Redington (India) Limited (NSE: REDINGTON) Q4 2025 Earnings Call dated May. 20, 2025
Corporate Participants:
Unidentified Speaker
V.S. Hariharan — Managing Director and Group Chief Executive Officer
S.V. Krishnan — Finance Director (Whole-time)
Analysts:
Unidentified Participant
Sarthak Nautiyal — Analyst
Sarvesh Gupta — Analyst
Vivek Desai — Analyst
Aejas Lakhani — Analyst
Sahil Doshi — Analyst
Nirmam — Analyst
Vivek Ramakrishnan — Analyst
Pritesh — Analyst
Pratik Kothari — Analyst
Rucha Somaiya — Analyst
Presentation:
operator
Good day and welcome to Reddington Limited Q4FY25 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 in the conference call, please signal an operator of a single then zero on your touchstone phone that this conference is being recorded.
I now hand the conference over to Mr. Hariharan, managing director and group CEO. Thank you and over to you Mr. Hariharan.
V.S. Hariharan — Managing Director and Group Chief Executive Officer
Thank you. Good morning everyone, this is Hariharan. I’m really happy to share with you our Q4 25 results. All figures and numbers that I’m going to mention are exclusive of Paynet Divestment gains. This has been our best Q4 so far with a quarterly revenue record of 26,510 crores at a quarterly profit of 400 crores. Our revenues were Q at 18% and profits at 23% year on year overall pack percentage was at 1.51 percentage and excluding arena the PAT percentage was at 1.73%. It has been a continuing story of profitable growth with growth coming back strongly.
Very good execution across business segments and geographies contributed to the performance. From a geography perspective, the revenue growth was contributed by a strong growth in India at 26%, UAE at 24%. We’re also seeing signs of growth recovery in Kingdom of Saudi Arabia at 7% and Africa has continued its momentum both east and West Africa at 11%. Year on year growth rates. All in all we had good growth across most of the geographies we are in. From a business unit perspective, all business units registered good growth. Cloud Solutions Group continued to lead with a stellar performance of 41%, top line growth, continued success in the hyperscaler business and subscription software in our portfolio.
Csg as said before, this quarter too contributed well to our profits and to above average net profit. The Technology Solutions Group consisting of server, storage and software grew well through this quarter at 28%. There was good enterprise demand. There were quite a few both in India and Middle East Africa and many new software contracts that had been signed during the year which yielded in additional revenues. The Mobility Solutions Group also did well this quarter at 18% growth on the back of several premium mobility brands performing well on a variety of routes to market and the Endpoint Solutions group with the PC business was steady at 11%.
All in all you can see all the business units put in good growth performances. The business teams and operations did an excellent job on management of working capital and we achieved a 34 day closing working capital which is same as compared to the previous year. Q4 rose was at 21%. Our working capital performance coupled with the lower interest rates helped us in lowering our interest costs. Opex Control was also very good on spend this quarter and grew much slower than revenue growth giving us good operating leverage. Our subsidiary arena continued to do a good job in managing the operating expenses as well with regards to the Paynet divestment that was shared the last few quarters from arena, all approvals were obtained during the quarter and the deal was closed and the proceeds of INR 626 crores, roughly 74 million US dollar was received net on related expenses out of the sales proceeds.
A large part of this has been used to repay Arena’s debt position resulting in significant reduction in interest and finance cost. This should have a positive impact in the arena performance in the upcoming quarters. Let us speak a little bit about FY25 in aggregate, since we have closed the year we have had a really good FY25 with a record revenue of 99,562 crores, just a bit shy of the 100,000 crore mark profit of 1340 crores, a growth of 11% on revenue and 10% on profit after tax. During the year we have managed to get many of our businesses healthier.
We have streamlined our investments on areas that have greater ROI and taken advantage of market trends. Our software solutions portfolio, consisting of the hyperscaler business, Pure Software and the security business, is now a little bit more than 15% of our entire portfolio. Our plan going forward is to drive faster growth across the software portfolio. We’re also building an AI strategy that will encompass bringing brand enabled AI solutions to our customers, AI enablement on our digital B2B platform and enabling our operations with AI to improve productivity and provide predictive analytics. With the new growth trends that we see on cloud AI digital transformation, we remain optimistic on the outlook going forward.
The uncertainty from the tariff changes and the geopolitical tensions in many of our geographies are areas we’re closely watching and we’ll respond as needed. Q1 is normally our soft quarter of the year, but we hope to execute well based on the addressable opportunities and retain our share in the market. We had deliberations at the board yesterday and we are happy to declare rupees 6.8 per share of final dividend for the year ended 31st March 2025. The dividend amount for FY25 is similar to FY24 dividend and this constitutes nearly 40% of our total profits for the year.
Without considering the one off impact on account of Paynet divestment. The company feels there are opportunities for investment which will help faster growth and we will plan accordingly. We look forward to your questions. Thank you.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchstone 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 comes from Sartak Naughtyal with Iraya Capital. Please go ahead.
Sarthak Nautiyal
Hello sir. Thank you for the opportunity of asking questions. I just want to know one thing. What could be the margin guidance over next three to four years from now?
