Ladies and gentlemen, good day and welcome to the Redington India Limited Q3 FY 2022 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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. 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. Rajiv Srivastava, Joint Managing Director. Thank you, and over to you, sir.
Hi. Thanks a lot. Good evening and welcome to everyone for joining this call. We've got Mr. Raj Shankar, the Vice Chairman and Managing Director of Redington on the call with me, along with our Global Chief Financial Officer , S.V. Krishnan, and Sowmiya Manickam, who is the investor relations leader for the country. The way I'm gonna do this is I'll give you a top-line or a headline commentary on how our performance has been in Q3. I'll hand over to Krishnan to take you through a bit more detail on the financial performance of the company. Then I'll give you a bit of a color on what's happening in the market, the way the market is reacting and behaving right now, the direction in which the IT industry and the technology industry in general is evolving.
We can open it up for Q&A. Let me begin by giving you a top-line commentary. In Q3, we had a consolidated revenue of INR 16,620 crore, which is 2% decline over same period last year. But that's just because we changed our accounting standard from a gross accounting of earlier times to a net accounting. If it was the regular numbers as just the way we had reported last year, we would have seen a 2% positive growth. Now, this aligns with the global accounting standard, and so it's perfectly fine.
Just to give you a sense on EBITDA, we have had an EBITDA of INR 544 crore, which is a 22% growth year-on-year, and a PAT of INR 388 crore, which is a 103% growth year-on-year. This is for us the all-time high PAT we've ever had. Just so you know, our PAT for nine months now happens to be greater than the PAT for the full all of last year. I think it's been a very, very nice rounded sort of a performance. Just to give you a split between India and overseas, that's the way we measure our businesses. Our India revenues are INR 7,157 crore, which is a -7% just because of gross accounting.
The EBITDA has grown to INR 204 crore, a 10% YoY, and India PAT is INR 140 crore, which is a 261% growth over the same time last year. Just giving a color on the overseas revenue as well. Our overseas revenue is INR 9,463 crore, which is a 2% YoY growth. If it was on gross accounting, it would be a 5% YoY growth. Our overseas EBITDA is INR 340 crore, which is a 30% growth year-over-year. Overseas PAT of INR 248 crore is a 62% growth year-on-year. I'm just gonna give you one more statistic. I know we've thrown a lot of numbers since we've been talking.
Just to give you a sense on business segment, the overall IT growth for the company, which is PC, server, storage, network, printers, all of that, is at a consolidated level, which is India and overseas put together, is a 12% consolidated growth, which would be 18% if it was gross accounting. Just, I'm relaying the numbers. Mobility is down -22% and services is a +5% growth. Those are the numbers at a high level, and we can get deeper into numbers or anything else that you would want. I'm going to hand it over to Krishnan to talk to you about some of the financial ratios and specific financial numbers.
Thank you, Rajiv. First on the working capital. Working capital for the quarter at a consolidated level, we closed at 12 days, which is similar to the Q3 of last year. While in India, it has come down from 11 to eight days. There is a corresponding three days increase in overseas from 12 to 15 days, all YoY. While inventory days and debtor days have gone up, there is a corresponding increase in the creditor days, resulting in the working capital days being similar to what it was last year at 12 days. Moving to the cash flow. For the quarter, the free cash flow has been negative at INR -445 crore.
Just wanted to mention the thing here. This is on account of seven days of working capital in the previous quarter, which was an all-time low. If you look at for the full year, the cash flow from operations was positive INR 909 crore, and the free cash flow from operations after taking into account INR 460 crore of dividend payout is positive INR 296 crore for the first nine months. This is on top of about INR 5,800 crore of the positive cash flow in the last five years. On account of better profitability, as Rajiv mentioned, our return ratios are quite high.
Our ROCE, I mean, for the quarter at consolidated level is at 93.6%, while in India it is 103%. In overseas it is at 89%, so quite substantially high. This is mainly on account of lower capital employed. Moving to return on equity. For the quarter at consolidated level, it is 29.7%. India contributing 31.2% and overseas 28.9%, which again substantially are high. Debt-to-equity ratio is still well, I think well maintained. The gross debt-to-equity ratio is at 0.1 times. The net debt-to-equity, it is -0.5 times. I need to mention here this quarter, except for Arena, in every other unit, we closed at the net debt being negative. So this is something very important to mention.
