Raymond Is Up 23% This Year – Here’s Why

Raymond's shares jumped 9% on Tuesday as the company moved forward with a plan to split into three separate businesses.

Why it matters: the restructuring represents a significant shift for the 98-year-old company which will unlock major value for shareholders and allow each business segment to chart its own growth trajectory.

• Raymond is splitting into three listed entities: Raymond (engineering), Raymond Lifestyle, and Raymond Realty
• Shareholders will receive 4 shares of Raymond Lifestyle for every 5 Raymond shares held

The lifestyle business demerger was completed on June 30, 2024. Raymond Lifestyle Limited (RLL) is expected to be listed on stock exchanges soon.

The company's board has also approved a scheme of arrangement for the demerger of its realty business to Raymond Realty Limited (RRL). This demerged entity will also be listed on stock exchanges, though the timeline is not yet disclosed.

What it means: Raymond was a diversified business with interests in textiles, apparel, real estate, and engineering.

• The split means each Raymond business can now raise money and grow on its own terms.
• It will allow investors to pick and choose which part of Raymond they want to bet on, rather than buying the whole package.

Markets approve of the move.

• Raymond's stock is up 23% year-to-date
• Raymond's worth jumped to ₹14,051 crore ($1.7 billion), up from ₹11,400 crore before the demerger news

What they are saying: At Raymond's annual meeting, Chairman Gautam Singhania pitched the demerger as a game-changer. "Shareholder value creation is at the core of these demerger plans." he said.

The bottom line: Raymond's triple play is a bold bet on unlocking hidden value. While initial investor response is enthusiastic, the true test lies in how each new entity performs in competitive markets. This demerger could set a precedent for other Indian conglomerates looking to streamline their operations.

Zoom out: India's strengthening financial markets have empowered promoters with the confidence and flexibility to pursue bold strategic moves.