Message to Shareholders

Dear Shareholders,

It is no exaggeration to say that FY 2016 was one of the toughest years I have seen yet. The all-round challenges faced by your Company, both in India and overseas, raged unabated through much of the year. But despite the huge ordeals on account of political uncertainties, depreciating currencies and unprecedented difficulties in the overseas markets particularly in the Middle East, Turkey and Africa, I am very pleased to share that your Company succeeded in registering strong growth both in India and the overseas markets.

On a consolidated level, your Company saw 12.2% revenue growth, 7.3% EBITDA growth, and 10.1% PAT growth. Revenue growth outside India was an impressive double digit at 18.7% and for India, it was 2.9%.

Again, all business verticals displayed growth, with IT contributing to 75% of the total revenue, Mobility, 23%, and Services, 2%. From the time your Company went public in February 2007, revenue has grown at a CAGR of 17% and EBITDA at a CAGR 17%. This has been possible due to well-planned and consistent expansion in operations through product and brand additions, expansion to new geographies, increase in market share and importantly, prudent risk management.

It is fitting that your Company has grown every business unit in FY 2016 whether it is the IT broad line distribution, IT enterprise business, mobility business, support services business, and logistics business, both in India and Overseas markets. This performance is significant as it comes at a time when globally many companies in this space have gone through a decline with some even exiting the market altogether. During FY 2016, your Company has grown its top and bottom line not only on a year-on-year basis, but also sequentially every quarter of the financial year.

Your Company’s IT distribution segment (which includes PCs, peripherals, networking products, packaged and enterprise software, storage products, security solutions and high-end servers), continued to register growth although in single digit. IT distribution revenues account for 66% of total distribution revenues in India and 81% of total distribution revenues in Overseas. While overall global shipments of Desktops and laptops were on a decline due to muted consumer demand and longer technology refresh cycles, it did not affect your Company’s growth as it was well positioned to take advantage of geographical and vertical based opportunities. Your company believes that Desktops and Laptops will continue to constitute the primary medium for content creation and will continue to be in demand in the corporate and government segments. With the anticipated pick-up in economic recovery in India and overseas, higher corporate investments and government spending, the demand for Computing products will remain steady, if not increase further. Your Company’s long standing relationships with major IT vendors, its dominant market share in India and overseas, and its strong distribution network, make it well placed to cater to future market demand. In the India market, your Company has shown consecutive growth on IT vertical quarter on quarter. For FY 2016, the growth is 12.3%.

The non-IT distribution segment (includes telecom devices, digital printing presses, tablets and gaming consoles) constitutes 32% of the total revenues in India and around 17% of the total revenues in Overseas. While the growth in global Smartphone shipments may be moderate in the coming years, your Company’s key markets - India and META (Middle East, Turkey and Africa), are expected to witness healthy growth in this product category.

There was a change in the distribution landscape of the Apple iPhone in India. Despite this setback, your Company continues to be one of the leading distributors for Apple in India, handling the vendor’s entire range of products comprising the iPad, Mac, iPhone and iWatch. Apple has declared that it intends to invest aggressively in the Indian market and as it captures a larger share of the market, your Company will continue to benefit from it.

Because of the persisting adversity and challenges, your Company was not able to manage working capital better in FY 2016. This led to negative cash flow for the year. I would hasten to mention that with the steps taken by the management, the working capital days improved for the last quarter resulting in a positive cash flow for Q4 FY 2016.

I am happy to share with you some positive developments in the overseas markets. Number one, your Company’s value added distribution business continued to show a strong growth in FY 2016, registering 30% for the year. Number two, your Company has been appointed as distributor for iPhone in UAE and Nigeria. In addition to this, your Company’s market share, particularly on PCs in Turkey and in Africa, grew appreciably, contributing to the strong performance in revenue and corresponding growth in profits.

I would like to recall the statement mentioned in last year’s message to Shareholders on the strategy carved out by your Company to address the E-Commerce segment. I am pleased to share with you now that it has started to show traction. As E-Commerce is slated to grow manifold, your company is well poised to capture the growth opportunities by addressing three kinds of services viz., (i) Distribution of products to E-Com Players (ii) Managing E-Com Logistics (iii) Providing post sale support services to products sold on the E-Com platform.

Other than the ADCs in the metros, your Company presently leases warehouses at close proximity to the market to cater to specific channel requirements. The introduction of GST will ensure integrated and uniform taxation across states and propel the demand for centralized warehouses like the ADCs. The phenomenal pace of growth of e-commerce in India is also translating to increased demand for large back-end centralized warehousing facilities and logistics. Your Company will, if necessary, expand its ADC network beyond the metros to cater to this demand.

I am overjoyed to share with you that ProConnect Supply Chain Solutions Ltd., which your Company set up in 2012 as a wholly owned subsidiary for providing logistics services, has had an exceptionally good year. Revenue grew by 45% and Profit after tax grew by 60%. Significantly, 53% of ProConnect’s business is now generated from third party customers across different product categories and industry verticals.

With a wide network of 90+ owned service centres and 270+ extended service centres in India and Overseas markets, your Company is catering to post sales service requirements for Information Technology and Mobility products through the brand ‘Ensure’. The shift in consumer behavior towards purchasing new products rather than repairing defective ones, poses a threat for the paid services model. Ensure plans to bring in more vendors for supporting their warranty services.

I am pleased to tell you that Your Company has invested in LinkPlus, a leading Oracle distributor in Turkey. We believe that Oracle-software, hardware, engineered systems and the cloud businesses are poised for a big growth going forward. Post end of FY 2016, we acquired an additional 10% stake in Link Plus and with this the total stake in LinkPlus now stands at 80%.

Taking first steps in the new technology space of Cloud Computing, Your Company has successfully launched the RedCloud portal. Developed wholly in-house, the portal offers our partners a seamless interface through cataloguing, auto-provisioning and auto-billing of vendor products and solutions. Going forward, your Company plans to include Managed Services offerings on this platform in order to offer a complete range of cloud products and services to end customers through the Company’s partner network.

Your Company’s performance in the middle of an unprecedented market volatility could not have been possible without the dedication and commitment of the employees who have stood rock solid in delivering the Company’s objectives. A fitting example would be the flood situation in Chennai in the first week of December 2015, when the team stayed at the office premises round the clock for several days, to ensure that the data center was fully operational and there was no risk to business continuity. I am deeply touched by the solidarity and commitment and I thank them for their show of strength.

Your Company set up a Foundation last year to implement various CSR activities for the betterment of the community. It addresses needs in quality education for the underprivileged, the urban poor and the economically challenged. I am happy to say the Foundation has made good progress this year. Details are included in this report.

Finally, I would like to thank all the Directors on the Board, Employees, all Stakeholders, Promoters, and Shareholders for their continued faith and trust in the Company. I look forward to their support this coming year and in the future.

With warm regards,

Raj Shankar

Managing Director