Rashi Peripherals (NSE:RPTECH) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Rashi Peripherals Q2 FY 'twenty seven Conference Call hosted by Monarch Network Capital Limited. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Vinay Menon. Thank you, and over to you, sir. Thank you. Good morning, everyone. Today on the call, we have Mr. Kapoor Kansari, Managing Director and Founder of the company Mr. Rajesh Moringa, Director and CEO and Mr. Himanshu Shah, CFO of the company. I hand over the call to you, sir. Thank you.

0:52 Hi, good morning. Good morning, everyone, and welcome to Rashi Peripherals' earnings call for the second quarter and first half of financial year twenty twenty six-twenty twenty seven. Thank you for joining us. I will cover three things this morning: what we are seeing in the market how we performed and most importantly, what kind of company we are building and why we believe it is different. In the first part of the market, India has held up better than most. IDC reported that India's PC market grew by about 12% in the April to June quarter, led by commercial, education and small business demand and also by premium and AI capable notebooks.

1:43 We should be clear eyed though part of the strength reflects channel partner buying ahead of future price increase and higher prices are now affecting consumer affordability. We expect commercial and enterprise demand to be steadier part of the market in the second half, and we are managing inventory and credit accordingly. The second part of our performance, on a consolidated basis, revenue for the second quarter grew by about 48.8% year on year, with PAT and EBITDA margins more than doubled. For half year, revenue grew by 54.5% with EBITDA and PAT margin trends doubling.

2:34 Our CFO will share more details in the later part of the call. To put it that in perspective, in the first six months, we have earned more than 80% of our profits we earned in the whole of last year. The quality of that profit matters as much as its size. Gross margins improved by close to 100 basis points in the quarter. So the expansion is coming from mix and pricing discipline, not only operating leverage. Annualized returns on capital employed and return on equity were both close to 23% for the quarter and highest since our listing. And working capital days also improved to 55 for the half from 61 a year ago.

3:23 I also want to be direct about two numbers you will see in our balance sheet. Operating cash flows for the half was negative and debt to equity rose to 0.76x. Net debt to equity rose to 0.76x. Both reflect deliberate choice. We built inventory to secure supply in a constrained market and to committed enterprise and AI projects. We also funded VDA acquisition through this route. Converting that cash inventory into cash in the second half is a priority, and we will report on our progress next quarter. On the third piece, what makes Rashi different is now the question that I think most of long term investors are interested.

4:14 First, we are an Indian company by choice. All of our capital management attention and network are focused on one market, the market with longest runway in technology adoption. We carry no geopolitical drag from distant geographies, and every rupee we invest goes where our customers are. Second, our profits grow faster than our revenue. This quarter profit grew to roughly 2.5x the rate of revenue, and this is a trend, not a single quarter. In a business often described as low margins, we have built margin profile that we believe is among the strongest in Indian technology distribution.

5:02 The third part, we choose depth and breadth in tandem. We work with 89 global brands, each of whom we can be genuinely meaningful for. Our branch head structure keeps decisions close to the customer and our 57 branches, 50 service centers and seven twenty eight locations reach deep into Tier two and Tier three India, where penetration is lowest and growth is highest. Fourth, we are building engineering capability, not only resale capacity. In semiconductors, our field application engineers work with manufacturers at the design stage, so the components we supply are designed into their product for the years.

5:48 Our joint venture with Restart Corporation adds Japanese design expertise and a dedicated engineering team in India. That is a capability few distributors have in India. And the last fifth, we are now one platform with three engines. We distribute through our core ITC business. We integrate through our VDS solutions in which we have acquired a 67% stake, bringing system integration, cybersecurity, cloud and managed services. And we enable through our embedded and semiconductor business. Each engine draws on the same channel relationship and customer access, which means a larger share of each customer's technology spend at higher value without a proportionate increase in acquisition cost.

