Raymond's spun-off business unit, Raymond Lifestyle Ltd (RLL), is expected to list in the first week of September 2024, becoming the second listed company of the spun-off Raymond Group. In preparation for this, it will expand its board of directors, taking its total strength to 10, of which seven will be independent directors. The company on Monday announced that Rajiv Sharma will be a non-executive director of the company.
Commenting on this, Gautam Hari Singhania, Chairman, Raymond Lifestyles, said, “We are pleased to welcome Rajiv Sharma to the RLL Board as we embark on an exciting journey as a pure-play branded textile and apparel company. His impressive track record in driving growth and implementing digital and sustainability initiatives brings a distinct advantage to the company. The diverse and deep expertise of our Board will complement the passion and commitment of the RLL management team as we pursue significant opportunities in the country including in the wedding, apparel and pyjama segments.”
“RLL has appointed its most senior Indian executive as an independent director. Sunil Kataria will continue to lead the company as CEO. RLL's management will focus on strengthening its core business, accelerating growth areas and building new segments such as ethnic wear, innerwear and pyjamas. The company's guidance is to grow sales by 12-15 per cent and double EBITDA by FY28,” the Incred Equities report said.
RLL is targeting 12-15 percent revenue growth from its lifestyle business and expects to double EBITDA to Rs 20 billion by FY28. According to Motilal Oswal Financial Services (MOFSL), growth will be driven by a) doubling of EBO network, b) leveraging opportunities in Bangladesh+1 and China+1, c) expansion into new categories such as innerwear and pyjamas, and d) wedding wear led growth. “Raymond has demonstrated positive actions in the form of divestiture of FMCG business, separation of lifestyle business, formation and separation of real estate business and setting up of engineering division after acquisition of Maini Precision (MPPL),” analysts said in a MOFSL report.
Expanding the EBO network
RLL has brands such as Park Avenue, Raymond, Parks, Ethnics by Raymond and Color Plus, which MOFSL said have the potential to reach at least 250 EBOs individually while penetration remains low with a combined total of 424 EBOs as at the end of Q1FY25. Speaking at an analyst meet at its Vapi facility in Gujarat, RLL CEO highlighted the group's efforts in taking decisive steps to reduce underperforming stores since the outbreak of the Covid-19 pandemic. According to Incred Equities, RLL is now focused on replicating the success of TRS stores with its EBO network and plans to add 500 new stores (with an emphasis on ethnics) across brands by FY27 from the current 409 stores. “We will continue to focus on improving accessibility,” the company said.
Capitalizing on Bangladesh-China opportunities
Apparel has a strategic advantage with over 95% B2B export business and opportunities in China +1 and Bangladesh +1 (USD 50 billion market). The MOFSL report states, “New trade agreements with the UK, EU and Australia will create further tailwinds and put the segment in a good position. RLL has made capex of Rs 1,000 crore in FY24, increasing its capacity to 10.7 million garments and plans to make another capex of Rs 1,000 crore in FY25, which is expected to boost revenues by Rs 4,000 crore (nearly double asset turnover) by FY27.”
At the analyst conference, management argued that in addition to China+1, the recent unrest in Bangladesh has many international buyers considering alternatives, which represents an opportunity for RLL. “Given its strong position in the sector, management is confident it can accelerate new customer acquisition and improve wallet share among existing customers to drive growth going forward,” Incred Equities said.
New categories driving growth
RLL will introduce two new categories: 1) Raymond's pyjama brand 'SleepZ', which will be launched in July 2024 at an attractive average selling price of Rs 500-999 and distributed pan India, and 2) 'Park Avenue Innerwear', which will be launched in the coming months at a price range of Rs 250-600. MOFSL said the company is targeting semi-premium and premium category consumers (more than 50% of the market) and has adopted an omnichannel distribution strategy with a focus on expanding MBO channels. Management expects SleepZ to contribute to revenues of Rs 5-7 billion by FY27.
Wedding Focus
According to MOFSL, RLL currently has around 5% market share in the Rs 7,500-crore men's wear market with wedding season contributing around 35-40% of revenues (Rs 25-35 billion in FY24). “The company continues to focus on premium wedding collections and aims to increase its market share to 6-7% with a revenue CAGR target of 15%. The wedding format has 300 bps higher gross margins and will boost EBITDA growth. While the ethnic wear market size is expected to grow at a CAGR of 8%, given the transition from unorganized to organized, management expects the organized market to grow at 14% (unorganized at 5%),” the company said.
The wedding and ceremony business accounts for 55-60% of branded textiles and 20-25% of branded apparel. According to Incred Equities, this implies around Rs 25,500 crore at the end of FY24, 1.8 times larger than its largest ethnic wear peer (Maniyaval) due to RLL's dominance in the suiting business. “Ethnics plans to add 300 new stores (currently 114) over the next 2-3 years and the wedding business is also expected to see further growth from the ethnic wear segment,” it added.
