Redington Limited — Call Transcript 2025

Ladies and gentlemen, good day and welcome to the Redington Limited Q1 and FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. This conference may contain certain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of their future performance and involve risks and uncertainties that are difficult to predict. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. V.S. Hariharan, Managing Director and Group CEO. Thank you. Over to you, sir. Thank you. Good afternoon everyone, this is Hariharan. I'm pleased to share with all of you our Q1 2026 results. This has been our best Q1 so far from a top line perspective with strong growth in both top and bottom line. Compared to the quarter 1 of 2025, our revenues for the quarter grew by 22% and profits by 12% year-on-year. Excluding Arena, our subsidiary in Turkey, our revenues for the quarter grew by 24% on revenue and profits by 15% year-on-year. Outside of the challenges with Arena, which I'll talk in a moment, our subsidiary, the profit performance has been good. Overall PAT percentage stood at 1.32% for the quarter excluding Arena. Now let's get into a little bit of detail on geographies and business units from a geography perspective. The revenue growth was contributed by strong growth in many geographies. India at 24%, UAE at 35%, Kingdom of Saudi Arabia at 32%, rest of Middle East at 18% and Africa was stable. India had an overall very strong performance with profit after tax growing faster than revenues with most business units contributing well. The Cloud Group, the Mobility Group and the Technology Solutions Group coming to business units. The Mobility Solutions Group led with a stellar performance this quarter at 44%. Growth and demand on the premium segment of the market across India and Middle East was strong. Cloud Solutions continued its momentum as you've seen over the last few quarters with 41% top line growth and continued success in the hyperscaler business. We continue to take advantage of the cloud transition and digital transformation enabled by AI. The Technology Solutions Group performed well on top line this quarter at 21%. There were a lot of big deals in India and UAE though margins declined due to a combination of mix of larger deals as well as general margin stress in the Technology Solutions space. The software businesses and security solutions, infrastructure software and application software continued their growth momentum. This is an area we can do a lot more, both increasing the breadth of our offerings and gaining share. Hence we are putting efforts and investments in all the geographies to increase our intensity and focus here. The Endpoint Solutions Group with the PC business was steady at 3%. It's been flattish for a while. We do see signs that what we've been talking about for a while on refresh cycles on PCs bought during the COVID period as well as the Windows 10 to 11 upgrades and hope to have and look forward to more growth in the second half, and we are seeing signs of that. We saw good growth from all the top 10 brands in our portfolio, and we also see several software brands getting into the top 10 of our business. Now coming to working capital and OpEx and gross margin hygiene factors. Continued efforts on efficient management of working capital resulted in 37 days closing working capital, which is 2 days lower than the previous year. Q1 our overall financing cost, excluding Turkey, reduced by 8% due to efficient management of working capital and our superior credit rating AA allowing us for better borrowing rates, especially in India. OpEx control continues to be good and grew much slower than the revenue growth at 6%, giving us good operating leverage. Gross margin has been below expectations, and it's a combination of the mix shifting towards Mobility for this quarter, the big deals in TSG, and also market pressures on the TSG run rate business. Now coming to Arena, our subsidiary. Arena's performance was impacted due to provisions. We believe these are one-time, but we are monitoring and watching them closely. Due to the market conditions in Turkey, we see a rise in the number of Concordat cases last quarter. Concordat is a temporary relief given by the courts to companies facing financial difficulty to restructure their debts with creditors. Few of our partners have filed for Concordat. The situation we have encountered was unexpected, and while we have taken provisions, the team is taking all necessary actions to recover outstandings. Though there is a tempering of inflation in Turkey and anticipation of lower lira interest rates, the outlook remains uncertain. Our subsidiary Arena is recalibrating our approach to the business in Turkey and taking proactive steps to manage the business cautiously. By tightening working capital, managing overdue credit limits closely, and reducing our Turkish lira exposure, we are hopeful that we will recover from the Q1 challenges of Arena as we go forward. With the new growth trends that we see on Cloud AI-driven digital transformation, we remain optimistic on the outlook going forward as mentioned in the last quarter as well. Q1 is normally our softest quarter of the year, but we executed well based on the addressable opportunities and retained our share in the market. We also encountered geopolitical tensions both in India and in the Middle East, but managed to weather through those. We feel there are opportunities to grow faster in Software Solutions, subscription models, and Infrastructure Hardware space. With the creation of Software Solutions Group, the focus and investment towards creating additional value add of brands and ecosystems should pave the way for faster growth. Though this will be a multi-year journey, we'll continue to emphasize and enhance our core hardware business which has been executing well and growing nicely. Before I close, I wanted to share something special this year. Redington was recognized as the most trusted company in the technology distribution sector by VARINDIA. This award isn't just a recognition of our business strength, it's a reflection of the trust we have built with our partners, our customers, and all of you our shareholders. Trust is not built overnight. It comes from showing up year after year with consistency, transparency, and purpose. This award belongs to every Redingtonian who brings in their best every day and to each of you who believe in our journey. Thank you. We look forward to your questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nitin from Investec. Please proceed. Yeah, hi, good evening. Thanks for the opportunity. I think we had a very great quarter from a growth perspective. Just wanted your thoughts on the margin side of things. You did mention three elements which sort of impacted the margin. If you could give some more color there as to why it is, I think anything from a philosophy standpoint, these large deals that we are seeing, in which geographies are they, and how are the sort of, are you happy with the kind of requirements on working capital and all of those for those deals, and how should we think of margins overall on a going forward basis? Do you think different thought process on how you would like to take this on a going forward basis? Thank you, Nitin. See, on the margins, if you see between Q1 of last year to Q1 of this year, there is about 60 basis points of drop, which was about 5.7%. Now it's about 5.1%, giving you a broad split of what is this drop on account of. About 10 basis points relate to the PayNet divestment because this was there as part of our results last year. Second, in Arena, like what Hari mentioned, there had been still the economy as well as the industry is going through stress. There is about some 10 basis points of drop on account of Arena on top of the PayNet. The balance, which is about between 35 basis points-40 basis points, is primarily on account of TSG business. That's where the large deals, it actually comes into play. We have discussed that before, where while either the gross margin could be low or the working capital could be beneficial, we have to make some compromise. These being large deals, we only ensure that our return on capital employed is that requirement is met. Those are taken care. Large deals do come at lower margins. Even otherwise, there are some stress in terms of margin because of higher competition in the marketplace, and also vendors are not in a position to offer higher margin in the TSG space. These are the main reasons why in TSG, if the drop in margin is observed, but otherwise this is a breakup overall in terms of the year-on-year gross margin drop outlook. If I need to give you in the same form, the PayNet is something that is permanent, but Arena, we feel it could get recouped. It will take some time, but we are confident we will bring it back. In the case of TSG, that also links to your other point. We think the large deals doesn't seem to be a one-off. It's going to continue for some time, and we need to play this in order to make sure that our revenue growth is in place, our market share, and also the vendor share is in place. We feel on the large deals, if there are significantly higher large deals, we will start tracking it separately, and also we will see how it can get shared. Outside of it, the rest of the TSG margins, which is on account of the market pressure, we think it is going to take some time. That's not going to come up that fast. Having said that, overall at an operating profit and the PAT level, the point which Hari mentioned, I think we have ensured visible Q1 that we have had in the past years. We are broadly in line, and that had come on account of the OpEx optimization as well as the working capital control, which has resulted in lower interest cost. We think this management of working capital and OpEx is going to help us from a profitability perspective. This is the guidance on the gross margin. Nitin, just to add one more point on a question that you asked. These deals are happening both in India and in UAE. We don't have a practice of calling out specific deals, but we see an increased number of deals both for data centers as well as the AI space. We are only seeing more of these, and we want to take our fair share as long as we are able to get our return on capital employed with the lower margins. One another point, Nitin, that you asked, do we have sufficient working capital for large deals as we speak now? We think we have. At the end of June, our gross debt to equity was 0.36x. Net debt to equity is about 0.23x. Do we have enough capital in terms of addressing some of the large deals? Yes, it all depends on the size of the deals. We think the size of the deals also could go up if there are requirements at an appropriate time. We will come back and talk to the street, but right now we are quite okay. Got it. I just have a follow-up if I may. I think this quarter we also had a reversal of provisions that added some 57 basis points on a sequential basis, which means that the margin drop was actually higher. The question is that these deals, and it looks like the bigger margin drop obviously is in the overseas segment. The overseas deals are what have actually dragged the margins more. Now those deals, are they government contracts? Are they private? In terms of the working capital deals there, how comfortable are they? Is it longer than our normal averages? I don't see it in the working capital. As of now it seems to be okay. Broadly, how is it? Could you just give some thought process and some guardrails that you generally have around it. The deals, Nitin, are only private deals. We're not working with the government. We work with people who might be working with the government, but we don't work directly. All these deals are private sector deals. Second point on the inventory provision reversal. See Nitin, Q4 and Q1 are really poles apart. My suggestion, please don't mix up the reversal of inventory provision, which is the inventory provision that we have this quarter. There is a positive inventory provision to the extent of about 5 basis points, which is broadly in line with our long-term trend of about 5 basis points to 6 basis points. For this quarter, inventory provision has not been any different from the long-term average. AR provisions, as Hari explained, have spiked and that's mainly on account of Arena. Got it. Perfect. Thank you so much and all the best. I'll get back in the queue for a follow up. Thank you. Thank you. The next question is from the line of Aejas Lakhani from Unifi AMC. Please proceed. Good evening, Hari. Mr. Krishnan, you know the top line and the margin is the good news. The provisions are hard to understand. They seem higher than anything you've taken in the past, and they came without warning. That's something I'd like to know more about. Also, the interest costs. We expected that the sale proceeds that you received would have helped you mitigate interest significantly. Your international interest cost seem to have spiked quite a bit. Again, total surprise. Can't understand. There's something about cash flow being INR 1,300 crores in the minus. Help us understand that. Also, could you tell us if you continue to use factoring, and if so, how much for this quarter? Okay, on the first point regarding provision, see in Turkey, seriously the economy is going through a lot of stress. There are increased applications that are made by companies for Concordat. Concordat is like debt restructuring. This is pre-bankruptcy. I'm just going to specify the number of companies that have applied for Concordat in the last seven years. The average has been between 1,500-2,000 companies. Last five years, every month starting from January 504, February 365, March 414, April 444, May 508, June 541. Consistently, you can see about 500 companies applying for Concordat in Turkey every month, vis-à-vis about 1,500-2,000 companies a year. I'm just giving you a perspective on how the economy is moving and we are part of the ecosystem. What we had seen in our business, there are some customers who have applied for Concordat in the current quarter. Maybe we could have given you a perspective last time, but all these are happening as we speak now. Also, it's something that we are keeping ourselves abreast of and we are also putting some actions. This called for some actions at our end. We felt after review of all our pending ARs and what has got delayed, there is a need for creating an extra provision. We had accordingly done about $8+ million of provision in Arena, which we think is one time and we should be able to manage as we speak now the rest of the ARs that need to get collected. Is this a surprise? It's a surprise even for us. Since the market is tough, we need to take a considered view. We think we have taken a proactive view in terms of identifying this case and have dealt with it in the books. Second is the interest cost. Interest cost per se in the balance sheet has gone up by 14% and that is only the interest. If you consider the factoring and interest together, for your other question, do we do factoring? Yes, the quantum has come down but we still do factoring. Overall, for last year, factoring plus interest together was INR 148 crores, which is now in the current quarter down to INR 122 crores. Has that come down? It has come down. It has come down by 18%. Is this what we expected? No, we thought it would come down even further for the reasons that we had explained within this. If you take only Arena, Arena's last year factoring plus interest was INR 90 crores, which is down to INR 69 crores. Even in Arena there is a drop of factoring and interest cost in the current quarter year-on-year. There were a couple of factors which has resulted in this not being even more significant. This was the expectation. The first point is the PayNet money, it came in U.S. dollar and U.S. dollar rates are about 10% to about 11%-12%. We had to pay off the loan which was costing us at 10%-11%-12%. On the other hand, there has been a corresponding increase in working capital. I'll explain why all those, but majority of those increases have happened in the Turkish lira business and the Turkish lira loans were costing us 50%. The delta you can see, while PayNet money has come which was only taking care of 1/5 of our interest cost reduction, on the other hand we had to take loans at a higher cost. Why did this increase happen? There were three factors. One, the delay that we are talking about, the Concordat related or the general market delays, because there is some sluggishness in terms of the overall liquidity situation in the market itself. Because of this, there has been a working capital blockage that had happened, which a part of it we have dealt with and we think the balance will come. It will take some time, but it will definitely come. Second, until the PayNet money came, we had some challenge in terms of cash flow there and because we were not able to get sufficient bank loans, etc. We were delaying some of our vendor payments. That pressure, we had been waiting for the payment transaction to get completed, so that got paid out. Third, we also thought now it has given us a headroom to increase the business. Please understand in this business if we remain on the sideline, vendors will push us out. We also need to play the market share game. While we are not going to compromise on any fundamentals, this is something that we need to consider in a balanced way. There has also been some buildup on account of inventory. All this has resulted in extra working capital and extra debt and also extra interest cost. While I did say interest on a year-on-year basis had come down, it could have come down even more faster had we not increased our working capital. This is where we are third on the negative cash flow. I think we had discussed that in the past with our profitability metrics and a 40% dividend payout. If you are able to retain our working capital days, our growth can be in the range of 10%-12% when our growth is in the range of 22%-24%. As Hari has mentioned, the three big markets which are India, UAE, and KSA, all these three constitute close to 80% of our business. Our growth rates are north of 20%. In UAE and KSA it was north of 30%. When we are growing at that pace, definitely there will be capital requirement. We will not have seen free cash flow, which is what we have seen the case in Q1. We think it is more to do with the growth and we are quite comfortable with that. Sorry, I'm not sure I've answered. It was a long answer. If there are further queries, please tell me. Sir. Yeah. On the subject of the provision, on earlier occasions you've clarified that you have an insurance. I'm not sure if that's limited to India business or also covers your global business. Could you help us understand if this is covered by insurance? Okay. My answer at that point in time would have been for other markets. For example, in India and in MEA our AR is majorly covered. That's not the case in every other market. For example, in Turkey, in Africa, in a few other countries, insurance either you don't get insurance or you get far less insurance. In this case, is there an insurance? There is an insurance, but the coverage has been quite small. Okay. Given what you've told us about the need to, if you operate in Turkey, you need to be a serious player. To retain market share is important, given the risks and the costs and the factoring costs and the interest costs and the never ending provision costs, it's been several quarters of this. When will you evaluate whether you need to be in Turkey? You have many markets in which you're doing well. Why would you destroy all the good work by continuing to break your head on a market that doesn't reward you? Fair question. We've spoken about this before. It's challenging to get into a market, but not very easy. We can exit a market easily. As we speak, we are recalibrating our strategy in Turkey. Over the next few months, we are going to see what is the best way for us to do business and continue in Turkey. It is being done. There is a strategy discussion that is happening with our subsidiary as well as with the board. We will keep you updated as we progress on this. It's a fair question. For other shareholders, you must understand that maybe we are less. We are able to be a little more dispassionate because there is some distance between the business and us. When you have recurring troubles in the market and you're actually increasing exposure, putting good money that you receive from the sale of your subsidiary into increasing business, that's resulting in increasing provisions, it's very, very frustrating, sir. It's disappointing that management has to be told this by a shareholder. No, we definitely take your point and I don't think we feel the same frustration. Believe me, we are as objective and dispassionate because we owe this to the shareholders and we are working for you. We understand as much on this and are as frustrated because we were seeing light at the end of the tunnel and we were expecting a good profit turnaround with the PayNet divestment and using that money to focus on the cleaner business. That was clearly our strategy going into this year. We are also equally frustrated and we want to make sure that you understand that we are clear that we want to do good business and make sure that we have a good return on investment. We are very clear about that. Just one add-on point, I think it is important to understand the facts here. I don't want you to think we have allocated more capital just to increase our business. Maybe I have not conveyed that correctly. A part of the money is stuck because of delay in collections, which is a regular part of the business. There is no increased allocation, but there is some money that is stuck and which we had seen in other places also in the past. That is not something unusual. This is a business risk and that is a conscious risk that we need to take and move on. That is an environmental situation that we are faced with and we are confident we will handle it in the best possible manner. Second, I had also said there had been a lot of delays to the vendors in terms of payment. Those are obligations. It's not an increased allocation. At some stage we had to end up paying. We were holding on, we were stretching it and once we got the money that had to get the thing paid. The third one where I said we have increased the, I mean we were trying to buy more to make sure that our market share is maintained. Maybe that's where there can be a judgmental view. I just thought I need to make it clear and if I still need to give you roughly, I mean the proportion, it could be 1/3, 1/3, 1/3. We are only talking about 1/3 where there is a judgment involved. Noted sir. Beyond. We don't have enough understanding and visibility of the day to day you're dealing with or the issues that you deal with. We respect what you're going through, but it's important in the spirit of the award that Hari talked about in his opening remarks. The shareholder trust is also contingent upon a realistic assessment of exit, not just entering businesses. It's been a long wait. There's been fantastic progress in India and in your Middle East businesses. Your Saudi and UAE are doing terrific P&L and growth. For some reason, you all have taken unnecessary time to resolve something that should have been done. That's our view. May agree, not agree, but that's our view and I think we thought we should share it. No, we don't disagree with it, Sarath. We will definitely give it our best in terms of viewing our long-term strategy in Turkey. We are also not running away from being objective and dispassionate about it. You can be rest assured. Thank you. I have one follow-up. Sir, you mentioned that 500 companies continue to come in the debt, bankruptcy. What gives you the comfort that the one-time $8 million provisioning may not repeat in the subsequent quarter? Could you just call out that the credit insurance that you have, how much do you expect to collect out of that $8 million from this credit insurance? Okay. Our insurance provision is net of whatever we expect to collect from the credit insurance agent. Hedges, for your first