Rashi Peripherals IPO: Hardware distribution major set for Dalal Street plunge – All you need to know

• The Mumbai-based company is an ICT product distributor with presence across 680 locations.
• It’s also a national distribution partner of 52 global brands including Dell, Asus, HP, Logitech and more.
• It offers value-added services like pre-sales, technical support, marketing services, credit solutions etc.
  

With a wide footprint as well as a wide product range, Rashi Peripherals has been able to garner a chunky market share as a pan-India distributor of technology products. The company which is opening its ₹600 crore IPO on February 7, distributes many ICT products ranging from processors to keyboards.

The Mumbai-based company which distributes over 10,500 types of products, has branches in 50 cities that operate as sales and service centres and warehouses. They cover 680 locations across 28 states and union territories in India through an ecosystem of 8,407 customers, as of September 30, 2023. It’s also the distribution partner of 52 global brands including Dell, Asus, HP, Logitech and more.

Thanks to casting a wide net, it has over 45% market share in processors, graphics cards and pen drives; over 20% market share in routers (33%), hard drivers, keyboards and mice, monitors; and over 10% share in UPS, laptops, desktops and switches.

Value-added offerings

It majorly works with hybrid resellers who are its channel partners that sell to both online marketplaces and retail channels enabling them to serve tier-II and tier-III cities in India.

“They are able to leverage their local sales and inventory knowledge and post sales servicing capabilities to offer local connectivity and just-in-time deliveries,” said a report by Axis Capital.

The company also incentivizes its resellers with credit financing and competitive pricing solutions, helping them scale up. “The company's service offerings include value-added services such as pre-sales, technical support, marketing services, credit solutions and warranty management services,” said a report by Sushil Finance.

Rashi also distributes equipment for high performance computing, AI, data centers etc to their enterprise customers to provide solutions to their end-consumers. It also intends to grow the number of categories it operates in.

“Rashi is one of the leading ICT product distributors in the Indian market, generating around 85% of the business from the B2B2C channel. It commanded a dominant market share in some of the ICT products. The company intends to continue with a considerable market share as one of its strategies for product category expansion,” said a report by Choice Broking.

Lowering financial liabilities

Its initial public offer of ₹600 crore is entirely a fresh issue, using which it intends to pay off loans, towards working capital and general corporate purposes. It has set a price band of ₹295-311, with a lot size of 48 shares. It opens on February 7 and closes on February 9.

Its revenue from operations grew by 57% in FY23, and profit by 35%. But it raked up debt to the tune of ₹1,275 crore, as of September 2022, including unsecured loans to the tune of ₹19 crore from promoters and members of promoter group and others.

The IPO proceeds can help cushion some of it, believe analysts. “Utilization of IPO proceeds would lower the financial liabilities, whereas availability of working capital would boost the business expansion capabilities in the medium-term, “ says Choice Broking.

Its sole listed peer in the market is Redington India and analysts say that the IPO’s price to earnings multiple is in line with that of the listed peer.

“The company is asking for a PE multiple of 10.54x on the upper end of the price band. The industry average is 9.92x. The issue seems fully priced. Looking at all the factors, risks, opportunities and valuation, investors may apply for the issue with a long term view,” says Sushil Finance.

Source: DRHP

Demand dynamics & other risk factors

The company enjoys high market share in the business, with deep knowledge of product assortment, pricing dynamics and strong supplier relationships. But the business itself has inherent risk factors like currency fluctuations, high working capital costs etc.

“Any changes in customer preferences, increased competition, change in margin by global technology brands, changing trends or any other reason, could decrease our revenue and profitability from these verticals and may result in an adverse effect on our business, financial condition and results of operations,” the company said in its DRHP.

Also, its growth and profitability is linked to the level of consumer confidence in India as well as overseas business it operates in. Factors like inflation, tax, government policies, and unemployment rates can affect consumer confidence and spending.

“The Indian ICT market, in particular, is very sensitive to broad economic changes, and retail purchases tend to decline during recessionary periods,” the company says. Change in the demand environment can also create an inventory overhang.