Post COVID, Raymond cancels demerger of apparels, to monetize real estate

Mumbai-based Raymond Ltd said it has abandoned its two-year-old plan of splitting its garments, or lifestyle, business into a different company, and will instead focus on monetizing its engineering business.

The company also said it will spin off its real estate business into a new company, but wholly owned by Raymond Ltd.

In 2019, Raymond Ltd had announced plans to move its core lifestyle unit — primarily focused on garments and textiles — into a separate legal entity with a mirror shareholding pattern. But it said it was withdrawing the plans today.

Instead, the focus seems to have shifted to trying to monetize the engineering business, and potentially, the real estate business “in the post pandemic” era.

“The engineering business has achieved scale and improved market share in both domestic and global markets. These businesses have demonstrated growth in EBITDA margins, generated free cash flows and are debt free,” the company said.

Earlier, the engineering business, the tools & hardware business and the auto parts business were all separate business units, but now, all of them will be brought under one unit.

CMD Gautam Singhania said this unit is poised for growth.

“We are consolidating the business to explore all options available to us for monetization, which will enable deleveraging leading to value creation,” he said.

The second business operations to be consolidated, likely for the infusion of external funds as well, is real estate.

The business was launched in 2019 which started development of land in Thane.

This too is poised for growth, and the company will focus on “value offerings”, the company said. “The real estate business will deliver around 3 million sq. ft. of residential projects and we have already achieved sales of over 70% of launched inventory of around 2 million sq. ft. In a short span of time, we have witnessed a good traction for the product offered by us.”

The consolidation of the business under a separate entity will help it “realize its full potential”, said the company.

“The Real Estate division is a sustainable profitable business led by experienced professional team with a clear long term strategy in place. Real Estate business now plans to capitalize on its strengths by extending beyond Thane.

“To achieve the high growth momentum in real estate business, the board has also given an in‐principle approval for subsidiarization of real estate business division through a wholly owned subsidiary,” Raymond Ltd said today.

The remaining operations, primarily the consumer-oriented apparels business, will be kept with the main company.

“Raymond will consolidate its B2C business by transfer of Apparel Business into Raymond Ltd. This move will strengthen efficiencies, streamline & simplify processes and bring in synergy benefits in terms of design & innovation, sourcing and retail network,” it said, adding that it had withdrawn the de‐merger scheme of Lifestyle business announced in November, 2019.

“These actions will enable each of the businesses for monetization which will fuel growth and deleveraging,” it added.