Raymond – The Complete Man

That’s a fair observation. And I’m a novice maybe I’m wrong but I’ll try to explain better what I meant by the comparison my facts may be a little off but just sharing my rationale

1. Companies like Trent & Aditya Birla Fashion keep acquiring new brands and keep growing them. Trent is particularly good at it and has very high PE, AB not that much

• Trend PE is 165 & ABFRL is a loss making company, hasn’t posted a profit in the last 4 years. I don’t know how to judge if a company is fairly valued when it’s loss making and to be honest tracked it at all

2. Companies like Vedant Fashion is focusing on particular segment and goes very deep in it (wedding and festivity ethnic collections like Manyavar). Margins are very high in this and hence commands high PE

• Agreed Vedant Fashion is a great company shows from their profit margins and ROCE and maybe a multibagger in the making but capital is finite and I wouldn’t be interested in Vedant Fashion at these valuations

3. Raymond has a mixed business on the lifestyle vertical
   a. Core textile business
   b. Few own brands (Raymond, Colorplus etc) and doesn’t add anything new (or add very rarely)
   c. As mentioned above, the new brand they added is Ethnix and want to grow it like Manyavar of Vedant

• In one of the interviews the CFO of Raymond mentioned that in every wedding at least 1 Raymond suit is used (Not quoting paraphrasing). That to me highlights the power of this brand. In spite of having such a strong brand they never killed it because of governance issues which also lead to too much debt and looks like both are resolved.
• Looks like management is getting aggressive in their approach they plan to get 500 new franchisee outlets. And moving from asset heavy to assets light model for expanding their footprint.
• Ethnix looks like a great expansion. Every year we hear this wedding season will be the biggest we’ve had so far and I believe this trend will go on for another decade the way our population is skewed.

Here’s a list of other branded play with their earning multiples
Redtape – 52x
Go Fashion – 82x
VIP – 84x
Indian Terrain – 57x

• When I talk about Raymonds as a fashion and premiumisation play I don’t mean to compare it with the MANYAVARs of the world and hence not looking for a 70-80x earning multiple but a reasonable 30x won’t be too much to ask for considering their brand recall and their distribution.