S.V. Krishnan
Okay, see after the COVID period if you see there has been a reduction in the margin and those are unexpected lines. We feel because of the composition change like what Hari mentioned, the focus is on software, subscription and the cloud business. We think moving forward because of the mix change there can be an advantage. But this could be slow and steady.
Sarthak Nautiyal
OK so sir, can we expect 3% kind of EBITDA margin?
S.V. Krishnan
Okay Satnak, I don’t think it is possible at least in the immediate future. We have been talking about between 2.3% to 2.5% of operating profit. We will be happy if we are able to stay in this consistently. But definitely as I’ve said because of the focus on the software and security subscription vertical we think this can go up in future. But I think for now we should stay with between 2.3 to 2.5%.
Sarthak Nautiyal
Thank you. Thank you.
operator
Thank you. Next question comes from the line of Sarvesh Gupta with maximal capital. Please go ahead.
Sarvesh Gupta
Good morning sir and congratulations on a. Good set of numbers. Sir, one thing that I wanted to explore further was in rest of the world we are seeing almost a zero gross margin sort of a growth. So in terms of the gross profit. So can you please throw some light on that?
S.V. Krishnan
Okay. First of all this also includes Arena. As we discussed, the last one year had been a challenging time there. Even though every quarter starting from Q2 we had been bettering the performance so it will take some time for that. You need to get revived, which is inbuilt in this rest of the world. But otherwise the margins are broadly stable. But having said that, as I’ve said post Covid, there has been some erosion of margin which was expected and that’s felt even in the rest of the world business.
Sarvesh Gupta
Yeah, but I think the rest of the world business, excluding arena, their margins have also fallen on a cross.
S.V. Krishnan
It has, let me tell you in Q4 the margin growth in Middle east and Africa is about 5%. The margin growth in RPP heading to Turkey is about 14%. So in those units there has been margin growth. But having said that, the margin percentage. Yes. Has come down.
Sarvesh Gupta
Going forward, do we expect further erosion in the gross profit margin or do we expect it to be steady?
S.V. Krishnan
I think we should be able to maintain this. I mean there can be some mix change but otherwise broadly we should be able to maintain this. Yes.
V.S. Hariharan
Some of the key trends, just to add to Krishnan, we are seeing obviously a bit more large deals in the technology solutions group. So those will come at a slightly lower margin and those are addressable opportunity. We need to take advantage of them. But if you talk by category, the mobility category, the category, the run rate, the technology solutions category and the cloud should largely the margin percentages we expect to be the same. The mix change and the larger deals in technology solutions will be the only two that will change the overall weighted margin for us.
Sarvesh Gupta
Okay. And sir, one more thing on the other expenses side, so that has come down a lot in this quarter. In fact for the full year also. It has come down by. Percentage. So any color on that.
S.V. Krishnan
See overall there is very high digital diligence and control on the opex for us. That’s something that we have established across all the quarters and we have also spoken about it because of better management of accounts receivable and lower forex loss. These two are the main contributors for the reduction in the other expenses. If you recollect the previous year we had some challenge in countries like Egypt etc. Which did not happen by 25.
Sarvesh Gupta
Understood sir, thank you.
operator
Thank you. A reminder to all the participants that you may press Star and one to ask a question. Next question comes from the line of Vivek Desai with Investech India. Please go ahead.
Vivek Desai
Hi. So my question was regarding the row margins excluding arena. So the margins this quarter is at. Around 6% which is a dip over last year. So is it sustainable or we could. See some changes over Here. And the other question is regarding the. What is the, what is the margin for the quarter?
S.V. Krishnan
Okay. Is it sustainable? It should be sustainable because in Reddington Turkey predominantly our business is the software subscription businesses which are generally high margin. So and while the cost of operations are higher in the overseas market and there is a corresponding increase in the gross margin also. So to your question, is it sustainable? The answer is yes. Regarding interest and factoring cost for the quarter both put together is about 110 crores. This is 186 crores Q4 last year and 155 crores in Q3 current year.
Vivek Desai
Okay, thanks.
operator
Thank you. Next question comes from the line of Ajax Lakhani with Unified Mutual Fund. Please go ahead.
Aejas Lakhani
Yeah, congratulations to the management team again on a phenomenal set of numbers. Again, credit to the way the management has been, you know, recasting the ship and the direction in which you are taking the business. So a couple of questions. So first is could you just give a broad thought process on the outlook that you expect region wise and business mix wise in terms of enterprises, that is mobility for FY26 and also if you could sir, call out that, you know, from an OPEX perspective, Sir Krishna X of these Forex losses that have taken place from FY24 to FY25, what has been the OPEX growth at a steady state level? And also given that we have been sort of shrinking the OPEX cost very mindfully, do we require increased OPEX cost?
V.S. Hariharan
Thanks Ajis. On the first question, in terms of outlook guidance, clearly we continue to see higher opportunities in the value side of the house, both in the rest of the world as well as India. And that includes both the Technology Solutions group, both on server storage, data centers as well as software and the cloud business. So we see that as a bigger growth opportunity and more opportunities there. The mobility part of the business continues to surprise us. The market actually grew a low single digit in the regions we are in. But we we have actually been able to grow double digit through a combination of good work done on the premium segment, working with the premium brands.