6:39 Lastly, our priorities for second half are clear: convert inventory to cash and bring working capital back towards our historical levels integrate VDA carefully and retain its people and client build the leadership and engineering team for semiconductor joint venture. This will keep growing our core faster than the market while protecting margin and credit quality. We remain cautious on consumer demand and disciplined on credit. As a closing note, we will continue to give investors a clear and balanced view of both opportunity and challenges. With India's digital infrastructure expanding and demand for AI, cloud and semiconductor growing, we are focused on sustaining growth while improving the quality and breadth of our earnings.

7:35 Our aim is to build on this quarter's record performance and continue Rashi's evolution into a trusted integrated technology solution partner. With this, I would like to hand it over to Mr. Rajesh Goenka, our CEO, who will take you through the key operational highlights for second quarter and first half of FY 'twenty seven. Thank you. Thank you, couple. Let me now get into the details. During the period under review, which is Q2 and H1, we continue to strengthen our core ICD distribution business while expanding our new growth engines.

8:23 Our focus remains on solution selling, deeper customer engagement and very importantly, increasing the wallet share across our 10,280 channel partner ecosystem, which is spread across seven twenty eight towns of India. We also continue our transition towards an integrated technology solutions provider, building across ICT distribution, managed services and embedded and semiconductor solutions. We expanded our enterprise technology capabilities through the acquisition of VDA Info Solutions. VDA's expertise across enterprise IT, cloud infrastructure, cybersecurity, system integration and managed IT services will support our move towards higher value solution led offerings and create opportunities to deepen customer relationships.

9:26 We also formalized the joint venture with Japan based Restar Corporation to establish a dedicated semiconductor and embedded solutions business. The partnership combines their technology expertise with our distribution network and customer relationship and will develop local design and engineering capabilities, talent transfer and technical services for the Indian market. We also conducted artificial intelligence boot camps across six metro cities and we had overwhelming participation of almost 150 customers at each locations, helping enterprise partners and customers to build AI capabilities in the accelerated computing, AI workstations and enterprise AI workloads.

10:20 Along these initiatives, we continue to expand our branch operations and strengthen Pan India reach and the last mile access, particularly in the Tire 3 and Tire four towns of India, which are also the emerging commercial hubs. We remain focused on product availability, supply chain efficiency, deeper engagement with our OEMs and our channel partners, and it's our endeavor to continuously strive to achieve continuous improvement on this. With this, I would like to again thank you and wish all of our investors a Happy Deepavali. Thank you, everyone, and I would now request our CFO, Mr. Himanshu Shah to brief on the financial performance about the company.

11:16 Thank you, Rajesh, and good morning and festival greetings to everyone. I'll now take you through the financial performance for the period under review. We delivered our highest ever profits for both quarter two and H1 FY twenty twenty seven on a standalone and consolidated basis, reflecting strong growth across our businesses and continued progress in building a broader technology solution platform. On a stand alone basis, revenue from operations for the quarter grew by 42% year on year to INR 5,708 crores. EBITDA increased significantly 96% year on year to INR 196 crores, with margins expanding 95 basis points to 3.44%. PAT rose exceptionally by 172% year on year to INR 153 crores with PAT margins improving 128 basis points to 2.68%.

12:10 For the first half of financial 2027, stand alone revenue from operations grew by 49% on a year on year basis to INR 10,540 crores. EBITDA reached to INR $3.45 crores, reflecting a robust growth of 71% on a Y o Y basis, with margins improving 42 basis points to 3.28%. PAT grew significantly by 117% year on year to INR250 crores and PAT margins expanded 74 basis points to 2.37%. On a consolidated basis, revenue from operations for the quarter grew by 49% year on year to INR $6,001.85 crores. EBITDA increased significantly by 112% year on year to INR $2.20 crores, with margins expanding 106 basis points to 3.56.

12:59 PAT grew exceptionally by 121% year on year to INR 131 crores, with while PAT margins improved 69 basis points to 2.11%. For the first half of the financial year 2027, consolidated revenue from operations increased by 55% year on year to INR 11,287 crores. EBITDA reached to INR $3.75 crores, reflecting a strong growth of 81% year on year with margins improving 49% basis points to 3.33. PAT increased by 95% on a year on year basis to INR225 crores and PAT margins expanded 43% to 2.08%. We also improved our working capital efficiency during the period. Working capital days improved to fifty five days from sixty one days.

