Raymond shares to trade ex-lifestyle biz today; key details

Raymond Ltd is in focus on Thursday morning, as the stock turns ex-date for spin off. The demerged Lifestyle business will be separately listed on stock exchanges around August-September, analysts said. The step is a part of a bigger plan, as Raymond intends to demerge real estate business as well, which could take 15-18 months period to complete. After completing the demerger process, the Raymond entity would comprise only the Engineering business.

The share exchange ratio for the lifestyle business stands at 4:5 (four shares of Raymond Lifestyle for every five of Raymond), and 1:1 for the real estate business. Raymond Lifestyle shares would be allotted to shareholders, whose names are recorded in the register of members and / or records of the depository as on today, the record date.

"This is to create three pure-play businesses for heightened value unlocking," said Arihant Capital Markets.

In the case of real estate business, 40 out of 100 acres of legacy land in Thane is under development. The revenue potential from the 40 acres under development is Rs 9,000 crore, and the remaining area has a revenue potential of Rs 16,000 crore -- a total Rs 25,000 crore, which should accrue in about 8 years.

"The current JDAs have a revenue potential of Rs 7,000 crore, which will accrue in 4-5 years. This business has Rs 500 crore cash on books and no significant capital requirements for the next 2 years. In the next 3 years, the real estate business will reach an annual run rate of Rs 4,000 crore and will maintain a stable Ebitda margin of 25 per cent. The company does not plan on acquiring any new land and will go the JDA route for further expansion," Arihant Capital noted.

In the case of engineering business, the acquisition of MPPL opened up massive potential for value unlocking in aerospace and defense, Arihant Capital Markets said.

In FY24, that business made a revenue of Rs 300 crore, with a margin of 25 per cent against mid-to-low teen margin of Raymond Engineering.

"The consolidated engineering business will own 2 subsidiaries; Raymond Engineering, and MPPL. MPPL is a high-growth, high-margin business, planned to double revenues in 3-4 years. Raymond Engineering will also double its revenues in 5 years. We foresee a heightened demand from major players like HAL owing to the ‘Make in India’ initiative. They are also preferred suppliers to Boeing, Airbus, and Comac," it said.