The early part of the year we continue to see good strong growth in the mobility segment. The rest of the year will depend on the NPIs and how the market pans out on tariffs and everything else. But definitely we do see growth on mobility continuing to be there in the early part of the year, Q1 and Q2, but we see beyond that. But the value side we see continued strong opportunities and growth and even recently both in Saudi Arabia and uae. There have been a lot of investments committed by big brands and the US in terms of more commitments and investments on AI and we will take advantage of those in addition to India.
S.V. Krishnan
Okay, so on the OPEX ages, our growth in the current year overall except for AR provision and Forex is about 12% which compares well with an 18% growth. In terms of revenue for the full year the growth is at about 6%. So very clearly we had focused on it wherever we think there are possibilities for production optimization that had got done. To your question on the future trajectory, maybe we have gone slightly overboard in terms of OPEX control. We are very conscious. I mean we will make sure that we don’t incur unnecessary opex. But having said that, investment into the future is important for sustaining the growth into the future, mostly in IT related cost, the people, related capability, investments, etc.
Definitely we will be mindful and wherever we think there are investments required, we will not make any compromise. Next on the business mix, the contribution Hari mentioned about the growth rates so I will again repeat. ESG for the quarter grew by 11%, ESG by 28%, MSG by 18% and ESG by 41%. The contribution to the total revenue is ESG, 30%, TSG, 28% MSG 35% and 5% from CSG. Got it sir.
Aejas Lakhani
Thank you. Thank you for that. Sir. Just could you spend a minute or two to walk us through what could be the tariff related challenges from a supply chain perspective as well as the geopolitical situation that India and Turkey have on our business.
V.S. Hariharan
All right, let me talk about the first topic first. So we are following closely the tariff situation and many of the leading hardware brands have started looking at diversification of manufacturing operations. The direct tariff impact on the geographies we are in, there doesn’t seem to be any short term impact. However, we can expect some supply chain disruptions because people are putting capacities in different places and if for some reason there is an upside or a downside in a geography and the sourcing was coming from one place and the source is now coming from multiple places, there could be some supply chain disruptions.
Near term we don’t see any supply chain disruption that has affected our business. But we are watching this closely and see how it evolves. But from a pricing and a demand perspective because of the prices going up, we have not seen a direct impact. So that answers the first question. The second one is India Turkey. See, we are an Indian headquartered company and we really are proud of our heritage and values Deeply rooted in India and we are a global company, we are in 40 countries and we. It’s purely commercial. Our presence and work we do, it’s managed by a local team.
So we don’t see there is no political inclination to any of the businesses we are in. It’s purely commercial so we don’t see any impact on this. Obviously we need to continue to watch the sensitivities and to manage our business in a way that we uphold our country values and at the same time manage and do good business. So that’s what I would say for now.
Aejas Lakhani
And finally, could you just talk about how Saudi is shaping out from a demand perspective? UAE seems to be doing extremely well. So could you just give some incremental more color of what are. Again you’ve mentioned earlier in the past that digitization endeavors that the Middle east is putting in is driving demand. But anything incremental you’re seeing on the ground in Dubai, in uae. Sorry. As well as the outlook on Saudi and also sir, in the India front if you could texturize or granularize the rate of growth that we are seeing and what pockets are you really seeing this growth from?
V.S. Hariharan
Okay, Saudi, clearly it was on a growth path and there was a reset last year because of the reprioritization we talked about on the government investments and the public sector investments. That’s clearly been now corrected and that has come out very clearly. And in the recent few months we’ve seen stepped up discussions on investments on AI infrastructure, etc. So if I had to look look at where this market is headed. There could be multiple things short term. Clearly it will all be around the value infrastructure to take advantage of the value infrastructure in Saudi that’s being put in place by the big brands, whether it’s Microsoft, aws, Google and on the back of that the big brands like Dell and HPE selling AIGTE into the market.
So that is one version we see. Clearly there will be a catch up that will happen on PC penetration and mobility penetration when the AI PC adoption increases. But that’s going to take a bit more time. So the early part we’ll see there and then we’ll also see continued growth on software because the digital infrastructure and the data center infrastructure as that gets on the cloud market in Saudi is behind the rest of the world and that’s going to grow rapidly. So the two places that we see the biggest growth because of the infrastructure will be in these two areas, the mobility business and the PC business for now will continue the current trajectory that’s on Saudi, on India.
Clearly we see growth on multiple fronts and the value business will continue to grow with the data center. It’s still a long way in terms of what is the capacity needed and what’s being put in place. Those will obviously be a lot of big deals and we have to see which ones we get into and which ones we don’t because there is a, these are lower margin deals with payments which are more challenging than usual. So you’ll have to manage working capital and payments. So that will continue to be a big growth area as well as software.
Upcountry clearly will be an area of growth agents and so we’re looking at all possible ways to shore up our upcountry investment. So our direct to retail, our regional large format retail initiative, all of those, those will play into those. So we see a good growth there. We also see a lot of the new initiatives that you see and a lot of new areas of growth like GCC. There are many GCCs that are coming up in India and they have a large capacity to consume both hardware and software that we see is an area of growth.