13:48 Letter's days reduced to forty three from forty six and creditors' increased to forty eight from forty four. With this, I would like to hand it back to moderate and open up for question and answer session. Thank you so much. Thank you very much. We will now begin the question and answer session. The first question is from the line of Hitesh Cohen from Origin Capital.

14:41 Sir, two questions. First, related to this inventory buildup in this quarter. So you said that consumer demand is softening. So why have you built such a strong inventory in this quarter? Second question is on the QIP provision. So it's a big dilution on current market cap around 15%. So is it related to acquisition or is it business related? Can you give us some sense on that? Yes, Hitesh. So I will answer the first question about the inventory buildup. While because of the continued price rise, there is a possible contraction in the consumer market. But the commercial market continues to grow very strong, which is almost 70% of India's total ICT market.

15:31 So in short, the impact so far is minuscule. That's point number one. Second, the major reason is because of the Deepavali season change. Last year, if you remember, the Deepavali in 2025 was around October 20, and this year, it is on November 8. So therefore, the cycle entire cycle, there is a delay of one month. And that is the reason we had to build the inventory towards end of September and entire October. While saying so, the sales have been good in October, very good in October, and it continues to happen in the current week as well. So there is no worry on the inventory front as such.

16:20 So with regards to the QIP, yes, you're absolutely right that this QIP preparation is a little we're doing as an advanced preparation for growth engine. When you're continuing to grow at about 40% to 5060% quarter year over year, every quarter, this will require at some point in time growth capital in terms of building capacity. Now this having said this, it is only a pre preparation. And in case we do not need this growth capital, we probably may not do a QIP at all. But as a practice, we do not want to be constrained with capital when the growth opportunity presents to us in the coming times.

17:10 Just a clarification there. So previously, I think management had said that if we reach INR 25,000 crores turnover, at current levels, we don't need any capital. So that holds, right? And you're already at that level now in terms of quarterly revenue. Right? So this this 900 crores basically will reach what kind of, you know, turnover in terms of what what kind of turnover you can achieve you... If you raise kind of funds? Yes. So good question, Hitesh. I think the principle remains the same. With every capital that we raise and managing a one:one debt equity ratio, this will give us an incremental deployment capacity of about INR 1,800 crores to INR 2,000 crores of deployable capital.

18:01 With six to 7x of working capital cycles, this will about INR 12,000 crores to 15,000 crores of additional revenue is sustained will sustain on an immediate basis. Now not the entire growth will come in one year. I got it. Got it. So just a just a suggestion there. So I think in... It would be prudent to do it in a calibrated manner rather than, you know, putting a 900 crore number with a 15% dilution. You know? That is not looked at very, you know, well by the market because, I mean, we understand the capital needs, but could that be done in a calibrated manner? That's my question. Thanks a lot, sir. You have feedback. Very well noted, Satish. Thank you for your note. The next question is from the line of Tanate Sai from 11H Advisers LLP.

19:03 Good morning, and thank you for the opportunity. We continue to remain long term investors. The question for management is twofold. One is what will be the sustainable EBITDA margin by FY twenty nine, FY thirty once the full CapEx utilization is complete for the 900 crore raise, if at all you choose to raise? Second question, which all investors are looking forward to hearing is the macroeconomic landscape view, especially the AI trade that is currently unwinding in the Western part of the world. How does that affect our company, and what will be the dependency on AI related products over the next three to four years? If the management can give a guidance on the mix in the next three to four years, that would be very helpful.

19:49 Thank you so much. So, Tanay, on the first question of sustainable EBITDA margin for the period you mentioned 2930%, I would like to say that around 2.75% EBITDA margin is a safe bet to consider for such long term horizons. Second question, I would Yes. Talay, on your question about the macroeconomics of this business. So first and foremost, as we all know that in India, economy is doing pretty well, and we are hoping that it will continue to do well. Second, digitization across all the sectors of business education continues very aggressively, which helps our business.

