On one hand, Raymond Group has been exiting businesses; selling off businesses such as cement, steel, synthetic in the past couple of decades and consumer care venture recently; while on the other, it is acquiring some. The group has now entered into an agreement to acquire a 59.25% stake in Bengaluru-based Maini Precision Products (MPPL) for `682 crore.
While this seems contradictory, for the group the motto is to exit ventures where it is not ranked among the top three.
“The quest has always been to be the market leader in the industry and the sector where we are present. In a particular business, we want to be in the top three, and if we are not there, then we would look at ways to grow the business to reach in leadership position, or monetise the venture and plough the funds for other businesses and taken them to leadership position,” Raymond Group CFO Amit Agarwal told FE in an interview.
“In the FMCG space, we would not have been able to make it to the top three,” he said, talking about selling its consumer care business to Godrej group for Rs 2,825 crore in April this year. This also completed the textiles-to-engineering conglomerate’s earlier announced restructuring plan that shifted focus from survival to growth.
In real estate, Raymond is considered to be among the top real estate developers in Mumbai.
On Friday, Raymond entered into a deal to acquire a majority stake in MPPL, a move that will help it foray into sunrise sectors such as aerospace, defence and electric vehicles (EV). The deal, which would be funded through a mix of debt and internal accruals, is expected to be completed in this fiscal.
“As we evaluated, we found this to be most complimentary to our existing business. We have been running JK Files and Engineering (JKFEL) for more than 65 years and the auto components business for more than 20 years. JK Files is among the top three players globally. However, engineering is not a very high growth sector, and we wanted to grow it at a faster pace and hence this acquisition fits very well with our strategy,” Agarwal said.
This would help the group foray into EV, defence and aerospace, which is a natural extension to its engineering business.
The acquisition will be concluded through Ring Plus Aqua (RPAL), a subsidiary of JKFEL. JKFEL is a wholly-owned subsidiary of Raymond. Post the acquisition, Raymond will consolidate JK Files, RPAL and MPPL into a new subsidiary, in which it will hold a 66.3% and the remaining will be held by MPPL founder Gautam Maini.
For FY23, the proforma consolidated revenue of the new subsidiary was at `1,600 crore with Ebitda of `220 crore.
“The Ebitda is expected to grow by 20% year-on-year,” Agarwal said, adding the total acquisition amount will be funded through a mix of debt and internal accruals. There will be no equity outgo from Raymond.
“A strong pedigree and knowledge base of both the businesses will enable to deliver strong profitable growth,” he added.
In July this year, Raymond chairman and managing director Gautam Singhania told FE that the group had successfully completed the restructuring and monetisation initiatives, and it has emerged as a zero-debt group. Its focus had shifted from survival to growth, and the group was targeting overall revenues of `10,000 crore in FY24.
For FY23, the group had posted consolidated revenues of `8,337 crore.
Going forward, its focus would be three businesses’ real estate, lifestyle/textiles and engineering – with each being among the top three in the country.