question, how comfortable we are as we speak now. It's an assessment that we need to take in our assessment, I think this is good enough. As you know, these are evolving situations. You need to have trust on us and we also have trust on the team. We are at it. That's what I can tell you. This is something it's not the first time that we have seen at all. We have seen it in various places in various times and each situation is different. In our assessment, an $8 million is good enough to handle this case. Could you please call out the specific factoring cost for the quarter? It's about INR 45 crores. Sorry, sorry. It's about INR 31 crores. This is INR 68 crores in Q1 last year. Thank you. Thank you. Thank you. Before we take the next question, we would like to remind participants that you may press Star and 1 to ask a question. The next question is from the line of Rucha Somaiya from Old Bridge. Please proceed. Thanks for the opportunity and congratulations on a good set of numbers. I just had one question. In terms of data center, you mentioned that you are getting demand from data centers. Specifically, I wanted to ask, is every hardware that goes into data centers, does that act as a demand center for Redington products? Any color on that would be great. Thanks. Your question is not very clear. Can you repeat, please? My question was the hardware demand that goes into data center, does that act as a demand center for relative products? Sorry, your question is does the data center products add demand to the Redington products? Yeah, yeah. It does. Typically, what goes into a data center are server storage, they can be GPUs, non-GPUs, Intel-based. We work with a variety of brands, both international and local, to fulfill these. Definitely, the IT products that go into a data center are something that we work with and have been working with for a long time. All right, sure. Thank you. Participants who wish to ask a question may please press star 1 at this time. The next question is from the line of Pratik Kothari from Unique PMS. Please proceed. Yes. Hi, good afternoon, sir. Two questions on PSG. One is you made a comment on the increased competition. Is this some geography specific? You also made a comment that vendors. Not very keen to pay higher. If you can just highlight a bit more on that. Please. First of all, this is not, I mean, in one market. This is something that we had seen across markets. This is more an industry issue than a market issue. There is increased competition because of higher growth in this space. Overall, the growth potential is high, there is increased competition, and vendors also have restricted margins. All said and done, if there are less margins that we can get in the marketplace, we always go back to the vendor and then get whatever that we can get from them. If they have a restricted margin, they have only so much to share, which is what I meant. Hence, the overall margin that's available in the business as we speak now is constrained, is limited. Let me add another perspective here. See, there are a few things happening in the technology solutions environment. One, there is the growth of cloud where the data centers for the cloud are being put up by a variety of players. The on-prem products are being played both by global players like HP Enterprise, Dell, Lenovo, etc. There are local players that are evolving, which are working on both GPU as well as non-GPU servers. The intensity of competition is going up for both cloud data centers and on-prem with a variety of different players jumping into the mix. As a result, the global players are pressured in terms of margins, in terms of pricing to compete. Obviously, they're trying to either play the game by going direct or by trying to work with distribution and channel partners with lower margins. Clearly, the demand is outstripping and the growth year-on-year is fantastic. If you add data centers and on-premises servers that are being consumed and with all the cloud, all kinds of cloud, the competitiveness has significantly increased. Fair enough. In these large deals which we called out, we said the margins are lower, but so are working capital. The overall ROC still gets meant there. See, I won't say ROCE will get merged, this thing met. If that's the case, it's an easy choice that we need to make. There could be some compromise, but we have some threshold ROCE which we don't want to breach unless it is too important or strategic that we keep in mind. These are not transactions which will come at regular commercials. That's first off. Correct. You called out this 60 basis points different gross margins. Out of this, it seems only Arena is something which can kind of mean reward based on whatever actions that you guys take. The rest all seems to be permanent. I mean PayNet obviously, but even say the large deals in TSG or the competition. Yes and no. See, the large deals, that's why I said if there are big, big deals which significantly impact the numbers, we need to track it separately and call it out. Even outside of it, we think as things settle down, the market operating price could go up, and we should be able to recoup back our profitability in the TSG segment. Having said that, the software services and the cloud part of the business, we are very positive there, the margins are better. We think the higher growth in that segment is going to help us to bridge this drop in margins. The Software Solutions piece of the business is about roughly 15% of our business, and it's growing at 25% right now. This quarter grew at 24% as well. That part of the business delivers a gross margin close to 6%, which should help us counterbalance the dips elsewhere. Next, off Arena, any guidance that you would like to give for the year. Next, what does normalize look like? Be it at a gross margin, PAT, whatever. Our objective we have set out, I mean set out clearly and have also called it out, we would want to maintain our operating profit between 2.3%-2.5% and PAT above 1.3%. That is something that we are still focused. We are hopeful. We don't see any challenge there. Thank you and all the best, sir. Thank you. The next question is from the line of P Venkatesh from Corporate Database India Private Limited. Please proceed. Hello? Hello. Yes, sir. Yeah, I just wanted to understand. If you have seen this number, we can mention about company filing for the. Could we have called out this risk much earlier as far as offices in Turkey are concerned? Any thoughts on that? The kind of provision that you have taken out there, what is the extent of refusals that are under kind of doubtful? Can you follow that figure also? Thank you. Okay. Venkatesh, these are evolving situations. If we had so much clarity, definitely we would have highlighted upfront. We had to take a view as we were closing our books. We think there is no delay and these are at an appropriate time. If there is anything more, definitely we will come back to you at the right time. Second, very specific to Arena, in our view about $20 million is the delay in collection, out of which we had provided for about $8 million. We think we should be able to collect the balance as we stand now. Thank you. The next question is from the line of Aejas Lakhani from Unifi AMC. Please proceed. Yeah, Krishnan, a follow up. I'm still trying to understand the call out of the ability to maintain that EBITDA aspirational margin of 2.3%. Given how the first quarter performance has been, what gives you the confidence that in the remaining nine months, given the dynamic situation in Turkey, we will have to cover up more than the 2.3% so that the blended number reaches 2.3%. What gives you that confidence, sir? Okay, see this issue in Turkey is we think it's one off. We don't see all this. We have to make an assessment at this point in time. Second, in the earnings deck, you would have seen one slide where we had given for a longer period how have been our Q1 operating profit and PAT percentage. I see a confusion. That's why some of the concerns are coming up. There is a comparison between Q4 or there is a comparison with a full year number versus Q1, which cannot be the case. Our Q1 has always been the lowest quarter in terms of revenue, lowest quarter in terms of profitability. You can see in the slide the trend in terms of operating profit. I am removing the three years of COVID period because those are, we don't want to reckon. The operating profit average pre and post is about 2.06% and we are at 2.09%. Better than that, the PAT percentage is 1.16%, I mean pre and post, and we are at about 1.32%. Have we done better like what Hari said? Definitely we are. Maybe if the AR issue in Arena has not happened, it would have very clearly come off. Look at it this way. Our AR provision is about 0.39% this quarter. Normally it's about 10 basis points. Let's assume it is 10 basis points. We are now talking about a 29, which is close to 0.3% dip in profitability only on account of AR, which at the PAT level could be about, say, about 22 basis points-23 basis points. 22 basis points-23 basis points impact is built in in the number that you are seeing. I don't think you need to be worried. We are definitely not worrying. We are confident in terms of what we have said. Understood, sir. My next question is for Hari. Sir, you had mentioned that you have now created a Software Solutions Group. Firstly, I wanted to understand that the HyperScaler, the pure SaaS, the software as a service as well as security is a part that encompasses this Software Solutions Group. Is that understanding correct? Absolutely right. Those are the three groupings. Security, software, and even within SaaS, infrastructure SaaS and application SaaS, and cloud was separately. Hyperscaler piece was separately in CSG. Now all three of them will be together in Software Solutions Group, and you will start seeing some of those in the coming quarters. Noted. Sir, given that this is the highest growing piece for us, could you specifically give some color on what are the gross margins and EBITDA margins that we have in this specific vertical? As I said earlier, we are tracking between 5.5% and 6% and closer to 6% on the gross margins. On these categories, obviously we have a lot of work to do. I think we focused very well in the last four, five years on the hyperscaler piece, going beyond just resale, going into consumption of workloads and professional services around it. You get to appropriate, when you do professional services, even higher gross margin even though it's a smaller percentage of the business. As we focus and double down on security and SaaS, there is an opportunity to maintain those kind of gross margins. There's potential to add services around it. There's also potential to bring in more brands and get more share. There is more growth and more gross margin that can be appropriated. We are building a plan. It's not going to happen overnight. It's a multi-year journey. We started the journey, we are making investments there. The gross margins you can expect in that business is between 5.7% and 6% plus margins. Understood. Sir Hariharan, in the start you mentioned that the TSG run rate business is seeing some sort of a challenge. When you're calling out the run rate business, what does it really encompass? The run rate business is really channel business that we work closely with global vendors and these are deals that we work closely with them, which they strike the deals and we fulfill them. It's an ongoing channel business with their Tier A, Tier B partners that Hewlett Packard Enterprise, Dell, and these kinds of brands and Lenovo, these kinds of brands have. We work closely with them to fulfill the deals that they work with customers and with us. Understood. Finally, what is the blended interest cost that we are paying on consolidated today sir. Can you say blended interest cost? You want absolute amount? No, just the percentage like is it 7.58%? No, no, no. That varies by market. It's too difficult to put, I mean 1% Arena we discussed. Right, right. In the rest of the markets maybe I should say it varies between 6%-7.5%. Understood, sir. Okay, sir, thank you much. Thank you. The next question is from the line of Sahil Doshi from Thinqwise. Please proceed. Yes, thank you for the opportunity. My question pertains to that. This quarter we've seen a positive delta in terms of the MSG shares. Consequently, we haven't seen a similar follow through in working capital in terms of benefit coming through. Could you talk a little on. Could you quantify the impact of the increased Mobility share on the gross margins? Okay. See the benefit of Mobility growth. Definitely seen in working capital. Outside of Mobility, there is an increase in the board. That's something that we see in the marketplace. It's just not in the case of Redington, even with other competition, the credit days in the market are more. However, if you see end of June last year, we were at about 39 days of working capital closing and now we are at about 37. There is a drop of two days. This is primarily on account of the mix, which is higher contribution from MSG because of the mix change. The disadvantage that we have had in terms of the Mobility is offset by the TSG. In TSG, our growth has been slower, which is what is taken over by MSG. Both broadly have got neutralized and hence that impact on the gross margin is not visible. Even if I need to put a figure, there could be about 5 basis points-6 basis points of impact on account of both. Okay, understood sir, appreciate it. The other question pertains to these large deals. Could you quantify how many, what do you define a large deal as, and is there any factoring on account of these again in this quarter? If we just see a long-term trend, the 5% adjusted gross margin which we've seen, this is the lowest ever we have reported in any quarter. Structurally, are we looking at growth at the cost of margins? Is this how we should think about it, or have the terms of trade in the entire channel changed? This should be the new normal. Okay. The definition of the large deal, it is too difficult to define because the size of the businesses are going up. I'm just putting it in a very broad level. One and a half, two years back, anything more than INR 100 crores could be a large deal. Last year we had handled certain deals which are more than INR 200 crores. I'm talking about each transaction. If we look at the businesses that are coming, there are some business which are multiple times bigger than this. It's too difficult to put a very specific amount if it's quite substantial. It is to one customer, one vendor. I mean, we think it need to be called out as a large deal. Okay. Related to the factoring and the other question on the growth over emergence. Sorry, which one? Is there any factoring on account of these large deals which you have done, and if you can quantify that. No, not in this quarter, but in the past for some of the large transactions. If we think we need to do receivable factoring, we had done, but not in this quarter. Sure, sir. My other question, some of this is difficult, Sahil, to guide. I tell you this is the challenge in the back to back business. The deals come, we need to take a decision at that point in time, what to take, what not to take. Each one is a different animal by itself. We are supposed to structure it in that form, so it cannot get guided in a very simple form. Wherever we think there are possibilities, we hedge it in the form of back to back payment terms, or if it calls for more credit and there are possibilities for us to factor it with the bank, we do that. The other question you had was is this a new normal and are we compromising gross margin for growth? See, it's a matter of relevance and market share. For the run rate business we will maximize and have our share. In the big deal business, if you play in that incrementally, yes, you will get additional growth and yes, your gross margin percentages will deteriorate as long as they make sense of a return on capital employed. We have a threshold as what Krishnan said, it makes sense to us. We have to play that game. If we don't want to participate in the big deal because it's pulling down our gross margin percentage, we may become less relevant in that category. See, one another point I want to make a mention here. This is a market which is very attractive and which is pretty large even for the global leaders, and they are all present in that market. You have to ensure as a leader, we are the leader in India. As a leader, it's important that you need to play the game in line with what a global player will do if the same transaction can be picked up by them. If we are not able to do, then that advantage goes. We are very conscious about the risk, we are conscious about the working capital that we deploy and the returns that we need to make. These are the choices that we need to keep making as we move forward to Sahil. Sure, sir. Thank you. Appreciate the candid responses. Just final one on Arena, if you can just quantify or you can just call out what's the situation currently and how should we think about profitability and capital infusion further on. No capital infusion. We haven't invested, we haven't put any capital, we haven't made any commitment in Arena post our acquisition way back in 2010. There are no capital investments that are planned. Having said that, in Arena, the economy and industry are still going through stress. We have confidence in our people in terms of how they manage and that's something. Wherever required, we are pitching in. I mean we are pitching in. We are helping them. We would be very cautious. We think the situation will become better. As Hari said, we are also looking strategically in terms of what we can do at the right point in time. We will share with you what's our thought process and what's our plans. As we speak now, we are trying to do our best in the given situation. Sure, sir. Thank you so much. Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please proceed. Good evening, sir. Just one confusion that I had. In the beginning, you had called out the 60 basis point decrease in gross margin, and out of that 20 basis point was attributable to Arena and PayNet, and the remaining to the TSG large deal business. Later in the call, you mentioned around 30 basis point of AR provisioning. So. I got confused about how much is the one-time thing and how much is because of the one-time AR provisioning and how much is repeatable. Can you please clarify that? See, AR provisioning is part of OpEx. It is not a part of margin. Both are independent. Have the margins dropped? The margins have dropped. We have discussed about it. At the same time, we had brought in OpEx control, which is why our OpEx increased. Even though revenue growth was 22%, OpEx growth was 6%. Even though gross margin growth was 14%, OpEx growth was 6%. Interest—we have had a degrowth by considering interest and factoring together. These have enabled the profitability to be strong. If your question is if this gross margin drop had not happened, if the AR provision had not happened, would the profitability growth have been more, the answer is yes. Your OpEx growth of 6%, which was anyways a good sort of number, would have been even lower had this 30 basis points of AR provisioning not been done this quarter. Oh, sorry. In OpEx I have not included AR. Without AR, the OpEx, the regular OpEx is 6%. If we consider AR, our OpEx growth is 13%. Okay, so this 13% would have been 6% except for this 30 basis points of AR provisioning that we have done this quarter. Yes. Okay. Sorry, one second. One. If you add up AR, including AR, the growth is 19%, not 13%. OpEx plus AR y-o-y is 19%. Only OpEx is 6%. Hello. Sorry, one minute. We are just taking the figures. Just give us one minute. Yeah, it's 19%. Understood. OpEx plus AR year-over-year is 19%. Only OpEx excluding AR is 6%. Correct. Okay. Secondly, sir, on this TSG large deal, I understood the strategic thing that since we are the market leader, we have to play sometimes. These could be something that is more in work going forward as well. Having said that, if I look at the working capital days, somehow it did not seem intuitive that we got the benefit of the lower working capital days because of these larger deals. The days reduction was small and the free cash flow was also sort of negative for the quarter because of that. How do I, I mean, did we get, what kind of benefit did we get on the working capital because of these large deals? It wasn't significant this quarter. It wasn't significant this time. On a normal basis, are those significant? Like because we take a hit on our margin. It depends on each deal. That's why I said normally there could be a compromise either on the margin or on the working capital, but sometimes, I mean, that may not be significantly felt. Working capital deduction wasn't quite significant. It was only two days overall. Sir, finally on the Turkish business, on our parent balance sheet, what is the net carrying value of the investments that we have done for Arena? It is currently at about $30 million, 30. 30. Okay, understood, sir. Congratulations for steady numbers and all the best for the coming quarters. Just on that question, I think it's important also for me to tell you Arena is a listed company, and Arena's market cap, I don't know, today it ranges between $85 million-$90 million. For your question, what's our current investment in the book is about $30 million. If I need to calculate what is the market value of that, it is 50% of this amount, which could be between $40 million-$45 million. That can give you some comfort. Understood, sir. Thank you. Thank you. Due to time constraints, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir. Thank you so much for all the questions. I know because of the gross margin declines as well as the challenges we've had in Arena, our subsidiary, there were a lot of questions. We feel very strong the way we've executed the quarter in all the geographies outside of Arena. We are confident as we go forward in Q2, we do see the NPIs in Mobility as well as the Technology Solutions and the Software Solutions business building out a decent quarter for us and look forward to sharing that with you in three months. Thank you. Thank you. On behalf of Redington Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Speaker 7: Ladies and gentlemen, good day and welcome to the Redington Limited Q1 and FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. This conference may contain certain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of their future performance and involve risks and uncertainties that are difficult to predict. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. V.S. Hariharan, Managing Director and Group CEO. Thank you. Over to you, sir. Ladies and gentlemen, good day and welcome to the Redington Limited Q1 and FY 2026 earnings conference call. ladies and gentlemen good day and welcome to the redington limited q1 and fy 2026 earnings conference call As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. as a reminder all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes This conference may contain certain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on the date of this call. this conference may contain certain forward-looking statements about the company which are based on the beliefs opinions and expectations of the company as on the date of this call These statements are not the guarantees of their future performance and involve risks and uncertainties that are difficult to predict. these statements are not the guarantees of their future performance and involve risks and uncertainties that are difficult to predict Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. should you need assistance during the conference call please signal an operator by pressing star then zero on your touchtone phone Please note that this conference is being recorded. please note that this conference is being recorded I now hand the conference over to Mr. V.S. i now hand the conference over to mr v.s Hariharan, Managing Director and Group CEO. hariharan managing director and group ceo Thank you. thank you Over to you, sir. over to you sir