20:41 Third, all third party reports indicate that India conservatively industry will continue to grow at least in early double digit or 10% to 12% on unit wise. Fourth, the price rise, although it has slowed down, but it is expected to continue to some extent. So all these macro conditions are favorable to our business. However, we are not limiting our focus only on macro things. We have simultaneously done the acquisition of VDA. We have simultaneously done the joint venture with Restar Corporation. And all these businesses, even in the first quarter, have started already booming.

21:28 And last but not the least is about the AI. I would say that while South Korea and Japan and other countries, there has been some collapse even today on AI front. India, that way, we are all we play very safe. So AI usage or implementation in India is at a very, very nascent stage. So since we are already not into that volume, the probability of any crash is very remote, and we see good opportunity even on AI front in India for at least next two to three years. So overall, very promising, our ICT business plus the parallel actions that we have taken to cover up if any mishap, if any, which also indirectly helps us to have an accelerated growth, which is evident from our H1 to H1 growth. If you see, we have almost 50% growth on a Y o Y basis without doing any major project business.

22:39 Yes, Tanay? Thank you. Thank you so much, sir. I think last bookkeeping bookkeeping question would be the interest cost estimate given the new debt levels for maybe FY twenty eight, if not beyond. That would be all from my side. Thank you. So interest cost estimate like H1 has given the trends. And since it includes the interest cost on the accretion debt also, which we obtained, so we give guidance of the interest cost remaining in the same range. Thank you. And we truly appreciate the promoter sentiment as well given the stake increase. We hope that the trend continues, and we hope the company continues to do well over the next three to four years. Thank you.

23:26 Absolutely. We will together. The next question is from the line of Karankam Das from Choice Institutional Research. Please go ahead. Good morning. Happy New Year, and congrats on a great set of numbers. Sir, if you could explain how the business grew this quarter in terms of volume price as well as DDA and DDA, that would be helpful. Could I get your name, please?

24:11 Karan, Karan Gandhar. Karan. Okay. Hi, Karan. So if you ask me very discreetly, our 50% growth can be very simply dissected in 30% growth has come from the price increase, which is the trend. 10% to 11% has come from the volume increase, which is the unit increase. And 10% has come from new businesses. So that's the broad breakup of our growth engine. However, to your question about VDA, we've just added Q2 revenue of VDAs, which is at this moment very small, less than about 2% only. So it's not very significant at this moment.

25:01 On EBITDA level, sir? Capital level, the new initiatives are adding around six lifts because it is first quarter only. Does. It's like one month only. That's why. Okay. One month only. Got it. What is sir, where do we see fastest load coming in outside of the traditional design, I. Semiconductor or semi system integration? And what prospects and plans do we have for expanding system integration? Can you repeat your question? The voice was not very clear. Sorry about that. I hope I'm audible now. So the question was, where do you see faster growth coming in, in terms of contribution to EBITDA, VDA or the semiconductor business?

25:53 And what are your plans for expanding the semiconductor business? Yes. So as I mentioned, VDA business was only added in Q2 and semiconductor, we just had one month. Going forward, we will have the full quarter and entire H2 will be there. We plan that they should contribute to more than 10% of our top line And bottom line anyway is more than 2x, so that also will get added. And next financial year, both these businesses will make a major positive impact on our revenue margins and EBITDA numbers.

26:50 Please press 1 on your touchtone telephone. Thank you. The next question is from the line of Aegis Lakhani from Unifi AMC. Please go ahead. Hi, team. Congrats on a strong set. I have three questions. Question number one is, again, this is a fairly seasonally strong quarter for us. And given the outline that you mentioned that VD was just mentioned for one month. I'm trying to understand the margin resilience, to be very honest. How much of this is value led? How much of this is volume led in terms of the growth that you have seen? And this I'm trying to really understand how you're able to squeeze out so much margin.

27:38 So it's a little surprising for me. So can I just request you to respond on this, and I'll come back with a subsequent two? So your question is about the margin resilience, right? So partly, yes, it's a seasonally strong quarter. I'm trying to understand that ex of VDA, how are you able to get these kind of margins? That's point number one. And is this margin performance been more because is it more value led because you know, you had... You know, the pricing has been increasing and you've been able to retain some of that. I'm just trying to understand the the semantics behind it, sir. Yeah. So basically, there are three factors. One is the overall demand continues to be strong.

