Over the past four years, Raymond has experienced significant growth, with its share price increasing sixfold. This positive trend can be attributed to key organisational changes, including the rapid expansion of the real estate business, a strategic emphasis on cost optimisation, the successful slump sale of the FMCG business yielding Rs 2,200 crore in growth capital after taxes, the simplification of the group structure through a potential de-merger of the lifestyle business, and the expansion of the engineering business by entering promising sectors like aerospace, defence, and EV through the acquisition of MPPL.
These initiatives are viewed positively as they pave the way for a clear growth trajectory for the company, delineated across three distinct vectors of growth: lifestyle (with a focus on Ethnix, retail expansion, and increased advertising spending), real estate, and engineering businesses. We recommend initiating coverage with a HOLD rating.
Real estate expansion: Real estate business experienced rapid growth, with revenue increasing sixfold and Ebitda surging 22x in FY20-23, contributing to the overall revenue and Ebitda of Raymond by FY23.
Cost optimisation: A focused effort on cost optimisation resulted in an improvement in Ebitda margin from 9% in FY20 to 14% in FY23.
FMCG business sale to GCPL: The strategic decision to sell the FMCG business to GCPL not only accelerated the timeline to achieve a net-debt-free status but also signaled a commitment to financial prudence.
Lifestyle business de-merger: There is a potential de-merger of the lifestyle business into a separate entity, further refining the company’s strategic focus.
Acquisition of maini precision products Ltd (MPPL): The acquisition of MPPL facilitated Raymond’s entry into sectors such as aerospace, defence, and EV, offering a clear growth path with three distinct vectors: lifestyle, real estate, and engineering businesses. These initiatives signify a positive trajectory.