Moving to the balance sheet. Our net worth as of 31st of December, I mean, has exceeded INR 5,400 crore and the capital employed at INR 2,733 crore. You can imagine INR 16,620 crore revenue for the quarter with a capital employed of INR 2,733 crore and in a working capital-intensive business. Finally moving to the provisions. The provision for inventory is broadly zero. There has been no provision for inventory for the quarter at the group level. The provision for bad debts is at 0.14%, 14 basis points. It's slightly higher than our long-term average of about 0.1%. It's mainly because of one provision that we have taken in India.
While we are confident of collection, we thought it has taken some time, so we had to provide for it. I will hand it over back to Rajiv.
Krishnan. Thank you so much. Really appreciate your commentary. I just wanted to give you two more colors to this. One is that, while we are on the YoY has been a very strong performance. Even on a quarter-on-quarter basis, it's been a very, very powerful performance. Our quarter-on-quarter revenue growth is 13%, one three. Our quarter-on-quarter EBITDA is 19% and quarter-on-quarter PAT is 26%. I think, all of that has been, in line, you know, in line with expectations that we have a very strong sort of a performance.
I just wanted to give you a bit of a context to what's going on in the market, and that will really put in perspective the performance that we are having right now. You will see that there is a very strong tech adoption by both end customers, enterprise and private sector enterprise customers and SMBs, and also by governments. So there is a very strong consumption that is coming in place. The regions that we operate in, the regions of India, South Asia, Middle East, Africa, Turkey, all of these countries happen to be in a very positive zone from a GDP perspective.
The prognosis going forward for each of these countries is a very strong positive GDP growth and also an associated strong ICT growth as well. Now, the reason why ICT and GDP are going hand in hand over there is there's a very, very strong infrastructure push by governments in these regions, in these countries, to make sure that there is investment-led growth that is taking place. Obviously there is a consumption, but largely most of these regions were driven by consumption earlier, but now they happen to be driven by investment as well. That's something which is far more long-term sustainable, far more sustainable from a long-term perspective. We've seen that there is adoption of digital tech, which means years of projects. People were planning projects on long-term basis earlier.
They are getting rolled out in a couple of months. Pretty much every sector of the economy, manufacturing, education, work from home, learn from home, retail, digital economy from a financial services perspective, payment, fintech, and a government policy support, all of these are literally leading to a very strong tech adoption in countries like India, UAE, Saudi Arabia, Egypt, Qatar, Nigeria, Kenya, Ghana, all of these countries that we're talking about. The other thing which is important is from a tech adoption perspective what technologies are getting really finding favor with the market. The technologies that are finding favor are of the nature of back-end data center, high-end, systems of enterprise, which is server, storage, network, software, and then also led very strongly by a cloud subscription model.
These are base foundational applications like SAP, CRM, customer experience, sales automation, but clearly many more apps-driven consumption that is now we are seeing. There is a strong push by a lot of customers to adopt new technology because we are seeing digitalization is the way to go forward. A far more digital connected organizations connected with their customers, connected with their partners, and pretty much playing the whole ecosystem end-to-end from a digitally enabled technology perspective. The technologies that are getting consumed in these areas are clearly artificial intelligence, very strong focus on that. Augmented reality, virtual reality, but also applications driven by Internet of Things, applications driven by blockchain. We are starting to find adoption in those areas.
Hopefully, over time, as 5G becomes much more proliferated, it proliferates a lot more, you'll find that there would be a huge amount of growth driven by IT. A lot of tech is also voice and video-based, driven by voice and video-based. We are also seeing. The other thing that we are seeing apart from tech consumption is the manner in which tech is getting consumed. The buying behavior is shifting. What people buy and how they buy is shifting. People used to buy in a very capital-intensive manner, but all of that is shifting to as a service. It's shifting to as a service. Products and services shift from own to a subscription-based model.
Then people are also shifting from a business model of a brick-and-mortar, which is very strong of the retail into the shop showroom kind of a buying. They're shifting to a lot more online omnichannel and everything in between. A true omnichannel world we are seeing to play out, as we speak. I feel good about the fact that we are in a very strong position to maximize and capitalize on all the trends that are taking place right now in the market because our play is purely technology. Let me stop over here, and open it up for any questions or answers, any comments that you guys might have.
