Rashi Peripherals

Partnerships with leading global technology brands

Pole market position in distribution of information and communication products

Rashi Peripherals (RP Tech) is the fourth largest player in the distribution business of information and communications technology (ICT) products and services in India.

RP Tech has 50 branches operating as sales and as service centers and 63 warehouses covering 680 locations in India through an ecosystem of 8,402 channel partners for 10,508 stock keeping units as of September 30, 2023. The company’s distribution network is more than 30 years.

The company is one among the leading national distribution partners for global technology brands in India for information and communications technology products in terms of revenue and distribution network in Fiscal 2023. The company is also one of the fastest growing national distribution partners for global technology brands in India in terms of revenue growth between Fiscal 2021 and Fiscal 2023.

The company has been instrumental in facilitating the entry of many global technology brands. It was among the select players that led the formalization of the fragmented and unorganized ICT products distribution in India. Over the years, the company has continually expanded its operations. Between Fiscal 2002 and the six months ended September 30, 2023, the company distributed 311.89 million units of ICT products.

As of September 30, 2023, the company is the national distribution partner for 52 global technology brands and distributes in product categories including personal computing, mobility, enterprise, embedded solutions, components, lifestyle, storage and memory devices, power, and accessories. The company distributes products for global technology brands such as ASUS,Global Pte. Ltd., Dell International Services India Private Limited, HP India Sales Private Limited, Lenovo India Private Limited, Logitech Asia Pacific Limited, NVIDIA Corporation, and Intel Americas among others.

The company has emerged as a leading B2B technology provider in last two years, with one of the most comprehensive and balanced products and solutions portfolio that ranges from small value product devices such as storage devices to high-end and complex equipment required to build super computers and servers. The company aims to expand its geographic presence by entering and growing its presence in non-metro cities, which includes tier I and tier II cities.

Object of the offer

The IPO consists of a fresh issue of Rs 600 crore and there is no offer for sale in the IPO.

Out of the proceeds from the fresh issue, Rs 326.0 crore will be used for prepayment or scheduled re-payment of all, or a portion, of certain outstanding borrowings availed by the company, Rs 220 crore to meet its working capital requirements and the balance towards any other general corporate purpose.

The company raised Rs 150 crore from investors in a pre-IPO placement, which reduced the fresh issue size in the IPO. Volrado Venture Partners Fund-III-Beta and Madhuri Madhusudan Kela (investor Madhusudan Kela‘s wife)) invested Rs 100 crore and Rs 50 crore respectively in the company via private placement (pre-IPO placement), on January 17, 2024.

Strengths

The company is one among the leading and fastest growing Indian distribution partner for information and communications technology products. The company distributes a range of ICT products such as personal computing, mobility, enterprise, embedded solutions, components, lifestyle, storage and memory devices, UPS, and accessories, manufactured by global technology brands. The company also distributes cloud computing solutions. The company is a major player catering to the Indian consumer demand in product categories like processors, graphic cards, and internal storage in Fiscal 2023. The company commands significant market share in India in product categories such as processors (45%), graphics cards (47%), pen drives (42%), hard drives (29%), keyboards and mice (21%), monitors (27%), UPS (13%), laptops (10%), desktops (10%), routers (33%), and switches (10%) in Fiscal 2023. As a national distribution partner of a leading motherboard and graphic cards brand, the company has contributed to approximately 47% share to the graphic cards demand and approximately 25% to the motherboard demand in India by volume in Fiscal 2023.

Pan-India and multi-channel distribution footprint backed by dedicated in-house infrastructure. The company has one of the largest ICT products distribution networks in India. It has branches in 50 cities that operate as sales and service centers and warehouses, covering 680 locations in 28 States and Union Territories in India through an ecosystem of 8,407 customers, as of September 30, 2023.

Long-term relationships with marquee global technology brands supported by committed engagement. As of September 30, 2023, the company served 52 global technology brands.

A diversified and comprehensive product portfolio and solutions. Between Fiscal 2002 and Fiscal 2023, the company distributed 311.89 million units from global technology brands, enabling it to satisfy customer requirements for seamless product availability and meet end-user demand for multi-vendor and multi-product IT configurations. Over the years, the company has continuously added products across sub-segments like lifestyle,components, networking, personal computing, storage and memory, mobility, enterprise, and embedded solutions.

