3 minutes, 7 seconds quarter as well as contribution from uh both the SSC side of the business and data center deals with new cloud operators. 3:16 3 minutes, 16 seconds There was continued traction in upcountry expansion initiatives. We grew 45% in the upcountry part of the business and strong adoption of digital and platformled distribution. 3:28 3 minutes, 28 seconds In Middle East, the geopolitical tensions during the last month of the quarter pulled down the performance in March. However, we did see a demand 3:37 3 minutes, 37 seconds spike for cloud and cyber security both from government and enterprise segments. 3:41 3 minutes, 41 seconds Africa continues to see encouraging momentum driven by expanding IT adoption and increased contributions from solution-led business particularly SSG. 3:52 3 minutes, 52 seconds Now moving on to quarterly performance by business units. Most of the business units contributed well to this growth. 3:59 3 minutes, 59 seconds Mobility grew 19% yearonear. It's about 33% of the top line now for this quarter. Driven by strong demand in the 4:07 4 minutes, 7 seconds premium segment and strong execution in the direct to retail segment in India during the quarter. 4:14 4 minutes, 14 seconds While this segment remains volumedriven, it continues to play a critical role for Readington in driving scale and partner engagement. 4:23 4 minutes, 23 seconds Many new initiatives on mid-market enterprise segment reach development of IR channel are underway to create uh 4:30 4 minutes, 30 seconds future growth on the endpoint solutions group uh primarily marked by PCs. Uh this grew 4:38 4 minutes, 38 seconds grew by 20 grew at 28% yearonear contributing to 30% of the top line. PC demand was strong partially uh driven by 4:47 4 minutes, 47 seconds the component shortage as I mentioned before and anticipated larger price increases as well as large deals during the quarter of nearly 1,500 crores. 4:57 4 minutes, 57 seconds Uh again I repeat 500 crores AIPC penetration into the commercial segment continued to grow with 41% of the 5:05 5 minutes, 5 seconds revenues in India from AIPC greater than 40 tops. 5:11 5 minutes, 11 seconds TSG technology solutions group had a growth of 34% contributing to 19% of topline driven largely due to timing of 5:19 5 minutes, 19 seconds large deal executions. We had mentioned in the previous earnings calls part of these deals moved from Q3 to Q4. Some of them got recorded uh this quarter. 5:30 5 minutes, 30 seconds Uh in PSG all cylinders fired data centers, networking, server storage uh and achieved the highest revenue ever. 5:38 5 minutes, 38 seconds We did large deals of more than 1100 crores in PSC during the quarter. 5:44 5 minutes, 44 seconds Now coming to SSG software solutions group continue to have good momentum grew by 31%. It contributes to 17% of 5:52 5 minutes, 52 seconds the top line now for the full year. SSG contributed to 17% of the top line as well versus 15% in fiscal year 25. 6:02 6 minutes, 2 seconds SSC now represents a strong and growing share of our business and a higher quality earning stream continuing to 6:09 6 minutes, 9 seconds deliver higher gross margin and PAT compared to the group. We continue to expand partnerships with tier one OEMs 6:17 6 minutes, 17 seconds and hyperscalers increasing our solution intensity in go to market and build joint business plans to drive wallet share. 6:26 6 minutes, 26 seconds During the quarter I wanted to call out we uh building a lot of uh capability building initiatives uh and several of 6:33 6 minutes, 33 seconds these got rolled out um uh that will realize future potential. Our next version of crowd quarks platform we call 6:41 6 minutes, 41 seconds it true auto internally has been rolled out this quarter. It has greater capabilities for digital life cycle management of customers with analytics. 6:50 6 minutes, 50 seconds We're also executing automated platforms for renewals of subscriptions supported by customer success teams. On the AI 6:58 6 minutes, 58 seconds front, many areas of progress. We formed an AI lab or capability center at Chennai headquarter deploying solutions 7:05 7 minutes, 5 seconds for both internal and external use cases. We've launched an AI exchange which is like a marketplace with over 7:11 7 minutes, 11 seconds 200 AI agents that brings ISPs and AI innovators and our customers through a partner ecosystem together. This has 7:20 7 minutes, 20 seconds potential to accelerate the adoption of AI agents by industry vertical through a distribution approach. 7:26 7 minutes, 26 seconds We've also rolled out this quarter five AI learning centers in uh tier 2 cities through our CSR program to create more 7:34 7 minutes, 34 seconds AI human capacity in the country. Our professional services team in India scope and approach has been shaped to provide a range of productized services around the customer life cycle. 7:46 7 minutes, 46 seconds So that's uh for some of the capability building initiatives. Moving on to operations, efficient manage working capital and higher mix towards mobility 7:55 7 minutes, 55 seconds solutions led to the overall lowering of working capital days to 30 days. Rosier was at 22%. 8:02 8 minutes, 2 seconds Despite the investments we are making in the growth areas, opex control continues to be good and grew slower than revenue growth giving us operating leverage. 8:11 8 minutes, 11 seconds During Q4 um there was a slight uptick on OPEX a combination of factors certain war related premiums on both insurance 8:19 8 minutes, 19 seconds and freight. Um one of AR provisions in geos uh always led to a higher OPEX during the quarter. On a full year basis opex to revenue declined by 17 bits. 8:30 8 minutes, 30 seconds Now coming to our subsidiary arena from a Q4 performance perspective there was a loss of 44 crores Readington portion 8:38 8 minutes, 38 seconds being 22 crores related to exit cost on the LERA business the company's wholly owned subsidiary Readington Gulf carried out an impairment of the trade name 8:46 8 minutes, 46 seconds classified as an intangible uh asset arising from its investment in it subsidiary in Turkey arena based on the 8:54 8 minutes, 54 seconds assessment taking into account challenging economic conditions in Turkey and revised future projections and impairment loss has been recognized 9:02 9 minutes, 2 seconds and disclosed as an exceptional item in the financial results. 9:06 9 minutes, 6 seconds The impact on the group PAT after minority influence is 75.2 crores. In the previous year, exceptional item 9:14 9 minutes, 14 seconds represents gain on divestment of payet or step down subsidiary. 9:20 9 minutes, 20 seconds To summarize, FI26 has been a year of strong growth, transformation, and disciplined execution. We've scaled our 9:27 9 minutes, 27 seconds core business, strengthened our solution capabilities, maintained capital discipline. Our core markets continue to deliver. Our solution business scaling 9:36 9 minutes, 36 seconds rapidly. We're making the right investments for the future. While we remain mindful of macro challenges, we are confident in our diversified 9:44 9 minutes, 44 seconds presence, our evolving business mix, and our ability to deliver sustainable long-term value. I would like to 9:52 9 minutes, 52 seconds reinforce that Edington strength lies in the human capital uh partners and vendors. The current quarter is a 10:00 10 minutes testimony to it. Spellbound performance in India, risk management and business continuity in the Middle East despite 10:07 10 minutes, 7 seconds the risks and dangers and building long-term avenues of uh growth in Africa through SSC. 10:15 10 minutes, 15 seconds Following the onset of West Asia conflict on 28th February 2026, our Middle East operations were conducted under significant constraints. 10:23 10 minutes, 23 seconds You'll be pleased to know while the quarter was impacted by software demand, supply chain disruptions, the withdrawal of war risk, insurance coverage, 10:31 10 minutes, 31 seconds inventory challenges, delays in receivables. 10:35 10 minutes, 35 seconds Uh our teams in the ground demonstrated strong resilience, ensuring business continuity after multiple data center 10:42 10 minutes, 42 seconds attacks where we had our own customers and partners as well. sustaining warehouse operations, creative initiatives uh that started yesterday 10:50 10 minutes, 50 seconds such as tech citadel which is an alternative to physical face-to-face events between OEMs and partner customers. 