Speaker 5: Thank you. Good afternoon everyone, this is Hariharan. I'm pleased to share with all of you our Q1 2026 results. This has been our best Q1 so far from a top line perspective with strong growth in both top and bottom line. Compared to the quarter 1 of 2025, our revenues for the quarter grew by 22% and profits by 12% year-on-year. Excluding Arena, our subsidiary in Turkey, our revenues for the quarter grew by 24% on revenue and profits by 15% year-on-year. Outside of the challenges with Arena, which I'll talk in a moment, our subsidiary, the profit performance has been good. Overall PAT percentage stood at 1.32% for the quarter excluding Arena. Now let's get into a little bit of detail on geographies and business units from a geography perspective. The revenue growth was contributed by strong growth in many geographies. Thank you. thank you Good afternoon everyone, this is Hariharan. good afternoon everyone this is hariharan I'm pleased to share with all of you our Q1 2026 results. i'm pleased to share with all of you our q1 2026 results This has been our best Q1 so far from a top line perspective with strong growth in both top and bottom line. this has been our best q1 so far from a top line perspective with strong growth in both top and bottom line Compared to the quarter 1 of 2025, our revenues for the quarter grew by 22% and profits by 12% year-on-year. compared to the quarter 1 of 2025 our revenues for the quarter grew by 22% and profits by 12% year-on-year Excluding Arena, our subsidiary in Turkey, our revenues for the quarter grew by 24% on revenue and profits by 15% year-on-year. excluding arena our subsidiary in turkey our revenues for the quarter grew by 24% on revenue and profits by 15% year-on-year Outside of the challenges with Arena, which I'll talk in a moment, our subsidiary, the profit performance has been good. outside of the challenges with arena which i'll talk in a moment our subsidiary the profit performance has been good Overall PAT percentage stood at 1.32% for the quarter excluding Arena. overall pat percentage stood at 1.32% for the quarter excluding arena Now let's get into a little bit of detail on geographies and business units from a geography perspective. now let's get into a little bit of detail on geographies and business units from a geography perspective The revenue growth was contributed by strong growth in many geographies. the revenue growth was contributed by strong growth in many geographies India at 24%, UAE at 35%, Kingdom of Saudi Arabia at 32%, rest of Middle East at 18% and Africa was stable. India had an overall very strong performance with profit after tax growing faster than revenues with most business units contributing well. The Cloud Group, the Mobility Group and the Technology Solutions Group coming to business units. The Mobility Solutions Group led with a stellar performance this quarter at 44%. Growth and demand on the premium segment of the market across India and Middle East was strong. Cloud Solutions continued its momentum as you've seen over the last few quarters with 41% top line growth and continued success in the hyperscaler business. We continue to take advantage of the cloud transition and digital transformation enabled by AI. The Technology Solutions Group performed well on top line this quarter at 21%. India at 24%, UAE at 35%, Kingdom of Saudi Arabia at 32%, rest of Middle East at 18% and Africa was stable. india at 24% uae at 35% kingdom of saudi arabia at 32% rest of middle east at 18% and africa was stable India had an overall very strong performance with profit after tax growing faster than revenues with most business units contributing well. india had an overall very strong performance with profit after tax growing faster than revenues with most business units contributing well The Cloud Group, the Mobility Group and the Technology Solutions Group coming to business units. the cloud group the mobility group and the technology solutions group coming to business units The Mobility Solutions Group led with a stellar performance this quarter at 44%. the mobility solutions group led with a stellar performance this quarter at 44% Growth and demand on the premium segment of the market across India and Middle East was strong. growth and demand on the premium segment of the market across india and middle east was strong Cloud Solutions continued its momentum as you've seen over the last few quarters with 41% top line growth and continued success in the hyperscaler business. cloud solutions continued its momentum as you've seen over the last few quarters with 41% top line growth and continued success in the hyperscaler business We continue to take advantage of the cloud transition and digital transformation enabled by AI. we continue to take advantage of the cloud transition and digital transformation enabled by ai The Technology Solutions Group performed well on top line this quarter at 21%. the technology solutions group performed well on top line this quarter at 21% There were a lot of big deals in India and UAE though margins declined due to a combination of mix of larger deals as well as general margin stress in the Technology Solutions space. The software businesses and security solutions, infrastructure software and application software continued their growth momentum. This is an area we can do a lot more, both increasing the breadth of our offerings and gaining share. Hence we are putting efforts and investments in all the geographies to increase our intensity and focus here. The Endpoint Solutions Group with the PC business was steady at 3%. It's been flattish for a while. There were a lot of big deals in India and UAE though margins declined due to a combination of mix of larger deals as well as general margin stress in the Technology Solutions space. there were a lot of big deals in india and uae though margins declined due to a combination of mix of larger deals as well as general margin stress in the technology solutions space The software businesses and security solutions, infrastructure software and application software continued their growth momentum. the software businesses and security solutions infrastructure software and application software continued their growth momentum This is an area we can do a lot more, both increasing the breadth of our offerings and gaining share. this is an area we can do a lot more both increasing the breadth of our offerings and gaining share Hence we are putting efforts and investments in all the geographies to increase our intensity and focus here. hence we are putting efforts and investments in all the geographies to increase our intensity and focus here The Endpoint Solutions Group with the PC business was steady at 3%. the endpoint solutions group with the pc business was steady at 3% It's been flattish for a while. it's been flattish for a while We do see signs that what we've been talking about for a while on refresh cycles on PCs bought during the COVID period as well as the Windows 10 to 11 upgrades and hope to have and look forward to more growth in the second half, and we are seeing signs of that. We saw good growth from all the top 10 brands in our portfolio, and we also see several software brands getting into the top 10 of our business. Now coming to working capital and OpEx and gross margin hygiene factors. Continued efforts on efficient management of working capital resulted in 37 days closing working capital, which is 2 days lower than the previous year. Q1 our overall financing cost, excluding Turkey, reduced by 8% due to efficient management of working capital and our superior credit rating AA allowing us for better borrowing rates, especially in India. We do see signs that what we've been talking about for a while on refresh cycles on PCs bought during the COVID period as well as the Windows 10 to 11 upgrades and hope to have and look forward to more growth in the second half, and we are seeing signs of that. we do see signs that what we've been talking about for a while on refresh cycles on pcs bought during the covid period as well as the windows 10 to 11 upgrades and hope to have and look forward to more growth in the second half and we are seeing signs of that We saw good growth from all the top 10 brands in our portfolio, and we also see several software brands getting into the top 10 of our business. we saw good growth from all the top 10 brands in our portfolio and we also see several software brands getting into the top 10 of our business Now coming to working capital and OpEx and gross margin hygiene factors. now coming to working capital and opex and gross margin hygiene factors Continued efforts on efficient management of working capital resulted in 37 days closing working capital, which is 2 days lower than the previous year. continued efforts on efficient management of working capital resulted in 37 days closing working capital which is 2 days lower than the previous year Q1 our overall financing cost, excluding Turkey, reduced by 8% due to efficient management of working capital and our superior credit rating AA allowing us for better borrowing rates, especially in India. q1 our overall financing cost excluding turkey reduced by 8% due to efficient management of working capital and our superior credit rating aa allowing us for better borrowing rates especially in india OpEx control continues to be good and grew much slower than the revenue growth at 6%, giving us good operating leverage. Gross margin has been below expectations, and it's a combination of the mix shifting towards Mobility for this quarter, the big deals in TSG, and also market pressures on the TSG run rate business. OpEx control continues to be good and grew much slower than the revenue growth at 6%, giving us good operating leverage. opex control continues to be good and grew much slower than the revenue growth at 6% giving us good operating leverage Gross margin has been below expectations, and it's a combination of the mix shifting towards Mobility for this quarter, the big deals in TSG , and also market pressures on the TSG run rate business. gross margin has been below expectations and it's a combination of the mix shifting towards mobility for this quarter the big deals in tsg and also market pressures on the tsg run rate business Now coming to Arena, our subsidiary. Arena's performance was impacted due to provisions. We believe these are one-time, but we are monitoring and watching them closely. Due to the market conditions in Turkey, we see a rise in the number of Concordat cases last quarter. Concordat is a temporary relief given by the courts to companies facing financial difficulty to restructure their debts with creditors. Few of our partners have filed for Concordat. The situation we have encountered was unexpected, and while we have taken provisions, the team is taking all necessary actions to recover outstandings. Though there is a tempering of inflation in Turkey and anticipation of lower lira interest rates, the outlook remains uncertain. Our subsidiary Arena is recalibrating our approach to the business in Turkey and taking proactive steps to manage the business cautiously. Now c oming to Arena, our subsidiary. now c oming to arena our subsidiary Arena's performance was impacted due to provisions. arena's performance was impacted due to provisions We believe these are one-time, but we are monitoring and watching them closely. we believe these are one-time but we are monitoring and watching them closely Due to the market conditions in Turkey, we see a rise in the number of Concordat cases last quarter. due to the market conditions in turkey we see a rise in the number of concordat cases last quarter Concordat is a temporary relief given by the courts to companies facing financial difficulty to restructure their debts with creditors. concordat is a temporary relief given by the courts to companies facing financial difficulty to restructure their debts with creditors Few of our partners have filed for Concordat. few of our partners have filed for concordat The situation we have encountered was unexpected, and while we have taken provisions, the team is taking all necessary actions to recover outstandings. the situation we have encountered was unexpected and while we have taken provisions the team is taking all necessary actions to recover outstandings Though there is a tempering of inflation in Turkey and anticipation of lower lira interest rates, the outlook remains uncertain. though there is a tempering of inflation in turkey and anticipation of lower lira interest rates the outlook remains uncertain Our subsidiary Arena is recalibrating our approach to the business in Turkey and taking proactive steps to manage the business cautiously. our subsidiary arena is recalibrating our approach to the business in turkey and taking proactive steps to manage the business cautiously By tightening working capital, managing overdue credit limits closely, and reducing our Turkish lira exposure, we are hopeful that we will recover from the Q1 challenges of Arena as we go forward. With the new growth trends that we see on Cloud AI-driven digital transformation, we remain optimistic on the outlook going forward as mentioned in the last quarter as well. By tightening working capital, managing overdue credit limits closely, and reducing our Turkish lira exposure, we are hopeful that we will recover from the Q1 challenges of Arena as we go forward. by tightening working capital managing overdue credit limits closely and reducing our turkish lira exposure we are hopeful that we will recover from the q1 challenges of arena as we go forward With the new growth trends that we see on Cloud AI-driven digital transformation, we remain optimistic on the outlook going forward as mentioned in the last quarter as well. with the new growth trends that we see on cloud ai-driven digital transformation we remain optimistic on the outlook going forward as mentioned in the last quarter as well Q1 is normally our softest quarter of the year, but we executed well based on the addressable opportunities and retained our share in the market. We also encountered geopolitical tensions both in India and in the Middle East, but managed to weather through those. We feel there are opportunities to grow faster in Software Solutions, subscription models, and Infrastructure Hardware space. With the creation of Software Solutions Group, the focus and investment towards creating additional value add of brands and ecosystems should pave the way for faster growth. Though this will be a multi-year journey, we'll continue to emphasize and enhance our core hardware business which has been executing well and growing nicely. Before I close, I wanted to share something special this year. Q1 is normally our softest quarter of the year, but we executed well based on the addressable opportunities and retained our share in the market. q1 is normally our softest quarter of the year but we executed well based on the addressable opportunities and retained our share in the market We also encountered geopolitical tensions both in India and in the Middle East, but managed to weather through those. we also encountered geopolitical tensions both in india and in the middle east but managed to weather through those We feel there are opportunities to grow faster in Software Solutions, subscription models, and Infrastructure Hardware space. we feel there are opportunities to grow faster in software solutions subscription models and infrastructure hardware space With the creation of Software Solutions Group, the focus and investment towards creating additional value add of brands and ecosystems should pave the way for faster growth. with the creation of software solutions group the focus and investment towards creating additional value add of brands and ecosystems should pave the way for faster growth Though this will be a multi-year journey, we'll continue to emphasize and enhance our core hardware business which has been executing well and growing nicely. though this will be a multi-year journey we'll continue to emphasize and enhance our core hardware business which has been executing well and growing nicely Before I close, I wanted to share something special this year. before i close i wanted to share something special this year Redington was recognized as the most trusted company in the technology distribution sector by VARINDIA. This award isn't just a recognition of our business strength, it's a reflection of the trust we have built with our partners, our customers, and all of you our shareholders. Trust is not built overnight. It comes from showing up year after year with consistency, transparency, and purpose. This award belongs to every Redingtonian who brings in their best every day and to each of you who believe in our journey. Thank you. We look forward to your questions. Redington was recognized as the most trusted company in the technology distribution sector by VARINDIA . redington was recognized as the most trusted company in the technology distribution sector by varindia This award isn't just a recognition of our business strength, it's a reflection of the trust we have built with our partners, our customers, and all of you our shareholders. this award isn't just a recognition of our business strength it's a reflection of the trust we have built with our partners our customers and all of you our shareholders Trust is not built overnight. trust is not built overnight It comes from showing up year after year with consistency, transparency, and purpose. it comes from showing up year after year with consistency transparency and purpose This award belongs to every Redingtonian who brings in their best every day and to each of you who believe in our journey. this award belongs to every redingtonian who brings in their best every day and to each of you who believe in our journey Thank you. thank you We look forward to your questions. we look forward to your questions

Speaker 7: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nitin from Investec. Please proceed. Thank you very much. thank you very much We will now begin the question and answer session. we will now begin the question and answer session Anyone who wishes to ask a question may press star and one on their touchstone telephone. anyone who wishes to ask a question may press star and one on their touchstone telephone If you wish to remove yourself from the question queue, you may press star and two. if you wish to remove yourself from the question queue you may press star and two Participants are requested to use answers while asking a question. participants are requested to use answers while asking a question Ladies and gentlemen, we will wait for a moment while the question queue assembles. ladies and gentlemen we will wait for a moment while the question queue assembles The first question is from the line of Nitin from Investec. the first question is from the line of nitin from investec Please proceed. please proceed

Speaker 10: Yeah, hi, good evening. Thanks for the opportunity. I think we had a very great quarter from a growth perspective. Just wanted your thoughts on the margin side of things. You did mention three elements which sort of impacted the margin. If you could give some more color there as to why it is, I think anything from a philosophy standpoint, these large deals that we are seeing, in which geographies are they, and how are the sort of, are you happy with the kind of requirements on working capital and all of those for those deals, and how should we think of margins overall on a going forward basis? Do you think different thought process on how you would like to take this on a going forward basis? Yeah, hi, good evening. yeah hi good evening Thanks for the opportunity. thanks for the opportunity I think we had a very great quarter from a growth perspective. i think we had a very great quarter from a growth perspective Just wanted your thoughts on the margin side of things. just wanted your thoughts on the margin side of things You did mention three elements which sort of impacted the margin. you did mention three elements which sort of impacted the margin If you could give some more color there as to why it is, I think anything from a philosophy standpoint, these large deals that we are seeing, in which geographies are they, and how are the sort of, are you happy with the kind of requirements on working capital and all of those for those deals, and how should we think of margins overall on a going forward basis? if you could give some more color there as to why it is i think anything from a philosophy standpoint these large deals that we are seeing in which geographies are they and how are the sort of are you happy with the kind of requirements on working capital and all of those for those deals and how should we think of margins overall on a going forward basis Do you think different thought process on how you would like to take this on a going forward basis? do you think different thought process on how you would like to take this on a going forward basis

