Rashi Peripherals Limited

Rashi Peripherals  Limited has filed  its DRHP with market regulator SEBI on January 20, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue. The size of Fresh Issue is up to [●] Equity Shares aggregating up to ₹ 750 crore. 

Business Model of the Company

Rashi Peripherals Limited is among the leading value-added national distribution partners for global technology brands in India for information and communications technology (“ICT”) products in terms of revenues and distribution network in Fiscal 2022. (Source: Technopak Report) 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 2020 and Fiscal 2022. (Source: Technopak Report) The revenue from operations grew at a CAGR of 53.85% from ₹ 39,344.82 million in Fiscal 2020 to ₹ 93,134.38 million in Fiscal 2022 and was ₹ 50,238.09 million in the six months ended September 30, 2022. The Company differentiates itself by offering end-to-end value-added services such as pre-sale activities, solutions design, technical support, marketing services, credit solutions and warranty management services.

The Company was incorporated in 1989 and has more than 33 years of experience in distribution of ICT products in India. The Company commenced operations with manufacturing of peripherals. With the liberalization of the Indian IT sector in 1991 (Source: Technopak Report), the Company transitioned to distribution of ICT products of global technology brands in India. The Company has been instrumental in facilitating the entry of a number of global technology brands and was among the selected players that led the formalization of the fragmented and unorganized ICT products distribution in India. (Source: Technopak Report)

Over the years, the Company has continually expanded its operations and between Fiscal 2002 and the six months ended September 30, 2022, the Company distributed 293.63 million units (including shortages of certain items, and items given free, if any) of ICT products. The Company expanded its distribution network across India and as of September 30, 2022, had one of the largest ICT products distribution networks in India. (Source: Technopak Report).

Management of the Company

(i) Krishna Kumar Choudhary is a Promoter, Chairman and Whole-time Director of the Company. He obtained his bachelor’s degree of commerce from Kashi Hindu University, in 1975. He has 25 years experience in the IT distribution industry. He is also a member of Institute of Chartered Accountants of India He has been associated with the Company since 1997.

(ii) Sureshkumar Pansari a Promoter, Vice-Chairman and Whole-time Director of the Company. He obtained his bachelor’s degree in commerce from the Rajasthan University in 1975. He is also an associate member of the Institute of Chartered Accountants of India. He has 33 years experience in the technology channel sector. He has been associated with the Company since 1989.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon.

Fresh Offer

The Company proposes to utilize the Net Proceeds from the Issue towards:

1. Prepayment or scheduled repayment of all or a portion of certain outstanding borrowings availed by the Company; 

2. Funding working capital requirements of the Company

3. General corporate purposes

In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges and enhancement of the Company’s brand name amongst its existing and potential customers and creation of a public market for the Equity Shares in India.

Risks in the IPO

The business is dependent on global technology brands

The business is dependent on global technology brands effectively maintaining, promoting or developing their brands and maintaining standard quality products including launching new information and communications technology products at regular intervals.  In the event of further development of technology or growing popularity of alternate products which global technology brands are unable to counter, the products of such global technology brands may become obsolete.

Company don’t have long term agreement with customers

The Company distributes ICT products to Channel Partners and customers, who are B2B end-customers. Accordingly, the sales of the Company are subject to demand variability by the Channel Partners and customers. The Company doesn’t enter into long-term agreements with the Channel Partners or customers for purchase of the products or provision of solutions. Since the Channel Partners or customers are generally not obliged to continue purchasing products and/or services from the Company, or otherwise retain their business relationships with the Company, there is no assurance that their purchase orders or engagements will remain constant or increase or that we will be able to maintain or add to the existing customer base.

The Company is reliant on the relationships with certain online marketplaces

The Company is reliant on the relationships with certain online marketplaces and disruptions to such relationships or changes in their business practices, may adversely affect the business and the financial condition, results of operations and cash flows.

The Company could be subject to product liability claims

Due to the nature of the business, the Company faces a risk of the products that it distributes containing quality issues or undetected errors or defects. These may result from the design or manufacture of the product, or from the software or other parts used in the product, over which the Company have no control. It may face the risk of legal proceedings and claims being brought against the Company by the customers on account of sale of any defective or misbranded products.

Increasing Competition

The ICT products distribution industry is highly competitive in India, with the main competitors being Savex Technologies Private Limited, Ingram Micro India Private Limited, and Redington (India) Limited (Source: Technopak Report). The Company also competes with other large multinational and national enterprise computing solutions distributors, as well as numerous smaller players. Increasing competition in the information and communications technology products distribution industry may create certain pressures that may adversely affect the business, prospects, results of operations, cash flows and financial condition.

Financial Performance 

As per the financial statements of the Company, here are Financial Highlights for FY22 compared to FY21:

Total revenue

FY22: The company’s total revenue increased by 57% to Rs. 9,321 crore compared to Rs. 5,930 crore in FY21.

Total expenses

FY22: The company’s total expenses increased to Rs. 9,082 crore, up from Rs. 5,751 crore in FY21.

Profit before tax

FY22: The company’s profit before tax experienced a 34% growth, reaching Rs. 239 crore in FY22, compared to Rs. 178 crore in FY21.

Profit after tax

FY22: The company’s profit after tax increased by 32% to Rs. 182 crore in FY22, compared to Rs. 136 crore in FY21.

Total assets

FY22: The company’s total assets grew to Rs. 2,669 crore in FY22, up from Rs. 1,594 crore in FY21.

Total equity and liabilities

FY22: The company’s total equity and liabilities also increased to Rs. 2,669 crore in FY22, compared to Rs. 1,594 crore in FY21.

Net cash used in operating activities

FY22: The company utilized Rs. 314 crore in operating activities, as compared to Rs. 109 crore in FY21.

Net cash used in investing activities

FY22: The company used Rs. 6 crore in investing activities in FY22, compared to Rs. 0.9 crore in FY21.

Net cash generated from financial activities

FY22: The company generated Rs. 337 crore from financial activities in FY22, as opposed to Rs. 134 crore in FY21.

Total cash and cash equivalents

FY22: The company had Rs. 45 crore in total cash and cash equivalents in FY22, up from Rs. 28 crore in FY21.