On July 11 when Raymond Ltd started trading ex-lifestyle business, the shares went up 5 per cent on that day from its discovered price. Since then the shares surged over 22 per cent to hit a high of ₹2,380.75 on July 18, a testimony to the value unlocking the demerger of the lifestyle business has achieved.
Having lightened its debt burden by selling its FMCG business to Godrej Consumer for ₹2,825 crore, the Raymond group is in the throes of a restructuring exercise that will see it emerge as a conglomerate with three distinct business verticals — the flagship Raymond Ltd under which will house the auto components and aerospace and defence businesses, lifestyle under Raymond Lifestyle that will list in a couple of months, and real estate under Raymond Realty.
The different businesses will have their own growth trajectories, Gautam Singhania, Managing Director of the Raymond group, told businessline in an interview. “We are focused on making money and shareholder value creation ...and that’s really what are doing .. these are all the mechanics of doing it,” he pointed out, referring to the components of the restructuring.
More value unlocking is expected with spinning off of the real estate business earlier this month into a separate entity that will be listed in 12-15 months.
On the timing of the restructuring, Singhania explained, “Everything has a time and place. The fundamental issue was debt… the one issue that stopped us from undertaking the restructuring.”
Growth sectors
The different companies will have different growth strategies.
“In the textile sector, we are among the top ten brands in India. Consumption of branded goods is going to go up, the wedding industry will drive demand,” he said. Under Raymond Lifestyle, which reported revenue of ₹7,000 crore in FY24, is the Raymond brand of apparel that is a benchmark for men’s suiting and shirting.
More stores will be added including more exclusive branded outlets, more product categories, and new lines in the lifestyle business.
“In the real estate sector, we operate in the affordable luxury segment, not in the super luxury – if you take the big middle class, where everybody wants a home, there is a huge potential. We have seen our real estate business grow from scratch to where it is today. We are seeing strong demand for the right product at the right price and that is what is happening,” Singhania said.
The company forayed into the real estate business since it owned considerable land (100 acres) in Thane. Initially it started with that and now it has 5-6 projects outside Thane within Mumbai city as well. “Currently, we are not looking outside Mumbai, because there are enough opportunities in the city,” Singhania made it clear.
The real estate sector had to be spun off because it had to be rerated.
The realty vertical reported revenue of ₹1,590 crore in FY24 with an EBITDA of ₹370 crore. Its land in Thane of which 40 acres are being developed, has a total development potential of ₹25,000 crore, while it has four projects under joint development in the Mumbai Metropolitan Region.
In the engineering segment, Singhania feels India’s cost competitiveness can move manufacturing from Europe, where labour costs are high. The auto components and engineering consumables segments have been part of the Raymond portfolio for a long time and the demerger would help in giving it a bigger focus and grow it. The aerospace and defence segments are seen as sunrise sectors with growth opportunities.
The engineering segment reported revenue of ₹1,800 crore in FY24 and EBITDA of ₹270 crore.