Stock in Action – Raymond

Raymond Shares Movement of Day

Highlights

1. Raymond Ltd stock crash: Raymond stock crash by nearly 40% due to demerger of its lifestyle business.

2. Raymond demerger news: latest Raymond demerger news indicates strategic move to unlock value by creating three separate entities.

3. Raymond Lifestyle listing: Raymond Lifestyle listing is expected to take place by August-September, offering new investment opportunities.

4. Raymond shares fall reason: primary Raymond shares fall reason is market adjusting to demerger of lifestyle segment.

5. Raymond real estate business: Raymond's real estate business is poised for growth, with significant revenue potential from its Thane project.

6. Raymond engineering business: Raymond engineering business is set to capitalize on high-growth sectors like aerospace & defense.

7. Raymond IPO analysis: Detailed Raymond IPO analysis shows company's strategy to enhance shareholder value through demergers.

8. Raymond stock investment opportunity: recent developments present Raymond stock investment opportunity, especially post-demerger.

9. Raymond financial analysis 2024: Raymond financial analysis 2024 highlights strong performance & future potential in its diversified business units.

10. Raymond market potential: Raymond market potential is significant, with growth prospects in lifestyle, real estate, & engineering sectors.

Why Raymond is in News? 

Raymond Ltd shares experienced dramatic 40% plunge on Thursday as stock went ex-date for demerger of its lifestyle business. company opened at ₹ 1,906 on NSE, down significantly from its previous day's close of ₹ 3,156.10. This demerger is part of larger strategic plan to unlock value by creating three separate pure-play entities focusing on lifestyle, real estate, & engineering businesses. As existing investors of Raymond will receive shares of newly listed Raymond Lifestyle, this restructuring is pivotal for company’s future growth & market positioning.

Analysis of Fundamentals of Raymond Ltd

Corporate Actions & Valuation Impact

Raymond's stock price’s Sharp decline can be attributed to demerger of its lifestyle business. Post-demerger, company’s stock is now trading without value attributed to lifestyle segment. Analysts from MOFSL estimate post-demerger per share value of Raymond Ltd at ₹ 1,415, which includes ₹ 1,200 for real estate business & ₹ 215 for engineering business. Raymond Lifestyle business could be listed at approximately ₹ 2,930 per share.

Breakdown of Business Segments

1. Lifestyle Business

- Listing & Valuation: lifestyle segment, Raymond Lifestyle (RLL), is expected to be listed separately by August-September. MOFSL values this segment at ₹ 2,930 per share post-demerger.

- Growth Prospects: lifestyle business will expand through new product lines & significant increase in Exclusive Brand Outlets (EBOs). New products include sleepwear brand & innerwear range, contributing to segment’s revenue growth.

2. Raymond’s Real Estate Business

- Valuation & Potential: InCred Equities values real estate business at ₹ 1,086 per share. This segment has significant revenue potential, with 40 acres of Thane land under development expected to generate ₹ 9,000 crore & another 60 acres with potential of ₹ 16,000 crore over eight years.

- Future Plans: Raymond Realty will continue developing projects through asset-light model, focusing on joint development agreements (JDAs) to ensure robust free cash flows. business aims to reach annual run rate of ₹ 4,000 crore within three years with stable EBITDA margin of 25%.

3. Raymond’s Engineering Business

- Valuation & Expansion: engineering segment is valued at ₹ 499 per share by InCred Equities. This business includes Raymond Engineering & Maini Precision Products Ltd (MPPL). acquisition of MPPL has opened significant opportunities in aerospace & defense.

- Growth Strategy: engineering business is expected to double its revenues within 3-4 years, driven by ‘Make in India’ initiative & increasing demand from major aerospace players like Boeing & Airbus.

Raymond Financial Health & Strategic Direction

- Sum-of-the-Parts Valuation: According to Motilal Oswal, combined value of three businesses (lifestyle, real estate, & engineering) works out to ₹ 3,755 per share. Antique Stock Broking & InCred Equities have set target prices of ₹ 3,905 & ₹ 3,650, respectively.

- Cash Flow & Debt: Raymond's real estate business has zero debt & ₹ 500 crore in cash reserves. engineering segment also has strong growth prospects with focus on high-margin aerospace & defense sectors.

- Management & Governance: Under leadership of Gautam Singhania, Raymond is transitioning towards focused business model with distinct entities for each segment. This strategic move is aimed at unlocking significant shareholder value.

Investment Opportunity

Current drop in Raymond's share price presents potential buying opportunity. Analysts believe stock is undervalued post-demerger & estimate fair value higher than current trading price. MOFSL’s ‘Buy’ rating, along with Antique Stock Broking's & InCred Equities' positive outlooks, reinforce this sentiment.

Conclusion

Raymond Ltd’s strategic demerger of its lifestyle business marks significant milestone in its corporate restructuring journey. By creating three pure-play entities, company aims to unlock substantial shareholder value. With strong growth prospects in each segment, robust financial health, & focused management approach, Raymond presents compelling investment opportunity. Investors should consider long-term potential & current undervaluation of stock post-demerger when making investment decisions.