Bulls And Bears Beckon The Channel

Dealers' cribbing about margins is a common phenomenon in the IT industry.
But for a change, there is another tier of the channel that is facing a
slowdown, despite the festive season. The sudden inclination of dealers to
invest in the stock market has become a cause of worry for distributors.

According to the distributors, with dealers heading towards the stock market,
the IT market has been partially hit. This has resulted in less of liquidity
with the partners causing delay of payments and cheques bouncing.

Ajay Bhatnagar, Channel Manager, eSys, Lucknow said, “Partners are still in
business, but 20-30 percent of their investment is going towards stock market.
As a result, we are facing problems as far as releasing of payments is concerned
and few cheques are bouncing as well. Besides, they are not ready to maintain
stock in bulk.”

“Since investing in shares is the easiest way to double the money one has,
traders are bound to take that route. Once the market hits back and shares don't
pay well, they will return to their main business,” opined Bhatnagar.

On the other hand, PS Neogi, President, Redington India suggested, “While we
are not in a position to confirm about the amount of money being invested
outside the IT business, the fact is that over the past few months, we have
experienced a gradual decline in the capital and liquidity available in the
channel. This has resulted in delayed realization of payments for us, and the
frequency of defaults and delinquency has displayed an unhealthy upward trend.”
He further added that this phenomenon exhibits a spurt whenever there is a sharp
movement in the stock market or in the real estate segment, but it was difficult
to draw a direct correlation.

According to Neerav Bansal, Marketing Head­—Haryana, Ingram Micro, “It is
true that partners are drifting towards the share market but this has affected
the IT market only to a limited extent.” On the other hand, Kolkata-based
distributor VK Bhandari of Supertron Electronics said, “As far as Kolkata market
has concerned, dealers are drifting towards the stock market but that is not
been the sole reason behind the slowdown. The festival season also affected the
IT business in the last quarter.”

Anil Jagasia, CMD, Savex Computers added, “Only about five to seven percent
of dealers are investing in stock markets. However, this trend is not exclusive
to the IT space because 30 to 35 percent of the diamond traders also invest in
stock markets. I do not think it will slow down the IT market completely.”

Why partners are drifting

Rise in stock market is not the only reason why dealers have suddenly
shifted their focus towards investing in shares. Low margins have forced them to
opt for shortcuts to double their investments. Rajiv Khanna, President,
Jalandhar Computer Dealers Association (JCDA) said, “Earlier, during the festive
season, we did not mind shelling out huge sums of up to Rs 10 lakh to buy fresh
stock and keep it intact. But nowadays, the trend has changed and dealers are
preffering to invest in the stock market because the profits they earn there is
much more as compared to the low margins they earn through selling IT products.”

He further elucidated that apart from the stock market, dealers are now
getting into all sorts of business like that of property dealing, export and
even distribution of luggage in search for higher margins.

Pooja Sharma

poojas@cybermedia.co.in