28:24 Second, pricing, as I said already, contributes 30% of our growth. So when the demand is high and the pricing continues to be higher, then there is less bloodbath in the market and that there is a chance to earn little bit more margin. Second, for Rashi Peripherals, as we all know that more than 35%, 37% of the business is non PC, predominantly accessories, peripherals, CPUs, motherboards, hard drives, all these places we always have an opportunity to earn some extra margin. So with our strong network across 57 branches, with our team structure and the KPIs, which are defined also on the margins, we are able to garner some extra margin across these product categories.

29:22 And to answer your point for future, near future, is it sustainable? My answer is definitely yes. Understood. Second, sir, is, you know, you know, we've we've read about ARISTAR and and your, you know, joint venture there. But, you know, if you could... And and the website is fairly there, you know, we're able to scroll through the products, etcetera. But could you speak a little bit about how... Because it's a large entity with large revenues, probably amongst the largest, you know, in the... Amongst the largest in the world. So I'm just trying to get a sense that what does that JV really bring for you on the table? Who are their constituents? Will you be exclusive for them?

30:08 More color and more depth and more perspective again on. Thanks. Absolutely, Ajis. So Restar Corporation, it's a Japanese distribution semiconductor distribution company. It's a $4,000,000,000 Japanese company. They are like us only, but they are focused only on semiconductor business and more focused on design and supply both. We have had this joint venture with them to pick up the market opportunity in India, which is currently distribution semiconductor distribution market opportunity in India is currently estimated at about INR25000 crores. So together we want to get a share of this market.

30:57 What are we going to get from Raystar when we do the JV? There are three very clear identified things. First and foremost is the products that they are distributing in Japan. Two very big Japanese brands have already come under our fold. And starting this month, we are going to distribute those brands. So that is the one. So our basket of products have already started increasing. Second, Restar has a very strong design capabilities. They have 200 engineers in Tokyo. So we also want to develop similar design capabilities in our Bangalore laboratory under their guidance. So they are also deputing one engineer in Bangalore to train and develop a design center.

31:47 And third is equally important is today for Rashi Peripherals, our semiconductor business, we don't have a single Japanese manufacturer as a customer in India. Example is Maruti or Daikin, there are so many Japanese manufacturers. By virtue of having a JV, the first level of discussions have already started and even in this month we are meeting five Japanese manufacturers in India. So all these also now potentially will become our customer. So in short, first, we are getting new products and lines offerings second, we are getting design capabilities and third, we will be able to penetrate to the Japanese manufacturers in India. So these are the three core things that we are looking from the JV.

32:37 Understood. And Rajiv, a follow-up on that. So is it that these new product OEMs who are core to restart globally, does that mean you have exclusivity with them? Is it possible to call out some of their who are these OEMs who are where you have the exclusivity? Have they already got distribution partners in India? Is this a new are you a new distribution partner through this JV? Or is it exclusive? Could you call out a little more color on this tax? Yes. It is since it is not yet formalized, I cannot announce the names, but I can say that two names is there on virtually every Indian. It's a Japanese manufacturer.

33:23 And to clarify to that, it necessarily may not be exclusive. There could be some Japanese distributor already serving in India directly or indirectly. It could be a mix of exclusive and nonexclusive, both. Understood. So then, if there are Japanese distributors who are already distributing those company products and we are also entering the same domain, are you seeing it as a market expansion opportunity and the market is underserved by these distributors? What is it that sort of you will be able to bring that you have distribution muscle and reach, which I understand. So what does it enable really?

34:09 So first and foremost, in our assessment, their market reach currently is only 10% of the overall opportunity. So 90% is not catered to. Second, they majorly do only dollar billing either from Japan or Singapore or Hong Kong. Third, with our reach, with our technical expertise locally spread about 57 cities of India. We can do local support, we can do local design, we can do local billing, we can do post sales support, all these things we bring on the table. So that is the bigger opportunity. And as I said, 90% is unserved, which we can do it.

