Raymond Limited (RAYMOND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Raymond Limited Q2 FY '25 Earnings Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Biplab Deb from Antique Stockbroking Limited. Thank you, and over to you, sir.

Thank you. On behalf of Antique Stockbroking, I would like to welcome all the participants in the Q2 FY '25 conference call of Raymond Limited. Today, we have with us Mr. S.L. Pokharna, Vice President, Corporate Commercial; Mr. Amit Agarwal, Group CFO; Mr. Harmohan Sahni, Executive Director and CEO of Realty Business; and Mr. Sunny Desa, Head, Investor Relations. Without taking further time, I would like to hand over the call to Mr. Agarwal. Over to you, sir.

Thank you, Biplab. Thank you all for joining us today for our second quarter fiscal '25 results conference call. We appreciate your continued support and interest in Raymond Limited. At the onset, I would like to wish all of you and your families a happy Diwali and a prosperous New Year. I hope you have received a copy of our results presentation and would like to urge you to go through this along with the disclaimer slides. Now before discussing our performance for the second quarter of fiscal '25, I would like to remind that Raymond Limited now encompasses the real estate and the engineering business. Let me start with a brief overview on the market for this quarter. We are pleased to report that Indian economy is on a positive trajectory, supported by good monsoon season and the completion of the general election. While there was a slight dip in GST collections due to pre-election spending slowdown, we remain optimistic about the growth outlook. With the festive season underway, we expect consumer sentiment to strengthen, aligning with the Reserve Bank of India's forecast of 7% or higher GDP growth for this and the next fiscal year. We typically see softer performance in the second quarter due to monsoon-related uncertainties and the inauspicious pitra paksh shradh period. However, the residential real estate sector, particularly in key markets like Mumbai continued to show a stronger demand. Engineering market witnessed growth in the auto ancillary business; however, engineering segment, consumables has been weak, both in domestic as well as export markets. Further, the aerospace sector is showing promising signs growth impacted by ongoing production issues faced by one of the largest aircraft manufacturers leading into a delay of dispatch. Now let me discuss about the second quarter fiscal '25 performance. We are pleased to announce that Raymond Limited delivered another robust quarter with strong performance in real estate and engineering business, reporting a revenue of INR 1,101 crores in the second quarter of fiscal '25, which reflects a growth of 115% on a year-on-year basis, over INR 512 crores. The revenue growth was driven by outstanding performance in the real estate sector. And during the quarter, the company has delivered an EBITDA of INR 172 crores in the second quarter of fiscal 2025 with an EBITDA margin of 15.6%. Our year-on-year basis, EBITDA number was offset by due to burn-off maintenance expense in Thane of INR 4 crores. And we also received a tax refund of INR 10 crores in the second quarter of fiscal '24. In the second quarter of fiscal '25, the company achieved a strong booking of real estate of INR 562 crores primarily driven by the demand for the Ten X Era, sale of retail shops in Thane as well as in JDA project of The Address by GS in Bandra. Overall, the company has reported the annual profit after tax from continuing operations of INR 59 crores, making a 111% increase compared to INR 28 crores in the previous year. Now let me discuss the segmented performance for the second quarter of fiscal 2025. In the Real Estate business, during the quarter, we have witnessed strong booking momentum and made a total booking of INR 562 crores across all of our projects. The construction momentum across all our projects, both in Thane and Bandra is progressing well, demonstrating our commitment to timely delivery and adherence to high-quality standards. In all of our projects, we are ahead of construction time lines and a comprehensive update on the construction status of our projects is provided in our investor deck. In the second quarter of fiscal '25, we have launched our commercial project for retail shop Park Avenue High Street Reimagined Retail in Thane with the RERA carpet area of 80,000 square feet in September 2024. The first of its kind high street retail in Thane, which received an overwhelming response. The project will host some premium aspirational brands. We at Raymond Realty offer affordable luxury apartments ranging from 1 to 4 BHK that caters to multiple segments of society. In a stated strategy to sell and construct fast, leading to quick project completion and faster revenue generation that has resulted yet another second quarter -- a stronger quarter with a revenue of INR 571 crores in the second quarter of fiscal '25 from INR 243 crores in second quarter of fiscal '24, recording a strong growth of 135%. The segment reported an EBITDA of INR 112 crores in the second quarter of fiscal '25 compared to INR 47 crores in the second quarter of fiscal '24, which is marginally higher as compared to the same quarter last year. As most of you