Charting a new course
Indore-based Computer Gallery is betting big on distribution of telecom, consumer durable and home security products
The Indore-based, ` 120 crore Computer Gallery initiated transformation in the organization in mid-2012 when it saw its margins in core IT distribution declining to 2-3 percent or even lower. The company realized that with the actual realization on IT distribution often turning negative due to payment delays, diversification of its portfolio was the only option left.
“Over the last few years, the IT business has become seasonal with peaks during festivals and deep troughs after that. While generally we maintain inventories of four weeks, in the lean periods it shoots up to 9-10 weeks with credit extending to 60-70 days. That sucks up all the margins with finance costs of 1.5 percent per month,” laments Sudhir Arora, MD, Computer Gallery.
The company entered into the distribution of home security solutions from Godrej in June 2012. It targeted security dealers as well as its existing base of IT dealers. It added 60 partners for security in 2012. “Security distribution offers double benefit of higher margins of 5-8 percent and credit terms of only 15 days,” explains Arora. In February 2014, the company ventured into mobile and tablet distribution by partnering with Samsung. Treating it as a separate P&L account, Arora formed a team of 12 personnel to drive the mobile business.
He notes that the mobile vertical has the benefit of clearly demarcated territories compared to IT where there is a lot of overlapping which leads to over-distribution. “With demarcated territories, we can predict the business and margins that we will make in a month. Moreover, the credit term is only 10 days with inventories of two weeks; this makes it easier to rotate the capital.”
Next fiscal, the company will venture into the consumer electronics space. “Within next three years, we want to hit a turnover of ` 250 crore with telecom contributing 50 percent, home security contributing 10 percent and home durables contributing 15 percent. IT business will only be 25 percent to the topline,” concludes Arora.
Within next three years, we are targeting a topline of ` 250 crore with telecom contributing 50 percent, 20 percent from consumer durable and home security and IT contributing only 25 percent
MD, Computer Gallery