10:57 10 minutes, 57 seconds We're also seeing increased demand for cyber security and cloud products and uh we'll continue to look for opportunities 11:04 11 minutes, 4 seconds and upsides uh in these tough moments uh while we continue to manage business continuity and downsides in these markets. 11:13 11 minutes, 13 seconds The board has also declared rupees 6 per share of dividend for the year ended 31st March 2026 which is 30% of profits. 11:21 11 minutes, 21 seconds We are very sensitive to our shareholder needs. We have additional capital needs for growth opportunities and are cautious about the evolving geopolitical uncertainty. 11:31 11 minutes, 31 seconds Thank you for your continued support. We look forward to your questions. 11:36 11 minutes, 36 seconds Thank you very much. We'll now begin with the question and answer session. 11:41 11 minutes, 41 seconds Anyone who wishes to ask a question may press R and one on the touchstone on telephone. 11:47 11 minutes, 47 seconds If you wish to remove yourself from the question queue, you may press R and two. 11:53 11 minutes, 53 seconds Participants are requested to use handsets while asking your question. 11:58 11 minutes, 58 seconds Ladies and gentlemen, we will wait for a moment while the question assembles. 12:10 12 minutes, 10 seconds The first question is from the line of Nitan Padmanaban from Invest. Please go ahead. 12:17 12 minutes, 17 seconds Hi, good morning. Uh thanks for the opportunity. Uh and congrats on a very uh solid performance in a very tough environment. 12:26 12 minutes, 26 seconds Now I had a couple of questions. The first is if you uh think about all the 12:33 12 minutes, 33 seconds challenges and the way things have evolved this year uh how are you thinking how should one 12:40 12 minutes, 40 seconds sort of uh think about the next year uh considering that India has been very 12:46 12 minutes, 46 seconds solid this year uh we possibly benefited from some pre- buying and all of that this year so uh that's on one side and 12:55 12 minutes, 55 seconds well on the other side you have had the uh rest of the world business be relatively weak. Um now do you think uh 13:04 13 minutes, 4 seconds the growth sort of flips between uh from an India to Row with Row sort of 13:11 13 minutes, 11 seconds improving a lot more next year and maybe India sort of growth sort of tapering down. So that's the first one. Uh the 13:19 13 minutes, 19 seconds second is in the context of uh the large deals and the pipeline. How is that sort of how how is the uh sort of the 13:28 13 minutes, 28 seconds shortage the price increases uh sort of impacting that and is that sort of you do you think that has a higher sort of 13:36 13 minutes, 36 seconds impact from a a margin perspective or how do you manage that? And finally on 13:42 13 minutes, 42 seconds the software solutions group uh uh this business has scaled extremely well now 17% of business 13:51 13 minutes, 51 seconds u do you think that at at this level growth sort of tapers or there are certain capability sets uh that we have 13:59 13 minutes, 59 seconds been adding which would help sort of sustain the growth as we go forward. Yeah thank you. 14:06 14 minutes, 6 seconds Thanks Nathan. I will uh try and give some answers and Tristan please jump in if I missed something. So let me start with the growth perspective. Uh so 14:14 14 minutes, 14 seconds Nathan if you looked at this year and the previous quarters um our India business grew very well but we also grew very well in Middle East and Africa for 14:23 14 minutes, 23 seconds the first 11 months of the year and uh the previous three quarters clearly we recorded good growth in UAE and GCCL we 14:31 14 minutes, 31 seconds call it uh in those regions and Africa too. Um it is uh the crisis uh and the disruption in supply chain and a little 14:40 14 minutes, 40 seconds bit of softening of demand in the third month of the quarter that led to a slower growth uh uh in Middle East. Uh 14:48 14 minutes, 48 seconds obviously we don't know when the West Asia crisis will resolve right now ceasefire and u uh so to give a little 14:56 14 minutes, 56 seconds bit of perspective on the coming yearly we continue to see good momentum and growth in India. Um we uh we will see a 15:04 15 minutes, 4 seconds little bit of softness for the first quarter. We expect the first two quarters in the Middle East region. 15:09 15 minutes, 9 seconds Africa continues to be strong. Uh and uh as soon as the crisis is out of the way based on I mean some of us were in Dubai 15:18 15 minutes, 18 seconds last week and uh we got a firsthand feel for the market as well. Clearly the government is coming out with a lot of initiatives to surp back demand and uh 15:27 15 minutes, 27 seconds there are many initiatives locally and uh we do expect uh both consumer demand and some of the projects and enterprise 15:35 15 minutes, 35 seconds deals that got delayed to come back. Uh but none of us know when the crisis will be completely out of the way. Uh so we definitely see some softness this 15:43 15 minutes, 43 seconds quarter and maybe a bit next quarter and if it gets resolved soon we do expect to see Middle East coming back to the band. 15:50 15 minutes, 50 seconds In terms of business units uh we all know uh and this has been shared due to component shortage. Uh we have uh gaps 15:59 15 minutes, 59 seconds in supply. We have gaps in supply on the smartphone side. We have gaps in supply on the PC side and uh on the uh GPUs as 16:09 16 minutes, 9 seconds well. And uh the demand is still very strong in many markets and so um that will somewhat drive uh our numbers and 16:17 16 minutes, 17 seconds ability to fulfill numbers. Uh first half of the year that we have visibility to uh the demand in India is strong and 16:25 16 minutes, 25 seconds the demand in uh uh Africa strong middle east again will depend on the supply chain disruption. So I just give you a 16:31 16 minutes, 31 seconds high level of how we look at the uh year out in terms of large deals uh and the 16:38 16 minutes, 38 seconds pipeline uh you know the data center market in India is 1.5 gawatt and it's going to 7.5 in a few years. So clearly 16:47 16 minutes, 47 seconds there's a lot of pent-up demand there and uh that is one part of it. Uh even on the onrem the collocation the the whole space is uh got a lot of demand. 16:59 16 minutes, 59 seconds It's a question of uh how much we want to play uh at what margin at what roay and uh we've talked about it in the last 17:07 17 minutes, 7 seconds few quarters. So we'll continue to make those calls as long as they meet our requirement metrics how much risk we take uh is the demand there. Obviously 17:15 17 minutes, 15 seconds it's very strong and in fact some of the deals that have got closed the previous quarter will show up this quarter. Uh 17:22 17 minutes, 22 seconds and uh they are significantly more than the numbers I talked about in terms of the size of the deals last quarter. Um so clearly we see a good pipeline there. 17:32 17 minutes, 32 seconds Uh but it's a question of appropriating and getting into deals that make sense for us from a profitability and rosé 17:38 17 minutes, 38 seconds perspective. SSG tremendous room for growth still. Uh and I will go part by part. Uh the cloud and the software 17:47 17 minutes, 47 seconds business has actually been growing above average. Uh when we say 31% SSG uh both cloud part of the business and the software is growing greater than 30%. 