Ricoh India Annual General Meeting ~ Managed Print Services

Parent continues to remain optimistic about the future of its Indian subsidiary

The company held its AGM and was addressed by Mr. T. Takano MD and CEO

Key highlights

Broadly, the Copier printer business constitute about 80% of total turnover, digital printers about 3%, laser printers about 5% and IT enabled services and Managed document services constitute about 1% each of the total revenue of the company.

Ricoh India has a unique business policy where by it is not at all competing with jobbers or for that matter companies like Canon. The main business of Ricoh India comes from clients like Pfizer, Siemens, Glaxosmith, HUL and such other large domestic and MNC players. Broadly, 40% of sales come from Government organizations including the PSU companies and the rest from the domestic and international giants.

Currently, the company has about 70000 such customers and has direct distribution model for metro customers and about 250 dealers for sale in Tier 2 and 3 cities. Broadly, 60% of sales comes from Tier 2 and 3 cities and about 40% from Metros.

Of the total sales of about Rs. 296 crore for FY'11, roughly 50% came from sale of equipment and the rest came from maintenance, lease and other services. Of the 50% sales from maintenance and other services, about 70% are from per copy print charges, which it charges based on a meter that is kept on its machine. This is a high margin business, as the company charges less on equipments and more on the per copy print charges which is more of recurring in nature and of healthy volumes.

Management continues to remain optimistic about the future business prospects of the company and expects to grow the core copier business by about 12% every year. The digital printing business is a market of about Rs. 200 crore in India and is growing around 5% every year and Ricoh India is expected to grow in that range for next year. The margins in digital printers are higher than the traditional copier printers. The laser printing business is expected to grow around 14% every year.

The real growth drivers according to the management are the IT business services which at this point of time constitute only about 1% each, and is expected to grow @25% every year. Ricoh India has acquired a company called Momentum Infocare in FY'11 at around Rs. 14.2 crore. Momentum Infocare is into core IT service business which provides software contents, cloud computing and such other software services. The whole object of Ricoh India is to create synergy by thus offering software requirements including scanning, hardware like computers, laptops etc along with its existing product line so as to be a complete hub of office automated solution provider. Ricoh India has already started offering the products of Momentum Infocare to its existing customers and vice versa.

Thus going forward in next 3 years, the management wants its traditional copier print business to be about 45% of total turnover from current 80%, simply because of the significant growth in the other segment of businesses.

For Q1 FY'12, momentum Infocare reported net sales of about Rs. 7.5 crore and was more or less breakeven during the first quarter even after restructuring exercise.

During Q1 FY'12, there was a one-time acquisition costs of about Rs. 6.85 crore which was booked immediately, rather than capitalized. Further during Q1 FY'12, the government orders took more time than the normal, resulting in increase in fixed costs and to add to that about 100 new employees were hired and trained so as to ensure that company is able to sell the products of both Ricoh India and Momentum Infocare in a package format. All these resulted in higher costs and thus losses in Q1 FY'12. The management has indicated that the losses are temporary and one off in nature. Though initially margins may remain under pressure in coming quarter may be one or two, the margins are bound to improve going forward.

The company imports by and large most of its machining equipments from the Parent in US $ currency and is hedged till next month. As long as Re does not breach Rs. 50, there will not be any major forex losses to worry about. But if Re breaches Rs. 50, then the forex losses can come.

The company has a capex plan of about Rs. 60 crore for next couple of years, which may include some acquisitions as well.

For Ricoh Parent, about 44% of its total sales come from Japan and the rest from the Rest of the World market. Of the rest of the world market, Asia Pacific region would constitute about 9% of the total sales and is the only market, which is growing in double digit. Thus according to the management, India and China both are very important markets for the Parent and it has no plans for any delisting. In fact it wants more and more product offerings to happen through its Indian and Chinese arms.

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