Company Overview
Established in 1989 and having over 34 years of experience, Rashi Peripherals Ltd. is a leading national distribution partner for global technology brands in India for information and communication technology (ICT) products. Initially, the company started as a manufacturer of peripherals but due to the liberalization of the economy in 1991, the company transitioned into distribution of ICT products of global technology brands in India. The company primarily operates in two business verticals, namely (i) Personal Computing, Enterprise, and Cloud Solutions (PES) and (ii) Lifestyle and IT Essentials (LIT). Under PES, the company is primarily engaged in the distribution of personal computing devices, enterprise solutions, embedded products, and cloud computing. The LIT business caters to the distribution of products such as graphic cards, central processing units (“CPUs”) and motherboards, storage and memory devices, lifestyle peripherals and accessories that include keyboards, mice, web cameras, monitors, wearables, casting devices, fitness trackers, gaming accessories, power equipment such as UPS and invertors, and networking and mobility devices. Over the years, the company has continuously expanded its operations and as of six months ended September 2023, the company distributed 311.89 million units of ICT products. The company also expanded its distribution network and currently has one of the largest ICT product distribution networks in India. The company differentiates itself by offering end-to-end services such as pre-sale activities, solutions design, technical support, marketing services, credit solutions, and warranty management services. Over the years, the company has consistently added new global technology brands to its portfolio and worked with them to distribute products across categories. The company has had business relationships for more than eight years with several global technology brands including Asus Global Pte Limited, Dell International Services India Private Limited, HP India Sales Private Limited, Lenovo India Private Limited, Logitech Asia Pacific Limited, NVIDIA Corporation and many more.
Objects of the issue:
The net proceeds from the fresh issue will be used towards the following purposes:
- Prepayment or scheduled re-payment of all or a portion of certain outstanding borrowings availed by the company;
- Funding working capital requirements of the company; and
- General corporate purposes.
Investment Rationale:
Leading and fastest-growing Indian distribution partner for information and communications technology products
The company distributes a range of ICT products manufactured by global technology brands such as personal computing, mobility, enterprise, embedded solutions, components, lifestyle, storage and memory devices, UPS, and accessories,. The company also distributes cloud computing solutions. The wide variety of products that the company distributes has helped them to achieve economies of scale and provide channel partners with a single sourcing point. The company is among the leading technology-integrated national distribution partners for global technology brands in India for ICT products in terms of revenues 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 is also a major player catering to Indian consumer demand for product categories like processors, graphic cards, and internal storage. As an important link in the technology value chain, the company creates sales and profitable opportunities for global technology brands and channel partners through its customized marketing programs, just-in-time logistics solutions, pre-sales and post-sales technical support, product planning, and distribution solutions.
Long-term relationships with marquee global technology brands supported by a committed engagement strategy with customers
Global technology brands undertake continuous research and development and introduce new products from time to time. These global technology brands also have extensive supply chain capabilities which ensures the availability of their products. These factors result in greater brand recall for such global technology brands which facilitates the sale of their products. The company maintains long-term relationships with such marquee global technology brands from whom it procures ICT products revenue of the company. The company also provides advertisements on behalf of global technology brands in technology and consumer media publications.
Valuation and Outlook:
With the increasing penetration of internet connectivity across geographies of rural and urban India, the number of smartphones, social media users, and online shoppers in India is on the rise. The IT penetration in non-metro cities in India has increased due to the penetration of smartphones and government-enabled village knowledge centres, leading to increased awareness which in turn is driving demand for ICT products. The non-metro cities and other rural geographies are becoming centers of consumption for ICT products like personal computers, smartphones, internet devices, and networking devices, and hence, there is a requirement for ICT distributors and resellers having a pan-India presence. The ICT sector significantly contributes to the country’s GDP. Due to such emerging demand, India’s ICT industry size is expected to reach Rs. 1,087 billion (approximately USD 136 billion) by 2025, growing at a CAGR of 10%. Various key factors for the growth of PC and components business include the booming gaming industry in India, increasing data volumes, efficient supply chain solutions, and the central government’s PLI schemes. Due to such factors, the demand for international hardware and software products is likely to rise. Therefore, Rashi Peripherals Ltd. emerges as one of the partners to bridge the gap for such emerging demand in India, given its diverse marquee suppliers and long-grown customer base. Hence, we expect the company to benefit from such a demand scenario in the long term. On the financial performance front, the company’s Revenue/EBITDA grew at a CAGR of 26.3%/10.1% during the FY2021-23 period. The company’s net profit dropped to Rs. 1,233 million in FY23 from Rs. 1,364 million in FY21. On the upper price band, the issue is valued at a P/E of 10.5x based on FY2023 earnings which we feel is fairly valued compared to its peers. Given a highly competitive environment and thin margins of the business, we recommend investors to “Subscribe” to the issue for listing gains.
