How Raymond is weaving a new story in realty sector

Raymond is weaving a new story in the realty sector

56-Gautam-Singhania Solid plans: Gautam Singhania, chairman and managing director of Raymond | Amey Mansabdar

THE YEAR WAS 1925, and India was under colonial rule. A member of the Wadia family sensed an opportunity to make clothes for Indian soldiers and he set up a woollen mill in Thane, on the outskirts of Bombay. The mill was later sold to E.D. Sassoon and Co, and was renamed as Raymond Woollen Mills, after its directors Albert and Abraham Raymond.

The first phase of Raymond’s residential project will have 2,800 units on 14 acres. It will provide a huge upside for Raymond’s turnover.
As a son to a father I will do whatever I have to do, and as managing director of the organisation, I will do what needs to be done for the organisation. The two do not need to cross paths. - Gautam Singhania, on the tussle with his father, Vijaypat

The JK Group owned by the Singhania family took over the mill in 1944, but they did not change its name. Under Vijaypat Singhania, Raymond became a household name for textile and readymade garments. It is now the world’s largest producer of worsted suiting fabric and is among the largest branded apparel retailers in India. Its textile costs anywhere between Rs200 to Rs10 lakh a metre.

One can find a Raymond store not only on Mumbai’s high streets but also in the narrow lanes in India’s vast hinterland. It runs 1,100 exclusive stores and its branded textile is available at around 20,000 points of sale in 600 cities and towns. Its branded apparel retails in 500 cities and towns at 5,100 multi-brand outlets. In the current financial year, Raymond will open another 250 exclusive stores.

Having covered the length and breadth of the country with its showrooms, Raymond is now exploring other opportunities. It recently opened a ‘Ceremonial Store’ in Mumbai for ethnic wear. It also has an exclusive store selling khadi fabric and apparel.

“You have to keep re-inventing yourself and continuously look for new concepts,” said Gautam Singhania, chairman and managing director of Raymond. “One is the horizontal expansion of Raymond stores, and the other is different verticals. Khadi and Ceremonial are two new concepts we launched and there is scalability on that.”

Singhania sees opportunities in scaling up Raymond’s made-to-measure studios as well as the super luxury concept stores called Atelier. The company is also looking at new platforms like tailoring hubs and new technologies like 3D printing of accessories and a do-it-yourself clothing line to attract more customers.

Raymond’s net profit grew 27 per cent in the January-March quarter, and sales were up 11 per cent. For the year ended on March 31, its net profit was up 23 per cent year-on-year, to Rs175 crore from Rs142 crore. Revenue for the year rose 12 per cent, to Rs6,708 crore. “Market is what it is, the environment is what it is, we have got to find growth in that,” said Singhania.

Sensing more opportunities in smaller towns, the company is now opening mini outlets of The Raymond Shop. Currently it has 300 such stores in 190 towns and has identified some 800 towns to open new ones. The company plans a capital expenditure of around Rs200 crore this year.

Gautam Singhania | Amey Mansabdar Gautam Singhania | Amey Mansabdar

Raymond shut down its Thane factory in 2010 and is now focusing on its maiden real estate project there. The first phase of the residential project will have 2,800 units on 14 acres. This project will provide a huge upside for Raymond’s turnover in the next five years. “The first phase is three million square-feet. It could be Rs4,000 crore to Rs4,500 crore in the first phase and then we will build up on that,” said Singhania.

Usually, companies with huge landholdings monetise it by selling it to real estate developers. Why did Raymond choose to go ahead on its own, despite not having any experience in the realty business? “If you have a small plot of land, then it does not make sense for you to set up the infrastructure. But, if you have a large parcel like we do, it is significantly better to do it yourself, because you do not leave too much on the table. Your value maximisation is maximum if you do it yourself. So, we looked at 20 acres as the first land parcel, which we want to do ourselves and we have started the construction work on that,” said Singhania.

The residential real estate market has been slow of late, owing to the introduction of the goods and services tax and the Real Estate Regulation and Development Act. But, Singhania is unperturbed. “If you are in the luxury part of the sector, it is always going to be under challenge, because luxury is discretionary and discretion can get deferred. We are in the affordable housing segment, 600 square-feet apartments. So, right product, right price, right location, right amenities and there is always going to be traction for that,” he said. The company is planning to continue monetising its sizeable landholdings.

Analysts have been bullish on Raymond’s growth prospects. “Raymond exceeded guidance expectations for the last two fiscals. With minimal capex and no large expenditure required for the commencement of the real estate project, the management expects the company to be free cash flow positive in fiscal 2020,” said Thomas Abraham of Karvy Stock Broking. Investors, however, would continue to be watchful of the land monetisation plans and the reduction in Raymond’s debt.

The Singhanias have been in the spotlight recently for the troubled relations between Gautam and his father, Vijaypat, and an ongoing legal battle. At the heart of it is the company’s family-owned property, JK House, in the upscale Breach Candy area in Mumbai. Vijaypat gifted his 37 per cent stake in Raymond to Gautam four years ago. Under an earlier agreement to settle a family dispute, Vijaypat was supposed to get an apartment in JK House. However, Gautam advised Raymond’s board against selling the asset below market price. Things further deteriorated last year, when Vijaypat was removed as chairman emeritus of Raymond.

The junior Singhania said that his father was not removed as chairman emeritus, but he ceased to be so for not attending board meetings. “He defaulted as per SEBI guidelines and he did not attend four consecutive board meetings,” said Singhania. “The law of the land says if you don’t attend four consecutive board meetings or for a period of 12 months you are absent from the board of a company, by default you cease to be a director of the company. That is the law of the land and that is exactly what happened.”

Raymond has gone to court seeking to stop the publication of Vijaypat’s biography, The Incomplete Man; the company has alleged that the book is defamatory. The matter is sub judice. Singhania said he was “open for a resolution” of any issues with his father. But he insisted that family and company were separate. “As a son to a father I will do whatever I have to do, and as managing director of the organisation, I will do what needs to be done for the organisation. The two do not need to cross paths,” he said.

Singhania wants to keep the attention to what Raymond has achieved under him. He was appointed managing director in 1999. In 2000-01, Raymond’s revenue was Rs1,302 crore. In 2018-19, it was Rs6,708 crore.

The promoters hold 44.28 per cent of Raymond. Singhania has been stepping back from day-to-day operations in key Raymond group companies, leaving professional managers in charge. Recently, he stepped down as chairman of Raymond Apparel. “Generally, you have to realise what your role is and our job is to get the best people in the company, deliver the best results and that is what we are doing,” he said.

When Singhania is not steering Raymond, he is mostly seen in the driver’s seat of one of his super cars. Last year, he was elected to the Federation Internationale de l’Automobile, and is keen on promoting motor sport in India. “I have now got involved in the governance of motor sport globally and am trying to push it aggressively in India,” he said. “I think we are seeing a lot of traction, getting a lot more events, and I hope in the next year or two we will have a little bit more momentum.”