The company’s business model is scalable and is supported by advanced technology stack. The company’s business model is driven by its branch heads who lead its branches in their respective regions, across the 50 cities in which it has branches, as of September 30, 2023. The branch heads have autonomy to manage credit terms with customers and manage decision-making for their region. The company’s business model is further complemented by its advanced IT infrastructure.

Weaknesses

The company is dependent on various vendors, who are global technology brands, for the products the company distributes. Any delay, or failure,by these global technology brands to make available their products can materially and adversely affect business.

The company’s business is dependent on global technology brands effectively maintaining, promoting, or developing their brands and maintaining standard quality products including launching new information and communications technology products at regular intervals.

If the company is unable to maintain its relationship with its channel partners or customers or if any of these parties change the terms of their arrangements with the company, then the business of the company could be adversely affected.

The ICT product distribution business is a low operating margin business. Further, the company faces stiff competition from larger and more established players in getting distributorship rights for lucrative geographies from principals. Moreover, products from newer, less-established brands could face price competition from the established principals that in turn can affect the profitability of their distributors.

The company’s inability to maintain or enhance the popularity of its brand among brands and customers may adversely impact its business prospects.

The ICT hardware distribution business entails significant working capital requirements, and the company uses short-term borrowings from banks for funding the same. The company had short term borrowings to the tune of Rs 1370.7 crore as on September 30,2023.

The company is reliant on its relationships with certain online marketplaces and disruptions to such relationships or changes in their business practices, may adversely affect the company’s business.

Certain of the company’s contracts or distribution agreements may have restrictive covenants and can typically be terminated without cause, which could negatively impact the company’s business.

The company has witnessed negative cash flows in the past, with net cash used in operating activities of Rs 1,09. 8 crore, Rs 315.2 crore, Rs 114.5 crore Rs 98.9 crore and Rs 285.7 crore in Fiscals 2021,2022 and 2023, and the six months ended September 30, 2022, and September 30, 2023, respectively. Any negative cash flows in the future would adversely affect its cash flow requirements, which may adversely affect its ability to operate its business and implement its growth plan.

Contingent liabilities as on September 30, 2023, stood at Rs 592.76 crore.

Valuation

For the six months ended September 2023, consolidated sales were up by 8.8% to Rs 2526.7 crore. The OPM increased 39 bps to 2.94%, which led to a 25.7% increase in operating profit to Rs 160.91 crore.Other income declined 44.3% to Rs 4.76 crore. Interest cost increased 35.5% to Rs 53.99 crore and depreciation increased 24.7% to Rs 9.06 crore. PBT increased by 14.8% to Rs 102.61 crore. Tax expenses increased by 38.9% to Rs 30.59 crore. Net profit stood at Rs 72.01crore as against net profit of Rs 67.37 crore in the corresponding period of the previous year.

For FY 2023, consolidated sales were up by 1.5% to Rs 9454.28 crore. The OPM declined 51 bps to 2.68%, which led to a 14.8% decline in operating profit to Rs 252.94 crore. Other income increased 72.9% to 14.67 crore. Interest cost increased by 60.8% to Rs 86.32 crore and depreciation inclined 42.6% to Rs 16.67 crore. PBT stood at Rs 164.63 crore as against Rs 239.85 crore in FY2022 a decline of 31.4%. Tax expenses stood at Rs 41.28 crore in FY2023. Net profit stood at 123.34 crore as against Rs 182.51 crore in FY2022.

On January 17,2024, the company issued 32,15,434 equity shares to Volrado Venture Partners Fund-III-BETA and 16,07,717 equity shares to Madhuri Madhusudan Kela at a price of Rs 311 per equity share.

At the higher price band of Rs 311, the offer is made at a P/E of 19.4 times TTM (till September2023) EPS (of Rs 19.42).

The company has one listed industry peer namely Redington India. In comparison, Redington India trades at 11.3 times its P/ TTM EPS.