Raymond wants to offload 20 per cent in branded apparels

Raymond wants to offload its 20 per cent stake in branded apparel business to fund expansion and is in talks with overseas private equity funds KKR & Co and Blackstone. Citibank has been appointed for the deal. The minority stake sale will help expand the apparel business which is facing stiff competition from Aditya Birla Group’s Madura Fashion and Arvind Lifestyle.

Raymond’s branded apparel business clocked in a revenue growth of 18 per cent in 2015-16 while the company’s operating profit margin was negative at -0.6 per cent. It is expected to be more profitable as it gains scale and there is renewed focus on brand building and dedicated retail expansion. The branded garments segment is expected to have 48 per cent share of overall readymade garments segment in 2019, up from 35 per cent in 2014, stated a report by Edelweiss Broking last year.

Raymond has taken several steps to in the last two years to reduce working capital, rationalise its product portfolio and revamp stores to improve the consumers’ shopping experience. Raymond has been in textile manufacturing and retailing business since 1925. Its apparel brands are Raymond, Park Avenue, ColorPlus and Parx.

India’s readymade garments market is estimated at 45 billion dollars (Rs 3,03,279 crores), with the branded apparel industry estimated at 10 billion dollars (Rs (Rs 67,399 crores) and growing at 10-12 per cent per annum. PE funds have been investing in apparel makers over the past few years. Recently, Aditya Birla Private Equity bought minority stake in Creative Lifestyle, owner of women’s apparel brands 109F, Fusion Beats and O2xygen while Everstone Capital picked up a minority stake in fashion label Ritu Kumar in 2014 by investing 16.6 million dollars (Rs 112 crores)