BackRaymond adds ready-to-wear line, initiates plan to cut debt
The company is looking to take on rival brands with its new line, which will be introduced under its Raymond brand
Premium
Mumbai: Textile company Raymond Group has initiated a number of measures, including the introduction of a ready-to-wear line and stake sales in two group companies, as it prepares to grow faster and reduce its borrowings.
The ₹ 5,000 crore company promoted by the Singhania family will look to take on rival brands such as Louis Philippe, Arrow, Van Heusen, Peter England and John Miller with its new line, which will be introduced under its Raymond brand that’s known more for its suitings fabric range.
“The company is now moving from consolidation mode into the growth mode and will be offering a wide range of shirts and shirting fabric, trousers, suits and accessories under the Raymond brand, besides suiting fabrics," chief financial officer (CFO) M. Shivkumar said in an interview on Tuesday.
Raymond already sells ready-to-wear clothes through its Park Avenue, Parx and ColorPlus brands that cater to the mid-market and premium segments.
The new Raymond line will have shirts priced from ₹ 1,500 to as much as ₹ 10,000, and suits from ₹ 6,000 to ₹ 46,000, Shivkumar said.
The company will also integrate its Makers brand into the parent brand in six-nine months, he said.
Growth in the apparel segment was muted in the last six- eight quarters until June due to inventory issues, he added.
In the December quarter, Raymond’s apparel segment grew 15% from a year ago, compared with a fall of 7% in the corresponding year-earlier period and a 9% growth in the preceding three months.
In 2012-13, Raymond Ltd’s earnings before interest, taxes, depreciation and amortization (Ebitda) contracted 18.9%, according to Bloomberg data.
Raymond is also selling equity in its engineering arm JK Files Ltd and its fast-moving consumer goods (FMCG) business JK Helene Curtis Ltd to pare its debt of ₹ 1,550 crore. It considers these non-core businesses.
Raymond has initiated talks to sell stake in JK Files to strategic investors and has mandated Mumbai-based investment bank Avendus Capital for the transaction, according to two people familiar with the discussions, who declined to be identified. “Talks are on with a strategic investor and are in an advanced stage," one of them said.
The company has also initiated the process to sell stake in JK Helene Curtis, which holds the Park Avenue brand, to private equity firms. It has mandated Mumbai-based investment bank Lincoln International for the transaction.
“The two transactions could be worth ₹ 600-700 crore, depending on the equity diluted," said an investment banker, who too did not want to be identified.
The company is also in talks with developers and banks for its 125-acre land in Thane, a Mumbai suburb, either for outright sale or a joint development, the company said in an analyst call in January.
Shivkumar refused to give specific comments about these transactions.
“Debt wise, our position is fairly comfortable, with a net debt in the range of ₹ 1,550 crore. We have a net debt-to-equity ratio of 1:1. With some initiatives that we are currently contemplating, we are hopeful of paring some portion of the debt sooner than later," Shivkumar said.
“As regards unlocking value from real estate, our efforts continue and we await the right time to do the transaction, and in our view, the current market value is not in line with the fair value of the property," Shivkumar said.
In 2011, The Times of India had reported that Raymond was eyeing ₹ 2,000 crore from the sale of its Thane land. Shivkumar said they will consider the land sale only after the general elections.
Among its other measures, Raymond has consolidated its sales and distribution activities, and closed non-performing stores and certain manufacturing operations.
It will renovate about 150 exclusive franchisee Raymond stores over the next three years and open another 80-100 exclusive stores in the next year, Shivkumar said. He added that capital expenditure on the renovation will be handled by the franchisees themselves.
India’s textile and apparel market was estimated at about ₹ 3.23 trillion in 2013, and is projected to grow at a compounded annual growth rate of 9% to ₹ 7.75 trillion by 2023, according to retail consultancy firm Technopak Advisors Pvt. Ltd.
“The menswear segment has been extremely attractive and it is only prudent for a company like Raymond with their kind of a consumer reach to expand more and tap the growing market," said Amit Gugnani, senior vice-president, fashion–textile and apparel and engineering, at Technopak.
About 42% of the total apparel industry is constituted of menswear and the organized market in the textile industry is small (around 19% of the total market in 2013), so there is a huge opportunity for existing companies such as Raymond, he added.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
