Welcome to the latest edition of Hidden Gems Weekly. In recent weeks we examined a small-cap automating India’s railway future, a QSR stock that just hit 570 stores and a debt-free gem front-running the data centre cycle spending and consumer expansion. This week we look at a business built on technological depreciation. GNG Electronics refurbishes and resells used IT equipment, converting corporate upgrade cycles into a global supply of affordable computing devices.
Every few years, companies replace their laptops.
Not because the machines stop working. But because technology advances, warranties expire and corporate IT policies demand standardization. The older devices still function. They simply fall out of the upgrade cycle.
This creates a peculiar kind of waste.
Machines that can work for years are discarded simply because a corporate upgrade cycle demands it.
At the same time, millions of people cannot afford a new computer.
This gap creates a steady supply of usable machines.
GNG Electronics has built a business around this inefficiency. It does not manufacture computers. It extends their economic life.
And right now, the economics of extending life have become unusually attractive.
GNG Electronics 1-Year Share Price Chart
When computers stop getting cheaper
For decades, computers followed a simple rule.
Every year they became faster. And cheaper.
Semiconductor improvements ensured that performance increased even as prices declined.
That rule is beginning to change.
Memory prices have risen sharply as semiconductor capacity shifts toward artificial intelligence infrastructure and data centres. DDR5 memory prices rose sharply between late 2025 and early 2026, pushing up the cost of new computers by nearly 20%.
This is not merely a temporary supply disruption.
Somewhere, it also shows a structural shift in semiconductor demand. AI systems require enormous computing capacity and memory. As this demand absorbs manufacturing capacity, traditional computing devices become relatively more expensive.
When new computers become expensive, refurbished computers suddenly begin to look attractive.
This is the economic environment in which GNG Electronics operates.
Turning corporate upgrades into a business
GNG Electronics refurbishes and resells used IT equipment.
Its business model is straightforward.
First, the company sources used laptops, desktops and other IT equipment from corporates, leasing firms and IT asset disposal companies. These machines typically come from enterprise replacement cycles.
Second, the company refurbishes them. Components are repaired or replaced, memory and storage may be upgraded and the machines are tested and certified.
Third, the devices are sold under the Electronics Bazaar brand across enterprises, institutions, distributors and channel partners.
The refurbished device performs almost like a new one but costs significantly less.
For price-sensitive buyers such as small businesses, educational institutions and emerging markets, this difference matters.
What corporations discard becomes affordable computing infrastructure for someone else.
Waste becomes inventory.
Why growth is accelerating now
The company reported a revenue growth of 40% yoy in December 2025. This was supported by rising demand for refurbished devices. As prices of new computers increase, institutions and businesses become more willing to adopt refurbished alternatives.
The company now sells devices across more than 40 countries through a network of distributors and enterprise clients.
Revenue grew 23% in FY25 and the management now expects growth to move closer to 28–30% annually as distribution expands, refurbishment capacity increases and demand for refurbished devices rises.
Operating margins (at around 11% in December 2025) are also expected to expand modestly as scale improves operating efficiency.
This is not growth driven purely by expansion.
It is growth enabled by changing economics.
The balance sheet explains the business better than the income statement
Revenue growth alone does not explain the business.
The balance sheet does.
Total assets increased from around Rs 137 crore in FY20 to more than Rs 900 crore by September 2025. But fixed assets remain modest at roughly Rs 37 crore.
Most of the increase comes from current assets.
Inventory and receivables dominate the balance sheet.
This tells us that GNG Electronics is not capital intensive in the traditional manufacturing sense. It is working-capital intensive.
Growth requires inventory. Inventory requires funding.
Borrowings rose steadily as the business expanded, reaching over Rs 450 crore before declining after the IPO. Even today, the company’s debt levels are an important line item of the balance sheet.
The debt to equity ratio at about 0.32, indicates moderate leverage relative to its equity base.
Interest coverage at around 4.14 times, suggests that operating profits comfortably cover interest obligations.
Working capital cycles remain long, typically in the range of 120 to 130 days.
Simply put, capital remains tied up in inventory for several months before it converts into revenue.
The balance sheet grows alongside the business.
Strong returns, but not because of monopoly
Return ratios appear impressive at first glance.
The company reports return on equity of about 35.3% and return on capital employed of around 19.8%.
For a hardware oriented business, these numbers appear unusually high.
But they reflect the structure of the model rather than exceptional pricing power.
Fixed asset requirements are low. Most capital is deployed in working capital. As inventory turns and revenue grows, capital is recycled efficiently.
High capital turnover leads to strong return ratios.
This is a business driven by operational efficiency rather than monopoly economics.
Returns remain dependent on inventory turnover and sustained demand.
What the company plans to do next
Management expects the business to continue expanding over the next several years.
Revenue growth guidance remains around 28 to 30% annually, supported by rising adoption of refurbished devices.
The company is expanding refurbishment capacity across India, the UAE and the United States.
Distribution partnerships with global technology distributors are also expanding, which could increase enterprise penetration and improve international reach.
The global footprint continues to expand, with the company already supplying devices across dozens of countries.
Rising prices of new computers are expected to sustain demand for refurbished devices.
Memory supply constraints could persist for several years, providing structural support for the refurbishment industry.
The market already expects a lot
At the current price of around Rs 370, the stock trades at a price to earnings ratio of about 40 times.
For a hardware oriented business, this is not cheap.
The valuation reflects three expectations.
First, revenue growth will remain strong.
Second, margins will improve as scale increases.
Third, the refurbished device industry will continue expanding due to rising hardware prices.
If these assumptions hold, the valuation may be justified.
If growth slows, the valuation could compress.
Where things could go wrong
Despite strong growth, the business model carries its own set of risks.
The biggest of these is working capital.
Refurbishment is an inventory heavy business. Devices must be bought, repaired, stored and then sold. This ties up capital for months.
As a result, the company needs continuous funding to maintain inventory levels. Even today, working capital cycles remain long, which means a large portion of capital remains locked inside inventory and receivables.
The business also depends on factors outside the company’s control.
Supply of devices comes largely from corporate upgrade cycles. If this supply slows, growth could be affected. Competition is another risk because the technological barriers to refurbishment are limited. Margins are also inherently modest in this business.
Finally, demand depends on the price gap between new and refurbished computers. If prices of new devices fall meaningfully, the economic advantage of refurbished devices could weaken.
A business built on depreciation
Most technology companies create new products. GNG Electronics, however, does something different.
It extracts value from depreciation.
Every year, corporations discard machines that still have useful life left. The company captures this residual value and resells it. Effectively, its business model converts technological obsolescence into economic opportunity.
As computers become more expensive and durable, the economics of refurbishment improve.
But the company does not control these industry forces. It benefits from them.
The larger perspective
Technology companies are usually associated with innovation.
GNG Electronics represents a different type of technology business. A business that benefits from technological maturity.
Computers last longer. Prices are rising. Replacement cycles create supply.
This creates the conditions for refurbishment to thrive.
The company’s balance sheet reflects this reality. Returns are strong because capital turns quickly. Debt remains manageable but necessary because inventory drives growth.
The company’s future depends on a simple economic relationship.
As long as new computers remain expensive, refurbished computers remain valuable.
And as long as refurbished computers remain valuable, GNG Electronics will continue to grow.
Not because it creates technology.
But because it extends its life.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.