Shares of Raymond Ltd. surged by 12% on December 10, 2024, reaching an intraday high of ₹1,812.80 on the National Stock Exchange (NSE). The rally comes amid heavy trading volumes and renewed investor confidence following the company’s strategic focus on real estate and engineering businesses after the demerger of its lifestyle segment earlier this year.
At 12:14 PM, the stock was trading 11.6% higher at ₹1,800, significantly outperforming the Nifty 50 index, which saw a marginal decline of 0.08%. Over 5.07 million shares, accounting for 7.6% of the company’s total equity, changed hands on both the NSE and BSE, marking a tenfold increase in average trading volumes.
Key Market Trends
- Recent Stock Performance: The stock has rebounded by 37% from its 52-week low of ₹1,325, recorded on November 4, 2024. Despite this recovery, it remains below its 52-week high of ₹2,182, achieved on September 3, 2024, shortly after the lifestyle segment’s demerger.
- Strategic Shift Post-Demerger: On July 11, 2024, Raymond completed the vertical demerger of its real estate business into its wholly owned subsidiary, Raymond Realty Limited (RRL). This move marks a pivotal shift in the company’s business strategy, focusing on growth opportunities in real estate and engineering.
The Strategic Real Estate Demerger
The demerger of Raymond Realty is part of the Raymond Group’s broader strategy to streamline its corporate structure and unlock shareholder value. Under the scheme, existing shareholders of Raymond will receive one share of Raymond Realty for every share held in Raymond.
Post-demerger, Raymond’s focus will remain on its engineering and textile businesses, while Raymond Realty will operate independently, concentrating on real estate projects.
- Enhanced Management Focus: The demerger facilitates dedicated management teams for each business, allowing for sharper focus on sector-specific strategies and tailored investment approaches.
- Growth Potential in Real Estate: Raymond Realty has a robust portfolio, including a significant land parcel in Thane and high-value projects like ‘The Address by GS’ in Bandra. These assets position the company to generate long-term revenue exceeding ₹32,000 crore.
Real Estate and Engineering Segments Drive Growth
1. Real Estate Success Stories:
In Q2FY25 (September 2024 quarter), Raymond Realty reported a remarkable 135% year-on-year (YoY) revenue growth, reaching ₹571 crore compared to ₹243 crore in Q2FY24.
- EBITDA Performance: The real estate segment achieved EBITDA of ₹112 crore, up from ₹47 crore in the same quarter last year.
- High Booking Value: A booking value of ₹562 crore was driven by demand for the TenX ERA project, retail shops in Thane, and a joint development agreement (JDA) for ‘The Address by GS’ in Bandra.
2. Engineering Segment Growth:
The engineering business, housed under JK Files and Engineering Limited, posted significant revenue growth, doubling to ₹862 crore in H1FY25 compared to ₹410 crore in H1FY24. This growth was primarily supported by strong domestic demand for products like flex plates, ring gears, and shaft bearings, despite weak export demand due to geopolitical challenges.
Key Financial Highlights
- Real Estate Revenue Potential: Raymond Realty’s portfolio, including the Thane land parcel and JDA projects, holds revenue potential exceeding ₹32,000 crore.
- Engineering Business Contributions: Contributions of ₹445 crore from Maini Precision Products Limited bolstered the engineering segment’s performance.
Outlook and Investor Sentiment
The strategic realignment of Raymond’s business post-demerger has enhanced its appeal to investors. With a focused approach to real estate and engineering, the company is well-positioned to capitalize on market opportunities.
Why Investors Are Optimistic:
- Real Estate Upside: Raymond Realty’s high-value projects and substantial land holdings in Thane offer promising long-term returns.
- Engineering Expansion: The engineering segment’s growth trajectory underscores its potential to deliver consistent revenue and profitability.
- Streamlined Structure: The demerger creates a simplified organizational structure, improving operational efficiency and unlocking shareholder value.
Conclusion
Raymond’s stock rally reflects the market’s confidence in its strategic pivot toward real estate and engineering businesses. The demerger of Raymond Realty aligns with the company’s vision of creating focused entities with specialized management teams to drive growth.
With robust real estate assets and a thriving engineering segment, Raymond is poised for sustained growth, making it a compelling choice for investors seeking exposure to India’s expanding infrastructure and industrial markets.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult with a financial advisor before making investment decisions.
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