17:57 17 minutes, 57 seconds The security part of the business is growing slower for us and we need to have catch up there uh both on market 18:03 18 minutes, 3 seconds share, wallet share. Uh so we will drive security much harder in the coming quarters. Uh but within cloud itself uh 18:11 18 minutes, 11 seconds we have great headroom uh for growth. um uh number of hyperscalers getting into the picture and their growth when we see 18:19 18 minutes, 19 seconds in the direct business that they are uh working on clearly on a DTAM the distribution tam perspective cloud has 18:26 18 minutes, 26 seconds good upsides and so does SAS with AI agents in the picture we do start uh seeing some traction on the AI exchange 18:35 18 minutes, 35 seconds I talked about we've been sharing that it got launched in the middle of March and we'll start seeing revenues on the AI part of the business uh sometime 18:43 18 minutes, 43 seconds during the year and uh that will also start ramping up. So the SSC business is still positive to sustain that momentum if not grow faster than that. 18:54 18 minutes, 54 seconds Uh very helpful. Uh just one quick followup. Uh during the uh COVID period when there were shortages obviously 19:02 19 minutes, 2 seconds working capital intensity went down, velocity of business went up uh uh right and doies went through the roof. uh you 19:10 19 minutes, 10 seconds think uh that happens this time or it's it's different? 19:16 19 minutes, 16 seconds It is different um partially because one uh see there is 19:24 19 minutes, 24 seconds also a an AI trend happening in the market. Uh the low end of uh there was a uniform shortage of supply. Um here 19:33 19 minutes, 33 seconds you're getting entry-level uh PCs and entry-level servers uh not being available and more higher price products 19:41 19 minutes, 41 seconds available. Um we are also seeing an uptick in uh end user uh demand but not 19:48 19 minutes, 48 seconds at the same pace uh um that uh partners are stocking up etc. So there is a combination of things happening there. 19:56 19 minutes, 56 seconds So it'll be a bit different. uh we also uh don't know how long this uh demand cycle will last and when the price 20:04 20 minutes, 4 seconds increases will stop. So uh something uh we're not clear even from the OEMs and the vendors. So in two to three quarters 20:13 20 minutes, 13 seconds uh I mean the the supply issues probably going to last for 12 to 18 months from what we hear but in two to three 20:19 20 minutes, 19 seconds quarters uh as people pull forward their buying patterns there could be a change but we don't know we cannot call it 20:26 20 minutes, 26 seconds right now. Listen with this difference between COVID and now COVID while there 20:32 20 minutes, 32 seconds was shortage there was a pent-up demand there was a high demand on account of work from home learn from home etc. 20:42 20 minutes, 42 seconds Today while supply is short the corresponding demand spike is not something that we generally see. But 20:51 20 minutes, 51 seconds having said that there are actually two I mean two sets of customers who the prices are going up quite substantially. 20:59 20 minutes, 59 seconds There are some set of customers who say no no I would want to buy now and avoid 21:06 21 minutes, 6 seconds a higher price increase in the next couple of quarters. So there is an increased demand in that segment. 21:13 21 minutes, 13 seconds Another set of customer group just want to wait for say another three four five quarters and then want wants the price 21:21 21 minutes, 21 seconds to get corrected normalized and then buy. So overall net neck the demand environment is okay but in covid the 21:31 21 minutes, 31 seconds demand environment was on the higher side that also resulted in while you haven't asked I just want to touch upon that resulted in higher gross margin in 21:40 21 minutes, 40 seconds in the in the covid period lower working capital in the covid period as we speak now we don't think that could be visible 21:49 21 minutes, 49 seconds in the current scheme of things that's our current assessment while revenue growth will be that again because of 21:55 21 minutes, 55 seconds higher ASPs not units because of the price rise and of course the gross margin we think we'll be able to 22:03 22 minutes, 3 seconds maintain and working capital could stay where it is or maybe it could go up because we may have to give more credit as Har said or we may have to stock 22:12 22 minutes, 12 seconds excess just to avoid stockout situations. 22:17 22 minutes, 17 seconds Very helpful. Uh uh thank you so much and all the very best. Thank you. 22:25 22 minutes, 25 seconds Thank you. Next question is from the line of Deepak Lalwani from Unifi Capital. Please go ahead. 22:31 22 minutes, 31 seconds Uh yeah. Hi team. Congrats on the results. Uh Krishna. So the first question is can you please break up the receivable and inventory provisionings 22:40 22 minutes, 40 seconds across India and rest of the world separately for the quarter and full year and how we should look at it for FI27? 22:52 22 minutes, 52 seconds Uh see overall inventory provision is well under control and for the full year 22:59 22 minutes, 59 seconds we have had an inventory provision situation of about three bits. This is what has been our long-term average at about five to six bits. 23:09 23 minutes, 9 seconds AR uh for the current quarter is on the higher side as Har explained. There had been certain one-off provisions we had 23:17 23 minutes, 17 seconds to take in example Saudi Arabia in India because there are some government receivables which has taken some time 23:25 23 minutes, 25 seconds etc. These are these are cautionary provisions. We are still confident of recovery but it's going to take some time. It had already taken a bit of a 23:33 23 minutes, 33 seconds time. So uh overall AR provisions are on the higher side. This service is our long-term average and inventory on the other hand has been lower than what it was uh in the past. 23:47 23 minutes, 47 seconds Understood sir. And uh could you just call out how should we think about uh both these line items for FI27? 23:54 23 minutes, 54 seconds Uh you know again to what we have seen in Saudi Arabia and your provisioning style there in the earlier quarters. Uh do you expect some of this to reverse 24:03 24 minutes, 3 seconds maybe in the first half or is it more second halfled? 24:08 24 minutes, 8 seconds We think AR provision may get normalized. Uh some part of it could come back. Uh we are unable to uh uh 24:17 24 minutes, 17 seconds estimate when these collections could happen because it has already taken some time. Inventory provision I think we should be able to maintain. We don't 24:25 24 minutes, 25 seconds foresee any big challenge on the inventory provision. AR uh for the MCU year as a percentage it could come down. 24:34 24 minutes, 34 seconds No sir. Uh so my second question is specifically on the mobility segment where we have seen that India has grown extremely well and premiumization 24:42 24 minutes, 42 seconds continues but mobility uh even if you adjust for exophone uh you know if you knock out that element in the rest of 24:51 24 minutes, 51 seconds the world has has not grown as as fast as uh as India is growing. Could you explain how we should think about the mobility aspect? 25:00 25 minutes Okay. Um see there are two two three things happening here. Um uh firstly 25:07 25 minutes, 7 seconds uh India is a smartphone uh market but within the smartphone segment uh uh and the premium smartphone segment if I take 25:16 25 minutes, 16 seconds for example the Apple uh brand perspective pro max is not uh as high in 25:24 25 minutes, 24 seconds India as it will be overseas. So um one of the reasons mobility uh has been uh 25:31 25 minutes, 31 seconds not growing as fast in the overseas is uh the demand for promax in some of the middle middle east customer segments is 25:38 25 minutes, 38 seconds far higher and that has been on constraint um and uh as that gets normalized we do see the premium segment 25:47 25 minutes, 47 seconds uh growing as fast uh and coming back strongly uh because uh if you look at UAE and KSA there's a lot of premium 25:55 25 minutes, 55 seconds customers who want to the most premium model of uh uh both Apple and Android. 