Despite the euphoria in Mumbai regarding redevelopment, Raymond Realty aims to maintain fiscal prudence and can walk away from negotiations if deals do not meet internal targets such as margins, Raymond Group Chairman Gautam Singhania said at a pre-listing press conference for the real estate arm.
"We have very strict financial discipline. I am willing to walk away from a deal if it does not meet our financial parameters. I will do a deal only if it meets my financial return criteria and not because it will be a good fit from the market capitalisation point of view. I am seeing deals that are so heated, that if I were a betting man, there is no way people can make money out of them," Singhania said, in response to a question on large incentives being offered by developers to secure redevelopment deals in Mumbai.
Raymond Realty's managing director and CEO Harmohan Sahni said that the company, which follows a broad redevelopment-led growth trajectory, will seek margins of at least 20 percent from any project, redevelopment or otherwise. Besides redevelopment, the company possesses a 100-acre land parcel at JK Gram in Thane with a development potential of 11.5 million square feet (msf), of which around 4.5 msf has been brought to the market.
Both Singhania and Sahni did not comment on the expected valuations for Raymond Realty. Market sources said that the real estate arm may list at a market capitalisation of Rs 8,000 crore to Rs 12,000 crore, which can take the total market capitalisation of the Raymond Group to around Rs 20,000 crore.
The company’s plans
Sahni added that apart from its stated target of growing its topline by 20 percent annually, the company plans to add projects with a gross development value of Rs 10,000 crore every year. He noted that, contrary to perceptions, there is no scarcity of land in the Mumbai metropolitan region. Besides its Thane land, Raymond Realty has signed six redevelopment deals, mainly in areas around the Bandra Kurla Complex, and is in talks to secure redevelopment projects in other suburbs.
Raymond Realty was demerged from Raymond Ltd in May, and is scheduled to list on July 1. This is part of the group's plan, in its 100th year of existence, to transform into what Singhania referred to as ‘Raymond 2.0’ in a letter to shareholders.
The demerger and creation of pure-play companies in apparel, real estate, and engineering services are part of the group's strategy to increase shareholder value.
Raymond Lifestyle was demerged and listed separately last year, while the rump Raymond Ltd is expected to represent the group's interest in the engineering, aerospace, and defence businesses.
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