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 the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets 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 Nisarg Vakharia from Lucky Investment Managers. Please go ahead.
Good evening, gentlemen, and congratulations on a great set of results. My basic first fundamental question is that over the last few quarters we have seen your EBITDA margins trend from about 1.8% to about 3% right now. What we understood was that Apple is a good customer who, you know, gives us higher margins than other guys. The contribution of Apple in this quarter is lower. Despite that, your margins are quite high. Can you please throw some color on the sustainability of these margins going forward? That's my first question.
Okay. Let me answer. Let me take that question. Look, I think EBITDA margins going in the right direction is absolutely a reality. The reason that this is taking place is because you'd find that we are in a market situation where there is a huge demand, and there is a demand which is changing supply right now. It's not the other way around. Demand is outstripping supply at the moment. And so that allows you to have a higher gross margin in business, and it just flows through to a higher EBITDA margin as well. That's one part of the business. Second is, to your point about Apple being lower in business, but the margin still happening. A lot of these margins are driven by a growth in the enterprise business.
Enterprise business, which is servers, storage, networks, software, cloud, and services around that, those are the ones which are the great drivers of margin and profitability. Our enterprise business in this quarter has grown 38%. I think that's a very strong growth across. It's obviously different by Middle East and different by India. Overall, at a consolidated level, our enterprise business has grown that much. It's a very strong growth, and that really is leading and contributing to a higher EBITDA margin. It's a shift. It's a business mix that is shifting a lot more towards enterprise, which is giving us a lift here.
Got it, sir. Thank you so much for answering my question.
Yeah, thanks.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Krish Mehta from Enam Holdings. Please go ahead.
Yeah. Thank you for taking my questions, and congratulations on the numbers. I had a question on the numbers for the cloud and cloud-managed services. If you could split the revenue and margins for both of these.
Okay. I'll give you a sense on the cloud business overall. Our cloud business for the quarter, you see, is INR 411 crore. That is a very strong 35% year-over-year growth. Okay, services as a proportion of this is just about 3%. It's not that great, but it's still trending in the right direction. As we go forward, I think that area, like I said earlier, the consumption model across the world is changing towards a much more as-a-service model . Cloud plays very straight into that from an enterprise perspective. Very strong growth in cloud, 35%, and a very strong services number, which is 3+% of the cloud revenue.
The margins on the cloud hardware business, you've seen, I answered the question earlier on why our margins are looking better because enterprise business has gone up. The margins in the enterprise business are better. I think cloud hardware and cloud product business runs at a similar margin as the enterprise level, which will be around in the range of 6%. The cloud services business runs at a much higher margin, which is in the range of about 25%-50%.
Thank you so much.
Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Good evening, sir. Sir, two questions. One on the margin side at, one query. One is that you mentioned that enterprise business being a higher margin business has grown faster. In the past, we have seen that it was actually growing slower than the other category of mobility. Do you think that this is a sustainable trend for your business wherein enterprise business will grow at a faster pace than the mobility business, thereby increasing the margin profile of the business?
Look, very difficult to say that enterprise will continue to grow faster than mobility, because mobility is in a very good space right now. I'll tell you why it is in a very good space and why it will be a much faster growth going forward. It's because you will see that the world is going to be shifting towards a lot more adoption of 5G. Now, 5G has multiple implications in the market. One implication of 5G on the market is that it leads to sales of more devices, 5G-enabled devices. The countries in which the network of 5G operates, devices consumption goes up and mobility will go up, right? That's one.
The second thing which happens in mobility in 5G is it spins off a lot more consumption because the 5G network enables you to do much more from a bandwidth perspective, zero latency. It allows you to consume a lot more applications. 5G and mobility will drive a lot more consumption and growth. The reason mobility business is lower this quarter is just because the demand was there, but the supplies was not adequate. Supplies across every single mobility band was constrained, and that's a slower. The enterprise business has been faster than mobility in this quarter, and I hope it will continue to grow at a fast clip. Whether it will grow faster than mobility or not, only time will tell.
Clearly, enterprise business has been in a good space because the world model is shifted towards a lot more as-a-service consumption, which is driving the whole range of shift towards a lot more back-end applications. People are redesigning, regenerating applications, redoing their applications. Plus the fact that digitalization of companies is moving at a really fast pace. Companies which used to take years to do projects, they're converting all of those year-long projects into few months now. I think that is the thing which is really driving the adoption of enterprise technology. I hoping and praying that both continue to grow at a very fast clip. One grows faster than the other, we will take all of that. I'm pretty certain that both will have a good growth.
