Raymond Limited - The Complete Man

CMP  =  453

Raymond is the leading player in the branded textile industry with a legacy of almost a century. The Raymond Group is a market leader in the organized textile industry in India. Raymond has its footprint across a diverse range of businesses such as Textiles, Apparels, Fashion Retail, Engineering, Auto Components, FMCG and Realty. 

Raymond Corporate AV

https://youtu.be/axoCd6ERoFE

https://youtu.be/YRqxj_tLevE

The company classifies its business operations into seven operating segments: Branded Textile, Branded Apparel, High Value Cotton Shirting, Garmenting, Tools & Hardware, Auto Components and Real Estate. FMCG and Denim business is operated through Associate and Joint Venture Company respectively. The company has 18 manufacturing plants in India & one in Ethiopia

Raymond has one of the largest exclusive retail networks in the textile and fashion space in India.  Raymond’s branded textile enjoys almost 100% customer awareness in India

Branded Textiles

Raymond is the #1 player in the worsted suiting fabrics in India and one of the world’s largest integrated manufacturers of worsted suiting fabric.  Branded Textiles is its flagship business and over the years. Raymond benefits from the vertically and horizontally integrated manufacturing facilities located in Vapi, Chhindwara and Jalgaon with an annual capacity of 38 million meters.  Suiting fabrics account for ~70 - 80% of the branded textile business and is the most preferred brand across the retail textile market. 

Raymond is also largest over-the-counter branded shirting player in the domestic organised market. The company markets its suiting and shirting fabric under the brand ‘Raymond Fine Fabrics’. 

Raymond also has a unique offering of Made-To-Measure ( MTM )across 47 stores in India. MTM is a personalized service that allows the customer to design their desired outfit right from selecting the fabric to the final product. The customer can select a range of fabric and designs from the Raymond collection to suit their taste and style. The company has launched advanced fabrics like ‘Technosmart’ and ‘Technostretch’ to offer smarter fabric to the customers. These fabrics are made up of poly wool fabrics with UV protection, wrinkle resistance, high stretch and smooth touch, which are ideal for crafting trousers, suits and jackets.

Raymond has  launched  high-end premium quality fabrics in five different blends including wool silk, Super 250s, Super 180s, Super 150s and Super 120s.  Raymond has recently launched an anti-viral fabric named VIRA SAFE which is also anti-odour to provide protection from bacteria and other germs. Raymond has over 20,000+ SKUs with a price ranging from Rs 300 to Rs 3 lakhs per metre suitable for every individual need.

Branded Apparel

Raymond has been one of the leading players in the Indian menswear segment, offering diversified high fashion apparel through four differentiated power brands — Raymond Ready to Wear (RRTW), Park Avenue (PA), ColorPlus (CP) and Parx. Additionally,  uniquely positioned brand - Ethnix by Raymond, offers ethnic wear apparel suited for special occasions and celebrations designed to appeal to the discerning Indian men.

Raymond enjoys a higher brand recall owing to its premium quality and legacy brand image. The company has also recently forayed into the ethnic wear segment through the launch of ‘Ethnix’ brand which will connect with the growing trend for Indian traditional wear market. The company also launched Next Look brand to offer differentiated products to the consumers evolving fashion trends. Raymond has also launched the Khadi collection signifying the roots of the nation. The company expects huge revenue potential from the Khadi portfolio over medium to long term.

Retail

Raymond is pioneer in organised textile retail in India. Raymond presented the first ‘The Raymond Shop’ (TRS) in 1958 to the Indian discerning consumers and offered them the unique fabric to garment service through in-house tailoring value proposition. Raymond continued its retail journey by establishing significant network through TRS, MTM and EBOs for its in-house brands namely RRTW, Park Avenue, ColorPlus and Parx across length and breadth of the country. 

The Company also introduced a new label called ‘Ethnix by Raymond’ to offer distinctive ethnic and Indo-Western collection. Targeting the millennials and hyper-mode consumers, Raymond introduced a new retail format called Style Play, which sells only apparels of all Raymond brands with a slick urban appeal to consumers especially in smaller towns and cities.

Retail in Numbers 

Overall retail space 2.4 mn sq.ft.

