EXCLUSIVE: Two revelations and a fiery defence from Raymond’s boss Gautam Singhania


  • The branded apparel major is likely to see free cash flow this year itself, Chairman Gautam Singhania said in an exclusive interview.
  • Development of Thane land may be capital light, he said but stopped short of divulging details.
  • Do not paint Raymond with the same brush as other promoters, he hit back on the question of governance.
Gautam Singhania, the second-generation promoter of Raymond Limited, whose businesses span from branded apparel and textile to fast-moving consumer goods to engineering and auto parts, is hoping that the business will increase its free cash flow as early as the current financial year that ends on March 31, 2019.

Raymond’s stock price has multiplied over two-and-a-half times in the last three years. This, at a time when the company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) was negative, and it has turned into the black only now.

The company posted a profit in four out of last five quarters. Most recently, the company declared a net profit of ₹ 260 million in the three months between October and December 2018. and Singhania is confident that it will only improve hereon.

“We are at the end of the investment cycle, so you will start seeing free cash flow now; from this year itself."

Gautam Singhania, Chairman, Raymond Limited


The company’s debt has been a cause for concern in the Indian markets for long. But Singhania is not bothered by it. “At the end of the day, Raymond has a net debt of about ₹2,300 crores. I don’t sleep with a net debt of ₹2,000 crores, people with debt 20 times and 50 times the size sleep easy. I don’t know why we are worried about Raymond’s debt,” he candidly said.

The plan to unlock value by selling a 20-acre land in Thane, in the outskirts of Mumbai, as well as non-core business like engineering and auto parts is on track, he said. The money from these sales will go into repaying debt, but Singhania is in no hurry.

“At the end of the day you have to understand one thing, I will do it to the best of my ability and number two, I am the biggest gainer. That’s all I am concerned with. I will do whatever is in the best interest of shareholders. I am the largest shareholder,” he said.

The company, which was admittedly looking to pare down debt by selling the Thane land, announced recently that it would develop the project on its own instead. This may raise concerns on whether the company would end up adding to the debt in the process. But Singhania dismissed those fears, saying, “What makes you say that developing on our own cannot be capital light? That’s your assumption. I am not going to tell how I am going to do it. How I do it, I am not at liberty to discuss it with you.”

The flamboyant 53-year-old who loves fast cars, high-flying private jets, and cruising speed boats has also faced some tough questions on corporate governance in recent times, which he has vehemently denied.

“You are not willing to accept that I am the only promoter in the country who has stepped off his own companies as chairman, has put in the highest level of corporate governance in the system, has got outside directors and outside professionals to take over as chairman. I have the best advisory board in the country. Don’t paint Raymond with the same paint brush as other promoters. Show me one other promoter who has done what Raymond has done, then talk to me,” Singhania said demanding credit for bringing in transparency in governance.

"Don’t paint Raymond with the same paint brush as other promoters."

Gautam Singhania, Chairman, Raymond Limited


Analysts seem to agree with Singhania’s narrative. “Over the last 2 years, a lot of changes in terms of management, brand positioning, disclosures, rationalising store network, etc. which have happened at Raymond post which the company has been steadily improving its performance on guided lines,” Edelweiss said in a report earlier this month.

Room for growth

Singhania is betting on Raymond’s scale and reach, and its well-known brand. “See, you always will have some competition, and it’s good. Some of the big brands will come to Mumbai, Delhi, Kolkata, Chennai. Raymond today is in Tier-10 towns, we are 515 towns, we are competing in a different marketplace as well. A foreign brand in our space, I don’t want to take names, has been in this country for 30 years and it makes $2 million a year. It’s irrelevant to me. It doesn’t bother me,” he said.

Additionally, Raymond’s franchisee model allows it to reach deeper into smaller towns without having to invest big money. “In the last 18 months, Raymond has added over 200 mini-TRS (The Raymond Shop) stores in over 180 towns, penetrating smaller cities,” PhillipCapital said in a note this month.

As of now, the company makes over 70% of its revenue from textiles and branded apparel. Going forward, there will be an added focus on relatively new verticals like fast-moving consumer goods space, said Singhania. Having decoupled the group companies from the parent through management changes, the FMCG vertical will have to make its own business decisions.

“It’s a separate business. It will find its own capital. If it requires capital, it will find it. It’s a professionally run company. Raymond capital doesn’t have to go there. Raymond will only put capital there only if it believes it wants to. The company will grow on its own steam. If it wants capital, it can go to the market and raise private equity or debt,” Singhania said.


{{}}
Subscribe to whatsappSubscribe to whatsapp
Add Comment()
Comments ()
X
Sort By:
Be the first one to comment.
We have sent you a verification email. This comment will be published once verification is done.