are aware, we have 100 acres of land parcel in Thane, which has a total potential of generating INR 25,000 crores revenue. Out of this 100 acres of land, approximately 40 acres is currently under development. And there are 5 ongoing projects amounting -- adding up to 4 million square feet, generating a revenue approximately of INR 9,000 crores with an additional potential of 7 million square feet on the balance 60 acres to generate another INR 16,000 crores of revenues. Additionally, we have signed also 4 JDA projects in Mahim, Sion and including the Bandra project. The combined revenue potential from 4 JDA projects in Mumbai Metropolitan Region is over INR 7,000 crores. With this and the development potential of Thane Land Bank and 4 JDAs gives the company a total revenue possibility of INR 32,000 crores over the next few years. We remain optimistic about the continued growth in the real estate market overall. Our pipeline of project remains robust with several development scheduled for launch in the coming quarters. Now let me talk about the engineering business. Raymond completed the acquisition of Mining Precision Products Limited, MPPL, on 29th of March 2024. Starting from the first quarter of fiscal '25, the company has consolidated the performance of its engineering business to include MPPL. The segment has shown strong performance with acquisition, making Raymond Group entry into sunrise sector of aerospace, defense and EV component. The segment sales stood at INR 443 crores in the second quarter of fiscal '25, doubling the revenue compared to INR 201 crores in the second quarter of last fiscal year. This performance was driven by the demand from the domestic market for the flex plates, ring gears and shaft bearing categories, which is the auto component. However, engineering consumable category continued to be impacted due to sluggishness in domestic and export market on account of weak demand and geopolitical issue. During the quarter, the business reported an EBITDA margin at 11%, mainly due to changes in the product mix. Aerospace business growth impacted by ongoing production issues faced by one of the largest aircraft manufacturers leading to delays in shipment. Now let me talk about the debt and cash position at the Raymond Limited. We continue to remain a net debt-free business with a net cash surplus of INR 685 crores, an increase of cash of INR 184 crores since March 2024. The total gross debt stands at INR 906 crores, which includes the debt taken for the acquisition of the MPPL as well as the existing working capital facilities at MPPL. Additionally, we maintained strong liquidity with cash and cash equivalents of INR 1,591 crores as of September 30, 2024. The interest cost in the quarter is INR 29 crores, higher by INR 20 crores on year-on-year basis as compared to INR 9 crores compared in the same quarter last year. The rise in interest cost can be attributed to the following factors: interest cost of INR 14 crores on account of acquisition debt for Maini Precision as well as working capital debt at Maini Precision. And another interest -- INR 4 crore interest cost is for the deferment of the approval cost payment to MHADA and TLC. Now let me provide an update on the demerger of the real estate business. The proposed demerger is progressing well with the demerger scheme filed with the stock exchanges. Upon completion, the new entity will seek automatic listing. According to the scheme of arrangement, each shareholder of Raymond Limited will receive 1 share of Raymond Realty Limited for every share held in Raymond Limited. This will position Raymond Realty to pursue its growth trajectory as an independent pure-play real estate business. In the Engineering business, as announced earlier, in the remaining business, 2 new subsidiaries of Raymond Limited will be created through a scheme of arrangements, one focused on aerospace and defense, the other on auto components and engineering consumables, each charting its own path for growth and a primary objective of value creation. Currently, we have filed the restructuring scheme with the NCLT. Now let me discuss about the current status of the operations and the outlook. In the real estate market, we -- residential real estate continues to demonstrate sustained demand. We are focused on future expansion through a capital-light business model via JDA route and targeting 20% to 25% growth in booking value year-on-year. Further, we are currently in discussions to finalize a few new JDAs as we continue to expand our operations. As far as Engineering segment is concerned, the aerospace business post the acquisition of MPPL is showing promising signs in which growth got impacted by ongoing production issues faced by one of the largest aircraft manufacturers, leading to delays in dispatches; however, with the post addressing labor concerns, we are hopeful to get the business on track. Additionally, recent softness in the auto component sector due to weaker market may impact the growth in the near term. Looking ahead, we remain optimistic about our growth prospects. Our diversified business portfolio, strong market position and strategic initiatives will continue to drive value for our stakeholders. Thank you again for joining, and we would be happy to take your questions. We may open the line for questions.