Speaker 8: Thank you, Nitin. See, on the margins, if you see between Q1 of last year to Q1 of this year, there is about 60 basis points of drop, which was about 5.7%. Now it's about 5.1%, giving you a broad split of what is this drop on account of. About 10 basis points relate to the PayNet divestment because this was there as part of our results last year. Second, in Arena, like what Hari mentioned, there had been still the economy as well as the industry is going through stress. There is about some 10 basis points of drop on account of Arena on top of the PayNet. The balance, which is about between 35 basis points-40 basis points, is primarily on account of TSG business. That's where the large deals, it actually comes into play. Thank you, Nitin. thank you nitin See, on the margins, if you see between Q1 of last year to Q1 of this year, there is about 60 basis points of drop, which was about 5.7%. see on the margins if you see between q1 of last year to q1 of this year there is about 60 basis points of drop which was about 5.7% Now it's about 5.1%, giving you a broad split of what is this drop on account of. now it's about 5.1% giving you a broad split of what is this drop on account of About 10 basis points relate to the PayNet divestment because this was there as part of our results last year. about 10 basis points relate to the paynet divestment because this was there as part of our results last year Second, in Arena, like what Hari mentioned, there had been still the economy as well as the industry is going through stress. second in arena like what hari mentioned there had been still the economy as well as the industry is going through stress There is about some 10 basis points of drop on account of Arena on top of the PayNet. there is about some 10 basis points of drop on account of arena on top of the paynet The balance, which is about between 35 basis points- 40 basis points, is primarily on account of TSG business. the balance which is about between 35 basis points- 40 basis points is primarily on account of tsg business That's where the large deals, it actually comes into play. that's where the large deals it actually comes into play We have discussed that before, where while either the gross margin could be low or the working capital could be beneficial, we have to make some compromise. These being large deals, we only ensure that our return on capital employed is that requirement is met. Those are taken care. Large deals do come at lower margins. Even otherwise, there are some stress in terms of margin because of higher competition in the marketplace, and also vendors are not in a position to offer higher margin in the TSG space. These are the main reasons why in TSG, if the drop in margin is observed, but otherwise this is a breakup overall in terms of the year-on-year gross margin drop outlook. If I need to give you in the same form, the PayNet is something that is permanent, but Arena, we feel it could get recouped. We have discussed that before, where while either the gross margin could be low or the working capital could be beneficial, we have to make some compromise. we have discussed that before where while either the gross margin could be low or the working capital could be beneficial we have to make some compromise These being large deals, we only ensure that our return on capital employed is that requirement is met. these being large deals we only ensure that our return on capital employed is that requirement is met Those are taken care. those are taken care Large deals do come at lower margins. large deals do come at lower margins Even otherwise, there are some stress in terms of margin because of higher competition in the marketplace, and also vendors are not in a position to offer higher margin in the TSG space. even otherwise there are some stress in terms of margin because of higher competition in the marketplace and also vendors are not in a position to offer higher margin in the tsg space These are the main reasons why in TSG, if the drop in margin is observed, but otherwise this is a breakup overall in terms of the year-on-year gross margin drop outlook. these are the main reasons why in tsg if the drop in margin is observed but otherwise this is a breakup overall in terms of the year-on-year gross margin drop outlook If I need to give you in the same form, the PayNet is something that is permanent, but Arena, we feel it could get recouped. if i need to give you in the same form the paynet is something that is permanent but arena we feel it could get recouped It will take some time, but we are confident we will bring it back. In the case of TSG, that also links to your other point. We think the large deals doesn't seem to be a one-off. It's going to continue for some time, and we need to play this in order to make sure that our revenue growth is in place, our market share, and also the vendor share is in place. We feel on the large deals, if there are significantly higher large deals, we will start tracking it separately, and also we will see how it can get shared. Outside of it, the rest of the TSG margins, which is on account of the market pressure, we think it is going to take some time. That's not going to come up that fast. It will take some time, but we are confident we will bring it back. it will take some time but we are confident we will bring it back In the case of TSG, that also links to your other point. in the case of tsg that also links to your other point We think the large deals doesn't seem to be a one-off. we think the large deals doesn't seem to be a one-off It's going to continue for some time, and we need to play this in order to make sure that our revenue growth is in place, our market share, and also the vendor share is in place. it's going to continue for some time and we need to play this in order to make sure that our revenue growth is in place our market share and also the vendor share is in place We feel on the large deals, if there are significantly higher large deals, we will start tracking it separately, and also we will see how it can get shared. we feel on the large deals if there are significantly higher large deals we will start tracking it separately and also we will see how it can get shared Outside of it, the rest of the TSG margins, which is on account of the market pressure, we think it is going to take some time. outside of it the rest of the tsg margins which is on account of the market pressure we think it is going to take some time That's not going to come up that fast. that's not going to come up that fast Having said that, overall at an operating profit and the PAT level, the point which Hari mentioned, I think we have ensured visible Q1 that we have had in the past years. We are broadly in line, and that had come on account of the OpEx optimization as well as the working capital control, which has resulted in lower interest cost. We think this management of working capital and OpEx is going to help us from a profitability perspective. This is the guidance on the gross margin. Having said that, overall at an operating profit and the PAT level, the point which Hari mentioned, I think we have ensured visible Q1 that we have had in the past years. having said that overall at an operating profit and the pat level the point which hari mentioned i think we have ensured visible q1 that we have had in the past years We are broadly in line, and that had come on account of the OpEx optimization as well as the working capital control, which has resulted in lower interest cost. we are broadly in line and that had come on account of the opex optimization as well as the working capital control which has resulted in lower interest cost We think this management of working capital and OpEx is going to help us from a profitability perspective. we think this management of working capital and opex is going to help us from a profitability perspective This is the guidance on the g ross margin. this is the guidance on the g ross margin

Speaker 5: Nitin, just to add one more point on a question that you asked. These deals are happening both in India and in UAE. We don't have a practice of calling out specific deals, but we see an increased number of deals both for data centers as well as the AI space. We are only seeing more of these, and we want to take our fair share as long as we are able to get our return on capital employed with the lower margins. Nitin, just to add one more point on a question that you asked. nitin just to add one more point on a question that you asked These deals are happening both in India and in UAE. these deals are happening both in india and in uae We don't have a practice of calling out specific deals, but we see an increased number of deals both for data centers as well as the AI space. we don't have a practice of calling out specific deals but we see an increased number of deals both for data centers as well as the ai space We are only seeing more of these, and we want to take our fair share as long as we are able to get our return on capital employed with the lower margins. we are only seeing more of these and we want to take our fair share as long as we are able to get our return on capital employed with the lower margins

Speaker 8: One another point, Nitin, that you asked, do we have sufficient working capital for large deals as we speak now? We think we have. At the end of June, our gross debt to equity was 0.36x. Net debt to equity is about 0.23x. Do we have enough capital in terms of addressing some of the large deals? Yes, it all depends on the size of the deals. We think the size of the deals also could go up if there are requirements at an appropriate time. We will come back and talk to the street, but right now we are quite okay. One another point, Nitin, that you asked, do we have sufficient working capital for large deals as we speak now? one another point nitin that you asked do we have sufficient working capital for large deals as we speak now We think we have. At the end of June, our gross debt to equity was 0.36x . we think we have. at the end of june our gross debt to equity was 0.36x Net debt to equity is about 0.23 x. net debt to equity is about 0.23 x Do we have enough capital in terms of addressing some of the large deals? do we have enough capital in terms of addressing some of the large deals Yes, it all depends on the size of the deals. yes it all depends on the size of the deals We think the size of the deals also could go up if there are requirements at an appropriate time. we think the size of the deals also could go up if there are requirements at an appropriate time We will come back and talk to the street, but right now we are quite o kay. we will come back and talk to the street but right now we are quite o kay

Speaker 10: Got it. I just have a follow-up if I may. I think this quarter we also had a reversal of provisions that added some 57 basis points on a sequential basis, which means that the margin drop was actually higher. The question is that these deals, and it looks like the bigger margin drop obviously is in the overseas segment. The overseas deals are what have actually dragged the margins more. Now those deals, are they government contracts? Are they private? In terms of the working capital deals there, how comfortable are they? Is it longer than our normal averages? I don't see it in the working capital. As of now it seems to be okay. Broadly, how is it? Could you just give some thought process and some guardrails that you generally have around it. Got it. got it I just have a follow-up if I may. i just have a follow-up if i may I think this quarter we also had a reversal of provisions that added some 57 basis points on a sequential basis, which means that the margin drop was actually higher. i think this quarter we also had a reversal of provisions that added some 57 basis points on a sequential basis which means that the margin drop was actually higher The question is that these deals, and it looks like the bigger margin drop obviously is in the overseas segment. the question is that these deals and it looks like the bigger margin drop obviously is in the overseas segment The overseas deals are what have actually dragged the margins more. the overseas deals are what have actually dragged the margins more Now those deals, are they government contracts? now those deals are they government contracts Are they private? are they private In terms of the working capital deals there, how comfortable are they? in terms of the working capital deals there how comfortable are they Is it longer than our normal averages? is it longer than our normal averages I don't see it in the working capital. i don't see it in the working capital As of now it seems to be okay. as of now it seems to be okay Broadly, how is it? broadly how is it Could you just give some thought process and some guardrails that you generally have around it. could you just give some thought process and some guardrails that you generally have around it

Speaker 5: The deals, Nitin, are only private deals. We're not working with the government. We work with people who might be working with the government, but we don't work directly. All these deals are private sector deals. The deals, Nitin, are only private deals. the deals nitin are only private deals We're not working with the government. we're not working with the government We work with people who might be working with the government, but we don't work directly. we work with people who might be working with the government but we don't work directly All these deals are private sector deals. all these deals are private sector deals

Speaker 8: Second point on the inventory provision reversal. See Nitin, Q4 and Q1 are really poles apart. My suggestion, please don't mix up the reversal of inventory provision, which is the inventory provision that we have this quarter. There is a positive inventory provision to the extent of about 5 basis points, which is broadly in line with our long-term trend of about 5 basis points to 6 basis points. For this quarter, inventory provision has not been any different from the long-term average. AR provisions, as Hari explained, have spiked and that's mainly on account of Arena. Second point on the inventory provision reversal. second point on the inventory provision reversal See Nitin, Q4 and Q1 are really poles apart. see nitin q4 and q1 are really poles apart My suggestion, please don't mix up the reversal of inventory provision, which is the inventory provision that we have this quarter. my suggestion please don't mix up the reversal of inventory provision which is the inventory provision that we have this quarter There is a positive inventory provision to the extent of about 5 basis points, which is broadly in line with our long-term trend of about 5 basis points to 6 basis points. there is a positive inventory provision to the extent of about 5 basis points which is broadly in line with our long-term trend of about 5 basis points to 6 basis points For this quarter, inventory provision has not been any different from the long-term average. for this quarter inventory provision has not been any different from the long-term average AR provisions, as Hari explained, have spiked and that's mainly on account of Arena. ar provisions as hari explained have spiked and that's mainly on account of arena

Speaker 10: Got it. Perfect. Thank you so much and all the best. I'll get back in the queue for a follow up. Got it. got it Perfect. perfect Thank you so much and all the best. thank you so much and all the best I'll get back in the queue for a follow up. i'll get back in the queue for a follow up

Speaker 8: Thank you. Thank you. thank you

Speaker 7: Thank you. The next question is from the line of Aejas Lakhani from Unifi AMC. Please proceed. Thank you. thank you The next question is from the line of Aejas Lakhani from Unifi AMC. the next question is from the line of aejas lakhani from unifi amc Please proceed. please proceed

Speaker 1: Good evening, Hari. Mr. Krishnan, you know the top line and the margin is the good news. The provisions are hard to understand. They seem higher than anything you've taken in the past, and they came without warning. That's something I'd like to know more about. Also, the interest costs. We expected that the sale proceeds that you received would have helped you mitigate interest significantly. Your international interest cost seem to have spiked quite a bit. Again, total surprise. Can't understand. There's something about cash flow being INR 1,300 crores in the minus. Help us understand that. Also, could you tell us if you continue to use factoring, and if so, how much for this quarter? Good evening, Hari. good evening hari Mr. Krishnan, you know the top line and the margin is the good news. mr krishnan you know the top line and the margin is the good news The provisions a re hard to understand. the provisions a re hard to understand They seem higher than anything you've taken in the past, and they came without warning. they seem higher than anything you've taken in the past and they came without warning That's something I'd like to know more about. that's something i'd like to know more about Also, the interest costs. also the interest costs We expected that the sale proceeds that you received would have helped you mitigate interest significantly. we expected that the sale proceeds that you received would have helped you mitigate interest significantly Your international interest cost seem to h ave spiked quite a bit. your international interest cost seem to h ave spiked quite a bit Again, total surprise. again total surprise Can't understand. can't understand There's something about cash flow being INR 1,300 crores in the minus. there's something about cash flow being inr 1,300 crores in the minus Help us understand that. help us understand that Also, could you tell us if you continue to use factoring, and if so, how much for this quarter? also could you tell us if you continue to use factoring and if so how much for this quarter

