Why Raymond Share Price is Falling

As Indian share markets are inching towards new all-time high, most of the sectors are doing well and so are textile stocks.

While textile companies like Nitin Spinners, Vardhman Textiles, and Nahar Spinning Mills are on the upward trajectory, The Complete Man brand, Raymond is facing a bit of a challenge.

In just one week, its stock price has dipped by over 10%. This is its longest losing streak in three years.

Now, the question is: why is Raymond not doing as well as other top textile companies?

Let's find out.

#1 Family Feud

Raymond, the famous clothing brand in India, has been in the news lately, not for its stylish suits or shirts. There is some family feud going on, and it's affecting the company's stock price.

A few years ago, the company's Managing Director, Gautam Singhania clashed with his father, Vijaypat Singhania, the former Chairperson of the company, over property and other issues which resulted in a public feud.

At present however, the share price of Raymond is falling due to the separation announcement of Raymond's MD, Gautam Singhania, from his wife, Nawaz Modi Singhania, a board member of the company.

The divorce proceedings have raised concerns among investors, particularly as Nawaz Modi has demanded a 75% share in the Singhania family assets as part of the settlement.

This personal turmoil along with Nawaz Modi's demand, has led to a drop in Raymond's market valuation, wiping out over US$ 180 million in market value.

In the financial year 2023, Nawaz Modi Singhania, who is also a director on the board, received Rs 3.1 million (m) as sitting fees and commission, an increase from the Rs 1.9 m she received in the previous financial year. Additionally, she holds 2,500 equity shares in the company, as per BSE data.

Due to these uncertain times and losing investor confidence, the company's director said, 'I am steadfast to create and deliver value to all our shareholders and ensure the interests of our employees, customers, and other stakeholders.'

But, the question is, amid this family feud, how is the company doing overall? Especially, after considering that the brand is a popular name among Indian consumers.

A Gist of Raymond's Q2 Results

In the September 2023 quarter, the company reported its highest ever quarterly revenue with a growth of 27% to Rs 23.2 billion (bn) as compared to Rs 18.3 bn in the June 2023 quarter.

Raymond also recorded its highest ever earnings before interest, tax, depreciation and amortisation (EBITDA) of Rs 3.8 bn.

The profit before tax (PBT) spiked 113% to Rs 2.7 bn in the quarter under review as compared to Rs 1.3 bn in the June 2023 quarter.

The management of the company specified that they were able to secure these positive numbers despite muted customer demand and tough market conditions.

Further contributing to its financial strength, Raymond successfully met its target of becoming net debt-free by 2025 well ahead of schedule. This was made possible by the sale of its FMCG business to Godrej Consumer Products amounting to Rs 28.3 bn.

The company's ability to reach this milestone two years ahead of its stated guidance reflects prudent financial management and positions Raymond strongly for the future.

What's Next

Raymond is undergoing a significant restructuring phase, with the demerger of its lifestyle business, which will be listed as a separate entity in the future. Meanwhile, the currently listed Raymond Ltd consist of its real estate and engineering segments.

In the financial year 2023, its real estate business achieved record sales of Rs 11.2 bn. Simultaneously, the engineering business which consists of auto components, aerospace and defence, and EV components, generated a revenue of Rs 16 bn during the same period.

A strategic move was made on 3 November 2023, when the Raymond group announced the acquisition of a 59.25% stake in Maini Precision Products (MPPL) at a cost of Rs 6.2 bn.

Following the completion of this acquisition, Raymond plans to merge its engineering businesses, including JK Files, RPAL (Ring Plus Aqua Ltd), and MPPL, into a new subsidiary named Newco which is aimed at creating a more efficient company.

In the suiting fabric space, Raymond already commands a 60% market share. With the ongoing wedding season, the company may see a potential uptick in sales during this period. As part of its expansion strategy, Raymond is set to add 150 outlets by the financial year 2024.

The last time, when there were disputes over inheritance of wealth between Vijaypath Singhania and Gautam Singhania, the share price dipped but it bounced back after a while.

However, it is important to understand that historical performance is not a foolproof indicator of future outcomes. The current family feud's potential impact on the company's share price remains uncertain, and only time will reveal the true implications.

To understand more about which growth sectors Raymond is tapping into, click here.

How Raymond Share Price has Performed Recently

Raymond share price has dipped 11% in the last five days and has gained a marginal 3% return in 2023 so far.

The company touched its 52-week high of Rs 2,240 on 5 September 2023 and its 52-week low of Rs 1,092 on 28 March 2023.

About Raymond

Raymond had a humble start. But, today it is a well-diversified business with a strong presence across different verticals.

The company's suits segment holds a 65% market share, establishing itself as the largest branded player in the shirt fabric space. Moreover, its apparel segment ranks among the top three players in the menswear industry.

Expanding its horizons, Raymond has successfully entered the denim market and is a leading manufacturer for international brands.

The company has diversified beyond fashion, into real estate and engineering. In the engineering segment, the brand has emerged as a front runner, particularly in the production of steel files.

With a rich legacy and a commitment to quality, Raymond continues to lead in its business landscape.

For more details about the company, you can have a look at the Raymond Limited fact sheet and quarterly results on our website.

You can also compare the company with its peers.

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