Sir, you mentioned that you have changed the accounting standards. What will be the like-for-like-
I'm sorry to interrupt you, sir, but we cannot hear you.
Sir, you mentioned that you have changed the accounting standards for revenues. What will be the like-for-like EBITDA margin for the quarter versus last year and for the nine-month versus last year if on a like-for-like basis?
Yeah, look, the accounting standard change is only impacting revenue. It's not impacting EBITDA at all. The EBITDA is not changing. EBITDA of INR 544 crore for this quarter at 22% growth stays whether you change the accounting standard or whichever accounting standard you follow. A PAT of INR 128 crore for this quarter at 103% growth, exactly the same as it would be without. It's only a revenue shift. When you do an accounting standard change in the revenue, gross to net, because you don't take the whole sort of top line in this, you just take the bottom line. That's the reason it shifts to the revenue only drops. The EBITDA and the PAT remain exactly the same.
Okay. I was talking about EBITDA margins. Will it be possible to give the margins on a like-for-like basis for the previous YoY periods for nine-month and this quarter?
Yeah.
Yeah.
Yes. Sarvesh, I mean, the difference is only about 10%, the EBITDA and the profit margins. It is not significantly higher in terms of percentage of revenue.
Understood. Sir, there was a news report for Apple wherein their shipments had increased a lot in the last quarter of this calendar year. It was, I think, a 40% sort of a jump. While in your case, you know, your Apple share has reduced. Is it because you're carrying some excess inventory for this quarter or something else which has happened in India business as far as Apple is concerned?
No, I think two things had happened. Apple business would have grown. You know, if you follow the global trends on mobility shipments, you'll find that there has been a decline in the smartphone shipments world over, okay? Including Apple. Fourth quarter 2021, which is October-December, is a decline over same period last year. It's not as if anybody has grown because globally the smartphone market has dropped by about 3.2 percentage points. It is true for Apple and for most brands and most vendors as we are dealing with across our entire region of Middle East, Africa, India and in all these places.
There has been a constraint on supplies, which is really causing this sort of a revenue drop to happen to that. There's a change in their. The other thing which is important to understand from an Apple perspective is also a change in the GTM. They had made a change in GTM last year, and this was the quarter in which it got impacted. They made a change in GTM from this to two of us to a lot more online play, which is now serviced directly by Apple. Those are the two things, a supply constraint and the GTM change which caused the Apple revenue to go down.
Our revenues caught up in Apple and in the other devices, which is in the Apple Mac and iPads. I think that's been a very good story.
Understood. Thanks a lot and all the best for the coming quarters.
Thank you.
Thank you. The next question is from the line of Pranav Kshatriya from Edelweiss. Please go ahead.
Oh, hi. Thanks for the opportunity. I have a couple of questions. Firstly, I just want to dwell a little deeper on what you talked about. So you said that, you know, GTM change has led to, you know, the decline in the revenues for Apple. Is that correct?
Yes.
Okay. My second question is, you know, if I look at the revenue composition by brand, you know, Apple is one part, then there is, you know, the next four brands and then there is others. That other section also I see a, you know, bit of a drop, you know, in terms of the revenue. Does it suffice to say that, you know, it is largely because of the mobility whereas the enterprise is done well and that's why, you know, you have the Dell, HP, Lenovo and even Samsung for that matter are doing well?
Oh, yes, absolutely. No, even Samsung has seen a drop because Samsung also is constrained on supplies. We don't do Samsung in India, you know that. We do Samsung in the Middle East and Africa. Samsung has also been constrained on supplies. That's the only reason why this thing has happened with Apple, the mobility revenue overall has gone down, whereas Enterprise was good shipment last quarter. Enterprise wasn't a good shipment in the quarter before that. You know, when you go to a Q2 you'll find that the Enterprise revenues, the shipments of Enterprise was little subdued just the way it has happened with the mobility in this quarter. It was the other way around in the previous quarter. That's the reason the supplies of Enterprise has happened. It's been a very strong growth.
Mobility was constrained and the change in GTM then led to a slowdown or a degrowth on the mobility side.