The number of startups in the startup ecosystem will be a big consumption factor and AI services will be an area of growth. We’re watching all these closely in terms of very specific precise actions on how we can take advantage of these. So largely for India will be the value infrastructure, the premiumization and touching the premium market as well as the new areas like DCCs and startups etc.
S.V. Krishnan
Just sorry to pitch in on the earlier point on opex. For the full year the growth was in 60%. 60%, 6% it is 8% and this opex is without AR provision and forex. Thanks.
Aejas Lakhani
Oh got it sir. So sir, quite a significant amount of saving has come from the OPEX curtailment. Got it sir. And sir Krishna. Sir, just one thing lastly is could you call out what has just been the factoring cost for FY24 and FY25? Just that, just the broad number. And also sir, given that factoring cost has run down to about 38 crores is this how should we think about this for FY26?
S.V. Krishnan
Okay, so for the full year both factoring and interest cost is about 531 crores. The service 706 crores for last year. We discussed this in the earlier calls in see with the paynet consideration coming in our objective is to reduce the debt. That debt reduction will happen mainly in factoring because that’s higher cost. So you Will see factoring cost coming down quite substantially. The overall interest in factoring cost should come down there and mainly it will be in the factoring cost for the quarter is about 28 crores.
Aejas Lakhani
Loaded sir. Thank you and wishing the team the best.
operator
Thank you. Next question comes from the line of Sahil Doshi with Thinkwise. Please go ahead.
Sahil Doshi
Hi sir, thank you for the opportunity and congratulations on a fantastic set of numbers. Just a few data keeping points. Firstly sir, could you call out what’s the forex loss impact in Q4 and in the full year as well. And second on the depreciation we’ve seen some kind of an increase this quarter. So is there some kind of a one off here?
S.V. Krishnan
Okay, so the forex loss one second. Yeah, for the quarter it is sat. 16 crores. Okay. This is last year about 3 crores. Okay. Out of this about 11 to 12 crores relates to mark to market loss which was again last quarter. If you see the financials in India because of the exchange rate movement it did depreciate quite substantially in Q3 and appreciated a bit in Q4. So that Mark to market was expected to come and hit us in Q4. So that’s what has happened. If you remove broadly it would be about 3, 4 crores this quarter. And your second question was on the depreciation? Yes, there is some one off depreciation cost in the current quarter that relates to our digital platform.
We had transitioned to a new digital platform last quarter for our online trading B2B trading and that resulted in some write off of earlier capex that was there.
Sahil Doshi
Understood, Understood. So could you quantify the forex loss for FY25 and also this one off in depreciation that we help.
S.V. Krishnan
Okay. For last year the Forex loss was 50 crores for the full year FY24. This year it is 14 crores 1 4. There is a 72% reduction and as I said for the other query, this 50 crores last year was mainly on account of Egypt where we had some challenge depreciation. I need to come back. I don’t have the amount ready made but I’ll come back in few minutes.
Sahil Doshi
Sure sir, that’s helpful. Just second one sir if you see the improvement in arena had been quite sharp from Q2 onwards. But we’ve seen moderation in the EBITDA margin. If I see in this quarter. So just wanted to get a sense how is the scenario there in terms of the business environment and how should we think about it incrementally?
V.S. Hariharan
Yeah, so see There were two, three factors at play there. One was the interest rates which was very high on the lira side of the house and that had affected us in a way because the 50% plus interest rates on the working capital usage. The second one was the sharp decline in the market itself. The PC market declined in Q2. Double digit high double digit. So we had to take a series of actions, as you know that we called it the previous two quarters in terms of our overall working capital. We managed our inventories, we managed our receivables and we also manage our OPEX which is what helped us recover from the Q2 to the Q4 situation.
We’re now largely getting on top of that and combined with the paynet proceeds that come into solving the debt on the working capital problem, it should. One is the business is more better managed when it comes to inventory and receivables and lower opex. And two, this money will help us reduce our interest costs in a big way. So I see things are only going to improve from here.
Sahil Doshi
Sorry, if I can rephrase this question, sir. If I see sequentially in arena we’ve seen deterioration in the EBITDA margin level. Only gross margins have improved but the EBITDA is down from 1.9 to 0.36. So my worry was, meaning my question was that we were seeing a sharp improvement from Q2 and Q3, but we’ve seen a deterioration in Q4. So is there a quarter specific phenomenon or the pace of improvement which you are seeing is not, not being visible now is basically the delta in earnings is what I was trying to understand incrementally going forward.
S.V. Krishnan
Okay. See in arena there is an environment loss of about 2.9 million in the current quarter which is also reported in the financial notes. And this relates to an investment that was done, I mean a phone agreement there. That impact is a significant impact. About 25 crores in the financials this quarter.
Sahil Doshi
Got it, got it. Understood that helps. And so just on Saudi in the opening remarks we mentioned the growth was around 7% if I’m not wrong. Could you just quantify what, how big is Saudi as a geography for us and incrementally increasing? You know, we were envisaging that this would be the biggest growth driver for us in terms of the geography. So where do we stand today and how do we think about this two to three years out or something like that.
