Branded fabrics and fashion retailer Raymond Group aims to be net debt free within three years, even though it would launch the first sale of wholly-owned JK Files and Engineering (JKFEL) shares this fiscal year.
“The company is focused on liquidity management through cost reduction initiatives and working capital optimization with the goal of becoming a net debt-free company over the next three years,” it said in its annual report for fiscal year 2021-22.
Raymond also expects the proceeds from JKFEL’s initial public offering (IPO) scheduled in FY23 to reduce its balance sheet and help it become net debt free.
JKFEL, under which the group consolidated its tool, hardware and auto accessories, had proposed to launch the IPO, with Raymond as the selling shareholder.
The draft prospects for red herring, or first documents, were submitted in December 2021 and received market regulator 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 protracted conflict between Russia and Ukraine, it was decided to wait until the right moment for JKFEL’s IPO. The board expects to complete the OFS in FY 2022-23, when market conditions for fundraising would be favorable,” it said.
Raymond had reduced his 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 declined to 0.4 in FY22, from 0.8 in FY20.
For the company, FY22 ended on a “high note” with its all-time high EBITDA of Rs 881 crore and net profit of Rs 260 crore on a consolidated basis over the past 10 years.
“Our strategy of focusing on the core and recalibrating the fundamental metrics of any business such as sales, costs and working capital has been very rewarding for the Raymond Group. Sustaining our focus on cost optimization and significantly reducing our operating expenses by Rs 453 crore compared to pre-Covid levels of FY19-20 has been critical to our business,” said Raymond Chairman and General Manager Gautam Hari Singhania in his message to shareholders .
Speaking about the new dimensions of retail, Singhania said the post-pandemic world has opened new avenues for consumers to interact and shop.
“While physical retail will continue to thrive in India, the digital world and social commerce are rapidly expanding in India,” he added.
Looking ahead, the company said in its annual report it expects profitable growth momentum, with positive general consumer sentiment in the domestic market driven by the summer wedding season and increased social gatherings. In the export market, B2B apparel and engineering companies are expected to maintain a healthy order flow.
The consolidation of B2C business, including apparel in Raymond, will generate synergies in design and innovation, procurement and operational efficiency, while the consolidation of engineering business is expected to generate synergies in business development, raw material procurement and logistics and general administrative processes , it added.
