Raymond showing signs of pick-up. Should investors take note?

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26 Aug, 2025 12:21

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Krishna Karwa
Moneycontrol Research

Raymond reported a decent set of numbers in the first quarter of FY18. The stock has had a good run in recent times on the back of several new initiatives. Will the momentum continue?

Quarterly Review

In the run-up to GST, stock clearances, extended sale periods, and steep discounts had a positive rub-off on sales volumes. In the process, the company was forced to take a hit on its margins, as was evident from the segment performance of its textile segments (barring shirting fabric).

Interest costs and depreciation on capital investments (attributed to the setting up of manufacturing facilities in Ethiopia and Amravati for suits and linen fabric, respectively) further dragged the bottom-line into the red.

Nonetheless, there were quite a few positive takeaways from a year-on-year perspective.

Branded textiles (including the ‘Raymond Made to Measure’ brand), the company’s flagship division, showed good traction. Recovery in procurement from wholesale channels and ‘The Raymond Shop’ outlets, retrieval of pent-up demand post demonetisation, and a pick-up in premium wedding garment sales contributed to the same. A change in the channel mix, however, impacted operating margins.

Raymond’s branded apparel division registered noticeable growth across all its brands (with ‘Raymond Ready to Wear’, ‘Park Avenue’, ‘ColorPlus’, and ‘Parx’ clocking 42/11/21/18 percent growth, respectively) because of the early onset of the ‘End of Season Sale’ in the quarter gone by. On similar lines as the branded textile fabric segment, margins, in this case, continued to remain suppressed too.

Raymond’s high value cotton shirting fabric division’s turnover rose by 14 percent due to an increased offtake from Indian consumers. On the other hand, the garmenting division, which primarily caters to the export market, reported a modest top-line growth of 2.4 percent as rupee appreciation impacted demand from international clients.

For the tools and hardware division, the domestic market contracted due to GST-induced uncertainties. However, export volumes to Latin American and African regions were reasonably good.

Raymond’s shift in focus towards auto components appears to be bearing fruit. This segment saw growth aided by an increase in demand from commercial vehicle majors in the US market and higher realisations.

What's in store for the future?Raymond, like many other players, is likely to face hiccups for a while following GST implementation. Furthermore, the company's management team stated that a change in the accounting treatment may lead to a 4 percent decline in revenue recognition in FY18.

In line with the company’s asset light network expansion strategy, going forward, most of the new stores will be based on the franchise model. 300 new Raymond mini stores will be set up in the tier 3/4/5 cities of India to target better realisations while simultaneously keeping overhead costs low.

Raymond’s turnover is expected to strengthen from FY19 as the Ethiopian plant gradually scales up its capacity utilization (from manufacturing 500 suits per day at the moment to 4000 units by FY20) while the Amravati plant (with a capacity of 3.2 million metres of linen fabric per annum) commences its operations in Q4FY18. The utilization rate of the Amravati plant is expected to ramp up moderately from 65 percent (at the start) to 90 percent over a four-year period. The average annual revenue generating potential of the new facilities is pegged at approximately Rs 200-300 crore each, subject to capacity utilization, among other reasons.

Additionally, in the subsequent quarters, investors should pay close attention to the margin trajectory of Raymond's branded apparel segment (constituting an average of 15-25 percent of the consolidated revenue), which has been fairly subdued until now. Lack of clarity on matters pertaining to the proposed real estate operations and monetisation of the company’s idle Thane land in Maharashtra are some of the other concerns that ought to be addressed too.

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