Introduction:
Shares of Raymond Limited experienced a notable 7% increase, reaching Rs 3,144.90 on the BSE during Friday’s intraday trading. This rally comes despite a generally weak market, driven by the company’s announcement after market hours on Thursday regarding the demerger of its real estate business. This strategic move aims to unlock shareholder value and capitalize on growth opportunities in the Indian property market.
Stock Performance
Raymond’s stock reached a record high of Rs 3,151.75 on July 1 and has rebounded significantly, up 66% from its previous low of Rs 1,890 on June 4. As of 09:30 AM, the stock was trading at Rs 3,041, up 3% in contrast to a 0.68% decline in the BSE Sensex.
Demerger Details
In its regulatory filing, Raymond outlined the vertical demerger of its real estate business into Raymond Realty (RRL), a wholly-owned subsidiary. Post demerger, both Raymond and RRL will function as separate listed entities under the Raymond Group, pending statutory approvals.
According to the scheme of arrangement, each Raymond shareholder will receive one RRL share for every Raymond share held. This move aligns with Raymond Group’s goals of simplifying its corporate structure and enhancing shareholder value.
Raymond Realty Overview
Raymond Realty owns approximately 100 acres of land in Thane, with 11.4 million sq ft of RERA-approved carpet area. Currently, around 40 acres are under development with five ongoing projects valued at Rs 9,000 crore. The potential revenue from the Thane land bank exceeds Rs 25,000 crore.
Recently, Raymond Realty adopted an asset-light model, launching its first joint development agreement (JDA) project in Bandra, Mumbai. Additionally, Raymond has signed three new JDAs in Mahim, Sion, and Bandra East, Mumbai, with a combined revenue potential of over Rs 7,000 crore from these four JDA projects. Overall, the development of the Thane land bank and the JDAs offers a potential revenue of Rs 32,000 crore.
Business Strategy and Market Outlook
Raymond’s management anticipates continued profitable growth. The company’s garmenting capacity is being expanded by one-third, positioning Raymond to become the world’s third-largest suit maker. The “China plus one” strategy further bolsters this expansion as India remains a preferred sourcing destination.
Domestically, consumer sentiment is expected to remain positive due to the upcoming wedding and festive seasons, driving demand for formal and daily wear categories. Raymond plans to introduce new initiatives to sustain growth, as highlighted in its FY24 annual report.
In the branded apparel segment, Raymond aims to diversify its product range by demerging its lifestyle business, enabling new product launches, emphasizing casual wear, and expanding its ‘Ethnix’ category.
Conclusion:
The acquisition of Maini Precision Products Limited (MPPL) will allow Raymond Group to venture into emerging sectors such as Aerospace, Defense, and electric vehicle (EV) components, further diversifying its business portfolio.
This strategic demerger and expansion underline Raymond’s commitment to growth and value creation for its shareholders, positioning the company for long-term success in various sectors.
Frequently Asked Questions FAQ:
1. What is the recent announcement made by Raymond Limited?
Raymond Limited announced the vertical demerger of its real estate business into its wholly-owned subsidiary, Raymond Realty (RRL). This demerger is aimed at unlocking shareholder value and capitalizing on growth opportunities in the Indian property market.
2. How did Raymond’s stock react to this announcement?
Following the announcement, Raymond’s shares surged 7%, reaching Rs 3,144.90 on the BSE during intraday trading. The stock has rebounded significantly, up 66% from its previous month’s low.
3. What is the structure of the demerger?
The demerger involves separating Raymond’s real estate business into Raymond Realty. Post demerger, Raymond and RRL will operate as separate listed entities within the Raymond Group, subject to statutory approvals. Each Raymond shareholder will receive one share of RRL for every one share held in Raymond.
4. What are the main objectives of the demerger?
The demerger aims to simplify Raymond Group’s corporate structure, enhance shareholder value, and leverage operational and structural benefits.
5. What is the scope of Raymond Realty’s assets and projects?
Raymond Realty owns roughly 100 acres of land in Thane, with 11.4 million sq ft of RERA-approved carpet area. It has five ongoing projects worth Rs 9,000 crore and potential revenue exceeding Rs 25,000 crore from this land bank. Additionally, Raymond Realty has launched JDAs in Mumbai, adding potential revenue of over Rs 7,000 crore.
6. How does the demerger benefit shareholders?
Shareholders will directly benefit from the value unlocked by the real estate business. By receiving shares in RRL, shareholders gain exposure to a dedicated real estate entity with significant growth potential.
7. What are Raymond’s future plans for its core business?
Raymond plans to expand its garmenting capacity, making it the third-largest suit maker in the world. The company is also focusing on diversifying its product range in the branded apparel segment and expanding its ‘Ethnix’ wear category.
8. How is Raymond Realty positioned in the real estate market?
Raymond Realty is strategically positioned with a large land bank and multiple high-value projects in development. Its asset-light model and strategic JDAs enhance its growth potential in the Mumbai Metropolitan Region.
9. What are the anticipated trends in the domestic market for Raymond?
Raymond expects positive consumer sentiment driven by the wedding and festive seasons, leading to increased demand for formal and daily wear categories. The company aims to introduce new initiatives to maintain growth.
10. What other sectors is Raymond exploring?
Raymond Group is venturing into Aerospace, Defense, and electric vehicle (EV) components through the acquisition of Maini Precision Products Limited (MPPL), further diversifying its business portfolio.
11. When will the demerger be completed?
The demerger will be completed following all statutory approvals. The specific timeline will depend on the regulatory process.
12. Will Raymond Realty be automatically listed on the stock exchanges?
Yes, according to the scheme of arrangement, Raymond Realty will seek automatic listing on the stock exchanges post demerger.
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