V.S. Hariharan
So Saudi is the third largest geography in our overall geographies that we have India followed by UAE followed by Saudi the year before last we ended Saudi with almost $1.5 billion in revenue. But this year, the year that’s gone by, we declined partially as I mentioned before, because of the prioritization of the government investment in it, et cetera. We do expect a good strong double digit growth coming back in Saudi both in the coming year and future years because all parts of the market, as I mentioned earlier, it’s not just the infrastructure side. If you look at the mid market, there’s a very big mid market in Saudi going to grow.
Even the PC penetration in Saudi for a 36 million population, there are only 5 million PCs in the market. So it is a market ripe for growth starting from infrastructure all the way to consumption at the consumer mid market level. So we do expect the next three years to be a good strong double digit growth.
Sahil Doshi
Got it. And just lastly, second take on if I see the mix you will give based on your customers and if I see the top two customers, the pace of growth basically has been much weaker than our overall revenue. For example, Apple growth is only 9% for the year and actually HP is degrown for this year. So could you just possibly call out what’s really playing out here?
V.S. Hariharan
It’s hard to call out specific items related to brands and it depends on what happens in the course of the year with actions by the brand. So we don’t really comment by brand but if you largely look at mobility as a category, we have grown 18% for the quarter and we’ve grown double digits for the year as well. So the mobility premium category is definitely growing well and we have done well for all of the mobility brands including Apple in India. So that’s one part of the question. On the PC side of the house, clearly the market is growing slower.
We’ve really not got the Windows 10 to 11 refresh and the AI PC push yet and we’re hoping the second half of the year coming year with the 10 to 11 reaching an end of life, we get that push and things will do better. So it will be I can only comment about categories broadly rather than talk about specific brand growth.
Sahil Doshi
Sure sir, appreciate that. Thank you so much for your comments and best wishes to the team.
S.V. Krishnan
Sir, for your earlier question, the one off depreciation on account of this digital platform this quarter is about 5 crores.
Sahil Doshi
Okay, thank you so much.
operator
Thank you. A reminder to all the participants that you may press Star and one to ask a question. Next question comes from the line of minimum with unique pms. Please go ahead.
Nirmam
Hi sir, Congratulations on a good set of numbers My question is on the software business, you mentioned that it is now 15% of the overall business. So how do you see this business shaping up in the next two to three years? You know, what is the kind of growth rate that we’re seeing? And also since the pie of software increases, you know, how will it impact our working capital and our return on capital employed?
V.S. Hariharan
Okay, so we look at three areas. One is the hyperscaler business, the pure SaaS business, software as a service and the security business. These three we are combining when we talk about software. This is roughly 1.8 billion out of our portfolio and this is growing at 20% plus today. But if I go deeper into this, there are pockets that are growing at 40 to 50% and others that are not. So clearly we have some work to do in one, getting the complete portion portfolio of products. Two is looking at what actions we can take to drive growth and to get our fair wallet share in each of the categories we play in.
And so that’s what is going to happen. But if I had to comment, what is the growth possibilities and what is available? Clearly all these areas put together we can grow anywhere between 30 and 40% when we are growing at about 20% plus right now. Now it will depend on our actions for us to be able to get the wallet share here, to be able to participate in these categories fully and well to take advantage of that growth. Your second question was on working capital and rose.
S.V. Krishnan
Yes. Working capital on a comparative basis will be lower in this part of the business because the inventory carrying is relatively less. And accordingly the rose will also be better. Number one, the margins are better. Number two, the working capital is comparatively lower.
Nirmam
Okay, got it, sir. And so secondly, on the arena business, you mentioned that factoring cost would be low. So because of the debt reduction we will have benefits on the interest side also. But in terms of business, you see the market coming back. What is, you know, what is happening? And on the demand side, to what time do you see arena stabilizing? For us.
V.S. Hariharan
We believe the worst in terms of decline is over. Having said that, the credit card business continues to show a decline because of the high interest rates and IP is most impacted by that. So that’s largely in the consumer and mid market space. But while we don’t see a growth coming back in the coming year, we see flattening out of growth. So we’ll see better year on year compares on terms of demand and top line and beyond this year. Hard to comment because we closely watch what’s going on in the global markets as well as what actions happens in the country.
But we don’t see a very sharp decline like 15 to 20% decline in growth that happened in Q2 and Q3. We expect it to be more flattening out the coming year.
Nirmam
That’s it from my side.
operator
Thank you. Next question comes from the line of Vivek Ramakrishnan with BSP Mutual funds. Please go ahead.
Vivek Desai
Hi, good morning, sorry, joined the call of bill tape. I have this one question with all this tariff was going on. Suppose there’s a reduction in tariffs for electronic goods, will that affect your inventory and would you have to take an inventory loss or do you have any kind of protection against that? That’s my only question. Thank you.
S.V. Krishnan
Normally unlikely, but all this we will know only as things pans out. Vivek, at this point point in time it is more speculative but we are very closely tracking this also. We are also very closely connected with each of the vendors in terms of what is their strategy.
