Ricoh India Ltd.

CMP – Rs. 29.05 BSE Code – 517496

Ricoh India Ltd is a 73.6% subsidiary of Ricoh Co. Ltd. Japan.

Ricoh Company Ltd., Japan was founded in 1936 in Tokyo, Japan. The company currently earns over $17 Billion in annual sales and with over 80,000 employees and offices in over 150 countries, the company has built one of the industry's most extensive sales and support network making the company a leading global player in digital office solutions.
Ricoh Company Ltd. operates in India through a subsidiary, Ricoh India Ltd. Ricoh India Ltd. was incorporated in 1993 with a joint venture between the RPG Group and Ricoh Co. Ltd. Japan, to form RPG Ricoh Limited. It was reincorporated in 1998 to form Ricoh India Ltd.

Ricoh in India earlier operated through two subsidiaries named Ricoh India Ltd. and Gestetner India Ltd. However, effective July 2005, Gestetner India was merged with Ricoh India to consolidate their market position.


Product Portfolio & Network

Ricoh India’s product range includes Colour Multifunction Printers, Black & White Multifunction Printers, Colour Laser Printers and Copy Printers. The company has introduced ‘The Aficio’ range of Multifunction products. These are advanced multifunction products and incorporate state-of-the-art copy, scan, print, and document storage capabilities as well as superior technology and security features.

Besides, the company derives a substantial portion of its Income from Service business and Sale of spares. The after sale service income is infact the bread and butter of the company. It generates nearly 50% of revenues from its service business, which is also a high margin one.

Ricoh India has a sales and service network, present across the country with 15 branch offices, 210 dealers, more than 300 company and 300 dealer service engineers, covering the remotest of areas besides being present in small cities and large metros. The company is also registered with DGS&D for government purchases.

Financials

QUARTERLY - LATEST RESULTS - Ricoh India Ltd (Curr: Rs in Cr.)

The company has grown at a rate of roughly 15% which is in line with the growth of the market. However, a pressure is being witnessed on the margins of the company. The increase in PAT for FY 06-07 has been mainly on account of Other Income on account of write back of a liability for earlier years.

Conclusion

Ricoh India faces competition from Xerox and Canon in the Indian market. The company has been taking steps to enhance its ‘Brand Image’ through an effective Brand Building campaign. The company has also created an extensive Sales & Service network with branch offices, an extensive Dealer network and Service engineers covering the entire country.

The company has taken steps to improve operational efficiencies, reduce costs and rationalize operations – these include reducing the workforce by offering VRS and sale of defunct manufacturing unit. Even though the benefits of VRS and terminal benefits will start accruing to the company in the coming years, the company is adopting conservative accounting policies like writing off the entire VRS amount and terminal benefits given to the employees in the same financial year. (rather than amortising it over years).

The company has access to the R&D by the parent. Other opportunities which can emerge in the future include the company expanding its product range to include the products in the parent company’s portfolio not currently being sold in India. Infact, the company has been introducing new products on a regular basis. The other big opportunity could be the parent company making India as the sourcing base for its requirements. Currently, the parent Ricoh is not sourcing from India. The parent company has neglected any opportunity of establishing Ricoh India as a manufacturing hub even for India. In fact most of the products are being imported from the parent company. We believe given the high growth rates in India, Ricoh India could get greater focus and attention from its parent.

The office automation market is directly linked to the economy and as India's economy is registering a high growth rate, the market is also witnessing buoyancy. Since the competitive pressures have put pressure on the hardware revenues, the company is focusing more on the revenues from the service side. However, with rationalization and cost cutting exercise including VRS, things could improve on the margin front.

We believe that there is a huge potential for office automation products in Tier II & III cities that still remains to be fully exploited.

Investors can accumulate shares of Ricoh India at the current price and on declines.