Raymond Ltd.

With festivals, wedding and other celebratory occasions returning to the pre-pandemic levels, there is a surge in the demand for ethnic and modern wear which places Raymond in its best space possible. What is also helping the company grow is its emphasis on launching new products and brands.

Raymond, one of India’s largest integrated worsted suiting manufacturers, provides comprehensive solutions for fabric and garmenting. The company is renowned for its commitment to quality, innovation and market leadership. Raymond’s brand portfolio includes well-known names like ‘Raymond Ready to Wear’, ‘Park Avenue’, ‘ColorPlus’, ‘Parx’, ‘Raymond Made to Measure’, and ‘Ethnix by Raymond’. With an extensive retail network comprising approximately 1,400 stores in over 600 towns, Raymond holds a significant presence in the Indian market. [EasyDNNnews:PaidContentStart]

Additionally, the company has diversified into the engineering sector, focusing on precision-engineered products for both national and international markets. Raymond has also ventured into the real estate sector with several projects. Their maiden project, Ten X Habitat, spans 14 acres and accommodates around 3,100 residential units. Following this, they launched ‘The Address by GS’, a premium residential project featuring approximately 550 residential units. In February 2023, Raymond introduced its third project, Ten X Era, comprising around 900 residential units. More recently, they unveiled ‘The Address by GS 2.0’, a premium residential project offering 440 residential units.
 

The company has decided to demerge its lifestyle business into Raymond Consumer Care. Post demerger, the branded textile, branded apparel and garmenting and high-value cotton shirting will be demerged and will be included in Raymond Consumer Care (RCCL) whereas Raymond Ltd. will predominantly be a real estate company along with investments in engineering and denim as a joint venture company. Moreover, every shareholder of Raymond will be entitled to four shares of RCCL for every five shares held in Raymond Limited.
 

Sector Overview

The global textile market grew from about USD 573 billion in 2022 to about USD 610 billion in 2023 at 6.6 per cent CAGR. The Russia–Ukraine war has led to an increase in commodity prices and supply chain disruptions, causing inflation across goods and services and impacting economies across the globe. The textile market is however expected to grow to about USD 755 billion in 2027 at a rate of 5.5 per cent CAGR. India is the world’s second-largest producer of textiles and garments. It is also the sixth-largest exporter of textiles spanning apparel, home and technical products. The Indian textile and apparel industry is expected to grow at 10 per cent CAGR from 2019-20 to reach USD 190 billion by 2025-26. 

India has a 4 per cent share of the global trade in textiles and apparel. The textiles and apparel industry contribute 2.3 per cent to the country’s GDP, 13 per cent to industrial production and 12 per cent to exports. The textile industry has on board around 45 million workers, including 3.5 million handloom workers. India’s textile and apparel exports including handicrafts stood at USD 44.4 billion in FY22, a 41 per cent increase YoY. The total textile exports are expected to reach USD 65 billion by FY26. Additionally, in FY 2022-23, exports of readymade cotton garments including accessories stood at USD 7.68 billion till January 2023. It is expected to surpass USD 30 billion by 2027, with an estimated 4.6-4.9 per cent share globally.
 

Global Apparel and Retail Market

The global apparel and retail market is expected to grow from USD 1.7 trillion in 2022 to approximately USD 2 trillion by 2025 at a CAGR of 6 per cent from 2022. The apparel business is considered to be one of the most challenging businesses as factors such as short product lifecycle along with volatile fashions, unpredictable market trends and the impulsive purchase nature of the customer are of utmost importance to the industry players to sustain themselves in this industry. The apparel industry may face challenges due to inflation impacting consumer demand.
 

Indian Apparel and Retail Market

The total Indian apparel market pegged at USD 65.6 billion in FY22 is expected to grow at 10.7 per cent CAGR by 2025. The industry has also benefited from the return of festivals and weddings to their pre-pandemic levels as during these periods there exists higher demand for categories such as ethnic and other occasion-based apparel. Apparel sales are set to rise with rising disposable incomes with the social media to act as a major catalyst to influence Gen Z and Gen Alpha who form a majority of the population in India. Despite the global economy experiencing recessionary headwinds, it is projected that India will experience minimal impact compared to its global counterparts due to the country’s favourable economic condition.
 

Financial Overview

Looking at the quarterly performance of Raymond Ltd. on a consolidated basis, in Q1FY24 the company reported a 4 per cent growth in sales which stood at ₹1,826 crore as compared to ₹1,754 crore in Q1FY23, while EBITDA surged by 9 per cent to ₹256 crore as against ₹235 crore in Q1FY23. Similarly, the net profit of the company jumped by 1,214 per cent and stood at ₹1,065 crore as compared to ₹81 crore in Q1FY23. Additionally, it is important to note that the net profit of the company includes other income of ₹983 crore, which was due to sale of its FMCG business, Raymond Consumer Care Ltd. to Godrej Consumer Care Ltd.

On an annual consolidated basis, in FY23 the company reported sales of ₹8,215 crore which was a surge of 32.95 per cent as compared to ₹6,179 crore in FY22 while the operating profit of the company grew by 70 per cent and stood at ₹1,199 crore as against ₹705 crore in FY22. Similarly, the net profit of the company jumped by 102 per cent and reached ₹537 crore as compared to ₹265 crore in FY22. Furthermore, the company has been able to grow its sales by 8 per cent CAGR for the past three years and net profit has grown by 53 per cent CAGR for the same period.

Looking at the financial metrics of Raymond Ltd., it has a market capitalisation of ₹13,907 crore. Additionally, analysing the company from the perspective of liquidity and solvency, it has a current ratio of 1.37, interest coverage ratio of 4.6 times and debt to equity of 0.87, which indicates a moderately healthy condition for the company. Moreover, Raymond has healthy ROCE of 21.7 per cent and great ROE of 22.9 per cent with a PEG ratio of 0.23. Taking into account the valuation metrics, the company currently trades at a PE multiple of 8.54, aprice-to-book value of 4.81 and an EV/EBITDA of 6.88. 

Outlook

The company anticipates a profitable growth trajectory. In the domestic market, positive consumer sentiment is expected to persist, driven by wedding and festive seasons, as well as strong demand for formal and daily wear categories. The suiting fabric segment will grow due to its emphasis on premium products, including wool-rich blends. Additionally, product offerings are being broadened from occasion wear to daily wear, with a focus on high-impact product innovations.

In the branded apparel segment, expansion efforts are concentrated on enhancing the core portfolio by increasing casual wear options and expanding the ethnic wear category. In the export market, the B2B businesses of garmenting and engineering are projected to maintain a healthy order flow. The China + 1 strategy is proving advantageous, strengthening relationships with existing customers and opening doors to new markets and customers. Also, the real estate sector is poised for continued growth, buoyed by factors like increased affordability, supportive government policies, a revival in consumption patterns and a desire for home upgrades.

In addition, there is expected to be an uptick in the second half (H2) driven by improved consumer sentiment during the festive and winter wedding seasons. The company will continue its focus on innovation and expanding its casual wear offerings. To achieve this, Raymond plans to open around 200 stores in the next 12-18 months through an asset-light franchise model. Notably, the Raymond Group has a surplus cash reserve of over Rs 1,500 crore available as growth capital. Hence, we recommend BUY.

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