It just not the tariff reduction at India in where do they manufacture, how much that country is being charged. So all those are part of our planning.
Vivek Desai
Okay, I understand that but my question was also more in terms of accounting because you know eventually let’s say they cut tariffs on something from 10% to 5% or let’s say there’s a customary reduction regardless of tariff force that means the inventory losses. How do you take it in? I mean do you have to just take the inventory loss on the books or you know there is some back to back that you’ve already talked to the manufacturers which might help protect you.
S.V. Krishnan
Normally tariffs are not part of the, I mean the back to back contractual arrangements with the vendor. If I need to, I mean answer you simply, the answer is yes, we have to take it but in this business there are always push and pull and we have seen in the past all these situations our business, I mean business constituents have handled it well with the vendors.
Vivek Desai
Okay, thank you very much and good luck.
operator
Thank you. Next question comes from the line of Rucha Somir with Old Bridge Capital.
Rucha Somaiya
Hi, thanks for the opportunity and congratulations on a great set of numbers. Apologies if these questions are already answered. My first question is on cloud. You mentioned about the great cloud opportunities but currently the only are about 4% of revenue from this segment. So are you looking at high single digit contribution from cloud business? What is your outlook on cloud? That would help.
V.S. Hariharan
Yeah. So see what we call out at Cloud relations group is 4% which is basically the hyperscaler business largely a little bit of SaaS. That’s why I alluded to software in general. Because. Because when it comes to cloud, you can’t think about hyperscaler separately. Software as a service separately, security separately. And increasingly a lot of these are sold both as licensing and subscriptions and they all contribute to the cloud overall business and opportunity. So all of that put together is roughly 15% of the business. And that’s how we want to look at it because that part of the business has potential to grow at 40 to 50%.
So 4% is only the hyperscaler part of the business and that actually turns out to be 5%. This quarter we’re increasing the contribution from the hyperscaler part of the business as well.
Rucha Somaiya
Okay, understood. And the kind of margin trajectory around these segments. If you can give us some color on this.
V.S. Hariharan
Sure. So see somewhere between 5.5 and 6. So it is on the higher side is what we appropriate from, from the pure resell and the subscription model. And there is additional margins to be had on professional services which can be anywhere from around 20% plus. And we are also building a smallish professional services business which is important to build competency and capability in house as well as bring the resellers together with us and to add more value to this entire business and to create stickiness for customers and resellers. So the pure resale consumption on the subscription models will be between 5.5 and 6.
In some more value driven software, margins could be even higher, but the end of professional services could be 20% plus.
Rucha Somaiya
So my next question is on the other brand partners. I understand you don’t comment specifically, but any color on this side would be great. I see that the contribution has been increasing and I understand that that is a high margin segment as such. So do you expect that to go up in the coming quarters?
V.S. Hariharan
Ian, Hard to comment specifically by brand, but clearly work that the brand does in the market and what they want to do with them, combination of the strategic actions that we work together contributes to a growth in a particular brand. But if you see the mobility part of the segment on the premium side is growing in India, we’ve taken advantage of that and there is a portion of that in Lenovo. Similarly, the peak market I mentioned earlier is a single digit growth. So if we are gaining share then, and we are participating in that, then that will contribute to our growth.
So that’s. Those are the two things that I would talk about but I cannot specifically say about a brand what happens.
Rucha Somaiya
Understood, thank you, that helps. And last question on the working Capital side, I see that there has been a spike of about 1500 crore in trade receivables because of which working capital has been hit. So what kind of stability do you expect in the trade receivable segment?
S.V. Krishnan
Okay, see, you need to look at the overall working capital. I’m sure you will appreciate things are under tremendous control. While we had said between 35 to 40 days, as a range we are lower than that band. Right. But within that, yes, ar this had gone up and we are working on it. And that’s a market scenario. It is just not on Reddington. But what we had done uniquely is we had reduced our inventory quite sizably and increased our payable days to compensate for it.
Rucha Somaiya
Okay, understood. Thank you so much for the opportunity and congratulations.
S.V. Krishnan
Thank you.
operator
Thank you. Next question comes from the line of Pitesh with corporate database India Private Limited. Please go ahead.
Pritesh
Hello. Hello. Yeah, just wanted to know we had referred to PSG segment seeing more large deals which can come at lower margins. So what would be the proportion of. Large deals in the overall revenue mix? And secondly, what would be the debt. On the books of arena presently and to what extent? We are seeing a reduction. We’ll be seeing a reduction in it. And thirdly. Will we see any further. Impairment loss in the books of Arena? Thank you.
V.S. Hariharan
So let me answer the first question. It’s hard to comment because the deals happen every quarter and I would say the large deals will be less than 20% of our business run rate should definitely continue to be around 80% but it can vary. Some quarters can be higher and some quarters can be lower. But largely it’s a smaller portion. The next few couple of questions.
S.V. Krishnan
Arena debt levels are currently at about $0.01, 70 and odd million. This money that we have got is about 70 million. So ideally it should come down to about $100 million. But having said that, we expect the growth revival to happen and to that extent the debt levels can get adjusted. Impairment we don’t expect. But I mean if there are any adverse conditions, we obviously need to test each of the assets for and as and when there are anything, we will let you know. But as it is, the. The goodwill that’s there in the books are quite limited.