[Operator Instructions] The first question is from the line of [ Aman Soni ] from [ Invest Analytics Advisory LLP ].

Am I audible?

Yes, yes.

Congrats for a good set of numbers. My first question is on the Engineering segment. So we are witnessing a rich demand there in the terms of organic growth. So like you mentioned in the presentation as well, this is majorly due to aerospace business and in opening remarks, you mentioned about the engineering consumables as well. So can you let us know like what is the outlook for the next 2 to 3 quarters in both of the areas, like how the demand is shaping up? How do you see like -- is there any indication of the recovery there in the upcoming quarters?

Sure. No, thanks. Thanks, Aman. I think as you see that first half was clearly impacted, and I'm sure you have understood when I talked about the workers challenges where we are talking about. So now what we hear the news and you hear the same news, that seems to have resolved or in the last stages of cutting the resolution. We have a very clear understanding with the customer that as soon as that gets resolved, we have continued to produce and that will take in form of shipments and dispatches as soon as that gets over. So I think Aerospace, we are very confident that the markets are going to come back or the customer will take the product. Now as far as the engineering consumables is concerned, we have seen a big improvement in the export market. However, domestic market continues to have a little bit challenge. But if I look at the auto ancillary, I think the first 6 months, as you heard me saying, first 6 months have been quite a decent number. But we have seen a little bit weakness right now, but it is not going to be prolonged. It is going to be a hopefully short-lived. And maybe in the next 1 or 2 quarters, we see a stronger recovery there as well. I hope that clarifies.

Understood, sir. Secondly, sir, in the engineering segment only, like what kind of order book do we have across the segments like aerospace or engineering consumable? So can you share that number?

Actually, what happens, this is an order book, whatever we produce, it is a B2B business. So you produce based on the orders only. So like that, we have always order book because the lead times of certain products is 3 to 4 months and certain products are 30 days. So depending upon the lead time and we work very closely with the customers, so therefore, we are not keeping the order book in such a manner. It's dependent basically in terms of asset utilization. So we are looking at it in the second half, especially in the Aerospace considering that hopefully this workers resolution happens, we should be able to use the facility at full extent. . Again, as far as the auto and ancillary, in taking out the short-term blip in terms of demand because of little slowness in certain parts of the world, I think we again see -- so far, we have seen a full utilization of those facilities. So that's where we are.

So what percentage of total engineering segment is coming from this Aerospace and what percentage is coming from auto component?

So if I look at it, roughly 15% comes from the Aerospace and 65% comes from the Auto Components.

And Auto Component is going to be sluggish for second half and you were saying Aerospace may recover. So more or less, second half should be a bit affected as compared to first half as far as the engineering segment is concerned, right?

No, no. But what happens is the Auto Components in certain pockets, there are impacts, but not all across the globe. We supply -- 65% of our products are exported. So it is in certain pockets, you are seeing sluggishness, not across the globe. So we should be able to offset that sluggishness in one part or the other part of the world to -- with the other supply to different parts of the world.

Understood. And lastly, on the real estate, like you mentioned in the presentation, we are having an opportunity of around INR 3,500 crores, right? And we are already at a quarterly run rate of around INR 600 crores that we did this quarter. So annualized basis, it is INR 2,400 crores. So do you believe like we can touch kind of INR 4,000 crores, INR 5,000 crores kind of opportunity on an annualized basis in the next 2 years?

Absolutely. I think that is very clear. See, today, you look at it, as we have embarked upon and we are continuing to launch the projects that will enable us to get to a higher number. And it is very simple that between Thane and non-Thane, the day you are at 10 million square feet to achieve a INR 4,000 crore run rate of bookings is given. Harmohan, you want to add anything?

