Fundamental Analysis of Raymond: When it comes to elegance & sophistication in terms of designing a suit, only one name comes to mind. The Company welcomes you at its store with a variety of clothing material of different colours & texture. It pioneered the concept of Made to Measure by draping Men in the most cusomized suits for their special occasions.
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Fundamental Analysis of Raymond
Today we will discuss one such Company that has a legacy of nearly a century. We will take a look at Fundamental Analysis of Raymond its history and will then understand what segments the Company operates, then learn about where the Company is heading, before fundamentally analyzing the Company and concluding the article.
In this fundamental Analysis of Raymond Ltd, we look at their business, segments, financials, future plans and more. Keep reading to find out.
Company Overview
Raymond, the brand’s roots date back to 1925, when Abraham Jacob Raymond started a textile mill in Thane, Maharashtra called Raymond Woollen Mill.
The Company was operated by Raymond & the Sassoon Family, a Baghdadi Jewish Family. After the death of AJ Raymond, the Company was sold off to the Singhania Family the year 1944.
Raymond is a diversified group with the majority of its business interests in the Textile and apparel sectors. Along with textiles, it also has a presence across varying segments such as Consumer Care, Realty, and Engineering in national and international markets.
Segment Analysis
Textiles and Apparels
Raymond Ltd. is the largest integrated textile company in the world. It exports its suits to more than 60+ countries including the USA, Canada, Europe, Japan, and the Middle East.
The brand has a vast network of over 20,000 points of sale in India, scattered across 600 towns. It has over 316 Exclusive Brand Outlets and 5830 multi-brand outlets across India and also has a presence in tier IV and V cities.
The Textile segment is the Company’s biggest segment which brought in 39% of FY23’s revenue. Followed by Apparel which contributed to ~16%. Both segments saw revenue growth of over 20.62% & 49.05% respectively.
Real Estate
Raymond’s Real Estate business was launched in 2019 with the development of a land parcel on its Thane land. FY23 marked the completion of the first 3 towers of its maiden project TenX Habitat, 2 years ahead of RERA timelines.
The Company has managed to sell about 80% of the total units in the first project ‘Ten X
Habitat’ as well as in the second project ‘The Address by GS’, sold more than 25% (i.e. 141 units) of launched units within two months of our newly launched project ‘TenX Era’ in FY23.
The Real Estate segment saw the highest growth compared to other segments in the Raymond portfolio. It grew by 57.71%, from Rs. 707 Cr in FY22 to Rs. 1115 in FY23.
Garments
Raymond’s garments unit is an integrated supplier of high-value clothing products, catering to the B2B space. The segment manufactures suits, formal blazers, jackets, formal trousers, denim, and shirts.
The business witnessed strong momentum in exports to the US, UK, and European markets due to which the Company went on to acquire marquee brands across Europe and the US Region.
During the year, they also forayed into new product categories – knit jackets, bombers, overshirts, and jogger pants to cater to new-age demand.
The Garmenting segment saw the 2nd fastest growth in the segment, growing by 51.72% from the previous year. It brought in Revenue of Rs. 1,100 Cr which is worth 12.89% of the Company’s FY23 revenue.
Engineering
The engineering business manufactures precision-engineered components for tools and hardware such as steel files, drills, hand tools, and power tool accessories. Auto Components such as ring gears, flexplates, and water pump bearings are also manufactured under this segment.
The segment was started in 1949, JK Files and Engineering Ltd (A subsidiary of the Company) is the largest manufacturer of steel files with a global presence in over 50+ countries.
The segment brought in 10.13% of FY23’s revenue. Growth was comparatively muted at just 6.4%, from Rs. 812 Cr in FY22 to Rs. 864 Cr in FY23.
High-Value Cotton Shirting
The segment consists of high cotton and linen shirting and bottom-weight fabrics. Raymond is a leading supplier to both domestic and international brands.
Raymond Luxury Cotton Ltd has become a wholly-owned subsidiary of Raymond Limited upon buy-back of the entire equity stake (24.31%) held by its erstwhile Joint Venture partner (Cotonificio Honeggar S.p.A, Italy).