Speaker 8: Okay, on the first point regarding provision, see in Turkey, seriously the economy is going through a lot of stress. There are increased applications that are made by companies for Concordat. Concordat is like debt restructuring. This is pre-bankruptcy. I'm just going to specify the number of companies that have applied for Concordat in the last seven years. The average has been between 1,500-2,000 companies. Last five years, every month starting from January 504, February 365, March 414, April 444, May 508, June 541. Consistently, you can see about 500 companies applying for Concordat in Turkey every month, vis-à-vis about 1,500-2,000 companies a year. I'm just giving you a perspective on how the economy is moving and we are part of the ecosystem. What we had seen in our business, there are some customers who have applied for Concordat in the current quarter. Okay, on the first point regarding provision, see in Turkey, seriously the economy is going through a lot of stress. okay on the first point regarding provision see in turkey seriously the economy is going through a lot of stress There are increased applications that are made by companies for Concordat. there are increased applications that are made by companies for concordat Concordat is like debt restructuring. concordat is like debt restructuring This is pre-bankruptcy. this is pre-bankruptcy I'm just going to specify the number of companies that have applied for Concordat in the last seven years. i'm just going to specify the number of companies that have applied for concordat in the last seven years The average has been between 1,500- 2,000 companies. the average has been between 1,500- 2,000 companies Last five years, every month starting from January 504, February 365, March 414, April 444, May 508, June 541. last five years every month starting from january 504 february 365, march 414 april 444 may 508 june 541 Consistently, you can see about 500 companies applying for Concordat in Turkey every month, vis-à-vis about 1,500-2,000 companies a year. consistently you can see about 500 companies applying for concordat in turkey every month vis-à-vis about 1,500-2,000 companies a year I'm just giving you a perspective on how the economy is moving and we are part of the ecosystem. i'm just giving you a perspective on how the economy is moving and we are part of the ecosystem What we had seen in our business, there are some customers who have applied for Concordat in the current quarter. what we had seen in our business there are some customers who have applied for concordat in the current quarter Maybe we could have given you a perspective last time, but all these are happening as we speak now. Also, it's something that we are keeping ourselves abreast of and we are also putting some actions. This called for some actions at our end. We felt after review of all our pending ARs and what has got delayed, there is a need for creating an extra provision. We had accordingly done about $8+ million of provision in Arena, which we think is one time and we should be able to manage as we speak now the rest of the ARs that need to get collected. Is this a surprise? It's a surprise even for us. Since the market is tough, we need to take a considered view. We think we have taken a proactive view in terms of identifying this case and have dealt with it in the books. Maybe we could have given you a perspective last time, but all these are happening as we speak now. maybe we could have given you a perspective last time but all these are happening as we speak now Also, it's something that we are keeping ourselves abreast of and we are also putting some actions. also it's something that we are keeping ourselves abreast of and we are also putting some actions This called for some actions at our end. this called for some actions at our end We felt after review of all our pending ARs and what has got delayed, there is a need for creating an extra provision. we felt after review of all our pending ars and what has got delayed there is a need for creating an extra provision We had accordingly done about $8+ million of provision in Arena, which we think is one time and we should be able to manage as we speak now the rest of the ARs that need to get collected. we had accordingly done about $8+ million of provision in arena which we think is one time and we should be able to manage as we speak now the rest of the ars that need to get collected Is this a surprise? is this a surprise It's a surprise even for us. it's a surprise even for us Since the market is tough, we need to take a considered view. since the market is tough we need to take a considered view We think we have taken a proactive view in terms of identifying this case and have dealt with it in the books. we think we have taken a proactive view in terms of identifying this case and have dealt with it in the books Second is the interest cost. Interest cost per se in the balance sheet has gone up by 14% and that is only the interest. If you consider the factoring and interest together, for your other question, do we do factoring? Yes, the quantum has come down but we still do factoring. Overall, for last year, factoring plus interest together was INR 148 crores, which is now in the current quarter down to INR 122 crores. Has that come down? It has come down. It has come down by 18%. Is this what we expected? No, we thought it would come down even further for the reasons that we had explained within this. If you take only Arena, Arena's last year factoring plus interest was INR 90 crores, which is down to INR 69 crores. Second is the interest cost. second is the interest cost Interest cost per se in the balance sheet has gone up by 14% and that is only the interest. interest cost per se in the balance sheet has gone up by 14% and that is only the interest If you consider the factoring and interest together, for your other question, do we do factoring? if you consider the factoring and interest together for your other question do we do factoring Yes, the quantum has come down but we still do factoring. yes the quantum has come down but we still do factoring Overall, for last year, factoring plus interest together was INR 148 crores, which is now in the current quarter down to INR 122 crores. overall for last year factoring plus interest together was inr 148 crores which is now in the current quarter down to inr 122 crores Has that come down? has that come down It has come down. it has come down It has come down by 18%. it has come down by 18% Is this what we expected? is this what we expected No, we thought it would come down even further for the reasons that we had explained within this. no we thought it would come down even further for the reasons that we had explained within this If you take only Arena, Arena's last year factoring plus interest was INR 90 crores, which is down to INR 69 crores. if you take only arena arena's last year factoring plus interest was inr 90 crores which is down to inr 69 crores Even in Arena there is a drop of factoring and interest cost in the current quarter year-on-year. There were a couple of factors which has resulted in this not being even more significant. This was the expectation. The first point is the PayNet money, it came in U.S. dollar and U.S. dollar rates are about 10% to about 11%-12%. We had to pay off the loan which was costing us at 10%-11%-12%. On the other hand, there has been a corresponding increase in working capital. I'll explain why all those, but majority of those increases have happened in the Turkish lira business and the Turkish lira loans were costing us 50%. The delta you can see, while PayNet money has come which was only taking care of 1/5 of our interest cost reduction, on the other hand we had to take loans at a higher cost. Even in Arena there is a drop of factoring and interest cost in the current quarter year-on-year. even in arena there is a drop of factoring and interest cost in the current quarter year-on-year There were a couple of factors which has resulted in this not being even more significant. there were a couple of factors which has resulted in this not being even more significant This was the expectation. this was the expectation The first point is the PayNet money, it came in U.S. dollar and U.S. dollar rates are about 10% to about 11%-12%. the first point is the paynet money it came in u.s dollar and u.s dollar rates are about 10% to about 11%-12% We had to pay off the loan which was costing us at 10%-11%-12%. we had to pay off the loan which was costing us at 10%-11%-12% On the other hand, there has been a corresponding increase in working capital. on the other hand there has been a corresponding increase in working capital I'll explain why all those, but majority of those increases have happened in the Turkish lira business and the Turkish lira loans were costing us 50%. i'll explain why all those but majority of those increases have happened in the turkish lira business and the turkish lira loans were costing us 50% The delta you can see, while PayNet money has come which was only taking care of 1/5 of our interest cost reduction, on the other hand we had to take loans at a higher cost. the delta you can see while paynet money has come which was only taking care of 1/5 of our interest cost reduction on the other hand we had to take loans at a higher cost Why did this increase happen? There were three factors. One, the delay that we are talking about, the Concordat related or the general market delays, because there is some sluggishness in terms of the overall liquidity situation in the market itself. Because of this, there has been a working capital blockage that had happened, which a part of it we have dealt with and we think the balance will come. It will take some time, but it will definitely come. Second, until the PayNet money came, we had some challenge in terms of cash flow there and because we were not able to get sufficient bank loans, etc. We were delaying some of our vendor payments. That pressure, we had been waiting for the payment transaction to get completed, so that got paid out. Why did this increase happen? why did this increase happen There were three factors. there were three factors One, the delay that we are talking about, the Concordat related or the general market delays, because there is some sluggishness in terms of the overall liquidity situation in the market itself. one the delay that we are talking about, the concordat related or the general market delays because there is some sluggishness in terms of the overall liquidity situation in the market itself Because of this, there has been a working capital blockage that had happened, which a part of it we have dealt with and we think the balance will come. because of this there has been a working capital blockage that had happened which a part of it we have dealt with and we think the balance will come It will take some time, but it will definitely come. it will take some time but it will definitely come Second, until the PayNet money came, we had some challenge in terms of cash flow there and because we were not able to get sufficient bank loans, etc. We were delaying some of our vendor payments. second until the paynet money came we had some challenge in terms of cash flow there and because we were not able to get sufficient bank loans etc we were delaying some of our vendor payments That pressure, we had been waiting for the payment transaction to get completed, so that got paid out. that pressure we had been waiting for the payment transaction to get completed so that got paid out Third, we also thought now it has given us a headroom to increase the business. Please understand in this business if we remain on the sideline, vendors will push us out. We also need to play the market share game. While we are not going to compromise on any fundamentals, this is something that we need to consider in a balanced way. There has also been some buildup on account of inventory. All this has resulted in extra working capital and extra debt and also extra interest cost. While I did say interest on a year-on-year basis had come down, it could have come down even more faster had we not increased our working capital. This is where we are third on the negative cash flow. I think we had discussed that in the past with our profitability metrics and a 40% dividend payout. Third, we also thought now it has given us a headroom to increase the business. third we also thought now it has given us a headroom to increase the business Please understand in this business if we remain on the sideline, vendors will push us out. please understand in this business if we remain on the sideline vendors will push us out We also need to play the market share game. we also need to play the market share game While we are not going to compromise on any fundamentals, this is something that we need to consider in a balanced way. while we are not going to compromise on any fundamentals this is something that we need to consider in a balanced way There has also been some buildup on account of inventory. there has also been some buildup on account of inventory All this has resulted in extra working capital and extra debt and also extra interest cost. all this has resulted in extra working capital and extra debt and also extra interest cost While I did say interest on a year-on-year basis had come down, it could have come down even more faster had we not increased our working capital. while i did say interest on a year-on-year basis had come down it could have come down even more faster had we not increased our working capital This is where we are third on the negative cash flow. this is where we are third on the negative cash flow I think we had discussed that in the past with our profitability metrics and a 40% dividend payout. i think we had discussed that in the past with our profitability metrics and a 40% dividend payout If you are able to retain our working capital days, our growth can be in the range of 10%-12% when our growth is in the range of 22%-24%. As Hari has mentioned, the three big markets which are India, UAE, and KSA, all these three constitute close to 80% of our business. Our growth rates are north of 20%. In UAE and KSA it was north of 30%. When we are growing at that pace, definitely there will be capital requirement. We will not have seen free cash flow, which is what we have seen the case in Q1. We think it is more to do with the growth and we are quite comfortable with that. Sorry, I'm not sure I've answered. It was a long answer. If there are further queries, please tell me. Sir. If you are able to retain our working capital days, our growth can be in the range of 10%- 12% when our growth is in the range of 22%-2 4%. if you are able to retain our working capital days our growth can be in the range of 10%- 12% when our growth is in the range of 22%-2 4% As Hari has mentioned, the three big markets which are India, UAE, and KSA, all these three constitute close to 80% of our business. as hari has mentioned the three big markets which are india uae and ksa all these three constitute close to 80% of our business Our growth rates are north of 20%. our growth rates are north of 20% In UAE and KSA it was north of 30%. in uae and ksa it was north of 30% When we are growing at that pace, definitely there will be capital requirement. when we are growing at that pace definitely there will be capital requirement We will not have seen free cash flow, which is what we have seen the case in Q1. we will not have seen free cash flow which is what we have seen the case in q1 We think it is more to do with the growth and we are quite comfortable with that. we think it is more to do with the growth and we are quite comfortable with that Sorry, I'm not sure I've answered. sorry i'm not sure i've answered It was a long answer. it was a long answer If there are further queries, please tell me. if there are further queries please tell me Sir. sir

Speaker 1: Yeah. On the subject of the provision, on earlier occasions you've clarified that you have an insurance. I'm not sure if that's limited to India business or also covers your global business. Could you help us understand if this is covered by insurance? Yeah. yeah On the subject of the provision, on earlier occasions you've clarified that you have an insurance. on the subject of the provision on earlier occasions you've clarified that you have an insurance I'm not sure if that's limited to India business or also covers your global business. i'm not sure if that's limited to india business or also covers your global business Could you help us understand if this is covered by insurance? could you help us understand if this is covered by insurance

Speaker 8: Okay. My answer at that point in time would have been for other markets. For example, in India and in MEA our AR is majorly covered. That's not the case in every other market. For example, in Turkey, in Africa, in a few other countries, insurance either you don't get insurance or you get far less insurance. In this case, is there an insurance? There is an insurance, but the coverage has been quite small. Okay. okay My answer at that point in time would have been for other markets. my answer at that point in time would have been for other markets For example, in India and in MEA our AR is majorly covered. for example in india and in mea our ar is majorly covered That's not the case in every other market. that's not the case in every other market For example, in Turkey, in Africa, in a few other countries, insurance either you don't get insurance or you get far less insurance. for example in turkey in africa in a few other countries insurance either you don't get insurance or you get far less insurance In this case, is there an insurance? in this case is there an insurance There is an insurance, but the coverage has been quite small. there is an insurance but the coverage has been quite small

Speaker 1: Okay. Given what you've told us about the need to, if you operate in Turkey, you need to be a serious player. To retain market share is important, given the risks and the costs and the factoring costs and the interest costs and the never ending provision costs, it's been several quarters of this. When will you evaluate whether you need to be in Turkey? You have many markets in which you're doing well. Why would you destroy all the good work by continuing to break your head on a market that doesn't reward you? Okay. okay Given what you've told us about the need to, if you operate in Turkey, you need to be a serious player. given what you've told us about the need to if you operate in turkey you need to be a serious player To retain market share is important, given the risks and the c osts and the factoring costs and the interest costs and the never ending provision costs, it's been several quarters of this. to retain market share is important given the risks and the c osts and the factoring costs and the interest costs and the never ending provision costs it's been several quarters of this When will you evaluate whether you need to be in Turkey? when will you evaluate whether you need to be in turkey You have many markets in which you're doing well. you have many markets in which you're doing well Why would you destroy all the good work by continuing to break your head on a market that doesn't reward you? why would you destroy all the good work by continuing to break your head on a market that doesn't reward you

Speaker 5: Fair question. We've spoken about this before. It's challenging to get into a market, but not very easy. We can exit a market easily. As we speak, we are recalibrating our strategy in Turkey. Over the next few months, we are going to see what is the best way for us to do business and continue in Turkey. It is being done. There is a strategy discussion that is happening with our subsidiary as well as with the board. We will keep you updated as we progress on this. It's a fair question. Fair question. fair question We've spoken about this before. It's challenging to get into a market, but not very easy. we've spoken about this before. it's challenging to get into a market but not very easy We can exit a market easily. we can exit a market easily As we speak, we are recalibrating our strategy in Turkey. as we speak we are recalibrating our strategy in turkey Over the next few months, we are going to see what is the best way for us to do business and continue in Turkey. over the next few months we are going to see what is the best way for us to do business and continue in turkey It is being done. it is being done There is a strategy discussion that is happening with our subsidiary as well as with the board. there is a strategy discussion that is happening with our subsidiary as well as with the board We will keep you updated as we progress on this. we will keep you updated as we progress on this It's a fair question. it's a fair question

Speaker 1: For other shareholders, you must understand that maybe we are less. We are able to be a little more dispassionate because there is some distance between the business and us. When you have recurring troubles in the market and you're actually increasing exposure, putting good money that you receive from the sale of your subsidiary into increasing business, that's resulting in increasing provisions, it's very, very frustrating, sir. It's disappointing that management has to be told this by a shareholder. For other shareholders, you must understand that maybe we are less. for other shareholders you must understand that maybe we are less We are able to be a little m ore dispassionate because there is some distance between the business and us. we are able to be a little m ore dispassionate because there is some distance between the business and us When you have recurring troubles in the market and you're actually increasing exposure, putting good money that you receive from the sale of your subsidiary into increasing business, that's resulting in increasing provisions, it's very, very frustrating, sir. when you have recurring troubles in the market and you're actually increasing exposure putting good money that you receive from the sale of your subsidiary into increasing business that's resulting in increasing provisions it's very very frustrating sir It's disappointing that management has to be told this by a shareholder. it's disappointing that management has to be told this by a shareholder

Speaker 5: No, we definitely take your point and I don't think we feel the same frustration. Believe me, we are as objective and dispassionate because we owe this to the shareholders and we are working for you. We understand as much on this and are as frustrated because we were seeing light at the end of the tunnel and we were expecting a good profit turnaround with the PayNet divestment and using that money to focus on the cleaner business. That was clearly our strategy going into this year. We are also equally frustrated and we want to make sure that you understand that we are clear that we want to do good business and make sure that we have a good return on investment. We are very clear about that. No, we definitely take your point and I don't think we feel the same frustration. no we definitely take your point and i don't think we feel the same frustration Believe me, we are as objective and dispassionate because we owe this to the shareholders and we are working for you. believe me we are as objective and dispassionate because we owe this to the shareholders and we are working for you We understand as much on this and are as frustrated because we were seeing light at the end of the tunnel and we were expecting a good profit turnaround with the PayNet divestment and using that money to focus on the cleaner business. we understand as much on this and are as frustrated because we were seeing light at the end of the tunnel and we were expecting a good profit turnaround with the paynet divestment and using that money to focus on the cleaner business That was clearly our strategy going into this year. that was clearly our strategy going into this year We are also equally frustrated and we want to make sure that you understand that we are clear that we want to do good business and make sure that we have a good return on investment. we are also equally frustrated and we want to make sure that you understand that we are clear that we want to do good business and make sure that we have a good return on investment We are very clear about that. we are very clear about that

Speaker 8: Just one add-on point, I think it is important to understand the facts here. I don't want you to think we have allocated more capital just to increase our business. Maybe I have not conveyed that correctly. A part of the money is stuck because of delay in collections, which is a regular part of the business. There is no increased allocation, but there is some money that is stuck and which we had seen in other places also in the past. That is not something unusual. This is a business risk and that is a conscious risk that we need to take and move on. That is an environmental situation that we are faced with and we are confident we will handle it in the best possible manner. Second, I had also said there had been a lot of delays to the vendors in terms of payment. Just one add-on point, I think it is important to understand the facts here. just one add-on point i think it is important to understand the facts here I don't want you to think we have allocated more capital just to increase our business. i don't want you to think we have allocated more capital just to increase our business Maybe I have not conveyed that correctly. maybe i have not conveyed that correctly A part of the money is stuck because of delay in collections, which is a regular part of the business. a part of the money is stuck because of delay in collections which is a regular part of the business There is no increased allocation, but there is some money that is stuck and which we had seen in other places also in the past. there is no increased allocation but there is some money that is stuck and which we had seen in other places also in the past That is not something unusual. that is not something unusual This is a business risk and that is a conscious risk that we need to take and move on. this is a business risk and that is a conscious risk that we need to take and move on That is an environmental situation that we are faced with and we are confident we will handle it in the best possible manner. that is an environmental situation that we are faced with and we are confident we will handle it in the best possible manner Second, I had also said there had been a lot of delays to the vendors in terms of payment. second i had also said there had been a lot of delays to the vendors in terms of payment Those are obligations. It's not an increased allocation. At some stage we had to end up paying. We were holding on, we were stretching it and once we got the money that had to get the thing paid. The third one where I said we have increased the, I mean we were trying to buy more to make sure that our market share is maintained. Maybe that's where there can be a judgmental view. I just thought I need to make it clear and if I still need to give you roughly, I mean the proportion, it could be 1/3, 1/3, 1/3. We are only talking about 1/3 where there is a judgment involved. Those are obligations. those are obligations It's not an increased allocation. it's not an increased allocation At some stage we had to end up paying. at some stage we had to end up paying We were holding on, we were stretching it and once we got the money that had to get the thing paid. we were holding on we were stretching it and once we got the money that had to get the thing paid The third one where I said we have increased the, I mean we were trying to buy more to make sure that our market share is maintained. the third one where i said we have increased the i mean we were trying to buy more to make sure that our market share is maintained Maybe that's where there can be a judgmental view. maybe that's where there can be a judgmental view I just thought I need to make it clear and if I still need to give you roughly, I mean the proportion, it could be 1/3, 1/3, 1/3. i just thought i need to make it clear and if i still need to give you roughly i mean the proportion it could be 1/3 1/3 1/3 We are only talking about 1/3 where there is a judgment involved. we are only talking about 1/3 where there is a judgment involved

Speaker 1: Noted sir. Beyond. We don't have enough understanding and visibility of the day to day you're dealing with or the issues that you deal with. We respect what you're going through, but it's important in the spirit of the award that Hari talked about in his opening remarks. The shareholder trust is also contingent upon a realistic assessment of exit, not just entering businesses. It's been a long wait. There's been fantastic progress in India and in your Middle East businesses. Your Saudi and UAE are doing terrific P&L and growth. For some reason, you all have taken unnecessary time to resolve something that should have been done. That's our view. May agree, not agree, but that's our view and I think we thought we should share it. Noted sir. noted sir Beyond. beyond We don't have enough understanding and visibility of the day to day you're dealing with or the issues that you deal with. we don't have enough understanding and visibility of the day to day you're dealing with or the issues that you deal with We respect what you're going through, but it's important in the spirit of the award that Hari talked about in his opening remarks. we respect what you're going through but it's important in the spirit of the award that hari talked about in his opening remarks The shareholder trust is also contingent upon a realistic assessment of exit, not just entering businesses. the shareholder trust is also contingent upon a realistic assessment of exit not just entering businesses It's been a long wait. it's been a long wait There's been fantastic progress in India and in your Middle East businesses. there's been fantastic progress in india and in your middle east businesses Your Saudi and UAE are doing terrific P&L and growth. your saudi and uae are doing terrific p&l and growth For some reason, you all have taken unnecessary time to resolve something that should have been done. for some reason you all have taken unnecessary time to resolve something that should have been done That's our view. that's our view May agree, not agree, but that's our view and I think we thought we should share it. may agree not agree but that's our view and i think we thought we should share it

Speaker 5: No, we don't disagree with it, Sarath. We will definitely give it our best in terms of viewing our long-term strategy in Turkey. We are also not running away from being objective and dispassionate about it. You can be rest assured. No, we don't disagree with it, Sarath. no we don't disagree with it sarath We will definitely give it our best in terms of viewing our long-term strategy in Turkey. we will definitely give it our best in terms of viewing our long-term strategy in turkey We are also not running away from being objective and dispassionate about it. we are also not running away from being objective and dispassionate about it You can be rest assured. you can be rest assured