Ventation.
Pritesh
Thank you.
operator
Thank you. Next question comes from the line of Amit with Edgar. Please go ahead.
V.S. Hariharan
Good morning. Yes, Amit.
Rucha Somaiya
Yeah, thank you for the opportunity and congratulations for good set of numbers. So my question was connected to circular economy, like what percentage of products sold are now part of refurbishment and reuse programs?
V.S. Hariharan
Good question. So we Just started the circular economy pilot in India six months back and we are only engaged in one part of the ecosystem, namely sourcing. And what we do is we work with our channel partners, resellers and some big large customers to source products. And it ranges from PCs to servers to storage. We’ve roughly had about 80 to 90 RFPs and we have already won about 40 of them and executed 40 of these. And the way we do this is we source these products and we make sure that we work ethical, take them to ethical refurbishes or recyclers.
I would say largely it is more recycling than refurbishing that we have worked on till now. But we are really working on this, learning from it every day and we are trying to see how to scale up. So right now we do it only in India. It is very hard to put a number around it but definitely seems like a very good area to be engaged. It’s doing good to the world as well as there is gross margin in this business to be had because there is a ready made ecosystem on both recycling and republishing that’s evolving both in India and in Middle East.
S.V. Krishnan
If I can add on Amit, as far as ESG is concerned, while on one hand we have ESG and CSR going in parallel, we also have built businesses around it and that’s our focus also. So I mean Harees objective is definitely to make sure we make a societal impact in the business that we do.
Rucha Somaiya
Thank you sir. Answer one different question. Can you tell me one key insight which we must have discovered in the past three to five years which is. Very unique to our understanding our business?
S.V. Krishnan
Well, sorry, I haven’t figured out your questions. What is that?
Rucha Somaiya
Yeah. Yes. Can you share any one key insight like which you must have discovered in past three to five years like which. Is very unique to understanding our business.
S.V. Krishnan
Better be disciplined, focus on balance sheet hygiene.
S.V. Krishnan
Thank you sir. Thank you. And all the best for the future.
operator
Thank you. Next question comes from the line of Pratik Kotali with unique. Please go ahead.
Pratik Kothari
Good morning. So just couple of clarifications this inventory and receivable provisioning for the quarter and the year.
S.V. Krishnan
Okay. So for the quarter it is reversal of inventory provision by 7 bips and AR provision by 6 bips. So there is a lot of, if I may say, cleanup that had happened. But for the full year Inventory provision is about 1bps and bad debts about 6bps lower than what has been our traditional average which is about 5bps in inventory and about 10bps in AR.
Pratik Kothari
Correct. And I believe from next year we. Expect the tax rates to go forward. So if you can just highlight the number there.
S.V. Krishnan
Okay, so we had guided for about 24 to 26% of tax rate for the current year. That was because if I go back to the earlier calls we said in some of the markets the tax rates, the corporate tax rates, I mean tax rates are going up, particularly in UAE where it was 0%, it has moved up to 9%. Next year the global minimum tax is coming in impacting some of the economies including UAE where from 9% it will move to 15%. So we expect next year the tax rate should range between 25 to 27, maybe closer to the Qing.
27.
Pratik Kothari
Fair enough. Thank you all the way sir.
operator
Thank you. Next question comes from the line of Sartak Matiel with Elaya Capital. Please go ahead.
Sarthak Nautiyal
Sir. I have three questions. First, can you tell us more about the product mix change over next two to three years? Also, what could be a revenue expectation for the same period? And my last question is as Apple. Is now manufacturing more in India, how it will affect our business?
V.S. Hariharan
Okay, I think we talked about many different points, but product mix change, clearly we see a larger part of the mix to be from software which I mentioned. 14% is today across the three categories of software. So we expect that to go higher. I wouldn’t say hazard I guess, but we would definitely. Today it’s 15, we should be more than 20 and higher as a percentage of our total business. Clearly the technology solutions group as a mix also should be higher because that’s part of the business you’ve already seen. It’s grown between 25 and 30% over the course of the quarter and high double digit during the year.
So mix on both those will go up. I wouldn’t be surprised. The PC market has been somewhat muted and growing single digit both on the Windows 10 to 11 refresh. And the AI PC is becoming real. We do expect in the next three years may not be only in the coming year. The Endpoint Solutions being a larger, growing faster and being a good part of the mix as well. So if I had to hazard a guess, higher growth rates will continue to be on software followed by value hardware. But the PC could continue to come back strongly which has not been the case for the last year, year and a half in terms of revenue expectations.
Again we don’t provide a guidance on growth and revenue expectations, but I can talk a little bit generally about the market. Clearly based on Gartner, the IT Growth rates for India is going to be more like 10%, 10 to 12% and in Middle east it’s going to be like 88 to 10%. But that’s overall it within that the cloud part of the business is expected to grow at 18 to 20%. And with this huge investments in data centers that could be more so clearly from a market perspective in the three big geographies which are 75% of our total business which is India, UAE and Saudi, there is a growth rate of about 20% to be had.