Yes. So this year itself we'll be crossing about 2,500 plus we will be doing. So on an average, we have grown between 20% to 30% every year. And going forward now with a larger base, we would be growing as per our estimates and the projects that we have in hand, and I'm not taking into account the further projects that we will be getting, that will be an addition to it. Clearly, you can safely assume a 20% growth rate on the bookings every year, year-on-year. So next year itself, we'll be very close to INR 4,000 crores.

[Operator Instructions] We have next question from Mr. Biplab.

So my question is, we saw strong registration number in Mumbai as well as Maharashtra in October. And same, the number was very high in September. So are we on ground seeing similar numbers. Will we strong numbers for Raymond in Q3?

Yes. So the registration number is an equation of what the booking value is. So booking value happens first, and then it is followed by registration. So it comes with a lag. So if our booking numbers are good, then it's a foregone conclusion that the registration numbers with a lag of 30 to 60 days will follow. So it's a good idea to just track the booking value and registration will automatically follow.

Sir, my question is, in general, how is the on-ground demand in Mumbai. Is it as good as what we are seeing in the registration number?

We are not seeing any signs of demand abating. So demand is still strong. It's doing well. Prices are also holding well. They are not running away. So it's a very healthy market today with large volumes and prices remaining more or less steady with 6%, 7%, 8% -- 6% to 8% increase year-on-year. So Bombay, that way is doing well. And I think it will continue to do well at least for the foreseeable future.

Sir, and my second and last question is on your upcoming launches, do you see any new launches in the second half? And what would be your next upcoming launches?

In this quarter itself, which is the running quarter post the end of Q2. So in Q3 itself, there is a launch you will see, in fact, very soon, it's a matter of days. We are just waiting for RERA registration. Once that is done, there will be launch of one project that you will see in Thane. And then in Q4 also, there is a launch which is scheduled, which is outside of Thane.

Okay. So you have one launch in Thane, one launch outside Thane?

That's right.

Hello. Hello, can you hear? Hello, are you able to hear us, operator?

You can't hear the static also. The one we get from static. [Technical Difficulty]

Ladies and gentlemen, we will just wait for a moment as the line for management has got disconnected. Please stay connected while I reconnect the management. [Audio Gap] Ladies and gentlemen, the management has been connected back. Please proceed, sir.

Sure. Sorry for this. I think we have finished the answer and maybe somebody else on the queue can ask the question.

We will take the next question from the line of Amit -- from Abhinav Bhandari from Soham Asset Management.

So a couple of questions. So one is, while you mentioned that second quarter is seasonally weak and from that perspective, we should not look at the micro numbers as such. But a couple of projects, The Address by GS Season 2 and the Bandra project as well. From a quarter-on-quarter perspective, there's been a significant decline, 40%, 45% decline as far as the sales value is concerned, so anything to kind of highlight in both these projects specifically?

So I mean first of all, I don't think H2 is going to be weak. In fact, that's -- this is a season which has started now. So I don't know how that impression got created, maybe some miscommunication from our side.

No, I mentioned -- as you mentioned, the quarter 2 is seasonally weak, not the H2.

No. But what we are saying is in quarter 2, generally, what happens being a monsoon, normally you get lesser bookings. But now because of our projects going at a good stage and the project is such that we have got a good set of bookings. And as far as bookings are concerned, you will see at a point when you launch a project, you will get a very large booking when you launch any time ever a project. For example, when we launched the Bandra, this The Address by GS, I think in the first 3 months, we got a significant number of bookings. So every project, when you launch, you will get a large number of bookings. And then you will follow through the normal booking procedures.

Yes. So I don't know where you're getting these numbers from, but what Amit said to add to that, when the launch happens, obviously, you will see a bump up. And after that, it will go into the sustenance phase. And that's the cycle which each project, every location, every developer will experience. It's not unique to us.

Sure. The numbers are actually from your presentation, sir, you gave the project-wise, quarter-wise breakup in terms of presales. So the -- I'm comparing the quarter 1 to quarter 2. But anyways, I got the broader sense.

I understand it's not a factory product, the demand will continue to be like that month-on-month and product availability also keeps on changing depending on what we launch when.