Speaker 1: Thank you. I have one follow-up. Sir, you mentioned that 500 companies continue to come in the debt, bankruptcy. What gives you the comfort that the one-time $8 million provisioning may not repeat in the subsequent quarter? Could you just call out that the credit insurance that you have, how much do you expect to collect out of that $8 million from this credit insurance? Thank you. thank you I have one follow-up. i have one follow-up Sir, you mentioned that 500 companies continue to come in the debt, bankruptcy. sir you mentioned that 500 companies continue to come in the debt bankruptcy What gives you the comfort that the one-time $8 million provisioning may not repeat in the subsequent quarter? what gives you the comfort that the one-time $8 million provisioning may not repeat in the subsequent quarter Could you just call out that the credit insurance that you have, how much do you expect to collect out of that $8 million from this credit insurance? could you just call out that the credit insurance that you have how much do you expect to collect out of that $8 million from this credit insurance

Speaker 8: Okay. Our insurance provision is net of whatever we expect to collect from the credit insurance agent. Hedges, for your first question, how comfortable we are as we speak now. It's an assessment that we need to take in our assessment, I think this is good enough. As you know, these are evolving situations. You need to have trust on us and we also have trust on the team. We are at it. That's what I can tell you. This is something it's not the first time that we have seen at all. We have seen it in various places in various times and each situation is different. In our assessment, an $8 million is good enough to handle this case. Okay. okay Our insurance provision is net of whatever we expect to collect from the credit insurance agent. our insurance provision is net of whatever we expect to collect from the credit insurance agent Hedges, for your first question, how comfortable we are as we speak now. hedges for your first question how comfortable we are as we speak now It's an assessment that we need to take in our assessment, I think this is good enough. it's an assessment that we need to take in our assessment i think this is good enough As you know, these are evolving situations. as you know these are evolving situations You need to have trust on us and we also have trust on the team. you need to have trust on us and we also have trust on the team We are at it. we are at it That's what I can tell you. that's what i can tell you This is something it's not the first time that we have seen at all. this is something it's not the first time that we have seen at all We have seen it in various places in various times and each situation is different. we have seen it in various places in various times and each situation is different In our assessment, an $8 million is good enough to handle this case. in our assessment an $8 million is good enough to handle this case

Speaker 1: Could you please call out the specific factoring cost for the quarter? Could you please call out the specific factoring cost for the quarter? could you please call out the specific factoring cost for the quarter

Speaker 8: It's about INR 45 crores. Sorry, sorry. It's about INR 31 crores. This is INR 68 crores in Q1 last year. It's about INR 45 crores. it's about inr 45 crores Sorry, sorry. sorry sorry It's about INR 31 crores. it's about inr 31 crores This is INR 68 crores in Q1 last year. this is inr 68 crores in q1 last year

Speaker 1: Thank you. Thank you. thank you

Speaker 8: Thank you. Thank you. thank you

Speaker 7: Thank you. Before we take the next question, we would like to remind participants that you may press Star and 1 to ask a question. The next question is from the line of Rucha Somaiya from Old Bridge. Please proceed. Thank you. thank you Before we take the next question, we would like to remind participants that you may press Star and 1 to ask a question. before we take the next question we would like to remind participants that you may press star and 1 to ask a question The next question is from the line of Rucha Somaiya from Old Bridge. the next question is from the line of rucha somaiya from old bridge Please proceed. please proceed

Speaker 9: Thanks for the opportunity and congratulations on a good set of numbers. I just had one question. In terms of data center, you mentioned that you are getting demand from data centers. Specifically, I wanted to ask, is every hardware that goes into data centers, does that act as a demand center for Redington products? Any color on that would be great. Thanks. Thanks for the opportunity and congratulations on a good set of numbers. thanks for the opportunity and congratulations on a good set of numbers I just had one question. i just had one question In terms of data center, you mentioned that you are getting demand from data centers. in terms of data center you mentioned that you are getting demand from data centers Specifically, I wanted to ask, is every hardware that goes into data centers, does that act as a demand center for Redington products? specifically i wanted to ask is every hardware that goes into data centers does that act as a demand center for redington products Any color on that would be great. any color on that would be great Thanks. thanks

Speaker 8: Your question is not very clear. Can you repeat, please? Your question is not very clear. your question is not very clear Can you repeat, please? can you repeat please

Speaker 9: My question was the hardware demand that goes into data center, does that act as a demand center for relative products? My question was the hardware demand that goes into data center, does that act as a demand center for relative products? my question was the hardware demand that goes into data center does that act as a demand center for relative products

Speaker 5: Sorry, your question is does the data center products add demand to the Redington products? Sorry, your question is does the data center products add demand to the Redington products? sorry your question is does the data center products add demand to the redington products

Speaker 9: Yeah, yeah. Yeah, yeah. yeah yeah

Speaker 5: It does. Typically, what goes into a data center are server storage, they can be GPUs, non-GPUs, Intel-based. We work with a variety of brands, both international and local, to fulfill these. Definitely, the IT products that go into a data center are something that we work with and have been working with for a long time. It does. it does Typically, what goes into a data center are server storage, they can be GPUs, non-GPUs, Intel-based. typically what goes into a data center are server storage they can be gpus non-gpus intel-based We work with a variety of brands, both international and local, to fulfill these. we work with a variety of brands both international and local to fulfill these Definitely, the IT products that go into a data center are something that we work with and have been working with for a long time. definitely the it products that go into a data center are something that we work with and have been working with for a long time

Speaker 9: All right, sure. Thank you. All right, sure. all right sure Thank you. thank you

Speaker 7: Participants who wish to ask a question may please press star 1 at this time. The next question is from the line of Pratik Kothari from Unique PMS. Please proceed. Participants who wish to ask a question may please press star 1 at this time. participants who wish to ask a question may please press star 1 at this time The next question is from the line of Pratik Kothari from Unique PMS. the next question is from the line of pratik kothari from unique pms Please proceed. please proceed

Speaker 2: Yes. Hi, good afternoon, sir. Two questions on PSG. One is you made a comment on the increased competition. Is this some geography specific? You also made a comment that vendors. Not very keen to pay higher. If you can just highlight a bit more on that. Yes. yes Hi, good afternoon, sir. hi good afternoon sir Two questions on PSG. two questions on psg One is you made a comment on the increased competition. one is you made a comment on the increased competition Is this some geography specific? is this some geography specific You also made a comment that vendors. you also made a comment that vendors Not very keen to pay higher. not very keen to pay higher If you can just highlight a bit more on that. if you can just highlight a bit more on that

Speaker 8: Please. First of all, this is not, I mean, in one market. This is something that we had seen across markets. This is more an industry issue than a market issue. There is increased competition because of higher growth in this space. Overall, the growth potential is high, there is increased competition, and vendors also have restricted margins. All said and done, if there are less margins that we can get in the marketplace, we always go back to the vendor and then get whatever that we can get from them. If they have a restricted margin, they have only so much to share, which is what I meant. Hence, the overall margin that's available in the business as we speak now is constrained, is limited. Please. please First of all, this is not, I mean, in one market. first of all this is not i mean in one market This is something that we had seen across markets. this is something that we had seen across markets This is more an industry issue than a market issue. this is more an industry issue than a market issue There is increased competition because of higher growth in this space. there is increased competition because of higher growth in this space Overall, the growth potential is high, there is increased competition, and vendors also have restricted margins. overall the growth potential is high there is increased competition and vendors also have restricted margins All said and done, if there are less margins that we can get in the marketplace, we always go back to the vendor and then get whatever that we can get from them. all said and done if there are less margins that we can get in the marketplace we always go back to the vendor and then get whatever that we can get from them If they have a restricted margin, they have only so much to share, which is what I meant. if they have a restricted margin they have only so much to share which is what i meant Hence, the overall margin that's available in the business as we speak now is constrained, is limited. hence the overall margin that's available in the business as we speak now is constrained is limited

Speaker 5: Let me add another perspective here. See, there are a few things happening in the technology solutions environment. One, there is the growth of cloud where the data centers for the cloud are being put up by a variety of players. The on-prem products are being played both by global players like HP Enterprise, Dell, Lenovo, etc. There are local players that are evolving, which are working on both GPU as well as non-GPU servers. The intensity of competition is going up for both cloud data centers and on-prem with a variety of different players jumping into the mix. As a result, the global players are pressured in terms of margins, in terms of pricing to compete. Obviously, they're trying to either play the game by going direct or by trying to work with distribution and channel partners with lower margins. Let me add another perspective here. let me add another perspective here See, there are a few things happening in the technology solutions environment. see there are a few things happening in the technology solutions environment One, there is the growth of cloud where the data centers for the cloud are being put up by a variety of players. one there is the growth of cloud where the data centers for the cloud are being put up by a variety of players The on-prem products are being played both by global players like HP Enterprise, Dell, Lenovo, etc. There are local players that are evolving, which are working on both GPU as well as non-GPU servers. the on-prem products are being played both by global players like hp enterprise dell lenovo etc there are local players that are evolving which are working on both gpu as well as non-gpu servers The intensity of competition is going up for both cloud data centers and on-prem with a variety of different players jumping into the mix. the intensity of competition is going up for both cloud data centers and on-prem with a variety of different players jumping into the mix As a result, the global players are pressured in terms of margins, in terms of pricing to compete. as a result the global players are pressured in terms of margins in terms of pricing to compete Obviously, they're trying to either play the game by going direct or by trying to work with distribution and channel partners with lower margins. obviously they're trying to either play the game by going direct or by trying to work with distribution and channel partners with lower margins Clearly, the demand is outstripping and the growth year-on-year is fantastic. If you add data centers and on-premises servers that are being consumed and with all the cloud, all kinds of cloud, the competitiveness has significantly increased. Clearly, the demand is outstripping and the growth year-on-year is fantastic. clearly the demand is outstripping and the growth year-on-year is fantastic If you add data centers and on-premises servers that are being consumed and with all the cloud, all kinds of cloud, the competitiveness has significantly increased. if you add data centers and on-premises servers that are being consumed and with all the cloud all kinds of cloud the competitiveness has significantly increased

Speaker 2: Fair enough. In these large deals which we called out, we said the margins are lower, but so are working capital. The overall ROC still gets meant there. Fair enough. fair enough In these large deals which we called out, we said the margins are lower, but so are working capital. in these large deals which we called out we said the margins are lower but so are working capital The overall ROC still gets meant there. the overall roc still gets meant there

Speaker 8: See, I won't say ROCE will get merged, this thing met. If that's the case, it's an easy choice that we need to make. There could be some compromise, but we have some threshold ROCE which we don't want to breach unless it is too important or strategic that we keep in mind. These are not transactions which will come at regular commercials. That's first off. See, I won't say ROCE will get merged, this thing met. see i won't say roce will get merged this thing met If that's the case, it's an easy choice that we need to make. if that's the case it's an easy choice that we need to make There could be some compromise, but we have some threshold ROCE which we don't want to breach unless it is too important or strategic that we keep in mind. there could be some compromise but we have some threshold roce which we don't want to breach unless it is too important or strategic that we keep in mind These are not transactions which will come at regular commercials. these are not transactions which will come at regular commercials That's first off. that's first off

Speaker 2: Correct. You called out this 60 basis points different gross margins. Out of this, it seems only Arena is something which can kind of mean reward based on whatever actions that you guys take. The rest all seems to be permanent. I mean PayNet obviously, but even say the large deals in TSG or the competition. Correct. correct You called out this 60 basis points different gross margins. you called out this 60 basis points different gross margins Out of this, it seems only Arena is something which can kind of mean reward based on whatever actions that you guys take. The rest all seems to be permanent. out of this it seems only arena is something which can kind of mean reward based on whatever actions that you guys take. the rest all seems to be permanent I mean PayNet obviously, but even say the large deals in TSG or the competition. i mean paynet obviously but even say the large deals in tsg or the competition

Speaker 8: Yes and no. See, the large deals, that's why I said if there are big, big deals which significantly impact the numbers, we need to track it separately and call it out. Even outside of it, we think as things settle down, the market operating price could go up, and we should be able to recoup back our profitability in the TSG segment. Having said that, the software services and the cloud part of the business, we are very positive there, the margins are better. We think the higher growth in that segment is going to help us to bridge this drop in margins. Yes and no. yes and no See, the large deals, that's why I said if there are big, big deals which significantly impact the numbers, we need to track it separately and call it out. see the large deals that's why i said if there are big big deals which significantly impact the numbers we need to track it separately and call it out Even outside of it, we think as things settle down, the market operating price could go up, and we should be able to recoup back our profitability in the TSG segment. even outside of it we think as things settle down the market operating price could go up and we should be able to recoup back our profitability in the tsg segment Having said that, the software services and the cloud part of the business, we are very positive there, the margins are better. having said that the software services and the cloud part of the business we are very positive there the margins are better We think the higher growth in that segment is going to help us to bridge this drop in margins. we think the higher growth in that segment is going to help us to bridge this drop in margins

Speaker 5: The Software Solutions piece of the business is about roughly 15% of our business, and it's growing at 25% right now. This quarter grew at 24% as well. That part of the business delivers a gross margin close to 6%, which should help us counterbalance the dips elsewhere. The Software Solutions piece of the business is about roughly 15% of our business, and it's growing at 25% right now. the software solutions piece of the business is about roughly 15% of our business and it's growing at 25% right now This quarter grew at 24% as well. this quarter grew at 24% as well That part of the business delivers a gross margin close to 6%, which should help us counterbalance the dips elsewhere. that part of the business delivers a gross margin close to 6% which should help us counterbalance the dips elsewhere

Speaker 2: Next, off Arena, any guidance that you would like to give for the year. Next, what does normalize look like? Be it at a gross margin, PAT, whatever. Next, off Arena, any guidance that you w ould like to give for the year. next off arena any guidance that you w ould like to give for the year Next, what does normalize look like? next what does normalize look like Be it at a gross margin, PAT, whatever. be it at a gross margin pat whatever

Speaker 8: Our objective we have set out, I mean set out clearly and have also called it out, we would want to maintain our operating profit between 2.3%-2.5% and PAT above 1.3%. That is something that we are still focused. We are hopeful. We don't see any challenge there. Our objective we have set out, I mean set out clearly and have also called it out, we would want to maintain our operating profit between 2.3%- 2.5% and PAT above 1.3%. our objective we have set out i mean set out clearly and have also called it out we would want to maintain our operating profit between 2.3%- 2.5% and pat above 1.3% That is something that we are still focused. that is something that we are still focused We are hopeful. we are hopeful We don't see any challenge there. we don't see any challenge there

Speaker 2: Thank you and all the best, sir. Thank you and all the best, sir. thank you and all the best sir

Speaker 7: Thank you. The next question is from the line of P Venkatesh from Corporate Database India Private Limited. Please proceed. Thank you. thank you The next question is from the line of P Venkatesh from Corporate Database India Private Limited. the next question is from the line of p venkatesh from corporate database india private limited Please proceed. please proceed

Speaker 6: Hello? Hello. Hello? hello Hello. hello

Speaker 7: Yes, sir. Yes, sir. yes sir

Speaker 6: Yeah, I just wanted to understand. If you have seen this number, we can mention about company filing for the. Could we have called out this risk much earlier as far as offices in Turkey are concerned? Any thoughts on that? The kind of provision that you have taken out there, what is the extent of refusals that are under kind of doubtful? Can you follow that figure also? Thank you. Yeah, I just wanted to understand. yeah i just wanted to understand If you have seen this number, we can mention about company filing for the. if you have seen this number we can mention about company filing for the Could we have called out this risk much earlier as far as offices in Turkey are concerned? could we have called out this risk much earlier as far as offices in turkey are concerned Any thoughts on that? any thoughts on that The kind of provision that you have taken out there, what is the extent of refusals that are under kind of doubtful? the kind of provision that you have taken out there what is the extent of refusals that are under kind of doubtful Can you follow that figure also? can you follow that figure also Thank you. thank you

Speaker 8: Okay. Venkatesh, these are evolving situations. If we had so much clarity, definitely we would have highlighted upfront. We had to take a view as we were closing our books. We think there is no delay and these are at an appropriate time. If there is anything more, definitely we will come back to you at the right time. Second, very specific to Arena, in our view about $20 million is the delay in collection, out of which we had provided for about $8 million. We think we should be able to collect the balance as we stand now. Okay. okay Venkatesh, these are evolving situations. venkatesh these are evolving situations If we had so much clarity, definitely we would have highlighted upfront. if we had so much clarity definitely we would have highlighted upfront We had to take a view as we were closing our books. we had to take a view as we were closing our books We think there is no delay and these are at an appropriate time. we think there is no delay and these are at an appropriate time If there is anything more, definitely we will come back to you at the right time. if there is anything more definitely we will come back to you at the right time Second, very specific to Arena, in our view about $20 million is the delay in collection, out of which we had provided for about $8 million. second very specific to arena in our view about $20 million is the delay in collection out of which we had provided for about $8 million We think we should be able to collect the balance as we stand now. we think we should be able to collect the balance as we stand now

Speaker 6: Thank you. Thank you. thank you

Speaker 7: The next question is from the line of Aejas Lakhani from Unifi AMC. Please proceed. The next question is from the line of Aejas Lakhani from Unifi AMC. the next question is from the line of aejas lakhani from unifi amc Please proceed. please proceed