Now it will depend on how we execute, what we can take, what is appropriate for Reddington basis, margin and basis, all of the other factors that we work on. It will depend on that. So there is a growth possibility available of 15 to 20% in these three markets alone. And specifically on Apple can’t comment on specifically on the brand. Obviously they are manufacturing in India is good for us because the responsiveness on the capacity required to fulfill the demand is there and over time pricing advantages, multiple SKUs, etc. The advantage should be there for us.
Our job is to work on the distribution part of the Apple business and we are trying to do as good a job as we can on the different routes to market that we work with them and maximize that. And that’s not just limited to retail but goes into enterprise as well. Because the Apple PC business is growing very well and we work closely with them in terms of getting that business to bigger heights. So that’s answering all your questions. If you have any other things that I missed out, let me know.
Sarthak Nautiyal
Thank you. Thank you for taking my question sir.
operator
Thank you. Next question comes from the line of Ruja Somaya with Old Bridge Capital.
Rucha Somaiya
Hi, thanks for taking my follow up question. Now one last question on the capital expenditure front. I see that the capital expenditure is little bit spiked. So any kind of color in what kind of capex are looking forward in the coming quarters. That’s it. Thank you.
S.V. Krishnan
Our capex has always been limited and this capex is more specific and that too has happened more in Proconnect because of the new businesses that they had got. But otherwise it will range between 40 to 60 crores quarter.
Rucha Somaiya
So it will stabilize at that range in the coming quarters. Am I right?
S.V. Krishnan
Yeah.
Rucha Somaiya
Okay, thank you. Thank you for taking the question.
operator
Thank you. Next question comes on the line of Sahil Doshi with Thinkwise. Please go ahead.
Sahil Doshi
Yeah, thank you for the follow up. I just want to check on ProConnect. Sir, could you call out what are the full year revenue and pat numbers and what’s the outlook for Proconnect?
S.V. Krishnan
Okay, the full year revenue for Proconnect consolidated is about 957 crores. That is at a consolidated level it continues to have operating margin of about between 10 to 12%. And the profit after tax has been very good. The current year close to 30 crores.
Sahil Doshi
And could you just throw some light on in terms of what is the outlook on this business for the next two to three years and at what stage and scale could we look at possibly monetizing or making it an independent business or a subsidiary?
V.S. Hariharan
Okay, let me try and answer that question. So there are two parts from a geography perspective. We play in India and we play in Middle East. From the India part of the business, clearly we have seen a lot of interesting opportunities come up in the last year like big commerce and we have jumped into some of those. We play in a space largely called integrated logistics and we don’t in India. And that is. And within that we try to play to our advantage where we are good at. And clearly one, we had stabilized over this year in terms of operations and profitability and then looking for growth within integrated logistics.
There’s also an area in India we call the mission critical services. So that’s India part. In the Middle east we largely are in UAE and Saudi. We’ve seen very good growth opportunities in Saudi, especially as Saudi pushes forward their agenda of a regional hub. And a lot of brands are beginning to to set up manufacturing centers in Saudi. So we are setting up warehouses and integrated logistics and automated delivery centers in Saudi. So we clearly see good growth upside in the India and Saudi business in specific areas. We do have ambitions to grow it fast, faster than today as we have stabilized this thing over the last year or two.
In terms of operations, we are not able to comment specifically on numbers and give any guidance on that. But we are quite excited about this business going forward.
Sahil Doshi
Sure, sir, that helps. And just one last question in terms of clarification where you said 15% is software business and that is something which can grow at 40 to 50%, is.
V.S. Hariharan
That correct or that is the available market growth in the available market size. The portion of the 15%, 5% is the hyperscaler business up 4 to 5 which is growing at 40 to 50 as we report every quarter. The other two parts, the security as well as the SaaS. There needs to be a lot of work done in terms of having a full portfolio and getting our right go to market, sales, structure, partnerships, platforms, et cetera, ready to be able to appropriate that. But the market is available for a 40 to 50% growth in all three parts of the market.
S.V. Krishnan
And if you can add to that, see, this is the business that we feel we need to invest on. For one of an earlier query with respect to opex, I think it’s important to call out that this may require investments and we would want to do it to make sure that this business scales up.
Sahil Doshi
Right. Perfect. This helps. Sir, thank you so much for this.
operator
Thank you. Ladies and gentlemen. That was the last question for today. We have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments.
V.S. Hariharan
Thank you so much for all the questions today. And we are really pleased to report a very good Q4 and a very good end to the year. And we are quite excited as we move into next year. We do have concerns on how the tariff situation evolves, geopolitical situations will evolve. But outside of that, all our theaters, we are set up to respond to the market and we are optimistic, assuming these two factors don’t come in the way to have a good year. Again, as I mentioned before, Q1 is normally a soft quarter quarter. But we are set up to execute well based on the market demand available.
Thank you and look forward to the next meeting.
S.V. Krishnan
Thank you.
operator
Thank you on behalf of Freddington Limited. That concludes this conference. Thank you for joining us. You may now disconnect your line.