Hopeful of stronger H2; may hive off non-core biz: Raymond

Apparel maker Raymond reported a massive fall of 86.14 percent in its consolidated net profit at Rs 9.44 crore for Q2 ended September 30, 2015 on account of under-performance of its engineering business.

Speaking to CNBC-TV18, M Shiv Kumar, chief financial officer, says the disappointing numbers were also on the back of its garmenting service business Made To Measure's expansion, and renovation in various units, along with a November Diwali (delay).

However, he is hopeful of a stronger H2 aided by Diwali and wedding season.

Furthermore, he says the company may consider hiving off its non-core business if they aren't performing well.Below is the verbatim transcript of M Shivkumar’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Take us through the topline first. That was absolutely flat should we expect that things can turn around for the full year?A: Textile business is flat whereas apparel has actually grown 16 percent. So that is a good sign. Some of the draggers are mainly in the engineering business. Even the denim and shirting’s business have done reasonably well. Engineering business continue to underperformer this is because of slowdown in the overseas and unprofitable product mix, depreciation all of it contributed to it. Textile business, Diwali season coming up in November as against last year it was in October and we expect definitely the next quarter that segment of the business will definitely perform better. Apart from the fact that our continued investments to scale up growth in the form of store renovation - expansion, lots of stores were under renovation. MTM expansion that is made to measure product and our extending reach to innovative advertising will give returns in the medium-term though we recognise that there will be a dip in the short-term.Sonia: Can you just tell us a little more about how consumer demand is? Does it continue to remain very weak and when do you think your topline could get back to double digits say a 10 percent growth?A: The like to like sales growth in the Raymond stores have been generally about 6 percent in this quarter. The apparel growth on the like to like sales is about 3-3.5 percent whereas across the network it is about 10 percent. To take it forward only the next quarter and the initial period of January will set a tone as to how much we will be able to grow.However, this Diwali season is coming up and wedding season is also there extending up to May. We expect improved performance in the core segment of our business. Latha: In the first quarter your margins as well improved. At the moment on year-on-year (Y-O-Y) comparison your margins are down to about 9 percent how would the margins pan out for the rest of year. A: It is a combination of two things – one is engineering business minorly which has contributed to the decline because of the topline having gone down. Second thing is our huge investments towards expansion, in the MTM network as well as advertising spend. Besides some promotion, dealer conference and all have contributed to the dip. Certainly we will be able to see improved performance in the next two quarters. Latha: Will you therefore ever think of hiving off the engineering divisions the tools and hardware or any of those?A: What we can say at this point of time, in the case of non-core segment businesses which are not profitable and which we cannot scale up we will consider divesting.Latha: Anything on the anvil should we expect it in this fiscal?A: I will be able to inform at the opportune time.Sonia: Since you are in an investment phase what kind of growth do you see for the second half because this 16 percent growth that you have seen this quarter is quite good. Can you replicate that in second half?A: We are hopeful of that.