Speaker 1: Yeah, Krishnan, a follow up. I'm still trying to understand the call out of the ability to maintain that EBITDA aspirational margin of 2.3%. Given how the first quarter performance has been, what gives you the confidence that in the remaining nine months, given the dynamic situation in Turkey, we will have to cover up more than the 2.3% so that the blended number reaches 2.3%. What gives you that confidence, sir? Yeah, Krishnan, a follow up. yeah krishnan a follow up I'm still trying to understand the call out of the ability to maintain that EBITDA aspirational margin of 2.3%. i'm still trying to understand the call out of the ability to maintain that ebitda aspirational margin of 2.3% Given how the first quarter performance has been, what gives you the confidence that in the remaining nine months, given the dynamic situation in Turkey, we will have to cover up more than the 2.3% so that the blended number reaches 2.3%. given how the first quarter performance has been what gives you the confidence that in the remaining nine months given the dynamic situation in turkey we will have to cover up more than the 2.3% so that the blended number reaches 2.3% What gives you that confidence, sir? what gives you that confidence sir

Speaker 8: Okay, see this issue in Turkey is we think it's one off. We don't see all this. We have to make an assessment at this point in time. Second, in the earnings deck, you would have seen one slide where we had given for a longer period how have been our Q1 operating profit and PAT percentage. I see a confusion. That's why some of the concerns are coming up. There is a comparison between Q4 or there is a comparison with a full year number versus Q1, which cannot be the case. Our Q1 has always been the lowest quarter in terms of revenue, lowest quarter in terms of profitability. You can see in the slide the trend in terms of operating profit. I am removing the three years of COVID period because those are, we don't want to reckon. Okay, see this issue in Turkey is we think it's one off. okay see this issue in turkey is we think it's one off We don't see all this. we don't see all this We have to make an assessment at this point in time. we have to make an assessment at this point in time Second, in the earnings deck, you would have seen one slide where we had given for a longer period how have been our Q1 operating profit and PAT percentage. second in the earnings deck you would have seen one slide where we had given for a longer period how have been our q1 operating profit and pat percentage I see a confusion. i see a confusion That's why some of the concerns are coming up. that's why some of the concerns are coming up There is a comparison between Q4 or there is a comparison with a full year number versus Q1, which cannot be the case. there is a comparison between q4 or there is a comparison with a full year number versus q1 which cannot be the case Our Q1 has always been the lowest quarter in terms of revenue, lowest quarter in terms of profitability. our q1 has always been the lowest quarter in terms of revenue lowest quarter in terms of profitability You can see in the slide the trend in terms of operating profit. you can see in the slide the trend in terms of operating profit I am removing the three years of COVID period because those are, we don't want to reckon. i am removing the three years of covid period because those are we don't want to reckon The operating profit average pre and post is about 2.06% and we are at 2.09%. Better than that, the PAT percentage is 1.16%, I mean pre and post, and we are at about 1.32%. Have we done better like what Hari said? Definitely we are. Maybe if the AR issue in Arena has not happened, it would have very clearly come off. Look at it this way. Our AR provision is about 0.39% this quarter. Normally it's about 10 basis points. Let's assume it is 10 basis points. We are now talking about a 29, which is close to 0.3% dip in profitability only on account of AR, which at the PAT level could be about, say, about 22 basis points-23 basis points. 22 basis points-23 basis points impact is built in in the number that you are seeing. I don't think you need to be worried. We are definitely not worrying. We are confident in terms of what we have said. The operating profit average pre and post is about 2.06% and we are at 2.09%. the operating profit average pre and post is about 2.06% and we are at 2.09% Better than that, the PAT percentage is 1.16%, I mean pre and post, and we are at about 1.32%. better than that the pat percentage is 1.16% i mean pre and post and we are at about 1.32% Have we done better like what Hari said? have we done better like what hari said Definitely we are. definitely we are Maybe if the AR issue in Arena has not happened, it would have very clearly come off. maybe if the ar issue in arena has not happened it would have very clearly come off Look at it this way. look at it this way Our AR provision is about 0.39% this quarter. our ar provision is about 0.39% this quarter Normally it's about 10 basis points. normally it's about 10 basis points Let's assume it is 10 basis points. let's assume it is 10 basis points We are now talking about a 29, which is close to 0.3% dip in profitability only on account of AR, which at the PAT level could be about, say, about 22 basis points-23 basis points. 22 basis points-23 basis points impact is built in in the number that you are seeing. we are now talking about a 29 which is close to 0.3% dip in profitability only on account of ar which at the pat level could be about, say about 22 basis points-23 basis points 22 basis points-23 basis points impact is built in in the number that you are seeing I don't think you need to be worried. i don't think you need to be worried We are definitely not worrying. we are definitely not worrying We are confident in terms of what we have said. we are confident in terms of what we have said

Speaker 1: Understood, sir. My next question is for Hari. Sir, you had mentioned that you have now created a Software Solutions Group. Firstly, I wanted to understand that the HyperScaler, the pure SaaS, the software as a service as well as security is a part that encompasses this Software Solutions Group. Is that understanding correct? Understood, sir. understood sir My next question is for Hari. my next question is for hari Sir, you had mentioned that you have now created a Software Solutions Group. sir you had mentioned that you have now created a software solutions group Firstly, I wanted to understand that the HyperScaler, the pure SaaS, the software as a service as well as security is a part that encompasses this Software Solutions Group. firstly i wanted to understand that the hyperscaler the pure saas the software as a service as well as security is a part that encompasses this software solutions group Is that understanding correct? is that understanding correct

Speaker 5: Absolutely right. Those are the three groupings. Security, software, and even within SaaS, infrastructure SaaS and application SaaS, and cloud was separately. Hyperscaler piece was separately in CSG. Now all three of them will be together in Software Solutions Group, and you will start seeing some of those in the coming quarters. Absolutely right. absolutely right Those are the three groupings. those are the three groupings Security, software, and even within SaaS, infrastructure SaaS and application SaaS, and cloud was separately. security software and even within saas infrastructure saas and application saas and cloud was separately Hyperscaler piece was separately in CSG. hyperscaler piece was separately in csg Now all three of them will be together in Software Solutions Group, and you will start seeing some of those in the coming quarters. now all three of them will be together in software solutions group and you will start seeing some of those in the coming quarters

Speaker 1: Noted. Sir, given that this is the highest growing piece for us, could you specifically give some color on what are the gross margins and EBITDA margins that we have in this specific vertical? Noted. noted Sir, given that this is the highest growing piece for us, could you specifically give some color on what are the gross margins and EBITDA margins that we have in this specific vertical? sir given that this is the highest growing piece for us could you specifically give some color on what are the gross margins and ebitda margins that we have in this specific vertical

Speaker 5: As I said earlier, we are tracking between 5.5% and 6% and closer to 6% on the gross margins. On these categories, obviously we have a lot of work to do. I think we focused very well in the last four, five years on the hyperscaler piece, going beyond just resale, going into consumption of workloads and professional services around it. You get to appropriate, when you do professional services, even higher gross margin even though it's a smaller percentage of the business. As we focus and double down on security and SaaS, there is an opportunity to maintain those kind of gross margins. There's potential to add services around it. There's also potential to bring in more brands and get more share. There is more growth and more gross margin that can be appropriated. We are building a plan. It's not going to happen overnight. It's a multi-year journey. As I said earlier, we are tracking between 5.5% and 6% and closer to 6% on the gross margins. as i said earlier we are tracking between 5.5% and 6% and closer to 6% on the gross margins On these categories, obviously we have a lot of work to do. on these categories obviously we have a lot of work to do I think we focused very well in the last four, five years on the hyperscaler piece, going beyond just resale, going into consumption of workloads and professional services around it. i think we focused very well in the last four five years on the hyperscaler piece going beyond just resale going into consumption of workloads and professional services around it You get to appropriate, when you do professional services, even higher gross margin even though it's a smaller percentage of the business. you get to appropriate when you do professional services even higher gross margin even though it's a smaller percentage of the business As we focus and double down on security and SaaS, there is an opportunity to maintain those kind of gross margins. as we focus and double down on security and saas there is an opportunity to maintain those kind of gross margins There's potential to add services around it. there's potential to add services around it There's also potential to bring in more brands and get more share. there's also potential to bring in more brands and get more share There is more growth and more gross margin that can be appropriated. there is more growth and more gross margin that can be appropriated We are building a plan. we are building a plan It's not going to happen overnight. it's not going to happen overnight It's a multi-year journey. it's a multi-year journey We started the journey, we are making investments there. The gross margins you can expect in that business is between 5.7% and 6% plus margins. We started the journey, we are making investments there. we started the journey we are making investments there The gross margins you can expect in that business is between 5.7% and 6% plus margins. the gross margins you can expect in that business is between 5.7% and 6% plus margins

Speaker 1: Understood. Sir Hariharan, in the start you mentioned that the TSG run rate business is seeing some sort of a challenge. When you're calling out the run rate business, what does it really encompass? Understood. understood Sir Hariharan, in the start you mentioned that the TSG run rate business is seeing some sort of a challenge. sir hariharan in the start you mentioned that the tsg run rate business is seeing some sort of a challenge When you're calling out the run rate business, what does it really encompass? when you're calling out the run rate business what does it really encompass

Speaker 5: The run rate business is really channel business that we work closely with global vendors and these are deals that we work closely with them, which they strike the deals and we fulfill them. It's an ongoing channel business with their Tier A, Tier B partners that Hewlett Packard Enterprise, Dell, and these kinds of brands and Lenovo, these kinds of brands have. We work closely with them to fulfill the deals that they work with customers and with us. The run rate business is really channel business that we work closely with global vendors and these are deals that we work closely with them, which they strike the deals and we fulfill them. the run rate business is really channel business that we work closely with global vendors and these are deals that we work closely with them which they strike the deals and we fulfill them It's an ongoing channel business with their Tier A, Tier B partners that Hewlett Packard Enterprise, Dell, and these kinds of brands and Lenovo, these kinds of brands have. it's an ongoing channel business with their tier a tier b partners that hewlett packard enterprise dell and these kinds of brands and lenovo these kinds of brands have We work closely with them to fulfill the deals that they work with customers and with us. we work closely with them to fulfill the deals that they work with customers and with us

Speaker 1: Understood. Finally, what is the blended interest cost that we are paying on consolidated today sir. Understood. understood Finally, what is the blended interest cost that we are paying on consolidated today sir. finally what is the blended interest cost that we are paying on consolidated today sir

Speaker 8: Can you say blended interest cost? You want absolute amount? Can you say blended interest cost? Y ou want absolute amount? can you say blended interest cost? y ou want absolute amount

Speaker 1: No, just the percentage like is it 7.58%? No, just the percentage like is it 7.58%? no, just the percentage like is it 7.58%

Speaker 8: No, no, no. That varies by market. It's too difficult to put, I mean 1% Arena we discussed. Right, right. In the rest of the markets maybe I should say it varies between 6%-7.5%. No, no, no. no no no That varies by market. that varies by market It's too difficult to put, I mean 1% Arena we discussed. it's too difficult to put i mean 1% arena we discussed Right, right. right right In the rest of the markets maybe I should say it varies between 6%- 7.5%. in the rest of the markets maybe i should say it varies between 6%- 7.5%

Speaker 1: Understood, sir. Okay, sir, thank you much. Understood, sir. understood sir Okay, sir, thank you much. okay sir thank you much

Speaker 7: Thank you. The next question is from the line of Sahil Doshi from Thinqwise. Please proceed. Thank you. thank you The next question is from the line of Sahil Doshi from Thinqw ise. the next question is from the line of sahil doshi from thinqw ise Please proceed. please proceed

Speaker 4: Yes, thank you for the opportunity. My question pertains to that. This quarter we've seen a positive delta in terms of the MSG shares. Consequently, we haven't seen a similar follow through in working capital in terms of benefit coming through. Could you talk a little on. Could you quantify the impact of the increased Mobility share on the gross margins? Yes, thank you for the opportunity. yes thank you for the opportunity My question pertains to that. my question pertains to that This quarter we've seen a positive delta in terms of the MSG shares. this quarter we've seen a positive delta in terms of the msg shares Consequently, we haven't seen a similar follow through in working capital in terms of benefit coming through. consequently we haven't seen a similar follow through in working capital in terms of benefit coming through Could you talk a little on. could you talk a little on Could you quantify the impact of the increased Mobility share on the gross margins? could you quantify the impact of the increased mobility share on the gross margins

Speaker 8: Okay. See the benefit of Mobility growth. Definitely seen in working capital. Outside of Mobility, there is an increase in the board. That's something that we see in the marketplace. It's just not in the case of Redington, even with other competition, the credit days in the market are more. However, if you see end of June last year, we were at about 39 days of working capital closing and now we are at about 37. There is a drop of two days. This is primarily on account of the mix, which is higher contribution from MSG because of the mix change. The disadvantage that we have had in terms of the Mobility is offset by the TSG. In TSG, our growth has been slower, which is what is taken over by MSG. Both broadly have got neutralized and hence that impact on the gross margin is not visible. Okay. okay See the benefit of Mobility growth. see the benefit of mobility growth Definitely seen in working capital. definitely seen in working capital Outside of Mobility, there is an increase in the board. outside of mobility there is an increase in the board That's something that we see in the marketplace. that's something that we see in the marketplace It's just not in the case of Redington, even with other competition, the credit days in the market are more. it's just not in the case of redington even with other competition the credit days in the market are more However, if you see end of June last year, we were at about 39 days of working capital closing and now we are at about 37. however if you see end of june last year we were at about 39 days of working capital closing and now we are at about 37 There is a drop of two days. there is a drop of two days This is primarily on account of the mix, which is higher contribution from MSG because of the mix change. this is primarily on account of the mix which is higher contribution from msg because of the mix change The disadvantage that we have had in terms of the Mobility is offset by the TSG. the disadvantage that we have had in terms of the mobility is offset by the tsg In TSG, our growth has been slower, which is what is taken over by MSG. in tsg our growth has been slower which is what is taken over by msg Both broadly have got neutralized and hence that impact on the gross margin is not visible. both broadly have got neutralized and hence that impact on the gross margin is not visible Even if I need to put a figure, there could be about 5 basis points-6 basis points of impact on account of both. Even if I need to put a figure, there could be about 5 basis points- 6 basis points of impact on account of both. even if i need to put a figure there could be about 5 basis points- 6 basis points of impact on account of both

Speaker 4: Okay, understood sir, appreciate it. The other question pertains to these large deals. Could you quantify how many, what do you define a large deal as, and is there any factoring on account of these again in this quarter? If we just see a long-term trend, the 5% adjusted gross margin which we've seen, this is the lowest ever we have reported in any quarter. Structurally, are we looking at growth at the cost of margins? Is this how we should think about it, or have the terms of trade in the entire channel changed? This should be the new normal. Okay, understood sir, appreciate it. okay understood sir appreciate it The other question pertains to these large deals. the other question pertains to these large deals Could you quantify how many, what do you define a large deal as, and is there any factoring on account of these again in this quarter? could you quantify how many what do you define a large deal as and is there any factoring on account of these again in this quarter If we just see a long-term trend, the 5% adjusted gross margin which we've seen, this is the lowest ever we have reported in any quarter. if we just see a long-term trend the 5% adjusted gross margin which we've seen this is the lowest ever we have reported in any quarter Structurally, are we looking at growth at the cost of margins? structurally are we looking at growth at the cost of margins Is this how we should think about it, or have the terms of trade in the entire channel changed? is this how we should think about it or have the terms of trade in the entire channel changed This should be the new normal. this should be the new normal

Speaker 8: Okay. The definition of the large deal, it is too difficult to define because the size of the businesses are going up. I'm just putting it in a very broad level. One and a half, two years back, anything more than INR 100 crores could be a large deal. Last year we had handled certain deals which are more than INR 200 crores. I'm talking about each transaction. If we look at the businesses that are coming, there are some business which are multiple times bigger than this. It's too difficult to put a very specific amount if it's quite substantial. It is to one customer, one vendor. I mean, we think it need to be called out as a large deal. Okay. okay The definition of the large deal, it is too difficult to define because the size of the businesses are going up. the definition of the large deal it is too difficult to define because the size of the businesses are going up I'm just putting it in a very broad level. i'm just putting it in a very broad level One and a half, two years back, anything more than INR 100 crores could be a large deal. one and a half two years back anything more than inr 100 crores could be a large deal Last year we had handled certain deals which are more than INR 200 crores. last year we had handled certain deals which are more than inr 200 crores I'm talking about each transaction. i'm talking about each transaction If we look at the businesses that are coming, there are some business which are multiple times bigger than this. if we look at the businesses that are coming there are some business which are multiple times bigger than this It's too difficult to put a very specific amount if it's quite substantial. it's too difficult to put a very specific amount if it's quite substantial It is to one customer, one vendor. it is to one customer one vendor I mean, we think it need to be called out as a large deal. i mean we think it need to be called out as a large deal

Speaker 4: Okay. Related to the factoring and the other question on the growth over emergence. Okay. okay Related to the factoring and the other question on the growth over emergence. related to the factoring and the other question on the growth over emergence

Speaker 8: Sorry, which one? Sorry, which one? sorry which one

Speaker 4: Is there any factoring on account of these large deals which you have done, and if you can quantify that. Is there any factoring on account of these large deals which you have done, and if you can quantify that. is there any factoring on account of these large deals which you have done and if you can quantify that

