Jun 19, 2003|
Raymond: Garments thrust
The imperative for Raymond to acquire Color Plus in FY03 not only stems from the fact that the core businesses of the company are stagnating, but also due to other reasons. We have compared Raymond's garments division with Raymond Apparel (a subsidiary that sells 'Parx' brands), Color Plus and Indian Rayon.
Raymond derives close to 70% of its revenues from sale of textiles that includes fabrics and woolen items. But in the last six years, volume and value growth of this division has declined at a CAGR of 1% and 2% respectively. Since this business is mature in nature, growth prospects are limited and the company has been concentrating on export to beat the slowdown. However, with global markets also exhibiting volatile trend, overall revenue growth has been lacklustre. This is one of the key reasons why Raymond has been increasing its presence in the garments sector.
The garments sector is benefiting from a number of factors like the robust growth in organised retailing, switch to branded garments from fabrics and general improvement in income levels. Though the sector has been growing at 30% in the last three years, bigger players have not been able to capitalise on the same due to stiff regional competition and from smaller brands. 'Park Avenue', Raymonds flagship brand, generates revenues in excess of Rs 1 bn for Raymond. However, having achieved a critical mass as an organised brand, Raymond focused on launching product extensions. The company launched 'Manzoni' in FY02 to keep the growth momentum growing. Raymond's garment division recorded a 14% rise in revenues in FY03. But it still forms just 2% of net sales.
Garments - A comparative view
*Sales of garment division alone
|Sales growth (%)
|Avg. realisation/unit (Rs)
**PBIT margin for textiles division
The acquisition of Color Plus, as a result, is of significance. Color Plus not only has a diversified 53 dealer network, but also is superior in terms of operating efficiency. Consider the table above. Color Plus scores high on growth in revenues, superior operating margins and higher realisations per unit sold.
Raymond currently trades at Rs 118 implying a P/E multiple of 8x FY03 earnings (7.5x FY04E earnings). Historically, the stock has traded in a P/E band of 7x-8x due to a low growth profile. Raymond plans to introduce Color Plus in its own retail outlets in FY04, which will further add to the growth in revenues of the consolidated entity. Though one could expect more acquisition in the future, the expansion of capacity on the denim front has to be viewed with caution. While denim prices are strong at Rs 120 per meter in the international markets, sustainability is a cause of concern.
More Views on News
Aug 11, 2016
Grasim's revenues and profits report strong growth during the quarter ended June 2016.
May 9, 2016
Grasim's revenues and profits report stellar growth during the quarter ended March 2016.
Feb 4, 2016
Grasim's revenues and profits report impressive growth during the quarter ended December 2015.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407