Basic HTML Version
48
|
The Textile Magazine
FEBRUARY 2012
are franchisee operated. The com-
pany products are present in nearly
18,000 touch points.
Raymond commands over 60
per cent of the market share in the
worsted segment and is the largest
integrated textile company.
The Indian apparel market is grow-
ing at 11 per cent CAGR. The share
of the organized segment is expected
to increase much faster. Companies
with strong brands like Raymond do
benefit most.
Restructuring
As its restructuring initiative, Ray-
mond is shifting its 7 mmpa worsted
fabric manufacturing facility from
the high-cost region Thane to low-
cost locations of Jalgaon (weaving
capacities) and Vapi (finishing ca-
pacities). Post restructuring the total
capacity of the firm will increase
to 38 mmpa, including 14 mmpa at
Chindwara and 14 mmpa at Vapi.
The facility is totally integrated, in-
cluding combing, spinning, weaving
and finishing. Major products include
poly viscose, poly wool, all wool and
recently started cotton fabric.
The company is likely to spend
around Rs. 100 crores for modern-
izing and re-location of plant. This
would enable it to add up additional
capacities in a short period of time
with minimum capex considering
that it would be relocating its exist-
ing plant and machinery.
The restructuring is likely to im-
prove volume for the firm from 31
mmpa to 38 mmpa. A large part of
this business is through B2C model.
Cost savings on account of employee
expenses and modernization would
further improve the margin for the
business by 200-300 basis points.
Raymond has entered into a 50 per
cent JV with Zambaiti for its shirting
fabric manufacturing. Total capac-
ity of the unit has increased from
11.5 mmpa to 21.6 mmpa in FY11.
This expansion will yield results in
the current year itself. Volume from
this business is expected to double by
FY13E.
Closure of loss-making
denim units
Restructuring initiatives include
closing down the denim manufac-
turing facility in Belgium and the
US with total capacity of around 40
mmpa. Raymond has a 50 per cent
JV with UCO NV Ltd. for its denim
facility. Post exiting its loss-making
Belgium and US facility, Raymond
will have total denim capacity of 47
mmpa, including 40 mmpa at Yavat-
mal and 7 mmpa at Romania where
the company has a 25 per cent stake.
The decision would certainly benefit
the firm in the long term.
The firm already has exited its
loss-making brands like Zapp and
Be Home. Zapp mainly targeted the
kidswear segment and Be Home was
mainly a home textiles brand. The
move would benefit it by synchroniz-
ing its brand portfolio.
Raymond branded apparel busi-
ness contributes around 21 per
cent to consolidated topline of the
company and 15 per cent to the bot-
tomline. With increasing presence
the business is expected to grow at
a CAGR of 15 per cent. The firm
has witnessed 10 per cent like-to-
like sales growth in FY11. How-
ever, growth has slowed down to 5
per cent in H1FY12 due to macro
concerns of inflation and interest
rates. No near term revival is like-
ly. However, demand may stabilize
from the current level.
The segment has witnessed chal-
lenges in terms of volatile raw ma-
terial prices and levy of excise duty
on readymade garments. However
the firm has successfully passed
on the cost increases due to the
strong brand presence. This has led
to increase in the margin from 10
per cent in FY11 to 16 per cent in
H1FY12. Margins are expected to
be maintained in the range of 12-14
per cent.
w
corporate news