Total Stores 1,486

1,090 TRS - The Raymond Shop

47 MTM outlet - Made-To-Measure

349 EBO’s - Exclusive Brand Outlets ( Comprising 34 RRTW, 83 PA, 113 CP, 36 Parx New format stores – 32 Ethnix, 50 Style Play, 1 Khadi )

• One of the largest exclusive men’s lifestyle retail networks in India

• Asset light model with around ~80% of stores on franchise model

• Strong capability to create world-class, designed stores for evolving consumer preferences

• Enduring and trusted channel relationships across generations, with some even spanning over 50 years

 High Value Cotton Shirting 

Raymond has high value cotton and linen B2B shirting business which offers high value cotton and linen shirting and bottom weight fabrics for leading domestic and international brands. The company offers the world’s finest fabrics such as 340s count cotton and 150 lea pure linen. 

The company has set up two state of the art manufacturing facilities in Kolhapur and Amravati with a manufacturing capacity of 27 mn meters and ~1,400 tons linen yarns & 4.8 mn meters of linen and blended fabrics respectively. The plants are strategically located in the vicinity of weaving clusters to take advantage of the flexibility and cost savings.

Garmenting 

Raymond had forayed into the garmenting business through its wholly owned subsidiaries - Silver Spark Apparel, Everblue Apparel to manufacturing high end suits, jackets, shirts and trousers. Raymond supply garments to major brands in international markets such as JC Penny, Macy and Haggar Clothing among others. The garmenting business is an export unit with majority of its exports to the USA, Europe and Japan. 

The company has set up facilities in Bangalore and Ethiopia with an annual capacity of 6.7 mn pieces and 2.1 mn pieces respectively. Raymond is also the largest exporter of full canvas suits from India.

Raymond has set up a plant in Ethiopia which is another developing hub for garmenting. Ethiopia has become a major attraction today for apparel manufacturers due to advantages such as duty-free access and low-cost labour and power availability. Also, Govt of Ethiopia is giving relaxations for ease-of-doing business, providing land to set-up plants to global manufacturers.

There is gradual shift in textile manufacturing is seen from China due to increase in labour & power costs along with ongoing Anti- China sentiment globally. India is at the forefront to capture a larger pie of the shift by offering incentives and other benefits with an aim to become a garmenting hub. Raymond being a larger and more established player in this segment will be a beneficiary from an increase in textile and garment manufacturing to India.

Raymond UCO Denim JV 

https://youtu.be/4OYfwjEdfYo

In 2006, Raymond entered into a joint venture with Belgian denim major UCO NV with a vision to mark worldwide presence. The manufacturing facility is strategically located in the heart of the cotton belt in Maharashtra India  with manufacturing capacity of up to 44 Million meters per annum. It is most versatile, flexible and vertically integrated denim manufacturing facility in India.

To complete the vertical supply chain and offer complete denim solutions to fashion forward customers, Raymond has set up state-of-the art denim-wear facility Everblue Apparel Ltd (EBAL) in an integrated textile park near Bengaluru India. The denim garmenting business offerings include products like super premium jeans and other apparels which are supplied to top global and Indian fashion brands.

It has strong footprint and network across the Americas, Europe, Asia and India

Engineering 

https://jksuperdrive.com/

Raymond had  diversified its business into engineering product segments such as tools & hardware and later ventured into auto components. 

JK Files is world’s largest manufacturer of files with a presence in over 100 countries. It can manufacture according to any specifications of customers including BS, FS, ISI and DIN. It has an impressive 32% global and 80% domestic market share.

The company manufactures steel files and cutting tools in the state of the art manufacturing facilities located in Ratnagiri, Chiplun, Pithampur and Vapi with a total capacity of 83 mn pieces of files and 21 mn pieces of drills annually. The company also markets hand tools and power tools under the same brand. Exports contribute around 47% of the total tools and hardware revenue.

http://www.ringplusaqua.com/

Ring Plus Aqua Limited, a subsidiary of Raymond Ltd, is a prominent manufacturer of ringears, flexplates and water pump bearings. It caters to domestic and international OEMs and after-market customers in automotive, non-automotive, industrial and power generators, agricultural, off-highway vehicles, earth-moving equipment, marine applications, among other industries.

The company commissioned a new manufacturing facility in Sinnar, Maharashtra, in May 2019, by further adding ~2 mn pieces of capacity for ring gears, making it by size the second largest player in India. Exports contribute around 65% of the total automotive components revenue. 

Turnaround of engineering businesses has happened few years back. Now it become the dark horse with very high growth rates both in terms of revenue and EBITDA margins.