34:56 And that's the opportunity for us. Understood. And typically, what are the margins in this segment? Is it better than company level margins materially? And how do you see the revenue scale up here in the any yes. Broadly, it is 2x on margin front. As far as top line is concerned, last year, last financial year, Rashi alone in semiconductor, we did about $20,000,000 of business. What I can say right now is in just first six months of the year, we have done 2x of the last year number. So this entire this financial year, we are hoping to do 3x to 4x of last year financial numbers. So that's the trajectory of business that we have currently.

35:47 Understood. Himanshu, I have a follow-up So here. See, sorry to interrupt. Sorry to Yes, join yes. Sure. Thanks. Thank you very much. The next question is from the line of from Counter Cyclical Investments. Please go ahead. Sir, thank you for the. Sir, firstly, I wanted to understand how should I look at the pricing scenario of our products. Sir, do we expect any price correction since there is a lot of talks regarding this AI bubble boosting and probably the demand for chips and storage should get better than what it is right now. So in that scenario, how should we look at our business, if you can help us understand?

36:35 Yes. So Madhur, if you see, as I have already mentioned, first six months of the year, our growth, 30% is attributed to the price increase. However, H2, the growth, what I anticipate would be about 10% to maximum 15% will get attributed to price increase. So that's the broad number indication I can give you. In the product categories, DRAM, particularly, which is the core reason for price elevation, the forecast is that it will continue to grow even at least in next one year. Although I see SK Hynes, Samsung stock prices already dropping, but the trend that we are told is going to be only on increasing.

37:28 On the flash and hard drive storage, the prices have more or less now flattened. So on an average in H2, we still expect 10% to 15% price increase. Got it. And sir, the second question was on our debt to equity, sir. We were always on on the... Like, post listing that we would like to keep it one is to one. So how should I look at going forward since the working capital requirement of our business has increased due to these price increases? And till the time maybe the fund raise comes, where should we expect that? Would we like to lever our balance sheet further? Or how should we look at the debt to equity? Yes. So debt equity, as we maintain that we would like to go up to one:one, barring opportunities where ROCE makes sense or not for the temporary phase. Otherwise, on broader scenario, it will be one:one only.

38:28 Currently, the 0.76, which is their net debt to equity, is that includes the acquisition debt also. So that much you can take as incremental. To add to you, Madhur, it's a very simple outlook. To fund the growth, either by way of acquisition or by way of the general distribution growth, There are three pillars of growth strategies that we've clearly outlined, right? There's a core distribution engine. There's a semiconductor segment. And the other one is managed services and enterprise infrastructure related services on the IT piece. To fund all these three things, we will use internal accruals.

39:16 We have a large debtors on our books to factor. And the third one is for the capital raise, if required. So depending on the situation and the time, whatever is the prudent for the economics and the financials of the organization, we will take that call. Got it. And just one final question from mine, sir. How is the enterprise deals on the data center front panning out? Have we... So where are we? Are we in discussions, or do we expect some major deals in the pipeline? That was from me. Thank you so much. Yeah. So being the first mover in the AI data center space, we are there in almost every project. But at this moment, while we speak in last one year, we have not we have chosen not to go aggressive in that segment because we already have 50% sustained growth for last almost so many quarters.

40:16 And needless to say that these are large sized projects where the exposure values are also big and the ROIs are also less. So considering our 50% growth, we have right now stayed away from these projects, but we are stay put as and when need comes, we can always jump and start winning the orders because we have a very strong credential in this sector. Got it. Sir, thank you so much and all the best. Thank you very much. The next question is from the line of Jagruti from Clockline Capital. Sir, thanks for giving me an opportunity. My questions have already been answered.

41:09 Next question is from the line of Dheeraj Kumar Reddy from AlphaSQR. My question is, basically, if you're saying that next second half, we'll have like a 10% to 15% price benefit and 10% from new initiatives and 10% from the volume. I'm just trying to understand now the company seems to, you know, get into an orbit of where I think the growth rates probably can be beyond 30% for the next couple of years. Is that assumption true or, like, are we missing out something, sir? It's very difficult to estimate for next year and next to next year because price trends are volatile and we are seeing price flattening already.

