On Thursday, shares of Raymond Ltd plunged by 40% at the market’s open, marking the ex-date for the company’s lifestyle business demerger. The stock’s value was adjusted to exclude the lifestyle segment, which will now be independently listed on stock exchanges around August-September. Raymond’s current shareholders will receive four shares of Raymond Lifestyle for every five shares of Raymond. Today is the record date for this transaction.
Raymond’s stock opened at Rs 1,906 on the NSE, a steep drop of 39.60% from the previous day’s close of Rs 3,156.10. However, the stock showed resilience, recovering to Rs 2,009.80, up 3.07% from its opening price as trading progressed. Motilal Oswal Financial Services (MOFSL) had previously estimated Raymond Ltd’s post-demerger value at Rs 1,415 per share, comprising Rs 1,200 from its real estate assets and Rs 215 from its engineering business. The lifestyle business is projected to be listed at Rs 2,930 per share.
InCred Equities provided a valuation breakdown, estimating the lifestyle business at Rs 1,982, real estate at Rs 1,086, and engineering at Rs 499 per share.
This demerger is part of Raymond’s strategic plan, which includes a future demerger of its real estate business, expected to take 15-18 months. Post these changes, Raymond will primarily consist of its engineering division. The share exchange ratio for the lifestyle business listing is 4:5, and for the real estate listing, it will be 1:1.
Arihant Capital Markets explained that this move aims to create three specialized businesses, enhancing value. The real estate division’s development in Thane, covering 40 of 100 acres, holds a revenue potential of Rs 9,000 crore, with the remaining area valued at Rs 16,000 crore, totaling Rs 25,000 crore over eight years. Joint development agreements (JDAs) are expected to yield Rs 7,000 crore in revenue over 4-5 years. This division boasts Rs 500 crore in cash reserves and minimal capital requirements for the next two years. It aims to achieve an annual revenue run rate of Rs 4,000 crore within three years, maintaining a stable EBITDA margin of 25%. Expansion will focus on JDAs rather than new land acquisitions.
Regarding the engineering business, Arihant Capital noted the acquisition of MPPL has unlocked significant potential in aerospace and defense. In FY24, this segment generated Rs 300 crore in revenue with a 25% margin, compared to Raymond Engineering’s mid-to-low teen margins. The consolidated engineering business, comprising Raymond Engineering and MPPL, is expected to double revenues in the coming years. Strong demand is anticipated from major industry players like HAL, Boeing, Airbus, and Comac, driven by the ‘Make in India’ initiative.
Raymond Ltd’s strategic realignment through these demergers aims to enhance value and unlock growth potential across its diversified business segments.