International standard product portfolio, backed by superior service

Leading manufacturer of steel files with corresponding advantages of scale economies

Dominant supplier in India with high brand recall among technical professionals

Wide pan-India dealer and agent network, with significant cross-sale synergies across a distribution channel spanning Africa, Asia, and Americas

Real Estate 

Raymond Realty TenX Habitat Presentation Video

https://youtu.be/cGv4R_wgQCE

Raymond has forayed into the Real Estate business in FY19 with the launch of its ‘Aspirational’ 10 Tower project in Thane Mumbai.  Raymond has a land bank of around 120 acres in prime location at in Thane Mumbai.  Out of which the company is building a real estate project in the 20 acres with 12 towers.  Ten X Habitat 10 towers will be developed first with the saleable area of ~2.7 mn sq ft comprising of 1 and 2 BHK flats.  Remaining  two premium towers Insignia will be later launched with the saleable area of ~0.3 mn sq ft comprising of 4 BHK flats. 

Another 20 acres of land is allocated for the school which is held by Raymond’s school trust.  Standing tall, this maiden project is a spectacular addition to the city’s skyline and has successfully sold over 60% of total launched inventory. The project is progressing in full swing. Total inventory sold to 1,387 units till Mar-21 with a saleable area of 1.18 million sq. ft. having a booking value of  Rs 1,324 crores in the 10 towers

The overall  current real estate project is expected to fetch the company revenue in the range of Rs 4,000- 4,200 crores with a PAT of around Rs 800-1,000 crores.

JK House

JK House is 37-storied building built on a 1-acre plot in  Breach Candy area in Mumbai. Raymond own this property since 1945, went for redevelopment in 2007 at the cost of 270 crores.  Valuation of the property is around Rs 7000 crore. 

FMCG Business 

http://www.jkhc.com/

http://www.parkavenuegrooming.com/

Raymond is amongst the top player in Fragrance and Sexual Wellness categories, with aspirational brands like Park Avenue and KS in personal care, Premium brand in home care segment  and KamaSutra brand in sexual wellness segment. It is selling FMCG products through its associate company Raymond Consumer Care Ltd (RCCL). FMCG business earning is not consolidated in the  Raymond financials because Raymond holds only 47.7% stake in it and the balance is held directly by the promoters.

The FMCG business includes products such as deodorants & perfumes, talc powder, hair gel, soaps, shaving foam and gel, shampoos, room freshener and  sexual wellness products. The company has developed some of the most reputed brands in the FMCG market such as Park Avenue, Kama Sutra and Premium which are well accepted by the consumers.

Last year integration of all the FMCG business was done to  increase the synergy and reduce the cost for the company with economies of scale. The distribution network of the FMCG business covers over 3,50,000 retail outlets including pharmacies in India. The company is also focused on increasing the global footprint of Kama Sutra and Park Avenue brands. Recently company extended  sexual wellness category and introduced women-centric products like Act 72 pill (emergency contraception) and VHealth (intimate wash). Both are OTC products and widely available through  strong chemist distribution network

Maintaining leadership across core segments of personal care and sexual wellness categories.

KamaSutra is a strong international sexual wellness brand in 20+ countries through exports

Building growth categories as future pillars in Personal care & hygiene segment through soap category. Foray into unisex proposition with natural extension of shampoo category.

Entry into women fragrance segment through meaningful market disruptions

Upscaling of digital platforms, increased visibility on e-commerce marketplaces and an increased focus on supply chain capabilities.

Promoters

Gautam Hari Singhania, chairman and managing director of the company has excellent leadership qualities. He has the ability to transform the company with the changing trends and consumer needs for future.

He has formed external independent advisory board to revamp the company business and to raise the level of corporate governance and transparency.

Most importantly he has succeeded to protect and safeguard the interest of retail shareholders. He has brought the resolution and voted against it to reject the proposal to sell the 4 duplex flat in Raymond owned JK House to four Singhania family members ( Veena Devi Singhania, Vijaypat Singhania, Madhupati Singhania, and Akshay Pat Singhania)  for   Rs 9,200 per square foot of carpet area at over 90% discount to market rates. The  agreement was made by his father Dr. Vijaypat Singhania with its wholly-owned subsidiary Pashmina Holdings Ltd in March 1994, pursuant to which it granted a lease of four duplex flats situated in JK House.

