'We are brand & platform agnostic' [Financial Express (India)]
(Financial Express (India) Via Acquire Media NewsEdge) Redington India is India's largest distributor of electronic goods, with a turnover of more than Rs 20,000 crore. It has a strong presence in 23 countries, is associated with over 120 leading global IT and telecom brands and has more than 32,000 channel partners. It also has 76 sales offices, 102 warehouses, 105 own service centres and 235 partner service centres. Redington handles 100,000 tonnes of goods per annum through multi-modal agencies to enable road, rail and air transportation. After running slightly behind the huge multinational Ingram Micro, Redington has reached the number one position, according to a recent Dataquest magazine survey.
The company has been, among other things, distributing Apple products such as iPads, Macbooks and iPods. Recently, the iPhone has been added to the distribution agreement. The company's founder and managing director, the very low-profile, low-key R Srinivasan tells me how it is possible to take on a multinational and succeed in India and also in some of the emerging markets in Asia, the Middle East and Africa.
We meet for lunch at the Italian restaurant at the Park Pod Hotel on Khader Nawaz Khan Road, which houses most of Chennai's upmarket boutiques and eateries, which also happens to be a convenient location for both of us. A tall cranberry spritzer seems perfect for a humid Chennai afternoon. "We give credit and collect intensively. In businesses where there isn't much investment in technology or a long gestation period, Indian companies have a big advantage," says Srinivasan. "Indian manufactured goods or services have been in demand in some of the emerging economies even before the Western companies entered the picture. Countries like Turkey and Egypt are absolutely the right markets to look at."
"There are a lot of Indian managers in the MNCs in these places. The gap between Indian companies and the MNCs exists only in terms of funding or investment in technology," he says as he asks for tomato basil soup. We settle down with fettuccini alfredo and feta salad for the main course. Srinivasan is an engineer with an MBA from IIM, Ahmedabad. After stints at Coca Cola and Reader's Digest in India, he worked on assignments in Indonesia and Singapore. He founded Redington in the early 1980s in Singapore for specialised trade in personal computer components, focusing on the market in India and the Middle East. Singapore is an intensively competitive international market. It made more sense moving from Singapore to India and not the other way round. "My co-promoters are the Singapore-based Kewalram Chanrai group. I put in 15% and they gave me bank facilities in lieu of which they got shares." Srinivasan does not believe in promoters having a substantial shareholding in a company. The companies he admires are L&T and HDFC. "With a substantial shareholding, the promoters are not answerable to anyone before going public. Answerability alone brings discipline. Our senior managers have stayed with the company for a long time. It is important that they get shares in the company. We have been liberal in sharing the shareholding. People start a business with the idea of making a lot of money. But if you see it as a large canvas to paint on, shareholding does not really matter."
When India opened up, Srinivasan could sense the kind of potential the country offered. Redington India was launched in Chennai in 1993. It went public in 1997. "We are comfortable with our margins in India. Our investors are happy. We have consistently given 20% returns to investors. I think of the old Hong Kong airport, where landing in the middle of the city, flying over rooftops, was a hair-raising experience. Having done it again and again, the pilots never failed. Nor have we. In the last 6 to 7 years, we have increased and expanded margins by changing the product mix."
Constant growth has also been due to Srinivasan's ability to read the market in advance and to spot opportunities. Redington is the distributor of all BlackBerry smartphones in India. "Four years ago, when we tied up with RIM, nobody thought BlackBerry will have such a high demand in India. What was thought of as an office productivity product became a consumer product." He thinks Microsoft's Xbox gaming console will become very popular in the next two or three years.
Srinivasan says that while the competition looks upon itself as an IT products distributor, Redington is a supply-chain service provider. "Coke was just a carbonated drink till the day it decided that its business was to quench someone's thirst. When you have a long pipeline, it need not be used just to transport water, it can also be (for) petroleum." As he explains, in the supply chain, you have logistics, finance and after-sales service. "We are disaggregating each of these businesses to create separate companies. Redington and others will be their customers."
In 2008, Redington launched its finance company Easyaccess Financial Services. "This company was set up only to finance the channels. Originally, it was meant only for Redington. Now we are trying to leverage it for other businesses. Some of our customers may want our full services." The logistics business was spun off recently. With 25% year-on-year growth, the Indian logistics management and services business is one of the fastest-growing in the country. Redington started its first state-of- the-art automated distribution centre in Chennai in 2009-10. "It makes sense for companies like Apple to hand over their distribution to us. They can concentrate on their brands and products and we will move them across the industries. As long as the product is cartonable and unique in numbers, we are in business. Wherever there is conventional distribution based on cash transactions, our model won't work. We have IT digital products, consumer durables, gaming consoles and so on in our portfolio. The German company Dorma, which makes door handles and hinges, chose us to transport their goods. We don't handle FMCG or pharma customers yet."
We skip desert and I ask for a small cup of espresso and Srinivasan has green tea. He agrees that it has been a challenging year. "In the last two quarters, we have continued to grow, but not at the same rate. New products will bring us growth. We deal across products and across platforms. We are really brand agnostic and platform agnostic. IT products now cater to both lifestyle and computing segments. People see the Apple iPhone or the iPad as consumer products. The HP notebook is a computing product, and is also a content creating product. The iPad is a content consuming product. Today, most of us have a content-creating product at the work place and content-consuming product at home. Growth will come from one or the other during these difficult times."
As we are walking out, I ask him about his commitment to promoting music and education in the city. "I like to do something in the area where I live. I don't want to start an institution but would like to help institutions that are doing good work," he says.
Copyright 2012 The Indian Express Online Media Pvt. Ltd., distributed by Contify.com
Credit: Sushila Ravindranath
(c) 2012 The Indian Express Online Media Pvt. Ltd., distributed by Contify.com
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