• MAY 13, 2000

Will Raymond seize the opportunity?

A fortnight back, Raymond finally succeeded in selling its 2.24 m tonne cement plant at a very decent price of Rs 7.85 bn. The management had hinted they could use a part of the money for acquisitions and some part of the money could be used for the repayment of debt.

The point to consider is: does Raymond have any other option other than the repayment of debt? The company has an approximate total debt of Rs 9.50 bn and its interest burden in the current year was Rs 968 m.

The steel business, which contributes 20% of the FY2000 turnover, is still in the doldrums. The company’s product silicon steel is largely used by the electrical industry. With the power reforms not taking off as fast as they were expected to, the demand for electrical equipment has been lukewarm at best.

Its core business, worsted suiting volumes are expected to slow down in the future due to increased competition and a shift in the consumption pattern in favour of readymade garments. (Raymond itself has introduced the ‘Parx’ range of casual wear apart from the Park Avenue range of shirting). Volumes are not expected to grow beyond 28 million metres over the next two years (from the present level of 24 million metres).

The apprehension that the management could diversify into unrelated areas again still remains. Raymond’s venturing into chopper services is cited as an example.

This is the best chance that the company has to get out of the hole it has got itself into. Will the management seize the opportunity?

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407