Apr 06 2024, 07:08
Raymond: How demerger of realty, lifestyle will unlock value for Gautam Singhania's firm:
For the past five years, Raymond is up 118% as against Nifty 50's 90% gain. However, it has underperformed the Nifty Realty Index. It seems Raymond is not valued as much as its real-estate peers. But that is likely to change soon as the company plans to demerge its textile and apparel business
Timing is everything for business ventures. It is the right time that pieces the big and small pictures together to give an entrepreneur the moonshot moment, which gives him/her the disproportionate advantage. For Raymond's realty business, the timing could not have been better.
In 2019, just before the pandemic, the company launched its first real-estate project. For the last five years, the stock is up 118% as against Nifty 50's 90% gain. But compared to the Nifty Realty Index, which is up over 200% in the last five years, Raymond has underperformed. It seems Raymond is not valued as much as its real-estate peers. But that is likely to change soon with the company planning to demerge its textile and apparel business and list it separately.
Leading real-estate consultants have been proposing Raymond to launch its realty business for nearly two decades, given the huge land parcel the company has in one of the most sought-after neighbourhoods in Thane. With the demerger, Raymond will become a predominant real-estate developer.
The land parcel:
The company has a 100-acre land parcel in Pokhran Road II, situated next to Thane's leading mall and a renowned hospital chain. According to property portal Magicbricks, prices on Pokhran Road went up from INR13,000 per sq ft at the start of 2014 to over INR19,000 per sq ft.
Harmohan Sahni, CEO of Raymond Realty, tells ET Prime that despite the intentions, the "Goldilocks moment" for Raymond's foray into real estate only arrived in 2019 when the company launched high-end housing project Ten X Habitat (priced between INR80 lakh and INR1.5 crore). On the back of the success of Ten X Habitat, starr
2021, Raymond has launched "The Address by GS', Ten X Era, and Invictus by GS in quick succession.
The real-estate cycle
The last decade has seen real-estate companies go through a lot of pain including high debt, low ROCE, and subdued demand. But post-pandemic, things have changed. As companies became more efficient in terms of managing their capital, the market turned. Demand has picked up and the overall capital efficiency is now getting reflected in high stock prices.
The Nifty Realty Index is up 133% over the last one year compared to Nifty 50, which is up 30%. Against this, Raymond is up only 50%. The question remains: Is there scope for Raymond to stay ahead of the pack?
Since 2013, the ROCE of the sector has been on a downturn at around 11%. In 2021, it went down 7%. Most fund managers and even end buyers were not showing any interest in the real-estate sector. But things turned in 2021. The companies started to pay off debt and made themselves more efficient. Interest rates were down, and sales had started to move up.
source: et
Apr 06 2024, 11:35
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