Raymond Ltd, a prominent name in the textile industry, recently announced a significant strategic move to demerge its real estate business. This decision aims to unlock value for shareholders and tap into the burgeoning potential of the Indian property market. The company has disclosed that its board has approved the scheme of arrangement between Raymond Ltd (the demerged company) and Raymond Realty Ltd (the resulting company), along with their respective shareholders.
The Scheme of Arrangement
According to the scheme of arrangement, each shareholder of Raymond Ltd will receive one share of Raymond Realty for every share held in Raymond Ltd. This move signifies a strategic reorganization to consolidate the entire real estate business of the Raymond Group under one entity, Raymond Realty Ltd. The newly formed entity will seek automatic listing on stock exchanges such as the BSE Ltd and the National Stock Exchange of India (NSE).
This demerger plan is subject to various regulatory approvals and sanctions, including those from the jurisdictional bench of the National Company Law Tribunal (NCLT), shareholders and/or creditors, the central government, or any other competent authority as directed by the NCLT. Upon the scheme’s effective date, Raymond Realty will issue 6,65,73,731 equity shares with a face value of Rs 10 each to the equity shareholders of Raymond Ltd.
Financial Highlights and Growth Potential
Raymond’s real estate division has shown impressive growth, contributing significantly to the company’s overall revenue. In the last fiscal year, the standalone operational revenue of the real estate division stood at Rs 1,592.65 crore, accounting for 24% of Raymond Ltd’s total revenue. This represents a 43% year-on-year growth, with the real estate business reporting an EBITDA of Rs 370 crore in FY24.
Raymond Realty holds approximately 100 acres of land in Thane, with around 11.4 million square feet of RERA-approved carpet area. Out of this, about 40 acres are currently under development. The company has five ongoing projects on its Thane land, valued at Rs 9,000 crore, with an additional potential to generate over Rs 16,000 crore. This gives a total potential revenue of over Rs 25,000 crore from this land bank alone.
Furthermore, Raymond Realty has recently launched its first joint development agreement (JDA) project in Bandra, Mumbai. The company has also signed three new JDAs in Mahim, Sion, and another in Bandra East, Mumbai. The combine revenue potential from these four JDA projects in the Mumbai Metropolitan Region is estimate to be over Rs 7,000 crore. When combine with the development of the Thane Land Bank, Raymond Realty’s total potential revenue reaches an impressive Rs 32,000 crore.
Strategic Rationale Behind the Demerger
Explaining the rationale behind this strategic move, Raymond Ltd emphasized the need to reorganize its real estate business to exploit growth potential and attract a new set of investors or strategic partners. The demerger is seen as a crucial step to unlock the full value of Raymond’s real estate assets, allowing for a focus and dedicate approach to managing this segment.
Gautam Hari Singhania, Chairman and Managing Director of Raymond Ltd, stated, “Having stated that now we have clear three vectors of growth at Raymond group i.e., lifestyle, real estate, and engineering, this corporate action is in line with creating shareholder value creation.” He further added, “This strategy to demerge the real estate business into a separate company that will be listed through an automatic route is another step to enhance shareholder value.”
Raymond Ltd believes that the demerger aligns with its objectives of simplifying the corporate structure and enhancing shareholder value for both operational and structural benefits. By leveraging Raymond’s institutional strength, the move will allow for independent, dedicated management teams with industry-specific expertise to sharpen business focus and tailor investment strategies to each sector’s unique dynamics.
The Future of Raymond Ltd and Raymond Realty
Post-demerger, Raymond Ltd and Raymond Realty Ltd will operate as separate listed entities within the Raymond Group. Each shareholder of Raymond Ltd will receive shares in the new listed real estate company in a 1:1 ratio. Moreover, This separation is expect to provide clearer insights into each business segment’s performance and allow investors to make more inform decisions.
Raymond Ltd, known as India’s largest integrated worsted suiting manufacturer, offers end-to-end solutions for fabric and garmenting. The company boasts a portfolio of leading brands such as ‘Raymond Ready to Wear,’ ‘Park Avenue,’ ‘ColorPlus,’ ‘Parx,’ ‘Raymond Made to Measure,’ and ‘Ethnix by Raymond.’ With around 1,450 exclusive retail stores across more than 600 towns, Raymond Ltd has established a strong presence in the Indian market.
The demerger is anticipated to provide both Raymond Ltd and Raymond Realty Ltd with the opportunity to chart their own growth paths, supported by dedicated management teams and tailored investment strategies. For Raymond Realty, this means capitalizing on its extensive land bank and ongoing projects to generate substantial revenue. For Raymond Ltd, it offers the chance to focus on its core lifestyle and engineering businesses, driving innovation and growth in these segments.
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Conclusion
In conclusion, The decision by Raymond to demerge its real estate business marks a pivotal moment in the company’s history. By creating a standalone entity in Raymond Realty Ltd, Raymond aims to unlock significant value for its shareholders and leverage the growth potential in the Indian real estate market. With a clear strategy and a robust land bank, Raymond Realty is well-position to thrive as an independent entity. At the same time, Raymond Ltd can concentrate on its core competencies, ensuring continued success in the textile and engineering sectors.
This strategic move underscores Raymond’s commitment to enhancing shareholder value and simplifying its corporate structure. As the company navigates this transition, both Raymond Ltd and Raymond Realty Ltd are expected to benefit from increase focus, dedicate management, and tailor investment strategies, setting the stage for sustaine growth and profitability in their respective domains.