Sure. I mean, the change in GTM is sort of a permanent thing. I don't think that, you know, those, you know, would come back. Considering the share of online quarterly is sort of increasing, do you think that there's a risk, you know, to that extent that mobility revenue growth might not remain risk like, you know, the overall growth?
On the contrary, I feel that in the last nine months, there's been a huge amount of stability that has set in now in the manner in which people buy. It's not only true for Apple phones. It is true for pretty much every single steady state technology product that there is a certain amount of share which the online has and there's a certain amount of share which the offline has and there is an equilibrium within that. I don't see that really impacting or changing anything going forward. We don't see a significant increase.
Think of it this way, you know, our drop in mobility, not Apple, I wouldn't say that. I think a drop in mobility revenue because of this shift in GTM would have been far higher had we, but our revenue drop is much smaller. Which means that we have at least recovered about 8%-10% of our growth back despite of the drop in the mobility revenue. Our engine of making sure that our other revenue engines start to crank up faster has been a great success story. That's one thing.
Our other revenue streams are kicking in very strongly and that's a very strong and positive factor. Second, there is a certain amount of equilibrium which sets in and I think it has set in now pretty much for every single brand and every single. You know, when you go to a Samsung with online versus offline, you'll find there's an equilibrium. When you go to an OPPO, vivo, whatever, whichever model, whichever brand you go to, they all, there's an equilibrium. Apple just started on that and so there was a spike and now there's an equilibrium. I think going forward you'll find that the steady state works to our advantage actually.
Sure. Last question from my side, and a quick one. How much time should we expect the working capital days to take to reach 35-40 days, which would be a steady state considering most of the COVID related things are behind?
Yeah. Hey, look, I'm going to defer that question back to Krishnan, but a short answer to your question is I hope never. That's the way we are trying to build our models in place. Krishnan over to you please.
Thanks, Rajiv. We think there will be some normalization that will happen in about three or four quarters down the line for now. What normalization means is, I mean the jury is still out. We still think we should be able to maintain, I mean, our total working capital sub- 30 days between 15, 25, 28 days, etc. That's our thing thought through.
I think it's important to understand, just as supplementing to what Krishnan said. It's important to understand what's happening in the global IT industry so that you get a sense as to how long this is going to sustain. I'm hoping that will sustain for a much longer time than otherwise, is because there is a global shortage of equipment. There's a global chip shortage. There's a global commodity shortage. Pretty much everything that goes into the manufacturing of an equipment, a laptop or a PC or a cell phone or anything of that nature is in short supply right now. The supply chain is impacted very badly. There are brands which got orders pending for six months, eight months, nine months, and only now they are shipping. There's a huge amount of demand which is changing supply.
All our conversations with pretty much every leading chip manufacturer across the globe, whether it is Intel or AMD or subsystem manufacturers or equipment manufacturers like Foxconn or Inventec or anyone, suggests that this is not gonna change in a hurry. You should be rest assured. I think it's in a good shape right now.
Thank you very much. That's it from my side. Wish you all the very best for the upcoming quarter.
Thank you so much.
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah. Hi, good evening, everyone, and congratulations on the elevation. I had two questions. The first one was, what is the contribution of Brightstar on the growth number in the overseas business this quarter? Considering the lira sort of moved the way it did, is there any sort of impact on the kind of margins that we are seeing on an overall basis from this? That was the first question.
Nitin, the contribution of Brightstar was just $35 million for the quarter in US dollar terms, because technically speaking, the acquisition happened on the first of December. The impact of Brightstar to top and bottom line is just not material at all.
Fantastic. Nice to hear your voice. I thought you weren't there on the call. Congratulations on the elevation as well. You'll be missed.
Yeah.
The second question was on, yeah, the profitability that we are seeing today. How sustainable is this gross margin that we are seeing at the moment? And how should we really think about it on a, you know, broadly on a going forward basis? Anything you can help from a thought process perspective will be very helpful.
Raj, are you continuing to take that or shall I take that?
Sure, sure. Please go ahead.
All right. Hey, Nitin, look, I think it's like I said earlier, the situation of the global supply chain industry on the technology front continues to be favorable right now. What it does to us is, and does to pretty much every vendor and every partner and the whole ecosystem, is it makes the whole ecosystem far more liquid and far more sustainable, and far more profitable in that sense. My sense is, I think this is here to stay for a bit. Our gross margin situation should continue to be where it is. We are absolutely tight-fisted on our cost controls, so we are not going to allow cost to spiral out of control. The equation of gross margin and cost control is helping us to be far more profitable.