Speaker 8: No, not in this quarter, but in the past for some of the large transactions. If we think we need to do receivable factoring, we had done, but not in this quarter. No, not in this quarter, but in the past for some of the large transactions. no not in this quarter but in the past for some of the large transactions If we think we need to do receivable factoring, we had done, but not in this quarter. if we think we need to do receivable factoring we had done but not in this quarter

Speaker 4: Sure, sir. My other question, Sure, sir. sure sir My other question, my other question

Speaker 8: some of this is difficult, Sahil, to guide. I tell you this is the challenge in the back to back business. The deals come, we need to take a decision at that point in time, what to take, what not to take. Each one is a different animal by itself. We are supposed to structure it in that form, so it cannot get guided in a very simple form. Wherever we think there are possibilities, we hedge it in the form of back to back payment terms, or if it calls for more credit and there are possibilities for us to factor it with the bank, we do that. some of this is difficult, Sahil, to guide. some of this is difficult sahil to guide I tell you this is the challenge in the back to back business. i tell you this is the challenge in the back to back business The deals come, we need to take a decision at that point in time, what to take, what not to take. the deals come we need to take a decision at that point in time what to take what not to take Each one is a different animal by itself. each one is a different animal by itself We are supposed to structure it in that form, so it cannot get guided in a very simple form. we are supposed to structure it in that form so it cannot get guided in a very simple form Wherever we think there are possibilities, we hedge it in the form of back to back payment terms, or if it calls for more credit and there are possibilities for us to factor it with the bank, we do that. wherever we think there are possibilities we hedge it in the form of back to back payment terms or if it calls for more credit and there are possibilities for us to factor it with the bank we do that

Speaker 5: The other question you had was is this a new normal and are we compromising gross margin for growth? See, it's a matter of relevance and market share. For the run rate business we will maximize and have our share. In the big deal business, if you play in that incrementally, yes, you will get additional growth and yes, your gross margin percentages will deteriorate as long as they make sense of a return on capital employed. We have a threshold as what Krishnan said, it makes sense to us. We have to play that game. If we don't want to participate in the big deal because it's pulling down our gross margin percentage, we may become less relevant in that category. The other question you had was is this a new normal and are we compromising gross margin for growth? the other question you had was is this a new normal and are we compromising gross margin for growth See, it's a matter of relevance and market share. see it's a matter of relevance and market share For the run rate business we will maximize and have our share. for the run rate business we will maximize and have our share In the big deal business, if you play in that incrementally, yes, you will get additional growth and yes, your gross margin percentages will deteriorate as long as they make sense of a return on capital employed. in the big deal business if you play in that incrementally yes you will get additional growth and yes your gross margin percentages will deteriorate as long as they make sense of a return on capital employed We have a threshold as what Krishnan said, it makes sense to us. we have a threshold as what krishnan said it makes sense to us We have to play that game. we have to play that game If we don't want to participate in the big deal because it's pulling down our gross margin percentage, we may become less relevant in that category. if we don't want to participate in the big deal because it's pulling down our gross margin percentage we may become less relevant in that category

Speaker 8: See, one another point I want to make a mention here. This is a market which is very attractive and which is pretty large even for the global leaders, and they are all present in that market. You have to ensure as a leader, we are the leader in India. As a leader, it's important that you need to play the game in line with what a global player will do if the same transaction can be picked up by them. If we are not able to do, then that advantage goes. We are very conscious about the risk, we are conscious about the working capital that we deploy and the returns that we need to make. These are the choices that we need to keep making as we move forward to Sahil. See, one another point I want to make a mention here. see one another point i want to make a mention here This is a market which is very attractive and which is pretty large even for the global leaders, and they are all present in that market. this is a market which is very attractive and which is pretty large even for the global leaders and they are all present in that market You have to ensure as a leader, we are the leader in India. you have to ensure as a leader we are the leader in india As a leader, it's important that you need to play the game in line with what a global player will do if the same transaction can be picked up by them. as a leader it's important that you need to play the game in line with what a global player will do if the same transaction can be picked up by them If we are not able to do, then that advantage goes. if we are not able to do then that advantage goes We are very conscious about the risk, we are conscious about the working capital that we deploy and the returns that we need to make. we are very conscious about the risk we are conscious about the working capital that we deploy and the returns that we need to make These are the choices that we need to keep making as we move forward to Sahil. these are the choices that we need to keep making as we move forward to sahil

Speaker 4: Sure, sir. Thank you. Appreciate the candid responses. Just final one on Arena, if you can just quantify or you can just call out what's the situation currently and how should we think about profitability and capital infusion further on. Sure, sir. sure sir Thank you. thank you Appreciate the candid responses. appreciate the candid responses Just final one on Arena, if you can just quantify or you can just call out what's the situation currently and how should we think about profitability and capital infusion further on. just final one on arena if you can just quantify or you can just call out what's the situation currently and how should we think about profitability and capital infusion further on

Speaker 8: No capital infusion. We haven't invested, we haven't put any capital, we haven't made any commitment in Arena post our acquisition way back in 2010. There are no capital investments that are planned. Having said that, in Arena, the economy and industry are still going through stress. We have confidence in our people in terms of how they manage and that's something. Wherever required, we are pitching in. I mean we are pitching in. We are helping them. We would be very cautious. We think the situation will become better. As Hari said, we are also looking strategically in terms of what we can do at the right point in time. We will share with you what's our thought process and what's our plans. As we speak now, we are trying to do our best in the given situation. No capital infusion. no capital infusion We haven't invested, we haven't put any capital, we haven't made any commitment in Arena post our acquisition way back in 2010. we haven't invested we haven't put any capital we haven't made any commitment in arena post our acquisition way back in 2010 There are no capital investments that are planned. there are no capital investments that are planned Having said that, in Arena, the economy and industry are still going through stress. having said that in arena the economy and industry are still going through stress We have confidence in our people in terms of how they manage and that's something. we have confidence in our people in terms of how they manage and that's something Wherever required, we are pitching in. wherever required we are pitching in I mean we are pitching in. i mean we are pitching in We are helping them. we are helping them We would be very cautious. we would be very cautious We think the situation will become better. we think the situation will become better As Hari said, we are also looking strategically in terms of what we can do at the right point in time. as hari said we are also looking strategically in terms of what we can do at the right point in time We will share with you what's our thought process and what's our plans. we will share with you what's our thought process and what's our plans As we speak now, we are trying to do our best in the given situation. as we speak now we are trying to do our best in the given situation

Speaker 4: Sure, sir. Thank you so much. Sure, sir. sure sir Thank you so much. thank you so much

Speaker 7: Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please proceed. Thank you. thank you The next question is from the line of Sarvesh Gupta from Maximal Capital. the next question is from the line of sarvesh gupta from maximal capital Please proceed. please proceed

Speaker 3: Good evening, sir. Just one confusion that I had. In the beginning, you had called out the 60 basis point decrease in gross margin, and out of that 20 basis point was attributable to Arena and PayNet, and the remaining to the TSG large deal business. Later in the call, you mentioned around 30 basis point of AR provisioning. So. I got confused about how much is the one-time thing and how much is because of the one-time AR provisioning and how much is repeatable. Can you please clarify that? Good evening, sir. good evening sir Just one confusion that I had. just one confusion that i had In the beginning, you had called out the 60 basis point decrease in gross margin, and out of that 20 basis point was attributable to Arena and PayNet, and the remaining to the TSG large deal business. in the beginning you had called out the 60 basis point decrease in gross margin and out of that 20 basis point was attributable to arena and paynet and the remaining to the tsg large deal business Later in the call, you mentioned around 30 basis point of AR provisioning. later in the call you mentioned around 30 basis point of ar provisioning So. so I got confused about how much is the one-time thing and how much is because of the one-time AR provisioning and how much is repeatable. i got confused about how much is the one-time thing and how much is because of the one-time ar provisioning and how much is repeatable Can you please clarify that? can you please clarify that

Speaker 8: See, AR provisioning is part of OpEx. It is not a part of margin. Both are independent. Have the margins dropped? The margins have dropped. We have discussed about it. At the same time, we had brought in OpEx control, which is why our OpEx increased. Even though revenue growth was 22%, OpEx growth was 6%. Even though gross margin growth was 14%, OpEx growth was 6%. Interest—we have had a degrowth by considering interest and factoring together. These have enabled the profitability to be strong. If your question is if this gross margin drop had not happened, if the AR provision had not happened, would the profitability growth have been more, the answer is yes. See, AR provisioning is part of OpEx. see ar provisioning is part of opex It is not a part of margin. it is not a part of margin Both are independent. both are independent Have the margins dropped? have the margins dropped The margins have dropped. the margins have dropped We have discussed about it. we have discussed about it At the same time, we had brought in OpEx control, which is why our OpEx increased. at the same time we had brought in opex control which is why our opex increased Even though revenue growth was 22%, OpEx growth was 6%. even though revenue growth was 22% opex growth was 6% Even though gross margin growth was 14%, OpEx growth was 6%. even though gross margin growth was 14% opex growth was 6% Interest—we have had a degrowth by considering interest and factoring together. interest—we have had a degrowth by considering interest and factoring together These have enabled the profitability to be strong. these have enabled the profitability to be strong If your question is if this gross margin drop had not happened, if the AR provision had not happened, would the profitability growth have been more, the answer is yes. if your question is if this gross margin drop had not happened if the ar provision had not happened would the profitability growth have been more the answer is yes

Speaker 3: Your OpEx growth of 6%, which was anyways a good sort of number, would have been even lower had this 30 basis points of AR provisioning not been done this quarter. Your OpEx growth of 6%, which was anyways a good sort of number, would have been even lower had this 30 basis points of AR provisioning not been done this quarter. your opex growth of 6% which was anyways a good sort of number would have been even lower had this 30 basis points of ar provisioning not been done this quarter

Speaker 8: Oh, sorry. In OpEx I have not included AR. Without AR, the OpEx, the regular OpEx is 6%. If we consider AR, our OpEx growth is 13%. Oh, sorry. oh sorry In OpEx I have not included AR. in opex i have not included ar Without AR, the OpEx, the regular OpEx is 6%. without ar the opex the regular opex is 6% If we consider AR, our OpEx growth is 13%. if we consider ar our opex growth is 13%

Speaker 3: Okay, so this 13% would have been 6% except for this 30 basis points of AR provisioning that we have done this quarter. Okay, so this 13% would have been 6% except for this 30 basis points of AR provisioning that we have done this quarter. okay so this 13% would have been 6% except for this 30 basis points of ar provisioning that we have done this quarter

Speaker 8: Yes. Yes. yes

Speaker 3: Okay. Okay. okay

Speaker 8: Sorry, one second. One. If you add up AR, including AR, the growth is 19%, not 13%. Sorry, one second. sorry one second One. one If you add up AR, including AR, the growth is 19%, not 13%. if you add up ar including ar the growth is 19% not 13%

Speaker 3: OpEx plus AR y-o-y is 19%. Only OpEx is 6%. Hello. OpEx plus AR y-o-y is 19%. opex plus ar y-o-y is 19% Only OpEx is 6%. only opex is 6% Hello. hello

Speaker 8: Sorry, one minute. We are just taking the figures. Just give us one minute. Yeah, it's 19%. Sorry, one minute. sorry one minute We are just taking the figures. we are just taking the figures Just give us one minute. just give us one minute Yeah, it's 19%. yeah it's 19%

Speaker 3: Understood. OpEx plus AR year-over-year is 19%. Only OpEx excluding AR is 6%. Understood. understood OpEx plus AR year-over-year is 19%. opex plus ar year-over-year is 19% Only OpEx excluding AR is 6%. only opex excluding ar is 6%

Speaker 8: Correct. Correct. correct

Speaker 3: Okay. Secondly, sir, on this TSG large deal, I understood the strategic thing that since we are the market leader, we have to play sometimes. These could be something that is more in work going forward as well. Having said that, if I look at the working capital days, somehow it did not seem intuitive that we got the benefit of the lower working capital days because of these larger deals. The days reduction was small and the free cash flow was also sort of negative for the quarter because of that. How do I, I mean, did we get, what kind of benefit did we get on the working capital because of these large deals? Okay. okay Secondly, sir, on this TSG large deal, I understood the strategic thing that since we are the market leader, we have to play sometimes. secondly sir on this tsg large deal i understood the strategic thing that since we are the market leader we have to play sometimes These could be something that is more in work going forward as well. these could be something that is more in work going forward as well Having said that, if I look at the working capital days, somehow it did not seem intuitive that we got the benefit of the lower working capital days because of these larger deals. having said that if i look at the working capital days somehow it did not seem intuitive that we got the benefit of the lower working capital days because of these larger deals The days reduction was small and the free cash flow was also sort of negative for the quarter because of that. the days reduction was small and the free cash flow was also sort of negative for the quarter because of that How do I, I mean, did we get, what kind of benefit did we get on the working capital because of these large deals? how do i i mean did we get what kind of benefit did we get on the working capital because of these large deals

Speaker 8: It wasn't significant this quarter. It wasn't significant this time. It wasn't significant this quarter. it wasn't significant this quarter It wasn't significant this time. it wasn't significant this time

Speaker 3: On a normal basis, are those significant? Like because we take a hit on our margin. On a normal basis, are those significant? on a normal basis are those significant Like because we take a hit on our margin. like because we take a hit on our margin

Speaker 8: It depends on each deal. That's why I said normally there could be a compromise either on the margin or on the working capital, but sometimes, I mean, that may not be significantly felt. Working capital deduction wasn't quite significant. It was only two days overall. It depends on each deal. it depends on each deal That's why I said normally there could be a compromise either on the margin or on the working capital, but sometimes, I mean, that may not be significantly felt. that's why i said normally there could be a compromise either on the margin or on the working capital but sometimes i mean that may not be significantly felt Working capital deduction wasn't quite significant. working capital deduction wasn't quite significant It was only two days overall. it was only two days overall

Speaker 3: Sir, finally on the Turkish business, on our parent balance sheet, what is the net carrying value of the investments that we have done for Arena? Sir, finally on the Turkish business, on our parent balance sheet, what is the net carrying value of the investments that we have done for Arena? sir finally on the turkish business on our parent balance sheet what is the net carrying value of the investments that we have done for arena

Speaker 8: It is currently at about $30 million, It is currently at about $30 million, it is currently at about $30 million

Speaker 3: 30. 30. 30

Speaker 8: 30. 30. 30

Speaker 3: Okay, understood, sir. Congratulations for steady numbers and all the best for the coming quarters. Okay, understood, sir. okay understood sir Congratulations for steady numbers and all the best for the coming quarters. congratulations for steady numbers and all the best for the coming quarters

Speaker 8: Just on that question, I think it's important also for me to tell you Arena is a listed company, and Arena's market cap, I don't know, today it ranges between $85 million-$90 million. For your question, what's our current investment in the book is about $30 million. If I need to calculate what is the market value of that, it is 50% of this amount, which could be between $40 million-$45 million. That can give you some comfort. Just on that question, I think it's important also for me to tell you Arena is a listed company, and Arena's market cap, I don't know, today it ranges between $85 million- $90 million. just on that question i think it's important also for me to tell you arena is a listed company and arena's market cap i don't know today it ranges between $85 million- $90 million For your question, what's our current investment in the book is about $30 million. for your question what's our current investment in the book is about $30 million If I need to calculate what is the market value of that, it is 50% of this amount, which could be between $40 million- $45 million. if i need to calculate what is the market value of that it is 50% of this amount which could be between $40 million- $45 million That can give you some comfort. that can give you some comfort

Speaker 3: Understood, sir. Thank you. Understood, sir. understood sir Thank you. thank you

Speaker 7: Thank you. Due to time constraints, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir. Thank you. thank you Due to time constraints, that was the last question. due to time constraints that was the last question I now hand the conference over to the management for the closing comments. i now hand the conference over to the management for the closing comments Over to you, sir. over to you sir

Speaker 5: Thank you so much for all the questions. I know because of the gross margin declines as well as the challenges we've had in Arena, our subsidiary, there were a lot of questions. We feel very strong the way we've executed the quarter in all the geographies outside of Arena. We are confident as we go forward in Q2, we do see the NPIs in Mobility as well as the Technology Solutions and the Software Solutions business building out a decent quarter for us and look forward to sharing that with you in three months. Thank you so much for all the questions. thank you so much for all the questions I know because of the gross margin declines as well as the challenges we've had in Arena, our subsidiary, there were a lot of questions. i know because of the gross margin declines as well as the challenges we've had in arena our subsidiary there were a lot of questions We feel very strong the way we've executed the quarter in all the geographies outside of Arena. we feel very strong the way we've executed the quarter in all the geographies outside of arena We are confident as we go forward in Q2, we do see the NPIs in Mobility as well as the Technology Solutions and the Software Solutions business building out a decent quarter for us and look forward to sharing that with you in three months. we are confident as we go forward in q2 we do see the npis in mobility as well as the technology solutions and the software solutions business building out a decent quarter for us and look forward to sharing that with you in three months

Speaker 8: Thank you. Thank you. thank you

Speaker 7: Thank you. On behalf of Redington Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you. thank you On behalf of Redington Limited, that concludes this conference. on behalf of redington limited that concludes this conference Thank you for joining us. thank you for joining us You may now disconnect your lines. you may now disconnect your lines