25:59 25 minutes, 59 seconds Um so that's one of the phenomenon that will really change and we expect that to get somewhat normalized during the year. 26:05 26 minutes, 5 seconds But uh having said that the component shortage will play a role uh in the premium phone segment as well and uh 26:13 26 minutes, 13 seconds we'll have to continue to uh just fulfill demand uh based on the supply available. uh but uh we do see overseas 26:21 26 minutes, 21 seconds uh can pick up may not be Q1 but Q2 onwards and there has also been some short supply uh in terms of supply from the 26:31 26 minutes, 31 seconds brands uh and on top of it March played a factor in Middle East where uh we 26:38 26 minutes, 38 seconds couldn't uh function in the in the normal pace even though we did make some alternate arrangements in terms of 26:46 26 minutes, 46 seconds importing into Ireland Netherlands since uh Bombay but still we couldn't catch up with what we would have otherwise done. 26:55 26 minutes, 55 seconds Understood. Uh so my third question is on the OPEX which has been a little more elevated uh because of the one-off of 27:03 27 minutes, 3 seconds receivable and it's still on the higher side. So could you just comment about OPEX uh what has been some of the 27:10 27 minutes, 10 seconds factoring costs here as well? Uh and uh you know employee costs are also in that same breath has has again gone up. So 27:18 27 minutes, 18 seconds could you comment on the opex and employee line item? And then sir, could you speak a little bit about the dividend? Because the dividend this time 27:25 27 minutes, 25 seconds has been a little low. Is this a direct signal that we're going to be using the cash flows for higher growth for 27 and 28? 27:34 27 minutes, 34 seconds Okay. First on the opex see um yeah employee cost has gone up and uh as we discussed in the past 27:43 27 minutes, 43 seconds mainly it's because of certain investments that we are may uh this that I mean that we are making uh towards capability building and that we think is 27:51 27 minutes, 51 seconds important for future growth and more particularly the enterprise segment. So that part of the increase will keep uh I 27:59 27 minutes, 59 seconds mean it'll keep happening. Uh there was also some element of increase on account 28:04 28 minutes, 4 seconds of FX rate as you know uh everything we need to convert into Indian rupees and 28:12 28 minutes, 12 seconds uh the 88 becoming 94 had advantage across also had a disadvantage in account of opics. So that's that's one 28:21 28 minutes, 21 seconds another factor uh that that contributed to the increase. Third uh is the increase which we think is is more 28:30 28 minutes, 30 seconds short-term on account of what's happening in Middle East. We saw some increase in cost and mainly on account of insurance, transportation etc. uh so 28:38 28 minutes, 38 seconds the so the cost of doing business in Middle East is up. Uh and then fourth is uh is on account of technology related 28:47 28 minutes, 47 seconds investments which again like uh the the mean the compensation we think is uh is is going to be on the higher side as we 28:56 28 minutes, 56 seconds move into the future also because of the capability uh the same thing building. 28:59 28 minutes, 59 seconds So overall we are in control because the revenue is going up quite uh interestingly but opex uh as an absolute 29:09 29 minutes, 9 seconds amount we think some part of it is more towards investment is not is I mean it's not the normal opex factoring has 29:16 29 minutes, 16 seconds actually has come down uh in uh in arena what would normally uh I I'm I'm just 29:24 29 minutes, 24 seconds reading out uh the numbers for Q4 last year it was 22 crores which moved down 29:31 29 minutes, 31 seconds to 18 crores in uh in Q3 which is last quarter is now down to 2 crores. So uh 29:39 29 minutes, 39 seconds the amount of factoring has considerably come down and that has resulted in some advantage in the opex overall but uh uh 29:48 29 minutes, 48 seconds it I mean it is it is more an interest cost increase as we discussed in the past. 29:55 29 minutes, 55 seconds uh notice. So could you speak about the dividend and growth aspirations of Readington for 27 and 28? 30:02 30 minutes, 2 seconds Sure. Um so we we h we have received uh inputs from shareholders in the past as well and meetings both one-on-one and 30:11 30 minutes, 11 seconds group meetings that uh definitely if there are growth opportunities uh both inorganic and organic uh we should look 30:19 30 minutes, 19 seconds at them. So as we have signaled uh before we are exploring an organic uh uh opportunities especially in the 30:27 30 minutes, 27 seconds professional services uh area uh on cloud and security uh and uh we are uh actively going through the discussion on 30:36 30 minutes, 36 seconds what types of targets etc. So we clearly considering uh growth opportunities there that can embellish and complement 30:43 30 minutes, 43 seconds what we're trying to do with regards to SSG and these will be directly in the area of professional services and that was one of the reasons uh uh we also 30:52 30 minutes, 52 seconds felt that uh can we conserve some of the capital for these growth opportunities. 30:56 30 minutes, 56 seconds Uh obviously the best Asia crisis uh is a uh something to watch out the short term for the next one or two quarters 31:04 31 minutes, 4 seconds and should we conserve cash for that as well. So those are the two driving factors but clearly we have many growth opportunities uh in our uh radar that we want to look at. 31:14 31 minutes, 14 seconds And just to also there are also expectations of higher working capital 31:21 31 minutes, 21 seconds requirement because of the intended large deals. We expect uh that's going to be more than what we had seen in the 31:29 31 minutes, 29 seconds current year. Plus uh uh because of RAM shortage as I've said maybe we may have to be prepared for higher inventory or 31:37 31 minutes, 37 seconds higher AR. So we just want to conserve cash to make sure all this are seamlessly handled. 31:45 31 minutes, 45 seconds Thank you Deepak. I request to come back for a follow-up question please. Thank you. Next question is from the line of Vijay Man from Monarch Network Capital. 31:55 31 minutes, 55 seconds Please go ahead. 31:57 31 minutes, 57 seconds Hi sir. Hi. Thanks for the opportunity and congratulations on a good set of numbers. A couple of questions from my side. Uh one, what kind of impact are 32:05 32 minutes, 5 seconds you seeing on SSD and CSG due to this you know AI disruption with anthropic and others coming up in cyber security? 32:13 32 minutes, 13 seconds Are you seeing uh the subscription model you know coming under threat and uh what kind of guidance can you do there? 32:21 32 minutes, 21 seconds Okay. Um again we have not clearly seen any uh specific see the way we look at all of 32:30 32 minutes, 30 seconds these models that are evolving is uh uh one step one uh people beginning to use 32:35 32 minutes, 35 seconds them uh for creating AI agents uh that will complement uh um what companies 32:43 32 minutes, 43 seconds want to do enterprises want to do and that's what I mentioned about this AI exchange uh that we have created where we have 200 plus agents from our ISVS 32:52 32 minutes, 52 seconds But has it have a has it had a direct impact on uh uh subscription models and the SAS products we sell? Um so if I 33:01 33 minutes, 1 second break them into three parts clearly cloud continues to be on its renetic momentum specific SAS products that we sell uh whole range of infra software 33:10 33 minutes, 10 seconds design software products we have not seen any let up on the demand of on subscription of these products. uh city 33:18 33 minutes, 18 seconds clearly uh continues to have the momentum that has had but uh there are new products that uh Anthropic has launched recently 33:26 33 minutes, 26 seconds and we expect the other uh providers also to launch where they are you know they are real time uh threat detection 33:34 33 minutes, 34 seconds and fixing uh we'll have to see how much of these are standalone products or how much of these get incorporated into the SAS and subscription products it's too 33:42 33 minutes, 42 seconds early to call uh or see anything in terms of softening of demand. Um long-term clearly we see there will be a 33:50 33 minutes, 50 seconds play for SAS software as a service and a play for AI agents which is service as software and that's why we are dabbling with both so that uh if there is any 33:59 33 minutes, 59 seconds softening in the first one uh we are able to take advantage with the AI agents uh but short-term we don't see 34:06 34 minutes, 6 seconds any impact okay that that helps and and can we look at these frontier models as potentially 34:14 34 minutes, 14 seconds OEMs going ahead like if they come up with products eventually can can they also be tie-ups which we can look at in the future? 