It will continue for the time period that this whole supply demand chain and supply situation continues over the course of next few quarters at least.
Sure. Just one bookkeeping question, if I may. What would be the creditor days, inventory days and debtor days for the quarter?
Krishnan, you wanna do that?
Yes. The debtor days for the quarter is at about 48 days. Inventory days, about 22 days. The creditor days at 58 days. Taking the net working capital to 12 days.
Perfect. Thank you so much and all the very best.
Thank you. The next question is from the line of Deepak Khatwani from Girik Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity and congrats on good set of numbers. I have a question on growth. You know, right now we are in abnormal scenarios. Once the scenario normalizes, let's say three, four quarters down the line, what is the kind of growth, you know, that you anticipate that there'll be in the market in the steady state?
Okay. A very interesting question because there is a certain amount of linkage that we have from a market perspective, the way in which GDP is trending, the way in which ICT industry is trending. Fortunately for us, in both these dimensions of GDP as well as ICT, across India, Middle East, Africa, South Asia, we are in a positive zone. All these regions of ours are in a positive zone on ICT and GDP perspective. You know, very difficult to hazard a guess on from the perspective of what exact growth number would you want to look for, but I can only tell you the prognosis for ICT industry in India is 8.8% growth over the course of next one year.
The prognosis for ICT industry in the Middle East and Africa over the course of next couple of quarters, which is a full year is about three points, 2.8% to 2.7%-2.8%. The thing that I can show you is that we will forever be trying to grow ahead of the market, beating the market by a factor. I think that's all, I think it's only worthwhile for us to say. Our growth doesn't come literally only from that growth. Our growth has got many other dimensions, Deepak. There are dimensions of what brands we can acquire, what geographies that we can open up for ourselves, what new markets we can really capture, and how we can gain share.
All of that combined into playing, you know, last year the industry did whatever it did, and we are growing much faster than industry, and we should continue to grow faster than industry over the course of the next couple of quarters.
If I like can rephrase the question. Do you have a growth target in mind for the company, you know, on a consolidated global level?
Yes, we have a double-digit growth target. I can't give the exact number. That will be a very bold statement, but I can only let you know that we will be targeting a double-digit growth.
If I may ask another question. You know, would you be able to share the growth of the industry in the last quarter, let's say December quarter, in India and overseas, you know, separately, if that's possible?
Yeah. Look, the IDC numbers for India and Middle East separately have not come out. I can only give you the global number right now. The IT is only available for PCs there. It's not available for servers or storage or the higher-end technology yet. On the PC, the world market grew by 1%. Versus that, we've grown 13% in the PCs, in the consumer IT space, which is PCs, laptops and all of that.
Right.
That's the way it is. The phones, like I told you earlier, somewhere around 3.8.
Sure. Do you see the growth getting impacted by the, you know, learn from home and work from home being, you know, like getting normalized, people going back to offices and schools?
I think very interesting question again. My personal sense on this one is the way I've seen the demand shift, when people started to get back to home, work from home and learn from home, children learn from home, people starting to work from home. Suddenly a huge amount of demand shifted towards home kind of equipment, which is a laptop, a PC, a big screen monitor, a collaboration equipment, some software for collaboration and some software for security. Those are the things which got bought at the homes, right? That fueled a huge amount of demand. Now, when people are going back to the office after two years, suddenly everybody's realizing that the equipment they used to work on are good in pieces, but they're not good overall.
I think there is a huge shift that has changed, taken place in technology. Applications have moved ahead. Microsoft Windows 11 has come in. That has moved up. There's a huge shift which is taking place, which is going to be forcing people to do a refresh. My personal expectation is that learn from home, work from home, the whole and in the office, that whole summation is going to be consistent. It may shift more towards home and less towards office or more towards office, less towards home, depending upon which part of the world you are in, which pandemic cycle you're going through. I don't see a demand which is stopping at all because it's a summation which is going to be a completely growth summation.
Sure. Okay. That answers my question. Thanks a lot.
Okay.
Thank you. The next question is from the line of Anuj Jain from ValueQuest Capital. Please go ahead.
