Branded fabric and fashion retailer Raymond Group aims to be net-debt free in three years, even as it would launch the initial stake sale of wholly-owned JK Files and Engineering (JKFEL) this fiscal.
“The company is focussed on liquidity management through cost reduction initiatives and working capital optimisation with a stated aim of becoming a net debt-free company in next three years,” according to its annual report for financial year 2021-22.
Raymond also expects the proceeds from the Initial Public Offering (IPO) of JKFEL, slated in FY23, to deleverage its balance sheet and help it become net debt free.
JKFEL, under which the group consolidated its tools, hardware and auto ancillary businesses, had proposed to launch the IPO, with Raymond participating as a selling shareholder.
The draft red herring prospects, or initial papers, was filed in December 2021, and it got market regulator’s approval on February 23, 2022, while the IPO was scheduled for March this year.
“However, due to the volatility in world stock markets caused by the extended Russia-Ukraine conflict, it was decided to wait till opportune time for the IPO of JKFEL. The board expects to complete the OFS during FY 2022-23, when the stock market conditions for fund raising would be favourable,” it said.
Raymond had reduced its net debt to Rs 1,088 crore by the end of FY22, from Rs 1,416 crore in FY21 and Rs 1,859 in FY20. The group’s net debt-to-equity ratio fell to 0.4 in FY22 from 0.8 of FY20.
For the company, FY22 closed on a “high note” with the group recording the highest-ever EBITDA of Rs 881 crore and a net profit of Rs 260 crore on a consolidated basis in the last 10 years.
“Our strategy to focus on the core and recalibrate the fundamental metrics of each business such as revenue, cost and working capital have reaped rich dividends for the Raymond Group. Sustaining our focus on cost optimisation and significant reduction in our operating costs by Rs 453 crore as compared to pre-Covid levels of FY19-20, was critical for our business,” Raymond chairman and managing director Gautam Hari Singhania said in his message to shareholders.
Speaking on the new dimensions of retail, Singhania said the post-pandemic world has thrown open new avenues for consumers to interact and shop.
“While physical retail will continue to thrive in India, the digital world and social commerce is rapidly surging in India,” he added.
On the outlook, the company said in the annual report that it expects to be on a profitable growth momentum, with positive overall consumer sentiments in the domestic market due to the summer wedding season and increased social gatherings. In the exports market, B2B businesses of garmenting and engineering are expected to retain healthy order flow.
The consolidation of B2C business including apparel into Raymond will generate synergies in design and innovation, sourcing and operational efficiency, while the consolidation of engineering business is expected to generate synergies in business development, raw material sourcing and logistics and overall administrative processes, it added.