Raymond, a leading clothing and textile company, witnessed a substantial decrease of almost 40% in its shares on Thursday. This abrupt decline was attributed to the trading of shares without factoring in the value of the lifestyle business, which is presently undergoing demerger from Raymond’s core business operations.
The company had stipulated July 11 as the record date for identifying the shareholders entitled to receive the demerged shares of Raymond Lifestyle business. For every five shares of Raymond owned by investors, they are set to receive four shares of the Lifestyle Business. It has been disclosed that the lifestyle business is anticipated to be listed separately within the next two months. Furthermore, it was announced on July 4 that Raymond would be demerging its realty business from the parent company, with shareholders set to receive one share in the demerged Raymond Realty business for every share held in Raymond.
Upon the completion of these demergers, Raymond will predominantly function as an engineering company, operating across three segments: steel files and tools and hardware, auto and electric vehicle components, and aerospace and defence, as indicated by Motilal Oswal.
Motilal Oswal has estimated a value of ₹2,930 for the Raymond Lifestyle stock, forecasting an 18% compound annual growth rate in revenue from the branded apparel segment over the period of FY24-26, along with a 9% growth in lifestyle revenue. Moreover, the management aims to achieve a sustainable pre-sales growth of 20%, a 20% EBITDA margin, and a 20% return on capital employed in the medium term for the real estate business, with the brokerage firm valuing it at ₹1,200 per share for the real estate entity. The Engineering segment is estimated to be valued at ₹215 per share by the same brokerage firm.
Following these developments, Raymond shares experienced a significant decline of 36.04%, falling to ₹2,001.30 on Thursday morning.
The recent announcements and subsequent market response clearly reflect a period of volatility and substantial change for the esteemed company. The implications and future outcomes of these demergers will undoubtedly be closely observed and analysed by investors and industry experts alike.