Thank you. Thanks for the opportunity and congratulations for the good set of numbers. My query is regarding the margins. You have mentioned that two reasons for the margin improvement are demand supply scenario and larger share of IT products versus mobility products. Let's say going forward two, three years down the line, what we understand is demand supply scenario should be sorted out. You yourself have mentioned that mobility products will grow much faster rate versus IT products. Should we consider the current margins as peak margins and they should normalize going forward?
Look, I think you've got to give it a few quarters before you even get to a situation of that nature. I didn't say that mobility will grow faster than enterprise. I'm saying mobility and enterprise both will grow at a very fast clip. Enterprise will grow because the enterprise and SMB and the governments, they're all shifting towards a much more digital environment, and that is fueling a whole range of enterprise procurement and buying and application. Mobility will grow because the 5G shift will lead to a lot more consumption or refresh of technology. Both, I'm expecting both mobility and enterprise to continue to grow. This demand supply gap will continue for a bit, for a couple of quarters.
If all the wise industry leaders and the wise companies which are very closely integrated with the supply chain ecosystem are to be followed and you can see the way in which they are stepping up over time to even supply the equipment that they have to, and the order books are six months to nine months. I think that shift is going to continue. That demand supply gap is going to continue for a couple of quarters. The shift to enterprise will continue and mobility will catch up even more because the 5G transition is in place. I think all in all, the whole ICT market, we are going to be seeing a shift in a very positive way.
Okay.
It's not one versus the other. It's not either/or. It's and.
Okay. Thanks for the response. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Dhaval Shah from Swan Investments. Please go ahead.
Yeah. Hello.
Hi.
Hello. Yeah. Hello, Rajiv Srivastava. Hello, Raj Shankar. Couple of questions from my side. Can you just highlight again on the India revenue for the details on, you know, India revenue side. My second question would be, you mentioned about 5G being a driver for growth. Say, over the next three to five year period, what sort of incremental growth you think 5G can add to our top line? Yeah, these are my first two questions.
Okay. I can give you a sense on India revenue, since your first question is India revenue. India revenue is INR 7,157 crore.
Yeah.
Yeah, which is for this quarter. I hope that answers your first question. The second question, which is about-
My question is that what led to the degrowth year-over-year?
It's just the mobility business that led to the degrowth. We had a very strong IT growth, which was IT growth was about 14%. If you don't take net accounting versus gross accounting, if I take it in a gross accounting, it would be 21% IT growth. The mobility business was a - 37%. Like I said, we had GTM shift and supply constraints that led to a drop in the mobility business. Outside of mobility-
Mainly to do with the chip shortages is what you mean?
Mainly to do with the shortages in supply of telecom equipment, yeah.
Mm.
Rajiv, if I could just supplement to give clarity.
Yeah.
It's important for you to understand that last year, Q3 of FY 2021 was one of the best quarters for us from a mobility point of view.
Mm.
Not only the fact that the product sold extremely well, we also were riding on the back of some solid sales to some of the e-commerce space. That part of the business this time, while the demand was good, supply was constrained, but on the other hand, the opportunity from a GTM point of view was not available like we had last time. The degrowth in mobility is only to do with when you look at last year Q3 vis-a-vis Q3 of this year. It's important for you to note that the contribution from mobility in India is 28%, whereas IT contributed to 71%. If you further break down IT just for academic information, enterprise contribution was 40%, with consumer being about 60%.
This will give you a sense that on IT, whether it is enterprise or consumer, we grew double-digit, whereas mobility on the back of the previous year being a spectacular year, therefore it is showing a degrowth, if that explains?
Okay. In last year, how much was mobility in India?
You mean to say in terms of contribution?
Yes. Out of INR 7,592 crore of distribution revenue in India.
Yeah.
When you give this percentage between mobility and IT, we have to do it on
Just to give you a perspective specific to Q3, I don't have it in front of me, but just to give you an idea, 44% was the contribution of mobility in India to the overall revenue. Now, when you see that from 44% shrink to 28%, whereas there is more than enough that is being made up by IT.
Okay. In terms of the margins, there is, I assume, there is no difference between, you know, dealing with brands like HP, Lenovo or Apple because the GP has increased.
Yes.
Yeah.