34:23 34 minutes, 23 seconds Can you uh clarify a little bit more when you talk about frontier because there are many definitions of frontier markets. 34:28 34 minutes, 28 seconds Yeah. Yeah. So basically looking at anybody like an anthropic or claude you know if if eventually if they come up with models which are standard products 34:37 34 minutes, 37 seconds can can we look at them as you know new tie-ups in the future like we have you know OEMs already working with us in these areas. 34:44 34 minutes, 44 seconds Absolutely. Absolutely. uh bang on uh we already do this with Microsoft with copilot and uh there is a a lot of 34:52 34 minutes, 52 seconds movement on how we market copilot and how we reach uh mid-market customers and uh how they can use that platform uh to 35:01 35 minutes, 1 second create uh AI agents and uh and the whole office automation uh movement uh with 35:08 35 minutes, 8 seconds Microsoft copilot and is a is a case in itself clearly we will uh continue to explore the other LLM and uh the other AI uh providers in terms of uh tie-ups. 35:20 35 minutes, 20 seconds We've already in discussion uh we cannot talk about it yet with a number of these uh but you will see some of these announcements and we definitely uh we 35:29 35 minutes, 29 seconds see that as a great area to focus on and grow. 35:33 35 minutes, 33 seconds Okay, that has and and this uh quarter and going ahead like can you call out what would be the ASCled growth and 35:41 35 minutes, 41 seconds volume led because uh you know ASC's are you know quite high and um you know like they are looking to sustain also going 35:49 35 minutes, 49 seconds ahead so what could be the mix in terms of growth and volume growth see it's uh difficult to mention I'm 35:58 35 minutes, 58 seconds just making a guess uh a significant part of the increase would be on account of ASP And the marginal increase will be on account of units. 36:09 36 minutes, 9 seconds Okay. And we see this trend sustaining for the next few quarters. Yes, that's the expectation. 36:17 36 minutes, 17 seconds Okay. Okay. Any kind of guidance on large deals for 27? Uh how are we looking at large deals and uh what kind of participation you can see there? 36:26 36 minutes, 26 seconds Let me let me tell you uh the past numbers. While for the quarter the total quantum of large deals are about 1,600 36:35 36 minutes, 35 seconds plus crores for the full year it's about 2,500 crores close to 2,500 crores. So you can see what it was in 9 months and what it 36:44 36 minutes, 44 seconds is in Q4 and believe me uh where we see the first two quarters of the current year definitely this can only keep going 36:52 36 minutes, 52 seconds up. This is a very interesting space and that's why one of the reasons why we said we want to conserve cash is to have 36:59 36 minutes, 59 seconds sufficient uh capital to to fuel uh opportunities like this. 37:06 37 minutes, 6 seconds Okay. And margins there could be uh how many like maybe 20 30% lower to you know core business or or how how does it work? 37:16 37 minutes, 16 seconds See I don't think uh in any way we can compare margins in the large deals versus the core business. We have said 37:24 37 minutes, 24 seconds this the two metrics you need to keep that in mind. It's an incremental business and hence there will be an incremental profits. 37:33 37 minutes, 33 seconds Second we are very particular on return on capital employed. No compromise on return on capital employed. Maybe gross 37:40 37 minutes, 40 seconds margin could be lower, working capital could be lower, higher, all those are fine but no compromise on return on capital employed. These two are the 37:48 37 minutes, 48 seconds metric but in terms of margins uh it's it's much lower. I mean it cannot get compared with the regular business. 37:56 37 minutes, 56 seconds Okay. Thank you. Thank you. 38:00 38 minutes Thank you. I request to all the participants kindly limit yourself to two questions per participant and rejoin the queue for a follow-up question. 38:12 38 minutes, 12 seconds Next question is from the line of Hendran Pradan from Maximal Capital. Please go ahead. 38:18 38 minutes, 18 seconds Yeah. Hi sir, I I hope I'm audible. Uh so sir, my first question is uh with regards to the war situation. If you can 38:26 38 minutes, 26 seconds like you know give us uh what is your uh revenue exposure on the you know main markets main impacted markets and uh you 38:33 38 minutes, 33 seconds know any color on consumer versus enterprise exposure. 38:39 38 minutes, 39 seconds See uh Middle East as you know has has been a large part of our business and uh uh 38:49 38 minutes, 49 seconds we are present in quite a lot of countries and this time it's just not one or two countries it's the region 38:55 38 minutes, 55 seconds that is impacted. Uh in terms of revenue and and profits about 30 to 35%age 39:03 39 minutes, 3 seconds of our business happens from this from this market. 39:10 39 minutes, 10 seconds And sir but you mentioned earlier that you know uh there have been incremental orders on the from the government and 39:17 39 minutes, 17 seconds enterprise side especially from DC even in the situation. Is that correct or that is that is more to do from the 39:26 39 minutes, 26 seconds security and the cloud related part because right now when there are challenges in terms of IT security 39:33 39 minutes, 33 seconds obviously that part of the demand has been more but overall there is a logistics impact and uh and the and the 39:41 39 minutes, 41 seconds core business to that extent has got impacted that's what Hari also mentioned in his initial brief. Yeah, the SSG part of the business just to add uh we see an 39:50 39 minutes, 50 seconds uptick um from the government and enterprise segment in the Middle East. 39:55 39 minutes, 55 seconds Uh but the uh hardware part of the business will be soft till the crisis uh gets over and we recover. 40:04 40 minutes, 4 seconds Go ahead sir. So the second question is you know with regards to follow up to you know all your discussion on the uh 40:11 40 minutes, 11 seconds growth in this investment environment. I mean sir u uh correct me if I'm wrong. I mean in this environment you mentioned 40:18 40 minutes, 18 seconds like uh um now the prices are increasing and there has been some shortages. So it is natural to assume that at least in 40:26 40 minutes, 26 seconds the short term there will be you know the ASP growth would be higher and you know that would benefit our growth and 40:33 40 minutes, 33 seconds our margins as well uh in you know uh especially on uh uh consumer businesses and all. So, so but you mentioned that 40:41 40 minutes, 41 seconds you are tentative about the uh growth sustaining unlike uh you know what happened in covid situation. So sir like at least in the short term can you 40:49 40 minutes, 49 seconds expect any uptick in terms of growth and that could taper off uh in the medium term or you know how do you think about it? If you can just you know elaborate 40:57 40 minutes, 57 seconds on that sorry I think uh uh I haven't communicated rightly. We haven't said we 41:05 41 minutes, 5 seconds are worried about the growth. We are positive about the growth and we think this ASP increase the price increase is 41:12 41 minutes, 12 seconds going to be a good tailwind for the business and the classic case is what you have seen uh as as part of the Q4 41:20 41 minutes, 20 seconds numbers. What I was clarifying was we may not see a margin uptick uh with 41:28 41 minutes, 28 seconds service the comparison was with co because in covid we also had while on one hand shortage on the other hand 41:35 41 minutes, 35 seconds higher demand enabled us as a distributor for us to make more money that situation at least in the short term we don't foresee that was uh the 41:44 41 minutes, 44 seconds point thank you I'll request to come back for a followup question 41:52 41 minutes, 52 seconds participants. Kindly limit yourself to two questions per participant. 