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Raymond – Now a ‘complete man’

Aug 26, 2000

Raymond Limited is a ‘complete man’ now. It has divested its cement division and the sale of steel division is on the way. This leaves just textiles and garments for the company. The company would be focusing in this area in coming years. Under the restructuring plan, Raymond Limited has almost finalised the sale of steel division to Thyssen, the German trading major, for Rs 2,760 m (US $60) (according to unconfirmed reports). The deal is expected to get through by early next month. Raymond will retain 26% stake in the joint venture for which it is expected to pay US $5 million (Rs 230 m). Raymond’s steel division manufactures cold-rolled steel (strips and silicon), and contributes to around 28% of turnover.

Sales mix
Division Turnover % of total
Fabrics 7,029 45.9%
Garments 141 0.9%
Shirtings 31 0.2%
CR Steel strips 2,315 15.1%
CR Silicon Steel 1,916 12.5%

Earlier last year, the company sold its cement division to Lafarge India for a consideration of Rs 7,850 m. Now, with the sale of its steel division, the company would be receiving Rs 10.6 bn. This will make the company almost debt-free and would bring significant improvement in the operational efficiency of the company.

Nevertheless, it is expected to post a sharp drop in sales for the current year as both the divested divisions contributed to the turnover in FY00. However, the garment business is supposedly one of the fastest growing business in India with the annual revenues of Rs 60 bn in FY99 (Rs 150 bn in FY10) where it commands 13% market share. Strong brands coupled with new ranges being introduced under its ‘Parx’ brand should help the company to post better results. However in the last one year, multinationals like Crocodile and domestic majors like Indian Rayon have been aggressively focusing on branded apparel, casual wear and the formal wear segments. However, good distribution network and aggressive expansion spree will enable Raymond to withstand competition.

The stock is currently trading at Rs 93 at a P/E multiple of 21 on FY00 earnings

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