Why Redington Share Price is Falling

Bears dominated Dalal Street as the Indian share market extended losses on 26 October 2023.

Taking cues from overseas equity markets tumbled for a sixth straight session on Thursday to the lowest level in four months.

The BSE Sensex fell 850 points to 63,119, its lowest level since 26 June 2023. The NSE Nifty50 lost 270 points to slide to 18,849. Persistent FII selling and weaker-than-expected Q2 FY24 earnings also weighed on Indian equities.

The market has already seen sharp moves in the last week. In the last five sessions, Nifty has fallen 3.4% and Sensex 3.5%.

In this challenging market environment, numerous stocks were adversely affected, and among them, Redington India witnessed a significant decline.

The company's shares eroded by 10% in the past five days. Here's an insight into the reasons behind this decline.

#1 IT Stocks Under Pressure

Redington India is currently grappling with a decline in its stock value, reflecting the broader challenges confronting the IT sector.

The Nifty IT index on Thursday (26 October 2023) experienced a significant drop of over 1%, indicating unfavourable market conditions.

This decline is driven by the persistent selling pressure on IT stocks, which has been exacerbated by major IT companies reporting earnings that fell short of expectations, alongside providing reduced revenue guidance for the upcoming year.

Key players in the IT industry, including Infosys, TCS, Wipro, and HCL Tech, have all encountered financial difficulties, resulting in the adjustment of their revenue guidance.

Infosys, for example, revised its full-year revenue projection to a modest 1-2.5%. TCS reported slower growth and adopted a cautious outlook for the second half of the year.

Wipro's revenue faced a third consecutive quarterly decline, and HCL Tech adjusted its guidance from 6-8% to a narrower 5-6%. These challenges extended to mid-tier IT firms like L&T Tech Services and Happiest Minds, which also had to reduce their guidance.

Furthermore, the Big Four IT companies initiated workforce reductions, collectively shedding 21,213 employees in the second quarter.

This substantial reduction in their workforce, apart from HCL Tech, which lost 2,299 employees, had a ripple effect on the industry. Over 5,000 employees left these companies in the September quarter, compounding the challenges.

Redington India, involved in logistics supply chain management and the provision of broader IT and telecom products, is no exception to this challenge.

These difficulties have weighed on the company's performance. Additionally, market expectations of another weak quarter, following a lackluster Q1, have further contributed to the decline in Redington's stock value.

This combination of industry-wide issues and market sentiment has created a challenging environment for the company.

#2 Top Level Exit

The resignation of Redington's Managing Director, Rajiv Srivastava, on 11 August 2023, citing personal reasons has also cast a shadow over the company.

Rajiv Srivastava had been an integral part of Redington, serving as Joint Managing Director since 2 April 2021 and subsequently taking on the role of Managing Director from 1 April 2022.

However, since his departure in August, the company's shares have been on a downward spiral, as such top-level exits tend to trigger a loss of market confidence, as they often raise concerns about internal issues or organisational instability.

What Next?

Going forward, the company is looking forward to diversifying into new business segments. Redington is currently focused on the distribution of IT products and services, but it plans to diversify into new business segments, such as cloud computing.

By diversifying its business segments, Redington aims to mitigate its dependence on a single sector, enhancing its resilience in the face of economic fluctuations.

Additionally, Redington is gearing up to introduce a spectrum of innovative solutions and visionary concepts under the overarching theme of 'Reimagining the Digital Future.'

These pioneering initiatives represent the company's forward-looking approach as it adapts to the ever-evolving digital landscape and positions itself as a leader in shaping the digital future.

How Redington Shares have Performed Recently

On a year-to-date basis, Redington shares have lost 25%. In the past month, the shares are down 10%.

In the past year, shares of the company have been trading 3% higher.

The company touched its 52-week high of Rs 202 on 12 December 2022 and its 52-week low of Rs 135 on 31 October 2022.

About Redington

As an integrated supply chain solution provider Redington India was incorporated in 1961.

Being the second largest distributor of IT products in India the company and through all its subsidiaries distributes products from over 220 leading manufacturers services over 39,500 channel partners in India.

It's engaged in distribution of information technology mobility and other technology products besides supply chain solutions.

The company successfully transformed itself from a pure IT products distribution firm with traditional cash and carry model to a leading integrated supply chain solution provider that includes non IT products and involves the management of inventory of greater than 45,000 SKU's (stocking units).

It provides logistics supply chain management and other support services in India Middle East Turkey Africa and South Asian countries.

For more details, see the Redington company fact sheet and quarterly results.

you can compare Redington with its peers:

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Redington vs HCL Infosys

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