41:57 41 minutes, 57 seconds Next question is from the from EMS. Please go ahead. Uh yeah. Hi, thank you for the opportunity. So my 42:05 42 minutes, 5 seconds first question is on Arena. So we mentioned we had some exit losses also in Q4 and earlier also we've mentioned that we would have these kind of losses 42:14 42 minutes, 14 seconds going forward. How do you see Arena panning out? We've also taken some impairments. So secondly, how much investment is there in the balance sheet 42:24 42 minutes, 24 seconds related to Arena? Only the 8 million that is left. Yes. 42:31 42 minutes, 31 seconds Let me um uh just give a perspective on Arena how we see going forward. So if you see what we've done over the last 42:38 42 minutes, 38 seconds few quarters, uh we exited from the LRA phone business. We also exited from the other LRA mixed business and we should 42:46 42 minutes, 46 seconds have exited from all of these by uh the end of this fiscal year. So starting next year our focus will be primarily on 42:54 42 minutes, 54 seconds it uh which is PC servers and of course uh cloud as well. Um there is a a good cloud business uh that's evolving in 43:03 43 minutes, 3 seconds arena. Uh so in that sense uh if I look at these businesses uh uh we're positive and they are largely US dollar based 43:12 43 minutes, 12 seconds business. Um the problem of course in Turkey is the the conditions continue to be challenging while the inflation has 43:20 43 minutes, 20 seconds gone down. The interest rates are going down but given the Middle East crisis and the uh West Asia crisis uh we do see 43:27 43 minutes, 27 seconds uh softening of demand further in in Turkey and so uh the conditions are not going to be less challenging. Uh we'll 43:36 43 minutes, 36 seconds have to uh do our best and we have a smaller size cleaner US dollar focused business. Jason you want to add color on balance sheet. 43:45 43 minutes, 45 seconds So see this impairment we have explained the rational nail it is more to do with what we saw uh in the last few quarters. 43:54 43 minutes, 54 seconds Uh there has been continuous losses. Uh the business performance is not in line 44:00 44 minutes with uh what what we had expected. The economic situation as Har said continues to be challenging in that market and uh 44:09 44 minutes, 9 seconds accentuated by the the recent Middle East war and the oil price increase. So uh we had to do what we can do. So uh uh 44:19 44 minutes, 19 seconds we have been uh exiting from the businesses that are not uh uh attractive uh which depends on the local currency 44:28 44 minutes, 28 seconds uh for for borrowing where the interest rates are still uh at about 40 to 45%. 44:34 44 minutes, 34 seconds So those actions are taken but uh since there is no clarity in terms of uh an 44:44 44 minutes, 44 seconds immediate turnaround I think it's important we need to take a critical view uh about uh the investment that 44:52 44 minutes, 52 seconds gets carried in the in the books and hence the retirement we have taken like you said we still have about 8 million 45:00 45 minutes in the books and uh since it's a listed company. As we speak now, the market value is about $75 million. If there are 45:10 45 minutes, 10 seconds any uh any significant corrections, it may call for the the investment of 45:16 45 minutes, 16 seconds current uh uh uh uh I mean book value also. 45:22 45 minutes, 22 seconds Uh and which we will we will we will take a view as we as we close every quarter. But a significant part of it 45:29 45 minutes, 29 seconds had been taken in the in the current quarter. 45:32 45 minutes, 32 seconds Got sir. So going forward since we have only the USD business left do we see these losses coming down? I mean uh so 45:42 45 minutes, 42 seconds my question is a lot of this loss in this quarter is because of the exit costs or do we see continuing loss USD business also? 45:54 45 minutes, 54 seconds There is a business loss. There are also some uh one-offs on account of exits. 46:01 46 minutes, 1 second the business related loss while uh I mean not that uh even the IT business 46:08 46 minutes, 8 seconds makes uh good good profit uh I mean really the environment is difficult you can see but I mean between last year and 46:17 46 minutes, 17 seconds current year the business is down by half and majorly because of our own conscious call what was a billion dollar 46:24 46 minutes, 24 seconds is now half a billion dollar so we expect this loss to continue the quantum would keep coming down. Initially our 46:33 46 minutes, 33 seconds our expectation was maybe uh towards end of uh the current year we will see profits. I think next year we will we 46:41 46 minutes, 41 seconds will see loss but maybe at a at a reduced level and the real turnaround in terms of profitability we expect in the subsequent year. 46:51 46 minutes, 51 seconds Got it sir. Um so my second question is on the PSG business. So earlier we've mentioned about some competition uh 47:00 47 minutes we've you know won large deals and uh we are doing good on that part. So how do you see this space evolving now? How is 47:07 47 minutes, 7 seconds the competition and um how do you foresee it for the next one two years? 47:13 47 minutes, 13 seconds See uh TSC has many dimensions uh Nan. 47:18 47 minutes, 18 seconds So uh one is obviously the on-prem servers that we uh sell to enterprise and government customers. uh uh with the 47:27 47 minutes, 27 seconds big brands. Uh second is the data center the where uh you have neocloud operators jumping into the picture. There is also 47:35 47 minutes, 35 seconds an evolution of uh other kinds of data centers. We call it the edge DCs and AI factories etc. Uh clearly uh the data 47:45 47 minutes, 45 seconds center part is a new business. the existing business uh we continue to have competition from existing distribution 47:52 47 minutes, 52 seconds players but in the neo cloud and the data data center uh we are also new to the picture and uh we are actually I 47:59 47 minutes, 59 seconds would say doing better than a lot of our uh competitors u but it's a matter of uh uh like what 48:07 48 minutes, 7 seconds Christian said uh getting the right deals with the right uh rosé uh and the right risk levels etc but we see the the 48:15 48 minutes, 15 seconds data center part of the business is the one that will be a huge upside and uh getting our strategy around it. First is obviously the hardware. Uh then you have 48:24 48 minutes, 24 seconds uh opportunities to work on power systems, cooling system adjacencies. Uh there's an opportunity to work on fulfilling the capacity of these data 48:33 48 minutes, 33 seconds centers for collocation uh and managed services. So there are many opportunities around the data center area and right now we're 48:41 48 minutes, 41 seconds constructing a plan on how to go after it which part of it makes sense uh and how to invest around it. Uh but that will be our work in the cut out in the next few quarters. 48:52 48 minutes, 52 seconds Got it sir. Thank you and all the best. Thank you. 48:57 48 minutes, 57 seconds Thank you. Participants kindly limit yourself to two questions per participant. Next question is from the line of Sah Doshi from Pink Voice. 49:05 49 minutes, 5 seconds Please go ahead. 49:07 49 minutes, 7 seconds Uh hi, good morning and thank you for the opportunity. Uh just firstly just wanted some clarity again on the uh 49:14 49 minutes, 14 seconds Turkey and the arena business. Uh so essentially this quarter what number we seen in terms of revenue is that the new normal base or we should see further 49:23 49 minutes, 23 seconds decline from here and uh in terms of factoring also would this stabilize at this that's my first question and uh 49:31 49 minutes, 31 seconds second question was related to uh the impact of the war the Middle East uh impact so we've stated in the press 49:38 49 minutes, 38 seconds release that we did see some softening in March. So do we think some further impact in this quarter to play out or 49:46 49 minutes, 46 seconds you don't really any expect any uh material impact because of the same? 49:53 49 minutes, 53 seconds Okay. See arena uh the current revenue is the new normal. 