“In March, we experienced a decline of approximately 25% compared to our budget projections,” stated VS Hariharan, Managing Director and Group CEO of Redington Group, adding that the company expects a “fairly fast” recovery of the impacted business once the situation improves.
Despite these challenges, Redington reported a year-on-year revenue growth of 25% in the January-March quarter of 2026 (Q4FY26), backed by strong performances in India and Gulf Cooperation Council (GCC) markets. Hariharan noted a 50% growth in India during the quarter, with similar gains of over 50% observed in the GCC and Levant markets, which helped mitigate the weakness in the UAE operations.
Watch the full conversation here or scroll for edited excerpts.
Redington is also aiming for earnings before interest, taxes, depreciation, and amortization (EBITDA) margins between 2-2.2% for 2026-27 (FY27), excluding significant one-off data centre projects. The company remains optimistic regarding long-term prospects in cloud, software, and data centre sectors, though Hariharan recognized that large data centre deals usually come with lower margins and will be assessed selectively based on return on capital employed.
Redington Limited currently has a market capitalization of approximately ₹16,933 crore, while its stock has declined nearly 22% over the past year.
This is an edited transcript of the interview.Q: You’ve mentioned the West Asia conflict had a temporary but consequential effect on operations in March. Can you quantify the revenue and EBITDA impact?
A: Firstly, I want to clarify that the impairment was an exceptional item, similar to the one we had last year regarding the divestment of Paynet.
Year-on-year, both revenues and profits surged for the quarter — revenues increased by 25%, while profits rose by 16%. This was in spite of the West Asia crisis, which primarily impacted the UAE and, to a lesser extent, Saudi Arabia.
For March, we noticed a decline of roughly 25% compared to our budget expectations. Once the crisis concludes, we anticipate a rapid recovery of that business segment.
Q: How significant was that 25% shortfall in terms of revenues and margins?
A: Typically, the Middle East operations generate around $400 million in revenue monthly. Therefore, a 25% shortfall translates to nearly a $100 million revenue impact and approximately a 4.5-5% decrease in gross margins.
The silver lining was a stronger contribution from the Software Solutions Group, which has better margins.
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The hardware segment was more adversely affected due to supply chain disruptions — we struggled to bring products in or ship them out. Additionally, we had to rely heavily on air freight owing to the closure of the Strait of Hormuz.
Some data centre attacks also necessitated the migration of customers from one Middle East data centre to another. Nevertheless, our warehouse operations and local teams responded adeptly, and we anticipate a swift recovery once conditions improve.
Q: Has the disruption continued into April and May as well?
A: Yes, we expect to encounter a 25% impact on that sector this quarter as well.
However, Redington is well-diversified across various geographies and business units. India witnessed a 50% growth last quarter, and several GCC nations, including Qatar and Kuwait, performed robustly.
Overall, the GCC and Levant regions experienced a 51% growth despite the crisis, which helped counterbalance some of the weaknesses in the UAE.
Q: Costs have also risen due to the crisis. Can EBITDA margins still exceed 2%?
A: Our EBITDA margin was approximately 2% in Q4.
The UAE operations contribute about 15% to the overall business, and the impact there does not scale proportionately across the entire company.
The higher costs arising from war-related insurance premiums and freight expenses had an approximate 0.2% impact on costs. Some of these expenses may eventually be passed on to customers and partners.
The more significant impact stemmed from reduced revenues, which affected gross margins. We also made some one-time provisions in Saudi Arabia due to slower-than-anticipated collections.
Q: What is your EBITDA margin outlook for FY27?
A: Excluding exceptional data centre projects and other major initiatives, we aim to maintain EBITDA margins in the range of 2.2-2.3%.
Our target for FY27 is to stay within the 2-2.2% spectrum, and we are actively working towards that goal.
Q: What about the data centre business?
A: Last year, we generated between ₹1,000-1,500 crore from data centre-related endeavors.
India’s data centre capacity is expected to expand from 1.5 gigawatts to 7.5 gigawatts, indicating a substantial opportunity pipeline.
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However, these projects typically yield significantly lower gross margins — sometimes less than half of the normal business margins. Therefore, we assess each deal more from a return-on-capital viewpoint rather than solely pursuing revenue growth.
The core business, excluding data centres, continues to operate within the 2-2.2% EBIT margin range.
Q: The Turkey business has faced various challenges. Looking back, was it a poor decision?
A: We ventured into Turkey nearly two decades ago, and while we have encountered obstacles recently, robust periods have also been part of our journey.
In the last two years, the business environment became challenging, with interest rates soaring from around 10% to over 50%, while inflation peaked at approximately 65% before subsiding.
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We have downsized the operation considerably and shifted our focus towards US dollar-denominated transactions rather than the local lira, as borrowing costs rose too high.
We continue to see promising traction in software and cloud sectors in Turkey and aim to navigate the challenging environment successfully going forward.
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