That is true. If you recall, there is one point I've always maintained that in the past we would be able to sell at normal margins for almost about 70, 80% of the products, but the balance 20% would be sold at lower margins, sometimes even at cost. Given that overall there is a shortage for most of the products, and particularly with PCs, right now we have no margin to give up or leave on the table. We are able to get our normal margins on the entire scale. To that extent, we are able to bring the gross margin to EBIT or EBITDA at almost all of it.
Even the employee cost had gone down 10% year-over-year. This is related to what? I mean, the reduction in the employee cost.
Because we are comparing it with the previous year when we had done a revision, because if you remember in 2020, we had to therefore do a salary freeze. We did some kind of a push up in the previous year. That is the reason why it is showing in relation to Q3. We did a good part of the revision in Q3 last year, and that is what is showing as a degrowth compared to this year.
Got it. Sir, towards the question on the 5G opportunity for us.
Hey, look, I think 5G opportunity you are trying to look to gauge in three to five-year timeframe, okay? 5G, like I said, is going to be a game changer for a lot of industries. Whether it is healthcare or it is retail, it is manufacturing of the Industry 4.0 variety, or it is any film editing, video, all those industries, 5G is going to be a game changer. It is a game changer because the direction in which the world is moving, it's moving towards a lot more voice-enabled, a lot more video-enabled. All of that is fueled by 5G. Now, three to five years down the line, how much will the industry be? What will the industry be? It's very, very difficult to conjecture right now. Suffice it
Sure.
Yeah.
Sorry. What I'm trying to understand is that, we shall also be expanding our product basket, you know, when 5G comes in. You mentioned the applications and the end users are many more. You know, the more devices also will be 5G-enabled. Will Redington be dealing in more products going forward?
Look, our view to the world is that we will be playing in the cutting-edge technology all the time. Whatever is cutting edge at that point in time or at any current currency of technology at that any point in time, we will be a strong player in that. That's our stated objective. That's our goal. That's where we will play. When new devices come in to support the 5G application environment, when new devices come in to support the applications of or the devices for mobility itself on 5G, of course, we'll be playing a very strong role there.
Got it. Okay, thank you. I'll come back to you.
Thanks, Dhaval.
The next question is from the line of Faisal Hawa from H. G. Hawa . Please go ahead.
Hello, good evening.
Hi, good evening, sir.
My question is, what should be the share of Apple revenues in terms of percentage of total revenue? The second question is, what percentage of revenue could be on cloud server business from one year from today?
Say it again. Second question.
Second question is that what percentage of revenue could be on cloud server business, from one year hence?
Okay. Faisal, let me just give you the answer to the first question, which is, your Apple revenues. The contribution of Apple iPhone to revenue at a consolidated level is about 20%.
Mm-hmm.
Okay? That's where it is. Your second question on cloud, how much of our revenue is cloud? Like I said, we've got a cloud revenue in this quarter of INR 411 crore from a total revenue of INR 16,620 crore. Whatever is that percentage, you can take it. Our hope and desire is to get towards at least a 10% contribution over time. It won't happen in just a hurry, but it'll be basically right to say that that's the direction in which we'll be moving in.
Okay, sir. All right. Thank you.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Rajiv for closing remarks.
All right. Yeah, thanks so much. Hey, look, it's been a very fascinating conversation with all of you. Like I said, we've had a very nice and strong rounded sort of a market coverage and rounded growth, very strong on the profitability as well. We see the trend of the ICT industry continuing to be an industry which is really creating and leading the transformation that all the organizations are wanting to move towards. The world of digital is expanding and changing all the time. It is getting far more digital than ever before.
The fact that there will be much more rollouts of the telecom network of the 5G variety will continue to fuel a lot more consumption of devices as well as the applications. We find all in all that the industry will continue to see very robust, very sustained demand and growth of technology across the zones, across the regions that we work in, which is India, Middle East, Africa, South Asia and Turkey. These are all emerging markets which are tech deficient and they have to be in a position to leapfrog as we go forward because all of them are very aspirational countries to get to the right level of GDP growth and get to the right level of people growth for themselves. I think we are in a good space.
We've had a good result, and I hope to make sure that we will continue to be on a very strong growth curve as we go forward. Thank you so much for speaking with us. Like I said, it's been a fascinating conversation. If you have any more questions, please let us know and we'll make sure that we get responses to everything. Thank you so much.
Thank you. On behalf of Redington Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.