50:00 50 minutes We hope the current factory will be the new normal. Uh we are we are working towards it and we will do whatever it 50:07 50 minutes, 7 seconds takes. But uh uh the the banking environment in that in that world is not 50:14 50 minutes, 14 seconds easy. So I don't uh want to commit anything here. Uh Middle East uh Middle East impact has been there for has been 50:24 50 minutes, 24 seconds there for one month and incidentally that one month is our peak month for the year. So uh it hit I mean it did had an 50:33 50 minutes, 33 seconds impact in terms of lower revenue and accordingly the lower gross margin and 50:40 50 minutes, 40 seconds incremental costs. So this is what has impacted our profitability for the month of March and as as Har has mentioned up 50:49 50 minutes, 49 seconds front we think this situation will continue for maybe Q1 to an extent in 50:55 50 minutes, 55 seconds Q2. All depends on how things gets resolved and life coming back to normaly. It's going to take some time. 51:03 51 minutes, 3 seconds And just to add the trajectory seems similar compared to March. It's not getting worse or it's not getting better 51:11 51 minutes, 11 seconds in the coming in it's coming in this quarter. 51:14 51 minutes, 14 seconds Sure that helps. Uh secondly on the cost structure Krishna sir you did call out uh the excess uh you know the increased 51:23 51 minutes, 23 seconds expenses uh because of investments as well as uh the impact of the rupee on employee cost to an extent but would it 51:31 51 minutes, 31 seconds be possible to you know try and quantify how much is this which is a frontloaded or something of that sort and uh where 51:40 51 minutes, 40 seconds do we expect at what levels in the following year because uh in the absence of improvement in gross margin large 51:49 51 minutes, 49 seconds part of the growth seems to be eaten away by this investment. So just trying to understand how should we think about 51:57 51 minutes, 57 seconds uh you know a sustainable profitable number in good question. 52:04 52 minutes, 4 seconds Uh I think we had already mentioned this uh the opex 52:11 52 minutes, 11 seconds uh and more particularly because we want to create required capabilities in the 52:17 52 minutes, 17 seconds uh technology space in SSG business is going to be more for some time and that need to be looked at more as an 52:26 52 minutes, 26 seconds investment uh than as part of the regular uh uh I mean cost of doing the 52:32 52 minutes, 32 seconds business. So that elevated opex for uh next couple of quarters maybe one or two years would continue is our expectation. 52:43 52 minutes, 43 seconds Uh forex related thing may not happen. 52:46 52 minutes, 46 seconds The uh AR provision incremental AR provision may not happen. Incremental insurance or transportation cost on 52:55 52 minutes, 55 seconds account of me related challenge that may not happen. All those will get normalized in due course. But the the 53:02 53 minutes, 2 seconds the capability building technology investment in our view we should not uh uh we should not be conservative miss 53:10 53 minutes, 10 seconds this opportunity and uh this investment will continue. 53:14 53 minutes, 14 seconds How should we see the profitability? Uh see um in our view we should be able to 53:23 53 minutes, 23 seconds maintain our operating profit. we should be able to maintain our return on capital employed quite strongly that we 53:30 53 minutes, 30 seconds are confident. Uh that's that's one on account of the growth in the rest of the business and while SSG uh the there is a 53:40 53 minutes, 40 seconds capability building cost which is there for some time the profitability could be subdued but uh over a medium to long 53:47 53 minutes, 47 seconds time you will see SSG profitability being quite interesting. So uh operating profit and return on on capital employed 53:56 53 minutes, 56 seconds are the are the two metric in our view outside of Arena um about about 2.2 2.3 2.4% 4% is what 54:06 54 minutes, 6 seconds we expect as IIDA subject to whatever is the composition of the large deal and we 54:12 54 minutes, 12 seconds are quite confident in terms of uh the return on capital employed being maintained above 18% as we speak now 54:19 54 minutes, 19 seconds it's closer to uh I mean it's closer to 20%. And these two are the important metrics I 54:27 54 minutes, 27 seconds sure that really helps and thank you so much for your uh you know detailed answer. Thank you. Thank you. 54:36 54 minutes, 36 seconds Next question is from the line of Ahmed Katan from Labernham Capital. Please go ahead. 54:41 54 minutes, 41 seconds Uh hi, good morning. Thank you for taking my question. Uh my first question is on the Middle East business. Uh what is the sort of uh inventory risk we have 54:50 54 minutes, 50 seconds here? Is this fully covered by insurance and are they distributed across multiple locations? 54:57 54 minutes, 57 seconds It is. Uh you you had asked a very interesting question. This is something which uh we would want to uh explain 55:06 55 minutes, 6 seconds this clearly. Uh we we normally take insurance policies for whatever risk that we foresee all 55:14 55 minutes, 14 seconds insurable risks. Similarly, we had taken war insurance for uh I mean as part of 55:20 55 minutes, 20 seconds our policies. But as the war started, the insurance companies joined together 55:27 55 minutes, 27 seconds with 7 days notice removed this risk coverage and it was an unilateral decision. So uh uh we had to we had to 55:35 55 minutes, 35 seconds manage we we did manage in the form of getting some additional cover from other insurance companies. uh also we did 55:44 55 minutes, 44 seconds transfer of the same identification of new warehouses uh in the in the uh same same location moved some part of the 55:52 55 minutes, 52 seconds stocks from one place to the other in order to avoid the uh open open coverage. So there are lot of things 56:00 56 minutes that had happened uh I mean full kudos to the team logistics team there in spite of uh the the missiles going all 56:09 56 minutes, 9 seconds around the place uh the same place. So uh we we had managed it well as we speak now we think uh we have the proper 56:17 56 minutes, 17 seconds coverage and we don't foresee a challenge but in between the long period yes there was some increased tension. 56:25 56 minutes, 25 seconds Understood. Understood. And my second question is I think in the SSG segment uh in the previous quarters you've called out gross margins being around 5 56:33 56 minutes, 33 seconds to 6%. uh if you could give some rough sense of how these gross margins differ between the different sub- segments of 56:41 56 minutes, 41 seconds you know cloud software and cyber security and overall for the segment how do you see margins evolving over the medium term the gross margins 56:50 56 minutes, 50 seconds let let me attempt the first part u it's harder to give a split uh on this uh but uh the overall SSG segment uh we are 56:59 56 minutes, 59 seconds expecting and tracking above 5.5% gross margin um And uh this can only get better as we get more into professional 57:07 57 minutes, 7 seconds services. Um the cloud see the the normal uh work that we do on cloud 57:14 57 minutes, 14 seconds security and software is resell and uh there will continue to be pressure on uh just the resell portion of the business. 57:22 57 minutes, 22 seconds But as we do more and more professional services that'll create more stickiness and more additional gross margins. Uh harder to give a split between the 57:29 57 minutes, 29 seconds three. uh over a period of time going forward we would like to maintain between 5.5 and six is uh our uh intent and plan and we are tracking so far. 57:40 57 minutes, 40 seconds Understood. Thank you. Thank you. 57:49 57 minutes, 49 seconds Next question is from the line of Deepak Lalwani from Unifi Capital. Please go ahead. 57:55 57 minutes, 55 seconds Yeah. Uh hi sir. Sir could you uh Christian sir could you please help me triangulate three numbers. Uh number one 58:03 58 minutes, 3 seconds is 467 crores of profit that you have uh you know reported in the PPT. Uh point 58:10 58 minutes, 10 seconds number two sir is the reported profit which shows in the uh in the financial disclosures of uh you know 281 crores 58:20 58 minutes, 20 seconds and third is the number uh which you know we have reported post minority as 391. So can you please help me triangulate all these three numbers sir? 58:32 58 minutes, 32 seconds Okay this is a very difficult question on me. 58:36 58 minutes, 36 seconds 467. Okay this 467 does not include uh arena related impairment which is 58:45 58 minutes, 45 seconds classified in the financials as an except exceptional expense. I'll tell you the logic. If you recollect same 58:53 58 minutes, 53 seconds quarter last year, we have had an upside in the form of pay and sale that was again classified as an 59:02 59 minutes, 2 seconds exceptional income. This time it is an exceptional expense. If you go back to all our uh all our decks and the 59:11 59 minutes, 11 seconds explanations, we haven't included that as as as part of our reported pack 59:18 59 minutes, 18 seconds because it was completely a one-off on the positive side. Similarly, uh we have 59:24 59 minutes, 24 seconds eliminated the impairment uh uh I mean impairment loss from this and that leads 59:31 59 minutes, 31 seconds us to 467 crores. This 391 crores is including arena impairment. 