Raymond to refocus on core businesses

AFTER HAVING successfully divested its cement and steel businesses last year, Raymond is refocusing its energies in its core businesses - textile, apparel and related businesses.

As part of its restructuring exercise, initiated in 1999-2000, Raymond sold off its stake in Raymond Synthetics to the Reliance Group and its 22.4 lakh tpa cement plant at Bilaspur to Lafarge India for Rs. 780 crores. It also sold its steel unit to EBG India for Rs. 412 crores. Further, it merged its wholly owned subsidiary - Raymond Calitri Denim into itself and acquired the files and tools division of HGI industries for Rs. 17 crores.

Now the focus is primarily textiles and garments. ``What really is not related to our current business is Files business - but here, we are global leaders. In apparel, we are seeing higher growth rates and have done well.'' said Mr. Nabankur Gupta, group president, Raymond. Raymond has related businesses like JK Helene Curtis selling products under the `Park Avenue' brand and JK Ansell which sells `Kamasutra' condoms and Latex gloves.

The government imposed a 16 per cent excise duty on branded garments which led to industry-wide protests. Mr. T. R. Venkatesh, president, Raymond Apparel, said, ``It is fair to say that as a one time measure, it is a fairly stiff hike.''

This led to possibility of cheaper imports from China and Bangladesh. ``That is a real threat. China particularly makes huge volumes, occupying the lowest end of the pyramid. They have the capability to dump having done so earlier but we have been competing with them internationally.'' said Mr. Gupta.

``However'', he added, ``There is an opportunity to source from them. In worsted suitings, however, there are not many who can compete with us. In products we want to enter, vendorisation is a phenomenon we have to examine with respect to the whole area.''

Branded readymades industry registered a 15 per cent growth last year against 30 per cent plus in the previous year. The demand slowdown being the factor. ``There was some confusion about the excise which has not helped. But in the medium term, forecasts indicate a 15 per cent growth, though we plan to grow much higher than this.'' said Mr. Venkatesh.

Raymond Calitri Denim was amalgamated into Raymond last year. The denim industry was faced with grim prospects and in India, a lot of capacity lies unutilised. However, there has been a change in fortunes and Mr. Gupta felt, ``There is a global revival in denims and from being a commodity it is getting fashion connotations. We make specialty ring denim - in demand in Europe. The domestic market has not shown the same uptrend having a 10-15 per cent growth. China manufactures coarser type of denims but their strategy is to fight on price. Keeping that in mind, they do not have a chance in our area of operation.'' said Mr. Gupta.

Raymond is also keenly looking at women's apparel. ``Studies are on in terms of the market and where we can move. We also have the wherewithal to merchandise it and are mainly looking at western wear,'' said Mr. Gupta.

Raymond adopted new strategies to increase its share in the business. ``There are two things to increase revenues - the first is the product itself where it is necessary to update and add freshness constantly. Second is adding to the product range in terms of interesting, related areas. Advertising is critical in the context of the competition,'' said Mr. Venkatesh.

Hitherto, the major part of garments business came from its chain stores. ``It is a great opportunity but limited in scope because of the inherent format.'' Raymond is considering the option of opening its own chain of exclusive garment stores to complement the retail chain. These would, as Mr. Venkatesh put it, ``be for impulse shopping - primarily to attract traffic as it goes by on the high street. Raymond retail stores are basically destination stores - readymade stores looking at high street sales where traffic exists. Because of the product changes we are talking about, we actually get to attract traffic.''

In distribution, Raymond is looking to expand multi-brand outfits - a general clothes shop. The company hopes to add 30-40 shops per month through dealers.

It opened three stores - two in Mumbai and one in Delhi. ``We are now opening one each in Pune and Nagpur and before year-end, hope to have 50-60 across the country.'' said Mr. Venkatesh. Raymond is investing in merchandise management - implementing supply chain management which will go live from July 1 and enable linking up of vendors, the plant and warehouses.

Regarding competition, Mr. Gupta said ``We have to do some things a little better both in terms of design and cost. We are looking at global sourcing in order to benchmark costs and to look at designs. This is across countries including China, Sri Lanka and Bangla Desh,'' he said.

Regarding brand acquisitions, Mr. Gupta said, ``In the last two years, we have floated brands successfully. However, if there are possibilities of integrating and taking it to a higher dimension, we will consider it provided the price is right. But given today's scenario, overseas acquisitions are difficult.''

``Between the changes in product, advertising and distribution, we hope to link up the entire chain. Our plans are already in various stages of implementation.'' said Mr. Venkatesh. A new trouser range is already available and in the current year's festive season (September-October), Raymond will launch readymade suits and jackets. ``In fact'', Mr. Venkatesh said, ``The bulk of product changes will fall in around the festive season and advertising will also dove-tail with the launches.''

Raymond's net profit was Rs. 332.22 crores in 2000-01 against Rs. 31.71 crores in the previous year on net sales of Rs. 1,457.06 crores (Rs. 1,657.91 crores).

The company bought back 137.10 lakh equity shares of Rs. 10 each at an aggregate value of Rs. 186.25 crores, the average purchase price being Rs. 135.85 per share. Consequently, the company's share capital stands reduced to Rs. 61.38 crores from Rs. 75.09 crores earlier. Raymond discontinued the buyback scheme with effect from April 30, 2001.

Ramnath Subbu

in Mumbai

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