The business witnessed strong top-line growth led by demand from cotton & linen fabric offerings by B2B customers in the domestic market. The segment continued to add more B2B customers on a domestic level.
During FY23, cotton prices stabilized but continued to remain at a higher level as compared to the pre-pandemic level. However, these prices are largely being passed on to customers as per seasonal bookings.
The segment brought in Rs. 762 Cr which increased by 33.22% from Rs. 572 Cr in FY22. It contributed to about 8.93% of FY23’s revenue.
| Segment | FY2023 | (% of Total Revenu) | FY2022 | (% of Total Revenu) |
|---|---|---|---|---|
| Branded Textile | ₹3,364.00 | 39.42% | ₹2,789.00 | 42.93% |
| Branded Apparel | ₹1,328.00 | 15.56% | ₹891.00 | 13.72% |
| Real Estate | ₹1,115.00 | 13.07% | ₹707.00 | 10.88% |
| Garmenting | ₹1,100.00 | 12.89% | ₹725.00 | 11.16% |
| Engineering | ₹864.00 | 10.13% | ₹812.00 | 12.50% |
| High Value Cotton | ₹762.00 | 8.93% | ₹572.00 | 8.81% |
| Total: | ₹8,533.00 | 100.00% | ₹6,496.00 | 100.00% |
Industry Overview
The global textile market is expected to grow to about US$755 billion in 2027 at a CAGR of 5.5%. Increasing demand for apparel in the fashion industry along with the growth of e-commerce platforms is expected to drive the market growth over the next few years.
The Indian textile and apparel industry is expected to grow at a 10% CAGR from FY20 to reach US$ 190 billion by FY26. India has a 4% share of the global trade in textiles and apparel.
The Textile and Apparel market is poised to grow, led by a boost in demand and government support in the form of attractive schemes such as Production Linked Incentive (PLI) & Mega Investment Textile Parks (MITRA).
In the past decade, the real estate market has undergone a massive transformation. Sustainability, gated communities, improved amenities, and expanded government assistance for low-income residents are just some of the real estate trends shaping the market.
The real estate industry has had a major rebound despite rising building costs and an increase in the repo rate. Following two years of lockdowns brought on by the pandemic and the ensuing economic unrest, the industry has seen a thorough recovery this year across Tier I, II, and III cities.
Raymond – Financials
Revenue & Net Profit
Raymond Ltd reported FY23’s revenues worth Rs. 8,337 Cr which grew by 31.33% from Rs. 6,348 Cr in FY22. The Textile segment collectively contributes to 76.81% of the Company’s revenues.
Net Profit figures grew aggressively from Rs. 260 Cr in FY22 to Rs. 629 Cr in FY23, recording a ~142% growth in a year. Profits have been growing at the rate of 39.10% on a 5-year CAGR basis.
| Fiscal Year | Net Sales | Net Profit |
|---|---|---|
| 2023 | ₹8,337.00 | ₹629.00 |
| 2022 | ₹6,348.00 | ₹260.00 |
| 2021 | ₹3,648.00 | ₹(297.00) |
| 2020 | ₹6,578.00 | ₹196.00 |
| 2019 | ₹6,708.00 | ₹168.00 |
| 5-Year CAGR | 5.59% | 39.10% |
Profit Margins
Operating Margins for FY23 came around 14.41%. These have improved significantly, from -1.92% in FY21. Operating Margins have increased fairly due to rising costs being passed upon consumers.
Net Profit Margins show great improvement from -8.54% in FY21 to 6.54% in FY23. The year FY21 has been a transitionary year, with the Company not only going back to Pre-Pandemic levels but outperforming its part performance.
| Fiscal Year | Operating Profit Margin | Net Profit Margin |
|---|---|---|
| 2023 | 14.41% | 6.54% |
| 2022 | 11.49% | 4.29% |
| 2021 | -1.92% | -8.54% |
| 2020 | 7.96% | 0.77% |
| 2019 | 8.69% | 2.78% |
| 5 Year Average | 8.13% | 1.17% |
Return Ratios
Return on Capital Employed was at 21.11% in FY23, due to an increase in earnings. RoCE figures should see a much higher number next year, as the Company will use the sale proceeds of RCCL brands to pay off some of its long-term debt.