59:38 59 minutes, 38 seconds Uh because the the impairment amount is about 75 crores for Readington. 59:46 59 minutes, 46 seconds 281 cr where do you see this 281? Are you talking about 287 is their profit for the quarter? 59:55 59 minutes, 55 seconds Yes sir. Yes sir. Sorry. 287 that is before that is before minority interest that became 391 because a part 1:00:04 1 hour, 4 seconds of the loss that we have taken in Arena that owes to the rest of the shareholders uh of of Arena if you 1:00:12 1 hour, 12 seconds adjust for it the 287 becomes 391 okay so I'll probably take the math from 1:00:20 1 hour, 20 seconds you once again offline uh Krishna could you just also call out that you know uh earlier in the Turkey we had the 20 1:00:29 1 hour, 29 seconds million receivable uh of which we had taken 8 million uh the 12 million was still uh at at at exposure. So could you 1:00:37 1 hour, 37 seconds speak a little bit about the 12 million there and if there is any need for uh creating provisions on that on that bucket 1:00:46 1 hour, 46 seconds as we speak now? No, there are some collections uh uh but but definitely the pace of 1:00:53 1 hour, 53 seconds collections could be better. We don't we don't foresee any need for any additional provision at this point in time. We are quite okay but we can be better in terms of collections. 1:01:05 1 hour, 1 minute, 5 seconds Understood. And sir just the final thing is uh could you call out given the the the wide uh range of uh you know 1:01:13 1 hour, 1 minute, 13 seconds revenues and verticals across the Middle East uh as a cluster Saudi GCC and and and the others. Could you just call out 1:01:21 1 hour, 1 minute, 21 seconds how you're looking at the demand environment in 27 probably vertical wise and regionwise if you can please? 1:01:30 1 hour, 1 minute, 30 seconds Okay. Um I will try and answer the deep u so let let me go uh there are four geographies in Middle East Africa um 1:01:38 1 hour, 1 minute, 38 seconds four clusters we call them. So one is UAE, one is uh KSA, Kingdom of Saudi Arabia, GCCL which has some of the GCC 1:01:46 1 hour, 1 minute, 46 seconds countries like Iraq, Kuwait and there also the Levant countries and the fourth cluster is Africa. Um the UAE uh cluster 1:01:55 1 hour, 1 minute, 55 seconds is the biggest uh and has been has seen the most impact due to the West Asia crisis. Um and that's where we see good 1:02:04 1 hour, 2 minutes, 4 seconds recovery once the West Asia crisis is out of the way. it was growing at around 20% if you remember the last year and the previous year. Uh now within that uh 1:02:13 1 hour, 2 minutes, 13 seconds let's talk about the verticals actually all business units are firing there. Um starting with SSG and PSC software and 1:02:20 1 hour, 2 minutes, 20 seconds technology solutions uh and followed by mobility followed by PC demand short-term because of uh the component 1:02:27 1 hour, 2 minutes, 27 seconds shortage. Uh the next uh would be GCCL uh where there is a big opportunity with 1:02:34 1 hour, 2 minutes, 34 seconds our focus on individual countries uh there uh surprisingly despite the West Asia crisis that area we have still seen 1:02:43 1 hour, 2 minutes, 43 seconds growth good growth and that's probably a combination of some virgin territory that we've not been playing in the SSG business was quite raw and it has 1:02:51 1 hour, 2 minutes, 51 seconds improved uh all of that uh and we saw through March and even as we speak we can see good demand there and the 1:03:00 1 hour, 3 minutes upsides there are on SSG and TSG. Uh and the mobility in that part of the region is also doing well. Um uh so that's a 1:03:08 1 hour, 3 minutes, 8 seconds second. Africa is a third. Africa uh has been been doing considerably well. This year has been a very good year for us in 1:03:15 1 hour, 3 minutes, 15 seconds Africa. Uh again the star performers there are SSE and TSC. uh and uh in the 1:03:22 1 hour, 3 minutes, 22 seconds past both on PCs and phones we've been quite uh flattish because of uh uh arbitrage logistics that we compete with 1:03:30 1 hour, 3 minutes, 30 seconds uh uh unorganized players and fourth is Saudi uh we talked about Saudi uh having a rep prioritization by the government 1:03:39 1 hour, 3 minutes, 39 seconds on investments initiatives etc which actually uh created problems on growth. 1:03:45 1 hour, 3 minutes, 45 seconds uh if you remember year before last we two years in a row we were growing at about 25 30%. But the last few quarters 1:03:52 1 hour, 3 minutes, 52 seconds uh have been challenged and we expect some of that to continue uh because Saudi as a country is trying to juggle 1:04:00 1 hour, 4 minutes with uh all the different initiatives, priorities, vision 2030 and really uh uh what are the uh focus priorities and as 1:04:08 1 hour, 4 minutes, 8 seconds we look at the IT part of the business uh we do see a little bit of a softer demand in Saudi uh we're trying to do best retain our market share which we 1:04:17 1 hour, 4 minutes, 17 seconds have done uh but that's the order GCCL and Africa we see continued growth. 1:04:24 1 hour, 4 minutes, 24 seconds UAE will depend on uh how fast we recover from the crisis. Saudi will take some more time once we uh understand the IT priorities. 1:04:34 1 hour, 4 minutes, 34 seconds Understood. And some of the smaller countries like Qatar and Bahin where do you really classify them as a part of GCCL or UEE? 1:04:42 1 hour, 4 minutes, 42 seconds GCCL. 1:04:43 1 hour, 4 minutes, 43 seconds GCCL understood. So those uh smaller territories are also where we've been gaining lot of share is is helping us right 1:04:51 1 hour, 4 minutes, 51 seconds that's correct and also some of the Levance countries. Yeah. 1:04:54 1 hour, 4 minutes, 54 seconds See if I can give the growth percentage it could be even more clear UAE for the full year we grew at 22%. 1:05:04 1 hour, 5 minutes, 4 seconds Uh for the quarter we grew at 6%. And as Har said this is mainly on account of the March impact uh the Middle East war. 1:05:14 1 hour, 5 minutes, 14 seconds DCCL for the full year we grew at 33% full year for the quarter we grew at 51 1:05:21 1 hour, 5 minutes, 21 seconds 51% in spite of the war which is the market share that he talked about in KSA for the full year the growth was 5% 1:05:29 1 hour, 5 minutes, 29 seconds subdued growth but for the quarter it's a degrowth of 12% it's it's an account of uh the the Middle East war in March 1:05:38 1 hour, 5 minutes, 38 seconds Africa for the full year the growth is 13% for the quarter is 26% So that's that's quite strong. 1:05:49 1 hour, 5 minutes, 49 seconds Understood, sir. Thank you and all the best. Thank you. Thank you very much. 1:05:56 1 hour, 5 minutes, 56 seconds Ladies and gentlemen, we'll take that as our last question. I'll now hand the conference over to the management for closing comments. 1:06:04 1 hour, 6 minutes, 4 seconds Thank you so much for all your questions and uh just wanted to emphasize that uh uh we we feel we have really weathered 1:06:12 1 hour, 6 minutes, 12 seconds through a very good quarter uh despite all the challenges we've had and uh kudos to the team uh the brands we work with and the partners. Uh in terms of 1:06:22 1 hour, 6 minutes, 22 seconds Q1, Q1 is normally a lower seasonality quarter for us but we are uh committed and we want to definitely sustain good 1:06:30 1 hour, 6 minutes, 30 seconds momentum. Um but having said that it is the lowest seasonality quarter for Readington uh uh normally but we'll do our best. Thank you and look forward. 1:06:41 1 hour, 6 minutes, 41 seconds Thank you very much on behalf of Readington Limited. That concludes this conference. Thank you for joining us and you may now disconnect the Thank you.