42:04 But what we are saying is on the macroeconomics, overall Indian economy continues to grow strong. Digitization continues to go strong. Education continues to be strong. Businesses are thriving. All these continue to drive the demand for PC, PC related accessories and the entire ecosystem. So in India, next few years, we very clearly see that opportunity will only keep on accelerating. And with Rashi Peripherals continued improvement in penetration beyond 57 towns of India and 700 towns of India billing, all this, we are ready technically to grab those opportunities.

42:51 So I think that is a better answer to your question, Diren. Understood, sir. And my second question is basically a new business, which is enterprise and semiconductor, because on a lower base and also you seem to be very optimistic on the growth. I just wanted to understand how large these businesses can become probably in the next two years and what are the fundamental, I mean, business I mean, drivers for this growth? So enterprise business, the opportunity is very huge. It all depends how much we want to pick up and at what cost.

43:36 I think someone already asked, I think Madhu already asked me that on the AI data center, are we doing? To the best of my estimates, last one quarter itself, more than INR 20,000 crores of orders have been placed. But there, we chose not to play a very active role because our growth was already at 50%. So and overall opportunity size is already is very high. It's how much we want to take. But broadly speaking, from Rashi perspective, this year and next year, we want to be around 20% business should come from enterprise so that our existing business strength that is there, that does not get defocused and does not get liquidated.

44:25 So we want to keep on strengthening our key strengths of businesses that we have developed in last thirty five years and keep on adding building blocks like enterprise, like semiconductor. So enterprise, I think next year should be about 20% and semiconductor is just the start with the JV, but it will be a substantial in terms of top line and more importantly on the bottom line as well. Got it, sir. Thanks. Thanks a lot, John. You very much. Ladies and gentlemen, in order to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Vinay Menon from Monarch Network Limited.

45:23 Hi, sir. Thank you. A couple of questions. Intangibles on the books have increased in the sheet. This is attributable to the VDI acquisition. And how are we expecting to take this now over the next few years? So the intangibles which have been increased, part of this is on VDA equation, which is in the consumer balance sheet. And as far as treatment of these are concerned, these are different components out of it in terms of customer know and goodwill. So goodwill is almost not more than 20% of the total intangibles, and it will be treated in line with the accounting principles and the income rules, which are applicable.

46:11 Secondly, on the AI FCC, sir, how is the outlook? How are we seeing some pickup in that segment? And we are expecting some new launches in H2 from most of the large OEMs in in association with NVIDIA. So what are the expectations for for those launches? So for India perspective, since we have a very small base on AI, on the commercial application and also the enterprise and data center applications, so there are a lot of projects announced and they are at a various stage of finalization. So at least next one to two years, we see the opportunity is very, very big. It's up to us now to define basis our capacity of finances and ROCE calculations.

47:02 But opportunity is very high for next two years for sure. Okay. Okay. And you gave an outlook on in terms of volumes, terms of prices, you said that there will be 10% to 15% more in H2. How would you categorize how volumes will grow in H2? And if you can guide the enterprise and consumer, that would be helpful. Yeah. So the conservative forecast for H2 will be at consumer business, there will be a degrowth in terms of unit wise. Commercial business could be flat or positive. My sense is it is going to be positive because January, February, March is a corporate quarter, especially year end, budgets are there, depreciation is there.

47:50 So overall, unit wise, H2, it should be flattish. However, for Rashi Peripherals, we continue to expand into new product lines, new vendors, new customers and new territories or towns, I would say. Apart from this, VDA and Restaur JV will also add value to our top line and bottom line. So we see a sustained growth engine in H2 as well. Okay. And one last question, a lot of people are looking at ASPs and are kind of worried that whenever the supply issue goes off, the ASPs might fall and maybe that will impact our revenues negatively.

