Raymond to follow the industry trend by hiving-off Core business

Raymond Group, having an interest in Textile & Apparels, Real Estate, FMCG and Engineering products has decided to streamline its corporate structure. In pursuant to this, the company will separate its lifestyle business division to separate company & later to list it separately.

Raymond Limited (Raymond) is India's largest integrated worsted suiting manufacturer that offers end-to-end solutions for fabrics and garmenting. Over the years, Raymond has been synonymous with quality, innovation and market leadership. It has some of the leading brands within its portfolio - Raymond Ready to Wear, Park Avenue, ColorPlus, Parx, Raymond Made to Measure amongst others. Raymond has one of the largest exclusive retail networks in the country with over 1500 stores across 601 towns. As a part of the diversified Group, it also has business interests in men's accessories, personal grooming & toiletries, prophylactics, engineering and auto components across national and international markets.

The Transaction

The company will demerge its core lifestyle business to a new company. The lifestyle business will include the business of branded textile, branded apparel & garments. After the demerger, the lifestyle business company will get listed on bourses with mirror shareholding structure.

The existing company will predominantly become a real estate company having an interest in the business of Real Estate, B2B Shirting Business, Engineering business of Auto components and tools & hardware, Denim and FMCG business.

The appointed date for the transaction is 1^st April 2020.  Every shareholder of Raymond Limited will be issued the shares of a new company in the ratio of 1:1.

The reason given by the management for keeping High Value Cotton Shirting business in the existing company is its existing litigation with JV partner which is being contested at NCLT and the matter is sub-judice. NCLT has passed an order freezing shareholding of RLCL and sale or transfer fixed assets of RLCL in which JV partner has an interest. Once the matter is solved, the company will come out with some mechanism to transfer this business to lifestyle business.

Earlier it was announced by the company that the existing company will grant perpetual brands usage rights for the “Raymond” brand to the Lifestyle Company at a brand royalty to be charged at a percentage of Turnover with a cap, in line with the best market practices, however, considering the objections from various investors, it is decided to that the brand licensing relating to the “Raymond” name relating to lifestyle business will get demerge with the business.

Preferential Allotment

It is also decided that J.K. Investo Trade Limited (JKIT-Associate Company) will infuse the net receipt of INR 350 crores in Raymond Limited in the form of Equity Shares & Compulsorily Convertible Preference Shares through preferential allotment route to pare debt. The equity & Compulsorily Convertible Preference Shares will be issued at INR 674 per share.

JKIT is an associate company in which Raymond Limited holds 47.66% stake. This company recently announced the signing of an agreement of sale of 20 acres of land with Virtuous Retail, which is utilizing the net proceeds of Rs. 350 crores from the land sale to be infused into Raymond Limited. The gross sale value of the land parcel is Rs. 700 crores.

After said allotment, the shareholding pattern of the company will be get changed. The promoter’s holding in the company will increase by ~4.38%.

Table 1: Changes in Shareholding post Preferential Allotment

Particulars	Pre-Preferential Allotment		Post-Preferential Allotment
	Shares (crs)	%	Shares (crs)	%
Promoter Group	2.69	43.83%	3.21	48.21%
Public	3.45	56.17%	3.45	51.79%
Total	6.14	100%	6.66	100%

Financials

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