Raymond Share Price | What next after 40% fall ?
Raymond Share Price Trades Ex-Lifestyle Business; Hits 5% Upper Circuit
Raymond's share price hit a 5% upper circuit as the company turned ex-date for its lifestyle business demerger. The record date for the demerger is set for July 11, 2024, with the lifestyle division expected to be listed within the next two months.
On Thursday, Raymond's share price was locked at a 5% upper circuit as the shares turned ex-date for the lifestyle firm. The share price opened at ₹1,950 on the BSE following a special pre-open price discovery session between 09:45 and 10 AM today. The stock touched an intraday high of ₹2,047.45 on the BSE and an intraday low of ₹1,852.50.
Raymond has set July 11, 2024, as the record date for the demerger of its lifestyle business venture into Raymond Lifestyle (previously Raymond Consumer Care) and establishing the entitlement of the company's shareholders. Four (4) equity shares of Raymond Lifestyle of ₹2 each, fully paid up, shall be issued and assigned to Raymond shareholders holding five (5) equity shares of ₹10 each, fully paid up, as of the record date.
Why Raymond Shares Showed a 40% Fall Today; What Lies Ahead?
Raymond opened at ₹1,906 on the NSE, down 39.60% from its previous day's closing value of ₹3,156.10. MOFSL had earlier estimated the per-share value of Raymond Ltd at ₹1,415 per share post the corporate action. Shares of Raymond Ltd nosedived 40% at the open on Thursday, as the stock turned ex-date for the demerger of its lifestyle business. The stock was trading at a value excluding the lifestyle business. The demerged business is expected to be listed separately on stock exchanges around August-September. Existing investors of Raymond would be offered four shares of Raymond Lifestyle for every five Raymond shares. Today is the record date for the same.
On Thursday, the Raymond stock opened at ₹1,906 on the NSE, down 39.60% from its previous day's closing value of ₹3,156.10. However, the stock gained over the opening price as the session progressed. It later traded at ₹2,009.80, up 3.07%. MOFSL had earlier estimated the per-share value of Raymond Ltd at ₹1,415 per share post the corporate action, which included ₹1,200 per share value of real estate and ₹215 of the engineering business. The lifestyle business could be listed at ₹2,930 per share, according to the domestic brokerage.
InCred Equities estimated the fair value of the lifestyle business at ₹1,982, the realty business at ₹1,086, and the engineering business at ₹499 per share. The demerger of the lifestyle business is part of a bigger plan, as Raymond intends to demerge its real estate business as well, which could take 15-18 months to complete. After completing that demerger, the Raymond entity would comprise only the engineering business. The share exchange ratio for the lifestyle listing is 4:5 (four shares of RLL for every five of Raymond), and 1:1 for the real estate listing.
"This is to create three pure-play businesses for heightened value unlocking," said Arihant Capital Markets. In the case of the 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 ₹9,000 crore, and the remaining area has a revenue potential of ₹16,000 crore -- a total of ₹25,000 crore, which should accrue in about 8 years.
The current JDAs have a revenue potential of ₹7,000 crore, which will accrue in 4-5 years. This business has ₹500 crore in 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 ₹4,000 crore and will maintain a stable EBITDA margin of 25%. 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 the 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 ₹300 crore, with a margin of 25% against the mid-to-low teen margin of Raymond Engineering.
"The consolidated engineering business will own two 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 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.
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