Raymond aims to be net debt-free company in next 3 years

Diversified group Raymond aims to be a net debt-free company in the next three years and is focused on liquidity management through cost reduction initiatives and working capital optimization, according to the latest annual report of the company.

For the financial year ended March 31, 2022, Raymond's net debt has been reduced to Rs 1,088 crore. It was Rs 1,416 crore in FY21 and Rs 1,859 crore in FY20.

The net debt-to-equity ratio of the leading Indian branded fabric and fashion retailer has also come down to 0.4 in FY22 from 0.8 in FY20, the report said.

''The company is focussed on liquidity management through cost reduction initiatives and working capital optimization with a stated aim of becoming a net debt-free company in the next three years,'' it said.

Addressing the shareholders, its Chairman and Managing Director Gautam Hari Singhania said through a sustained focus on cost optimization, the company has reduced operating costs by Rs 453 crore, as compared to pre-COVID levels of FY19-20, which was ''critical'' for its business.

''The profitability and working capital management have helped in generating free cash flows, thereby reducing our debts, drastically,'' he added.

Moreover, the company has also lowered the NWC (Net Working Capital) days by over 50 percent to 45 days in March 2022, from peak levels of 98 days in September 2019, Raymond Group CFO Amit Agarwal said.

NWC is referred to as the number of days that a company takes to convert its working capital into revenue.

''The above measures resulted in Rs 940 crore of net debt reduction through free cash flow generation during the pandemic impacted period of FY20-21 and FY21-22,'' he said.

Diversified group Raymond, which operates in segments such as -- branded textile, branded apparel, retail, garments, engineering, real estate, and FMCG -- had recorded consolidated revenue of Rs 6,348 crore in FY22, as against Rs 3,648 crore a year ago.

''Our strategy to focus on the core and recalibrate the fundamental metrics of each business such as revenue, cost, and working capital have reaped rich dividends for the Raymond Group,'' said Singhania.

As part of the group restructuring exercise, Raymond is demerging its B2C business including the Apparel business -- Raymond Apparel Ltd, a wholly-owned material subsidiary into the company, to achieve synergies thereby creating a focused business-to-consumer (B2C) business.

Besides, Raymond is also mulling the IPO of JK Files and Engineering Ltd (JKFEL), which handles its tools and hardware business and auto ancillary business and has filed its DRHP with market regulator SEBI on December 8, 2021.

However, due to volatility in the global equity markets caused by the extended Russia-Ukraine conflict, Raymond has decided to wait till an ''opportune time'' for the IPO of JKFEL.

''The Board expects to complete the offer-for-sale (OFS) during FY 2022-23 when the stock market conditions for fundraising would be favorable. The proceeds from the offer will help Raymond to deleverage its balance sheet and progress on its path of becoming net debt-free,'' it added.

While sharing the outlook for FY23, the Raymond annual report said it ''expects to be on a profitable growth momentum.'' In the domestic market, the overall consumer sentiments are positive with the summer wedding season and increased social gatherings.

''In the Exports market, Business-to-business (B2B) businesses of Garmenting & Engineering are expected to retain healthy order flow. The consolidation of B2C business including Apparel into Raymond Limited will generate synergies in design & innovation, sourcing and operational efficiency,'' said Raymond, which is approaching its centenary year in 2025.

Moreover, the consolidation of its engineering business is expected to generate synergies in business development, raw material sourcing & logistics, and overall administrative processes.

''In the Real Estate business, construction activity is in full swing in compliance with all the relevant guidelines and the company continues to closely monitor and manage rising input prices and inflation. ''Subsidiarisation of Real Estate business is expected to be completed in FY 2022- 23, which would help in attaining differentiated focus and attract growth capital,'' it said.