Raymond – The Complete Man

Few of my takeaways from Q1 FY25 of Raymond

Raymond seems to be navigating a complex business environment with mixed results across segments. The real estate business is showing strong momentum, while the lifestyle segment faced headwinds. The engineering business performance was bolstered by the Maini Precision acquisition but saw some margin pressure. Overall, management appears confident about growth prospects in the latter half of FY25, banking on a robust wedding season and festive demand.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:

The company is in the midst of significant restructuring, having completed the demerger of its lifestyle business and initiating the vertical demerger of its real estate arm. This signals a clear intent to create focused, independent entities that can chart their own growth trajectories. The acquisition of Maini Precision also indicates Raymond’s push into high-potential sectors like aerospace and defense.

𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:

A key trend is Raymond’s shift towards an asset-light model, especially evident in its real estate business where it’s pursuing joint development agreements (JDAs). In the lifestyle segment, there’s a clear focus on expanding retail footprint and distribution reach. The company is also betting big on the ethnicwear market with its Ethnix brand.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:

The residential real estate market continues to show strong demand, particularly in the affordable luxury segment. In engineering, the auto ancillary and aerospace sectors are showing promising growth. The potential shift of garment manufacturing from Bangladesh to India could be a significant opportunity for Raymond’s garmenting business.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:

The lifestyle business faced challenges due to inflationary pressures, unseasonable weather, and a muted wedding season in Q1. The engineering consumables segment is grappling with weak demand both domestically and in export markets.

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:

There were questions about the sharp margin decline in the garmenting business despite revenue growth. Management attributed this to capacity ramp-up costs and adverse product mix but expressed confidence in margin recovery. Concerns about channel inventory in the lifestyle business were addressed, with management stating that secondary sales exceeded primary sales.

𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:

Raymond’s integrated play from fabric to garments positions it uniquely in the textile and apparel space. In real estate, its brand equity and execution capabilities are helping it compete effectively in a crowded market.

𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:

Management maintains a positive outlook for H2 FY25, expecting a strong wedding season to boost the lifestyle business. They’re targeting 20-25% year-on-year growth in booking value for the real estate segment. For the engineering business, mid to high-teens growth is projected.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:

Raymond is investing in capacity expansion for its garmenting business, having spent INR 200 crores. In real estate, the focus is on an asset-light model through JDAs. The company is also investing in marketing and branding, particularly for new store launches and the Ethnix brand.

𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:

The Bangladesh situation presents a significant opportunity for the garmenting business. However, execution will be key. The real estate business has substantial growth potential but faces risks typical to the sector like regulatory changes and economic cycles. The lifestyle business needs to navigate changing consumer preferences and increasing competition.

𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:

While Q1 saw muted consumer sentiment in the lifestyle segment due to various factors, management expects a revival in the latter half of the year driven by the wedding and festive seasons. In real estate, customer sentiment remains positive, especially for affordable luxury offerings.

Disclaimer: This is a general analysis and does not constitute financial advice.