Raymond’s restructuring works well for T&A business

12 September 2023, Mumbai

There is finally light at the end of the tunnel for Raymond as their shares hit a record high in the live S&P BSE Sensex earlier this month -- after facing many challenges over the last few years -- due to changing customer preferences for ready-made garments, mounting debt, and a sharp decline in revenue and other legacy issues.

Raymond’s shares as the leading branded textiles and apparel franchise in India, shot up 9.85 per cent to Rs 2,172 apiece in market trade. It recorded a new all-time high of Rs 2,240 during a recent session, making it the biggest intraday gain since December 2022.

Having built up a legacy over the years, Raymond has been facing many challenges in post-Covid years, due to growing demand for readymade garments instead of fabric and getting it custom-stitched by tailors, who are also no longer readily available or formally trained in tailoring luxury garments. However, the up-coming festive and wedding season looks optimistic and is already hiking up demand, which has led to the recent growth spurt.

Re-structuring of group divisions spurs growth

Raymond is currently focusing on three key steps to restructure the group and focus on its core business to bring back former glory. Firstly, the company has divested its FMCG business, earlier operated by Raymond Consumer Care (RCCL), into an all-cash transaction valued at almost Rs 28 billion to GCPL (Godrej Consumer Products).

Secondly, it announced the separation of its lifestyle business into RCCL, which would clearly demarcate the consumer apparel segment from other unrelated businesses such as the real estate and engineering interests of the company.

Additionality

Thirdly, Raymond has also put almost 22 billion (adjusted for tax) into the group, which also includes the promoter’s stake in RCCL. All these steps have cohesively helped in reducing debts by selling off loss-making brands, creating healthy cash to drive growth, and making the operating structure of respective businesses more profitable. It has also increased promoter’s confidence through infusing cash transactions worth Rs 11 billion for Rs 1,500 per share.

The company is currently focused on having a more comprehensive strategy to leverage full profitability of its many brands, as highlighted by the BSE. Raymond's stock recently surged almost 13.3 percent to hit an all-time high, especially after brokerage firms Motilal Oswal and Jefferies initiated coverage on the stock with a high 'buy' call and a target price of Rs 2,600 apiece.

These efforts are expected to drive future growth, with projected revenue and profit growth of 10 and 19 percent, respectively, between FY 2023-25, points out Motilal Oswal.

Smart retail strategies working well

The Raymond group finally became net debt-free after the sale of their FMCG business and currently has a significant liquidity surplus of over Rs 1,500 crore at the group level to steer ahead of future growth.

The stroke of good luck is expected to continue well past the de-merger, as there will now be two independent consumer-facing net debt-free listed entities for lifestyle as well as real estate businesses.

Wind of change

With consumers preferring to buy ready-made over tailor-made, Raymond is on an all-new high as it gears up towards the upcoming festive and wedding season with the ready-made segment having undergone a restructuring process.

All loss-making EBOs have been downsized across India along with strategic control and channelizing the retail and marketing strategies of MBO’s for brands such as Raymond, Park Avenue, ColorPlus, Ethnix, and Park Avenue among others.

With around 150 exclusive outlets to be set up annually across India, Raymond should soon be back where it belongs leading the Indian apparel industry. 

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