48:38 So being in the industry for so long, and I'm sure this has been trends like this. Has there ever been, you know, the price cuts which have come and maybe impacted both from a distribution angle for us? Yeah. So post COVID COVID situation was something similar where there was a shortage and price went up and post COVID prices dropped by 10% to 15%. So for a year, there was some flip across the market. But from distribution perspective, it does not make too much of a difference because in distribution, you continue to expand into new products, new territories, new customers, new cities. So those gaps normally get covered.

49:25 I honestly do not remember post COVID, we grew, I think, by 7%, whereas the market degrew by about 15%. So because we are into distribution business, we are able to cover from other business opportunities that are there. And additionally, Vinay, please remember that we're building semiconductor and the services portfolio, enterprise services portfolio. These will bring resilience to our overall growth, considering the lower penetration that they exist in the market. So the upside is much larger to offset any such reverse trend that happens in the distribution space. That's good to know. All the best to do. Thanks. Thank you.

50:15 Thank you very much. The next question is from the line of Vavin Chedda from Inam Holdings. Please go ahead. Congrats for excellent result to the entire team. So just on the few numbers, post this VDA consolidation from this quarter, this would be the new depreciation run rate of INR 12 crore per quarter as well as the employee cost, what I'm seeing around INR 70 crores, 71 crores or what will be the new run rate? Yes. So INR 12 crore per quarter will be including the amortization of the intangibles. So it will take that as depreciation post consolidation.

51:00 And employee cost, definitely, this is first quarter and all the employee cost which has come in is on the normal run rate basis. So this includes the VDA employees cost which is in comparison? Yes, yes. And in that INR 7 crores is the ESOP amortization there? ESOP is INR 3.8 crores. INR 3.8 this quarter? Yes. Okay. Okay. And the other thing I heard for the basically second half numbers, basically you said that as compared to second half last year, still the prices are around 14%, 15% higher than last year. So that's a growth cushion in next year, plus there would be some volume growth or even assuming flattish volumes, right?

51:53 Yes, Bhavan, I think overall 10% to 15% price rise will give us this additional business. Second, while the volumes may at worst remain flattish or positive, that is there. But however for Rashi Peripherals, our continued expansion into new product lines, new brands, new territories, all this will give us additional business. And then VDA and Restar also will give us accelerated business. Apart from this, the enterprise and data center business opportunities are already existing on the table. The first H1, we decided not to play an active role. In H2, if required, we can always play an active role because we have a very strong credentials.

52:44 So all this put together, we are very confident of maintaining the good run rate in H2 as well. Sure. And on the gross borrowings level, it was INR1968 crores as we obviously the inventory has increased following strong business momentum. In second half, there will be inventory unwinding also. So in terms of gross and net debt levels, should we consider this as a peak level or we still will need extra borrowings? So like September quarter, which is a peak in terms of revenue, so is the borrowings and this includes the acquisition debt also. Sure, sure, yes. Definitely, it tapers down a little bit with the orders, which differ in size in terms of seasonality of business.

53:36 Okay. Thanks a lot. Yes. Thank you very much. The next question is from the line of Akshay Choranya from an individual investor. Please go ahead. Mister Akshay, please go ahead. Mister Akshay, please go ahead. As there are no further questions, I would now like to hand the conference over to management for closing comments. Thank you for all your questions and your time this morning. As we welcome Diwali, I wanted to extend my warmest wishes to you and your family.

54:27 This season reminds us that shared purpose, strong relationship and optimism for the future light the way forward. I am deeply grateful for your trust, partnership and collaboration. They have made this year both meaningful and successful for us. The opportunities ahead are extraordinary. Together, we will keep advancing innovations and creating new possibilities and meaningful impact around India. I look forward to what we will achieve in this year to come, wishing you a very happy Diwali filled with peace, prosperity and happiness. We remain cautious about consumer demand, disciplined on credit and confident on the opportunity in the future. Many thanks to our shareholders, brands and channel partners, our bankers and our colleagues.

55:20 We look forward to speaking to you again next quarter. Thank you. Thank you, and Happy Diwali to all of us. Thank you very much. On behalf of Mona Networks Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.