Raymond creates new consumer biz co;parent to focus on realty

In a major rejig, textile player Raymond on Thursday announced hiving off the consumer and lifestyle businesses into a separate entity that will be publicly traded valued at around USD 1 billion. The company also announced a preferential allotment of equity to the promoters, which will increase their stake by 5 percentage points to over 48.

Chairman and managing director Gautam Singhania expects return on capital from the new company will be almost three-times the peers. He also said the new company will be listed and the existing shareholders of residual Raymond will get the shares of the new company on a 1:1 basis.

Singhania said under the demerger scheme, promoters will be utilising the Rs 350-crore gains from Thane land bank sale to subscribe to the preferential shares, and the move is aimed at maximising shareholder value. Residual Raymond will focus on realty, while the new holding company will control the lifestyle and consumer verticals, will together deliver a topline of Rs 5,500 crore.

Singhania was planning the demerger for the past decade but could not take it forward because of the high debt of over Rs 2,700 crore at Raymond. Another impediment was the lack of clarity on the revenue stream for residual Raymond. He expects the restructuring to be completed over the next three quarters. The first step is to book Rs 350 crore gains from the Thane land deal, which will be followed with the preferential allotment to promoters and the proceeds will be utilised to deleverage the book of Raymond.

Following the preferential allotment, promoters' stake in Raymond will go up to 48.33 percent, Singhania said, adding the lifestyle business will be listed and shares will be given to all Raymond shareholders on a 1:1 basis. For the residual Raymond, the revenue opportunity from the realty play stands at Rs 4,500 crore over the next four- five years, while it also has other businesses including tools & hardware (Rs 400 crore), auto & engineering (Rs 300 crore) and B2B clothing (Rs 700 crore) with it.

Singhania said the sale of non-core assets will continue, but declined to offer a timeline or name the assets. Singhania, embattled in a fight with his father, said his dream is to be just a shareholder and let professionals manage his businesses.

He said investors like focus and this rejig is aimed at the same as governance will get a fillip with this. On the reported tie-up with Ayurveda major Patanjali, Singhania said it is on the backburner.

The Raymond scrip closed 6.94 percent up at Rs 673.70 on the BSE as against a 0.45 percentage points rally on the benchmark, reacting to the preferential allotment issue. The demerger was announced after the market hours..