Return on Equity came around 20.44% in FY23, growing by ~9% points from 11.91% in FY22. RoE is at an all-time higher, notably higher than its 5-year average of 6.24%.
| Fiscal Year | RoCE | RoE |
|---|---|---|
| 2023 | 21.11% | 20.44% |
| 2022 | 10.95% | 11.91% |
| 2021 | -3.99% | -13.16% |
| 2020 | 6.72% | 2.32% |
| 2019 | 11.67% | 9.71% |
| 5 Year Average | 9.29% | 6.24% |
Debt Analysis
Debt to Equity ratio was around 0.72x as of FY23, lower than the 5-year average of 0.97x. The Company had a significant exposure as of FY19, which it is now able to manage. The selling of other businesses to focus on a core few is a move in the right direction. The Company aims to become Net Debt free post the same of its two brands to GCPL.
Interest Coverage Ratio has improved by 180 basis points from 2.07x in FY22 to 3.87x In FY23. ICR figures have to improve, although a future reduction in debt will automatically reduce this ratio.
| Fiscal Year | Debt / Equity | Interest Coverage |
|---|---|---|
| 2023 | 0.72 | 3.87 |
| 2022 | 0.88 | 2.07 |
| 2021 | 0.99 | -0.65 |
| 2020 | 1.02 | 1.02 |
| 2019 | 1.26 | 2.15 |
| 5 Year Average | 0.97 | 1.69 |
Fundamental Analysis of Raymond – Key Metrics
The Key Metrics of Raymond Limited (RL) are given below.
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹1,793.65 | Market Cap (Cr.) | ₹12,038.00 |
| EPS (TTM) | ₹227.31 | Stock P/E (TTM) | 7.98 |
| RoE | 20.44% | RoCE | 21.11% |
| Promoter Holding | 49.11% | FII Holding | 17.76% |
| Debt to Equity | 0.72 | Price to Book Value | 4.06 |
| Net Profit Margin | 6.54% | Operating Profit Margin | 14.41% |
Demerger of Consumer Care Business
- The Company is currently in the process of demerging Raymond Consumer Care Ltd (RCCL) from Raymond Ltd., post the sale of the KamaSutra and Park Avenue brands.
- The demerger will result in Raymond shareholders getting 4 shares of RCCL for every 5 shares held in the parent Company.
- Post-demerger Raymond Ltd. to make Real estate its core business along with Investments in Engineering and denim (via a JV Co.)
- RCCL will gain control of the Branded Textile and apparel, Garmenting, and high-value cotton shirting.
Future Plans
- The sale of Raymond Consumer Care Ltd (RCCL) brand to Godrej Consumer Products Ltd (GCPL) is worth Rs. 2,825 Cr.
- Raymond will use proceeds from the sale to pay off its debt and aim to become a Net-debt-free Company.
- In the coming years, Raymond plans to focus on consolidating its business into two specific segments: Textiles and Realty.
- It expects to make realty one of its core businesses, by developing properties via Joint Development Agreements (JDAs).
Conclusion
Raymond Ltd has been completely transformed in over a century. Although it has still stayed true to its roots in the Textile industry, the Company is ready to diversify into other businesses. The coming few years will tell us whether that transformation will be successful or not.
Talking about its present-day fundamentals, the Company reported solid results in the last two years growing its margins & return ratios sustainably. However, a deeper look at its balance sheet shows that its inventory has been piling up on its sheets.
The Company reported a 24% YoY rise in inventories, which now stand at Rs. 2,496 Cr or 30% of Raymond’s Total Assets. A further rise in these assets can be detrimental to the Company’s working capital and needs to be checked upon.
However, the Company has a good set of plans for the future which should fuel its growth in the future. With that said, we are finally at the end of this article on Fundamental Analysis of Raymond
Do you think Raymond’s move to shift focus from Textile to Realty is a move in the right direction? Or should it just stay true to its current business? Let us know in the comments below.
Written by Nasir Hussain
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