This action has created rift between Gautam Hari Singhania and his father along with other family members. 

https://www.bseindia.com/xml-data/corpfiling/CorpAttachment/2017/6/ee24e414-e067-4711-8805-29b332b3d517.pdf

https://www.bseindia.com/xml-data/corpfiling/CorpAttachment/2017/6/92637f3a-2bfc-413c-9d0d-ae12eba50e6c.pdf

Investment Rationale

Demerger - Value Unlocking

Raymond had announced a demerger of its Lifestyle business in FY20 which includes branded textile, branded apparel and garmenting business. The demerger will help to unlock potential value from each of the businesses through focused strategy and simplification of the overall group structure. Through the demerger, Raymond is positioning the lifestyle business as an independent consumer business capitalizing on its century-long brand reputation. The other business will stay under the main company i.e. Raymond Ltd and will house the remaining businesses like real estate, HVCS, tools & hardware, automotive components. The FMCG and denim business will still be under the same organizational structure as before. 

https://www.youtube.com/watch?v=HQnQZZV2eNA

Raymond has received the approval from the SEBI for the demerger scheme. The company has already filed the application with the NCLT for the demerger for which the order is awaited. Once the permission is received from the NCLT, the lifestyle business will list on the exchange. The new lifestyle company would issue shares to the shareholders of Raymond Ltd in the ratio of 1:1 and the shareholding pattern of the Lifestyle business will replicate that of the Raymond Ltd.

The demerger will help Ramond Fashion Retail to trade at par with industry peers. It is expected to trade with market capitalization around 5 -6k crores. Which is almost double than current market cap of Raymond.

Raymond is a market leader in deodorants under the brands of Park Avenue and Kama Sutra (KS).  FMCG business has highest growth potential. At present in normal business condition its sales will be around 1000 crores and it is expected to double in next 2-3 years. Company has plan to list it separately and it will also unlock decent value for Raymond shareholders.

The 80 acre land at prime location in Thane Mumbai  gives 8 - 10 years fair business visibility to Raymond Realty execute its future project with good profit margin above 20%.

Ramong has already huge manufacturing capabilities with latest machines and technology so it is not required any major capex in next 3-4 years.

Raymond has created iconic brands over the last 9 decades of its operations. 'Raymond Brand' itself add significant value to new products or brand extension.

Raymond is doing cost optimisation exercise and re-calibration. It has achieved significant cost saving through digitisation of stores, rationalisation of capex and reduction in discretionary expenses.

The company is expanding its network through an asset light franchise model and closing the non performing rented stores. Raymond is gradually moving towards omni channel business with impetus on digital and ecommerce business model. 

Raymond has an extensive sales network with 20,000+ unique touch points spread across 600+ cities and towns in India. The company has established its retail footprint in 1486 stores across Tier I-VI cities and towns in India and 47 international stores in nine countries such as Kuwait, Bangladesh, Pakistan, Sri Lanka, Saudi Arabia, the UAE, Bahrain, Nepal and Oman. Raymond has a retail footprint of a total 2.5 million sq ft with around 80% of the stores covered under the franchise model.

The textile and apparel business is expected to grow at double digits in future. Raymond has dominant position in its several business segment with huge manufacturing capacities. Garmenting, High Value Cotton Shirting and UCO Denim are already well set to meet the increase in future demand. It is going to benefit immensely.  

The company is constantly adding new and innovative products along with the launch of new segments such as Ethnix, Style Me and Khadi among others to attract a wider customer base and enhance the customer experience. 

Raymond is also the market leader in steel files and tools market which is another growth driver for the company. The Automotive component business has also turned around and is one of the highest margin business of the company. 

Raymond has also moved towards omni-channel model by offering the entire EBO products through its online ecommerce platform myraymond.com The company is also offering the customers the facility to buy the product online and pick up  from the nearby stores.

Raymond has successful diversification from its legacy Textile Business . It generates around 33% of its business from other segments such as Garmenting, High Value Cotton Shirting, Engineering and Real estate business. The contribution from these segments is expected to further increase with faster growth in these segments than the legacy textile business.

Conclusion

Raymond is clear market leader in several business like Suiting - Shirting Fabrics, Fashion Retail, Engineering Business,  Fragrances and Sexual Wellness categories. All business verticals have huge growth potential and company is well set to capitalise opportunity.

The effect of the ongoing pandemic will reduce in coming quarters. It is expected that Raymond will have very strong business growth.

Demerger of its Lifestyle business is going to unlock potential value for investors. Raymond stock at cmp 453 is giving excellent investment opportunity for  short term to long term ( 1 year to 5 years ). It can be bought + / - 15% from cmp with 10 - 20 % allocation.