Raymond Lifestyle Ltd (RLL), the demerged business unit of Raymond, is all set to get listed in the first week of September 2024 and become the second listed entity of the Raymond Group following a demerger. In preparation for it, it is expanding its board and taking the total strength to 10, of which seven are independent directors. The company, on Monday, announced the induction of Rajiv Sharma as the non-executive director of the company.
Commenting on this, Gautam Hari Singhania, Chairman, Raymond Lifestyle Ltd, said, “I welcome Mr. Rajiv Sharma to the RLL Board as the Company embarks on an exciting journey as a focused, pure-play branded textile and apparel player. His impressive track record in driving growth and implementing digital and sustainability initiatives adds a distinct advantage. The diverse and deep expertise of our Board will complement RLL management’s passion and commitment as we pursue large domestic opportunities, including those in the wedding, apparel, and sleepwear segments.”
RLL has appointed top executives from India Inc. as independent directors. Sunil Kataria remains at the helm as its CEO. RLL’s leadership team will focus on strengthening its core, accelerating its growth categories and building new categories like ethnic wear, inner wear, sleep wear. Management guidance entailed sales growth of 12-15 per cent and doubling the EBITDA by FY28F,” stated a report by InCred Equities.
RLL is guiding for 12-15 per cent revenue growth in the lifestyle business and expects to double its EBITDA to +Rs 20 billion by FY28. The growth, Motilal Oswal Financial Services (MOFSL) said, will be led by a) the doubling of its EBO network, b) capitalizing on Bangladesh +1 and China +1 opportunity, c) the extension of new categories such as innerwear and sleepwear, and d) wedding wear led growth. “Raymond has been demonstrating positive actions in the form of selling the FMCG business, de-merging the Lifestyle Business, shaping the Real Estate Business and demerging it, and establishing an engineering unit after the Maini Precision (MPPL) acquisition,” analysts said in a report by MOFSL.
EBO network expansion
RLL has brands like Park Avenue, Raymond, Parx, Ethnics by Raymond and ColorPlus, and yet, MOFSL said, it has remained underpenetrated with a total of 424 EBOs as of Q1FY25 end, while each of these brands has potential to reach at least 250 EBOs individually. During the analyst meet at its facility in Vapi, Gujarat, RLL’s CEO highlighted the group’s initiatives since the onset of Covid-19 pandemic, where it took decisive steps to cut underperforming stores. Now, InCred Equities said, RLL is focusing on replicating the success of TRS stores in its EBO network, adding 500 new stores across brands (large focus on Ethnix) by FY27F from 409 currently. “Focus will remain on improving accessibility,” it said.
Capitalizing Bangladesh and China opportunity
Garmenting is +95 per cent B2B export business and holds a strategic advantage with the China+1 and Bangladesh+1 (USD50b market) opportunity. The MOFSL report stated, “New trade agreements with the UK, EU and Australia should create additional tailwinds, which make the segment in a sweet spot. RLL has incurred a capex of Rs 1 billion in FY24 to increase the capacity to 10.7 million pieces and will incur an additional capex of Rs 1 billion in FY25, which could generate Rs 4 billion of incremental revenue by FY27 (~2x asset turnover ratio).”
At the analyst meet, the management maintained that in addition to China+1, with the recent turmoil in Bangladesh, many international buyers are looking at alternate options, which is an opportunity for RLL. “Considering its strong position in this segment, management is confident of accelerating new customer additions as well as improving wallet share from existing customers to drive growth going ahead,” stated InCred Equities.
New categories to drive growth
RLL is introducing two new categories: 1) sleepwear brand, SleepZ by Raymond, launched in July 2024 at an attractive ASP range of Rs 500-999 and will be distributed across India, and 2) Park Avenue Innerwear, which will be launched in the next few months at a pricing of Rs 250-600. MOFSL said that the company is targeting the semi-premium and premium category consumer (> 50 per cent of the market) and following the omni-channel distribution strategy with strong focus on MBO channel expansion. The management expects SleepZ to contribute Rs 5-7 billion of revenue by FY27.
Wedding focus
Per MOFSL, RLL currently holds around 5 per cent market share in the Rs 750 billion men’s wear market as the wedding season contributes approximately 35-40 per cent of revenue (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 per cent, with a revenue CAGR target of 15 per cent. The wedding format also offers 300bp higher gross margins, which boosts EBITDA growth. The market size of ethnic wear is expected to grow at an 8 per cent CAGR; however, given the shift from unorganized to organized, the management expects the organized market to grow at 14 per cent (vs. unorganized at 5 per cent),” it said.
Wedding & ceremonial business constitutes 55-60 per cent of branded textile and 20- 25 per cent of branded apparel. This, InCred Equities said, implies roughly Rs 25.5 billion as of FY24-end, which pegs it 1.8x higher than the largest ethnic wear peer (Manyavar), driven by RLL’s dominance in the suiting business. “With Ethnix adding 300 new stores over the next two-to-three years (from 114 currently), the wedding business will also see added growth from the ethnic wear segment,” it added.
From: financialexpress
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