Yes. So what you are seeing, as I mentioned, that Bandra project, which you are seeing and when you are seeing the value of the bookings from INR 182 crores to INR 99 crores, as I see very clearly, the project got launched only in the month of February. So what happens is when you launch in February, then you will see February, March, April, May, you will get a very large number of bookings because I think we launched end of February or the 20th of...

End of February.

End of -- so you will see 3, 4 months, very large number of bookings. And then as Harmohan said, that it will go into the normal booking phase. So there is an excitement built always in a new project. You will get a significant number of bookings in the first 3, 4 months, and then it goes in a normal phase of bookings.

So pricing also plays a role. At the launch stage, there is a certain pricing and then the pricing keeps moving up. And that's the trend you will find in every project. In fact, Bandra, we would be soon launching 1 or 2 more buildings also. So we have more stock left because currently, the availability of the apartments also is very different. We've only launched half the stock so far. So the balance half of the stock is yet to be launched. It's under approval. So we'll be launching that soon. It will be launched this year itself. So you will again see a bump up and again down. So you will continue to see this cycle in every project.

I think for us, the most important is the inventory which we have launched, what percentage we have sold. If I look as of today, within 6, 7 months, we have sold 55% of the inventory launched, which is a very good number, and you have a period of 6 years to build the project.

Got it. Fair. The other question was on the 3 -- the other projects that we have, Mahim, Sion and I think one more in Bandra. So these projects are at what stage today in terms of approvals, registration, et cetera? And broadly, what we should take as time line for launch for all these 3?

So the launch for all these 3, you should assume next year towards H2. Earliest would be Q3 or around Q4.

We have next question from the line of Ujjwal Lal who is an individual investor.

Can you clarify that after the demerger, in which company will JK House be transferred?

JK House is the property of Raymond Limited and stays in Raymond Limited.

Okay. And another question on the reality side that we have seen some new launches from listed competitors. So any word on competition in the Thane market?

I mean, it's not our place to comment on competition, but our demand continues to be strong. We haven't seen any impact or dip in our stock being sold. So I mean that's all I can say. I can talk about my operations. Competition is always there. This is not some new competition that we are seeing. Every big developer has got a larger than our project in Thane, and they've been there for over 10, 15 years. In fact, we are the new ones.

Can you tell something like how can we see Thane's pricing moving over the medium term, let's say, 2 years, 3 years?

Sorry I didn't get the question?

How do you see the pricing in Thane moving over 2, 3 years, 4 years, 3 years?

I think pricing will remain steady. So you can expect a 6% to 8% increase per annum over the next 2 years.

[Operator Instructions] The next question is from the line of [ Aman Soni ], who is from [ Invest Analytics Advisory ].

Sir, my question like it is just a clarification on like you mentioned about INR 4,000 crores in next year. Are you talking about revenue? Or are we talking about book value?

This is the booking value. The revenue is...

Do we have any internal targets for revenue?

Sorry?

Do we have any internal target to share in terms of revenue for the Real Estate business?

So I think we have said very clearly that 20% to 25% growth, which we have been able to demonstrate should continue over the next few years.

Likewise, like in this quarter, we are able to grow significantly. So that is why I was asking like, is this number going to be significantly well as compared to 20% to 25% growth that we are targeting?

Yes, sure. Actually, that is what we are saying that is a minimum that one should consider. And going forward, you have seen the delivery performance of ours.

Understood. And based on the earlier conversation, like you mentioned about Automotive is going to be slightly weak in terms of certain segment, right? So is it correct to assume like H2 for Engineering segment is going to be more or less same as we did in H1?

No, it should be better. .

Understood, sir.

We have next question from the line of [ Praful Shah ] from [ Anubhavati Advisors ].

Sir, my question is with respect to the land bank. So currently, we possess the 100 acres of land. So -- and we have announced and we have planned the projects accordingly. But are we planning to acquire any new land in Thane or any other region? Or we are just going to go with respect to -- in JDA format only going forward?

See, our stated strategy is to continue with the JDA model for future expansion. And while having said that, we never say no to any opportunity, but we are not actively looking for any land acquisition as such.

Okay. Got it, sir. And sir, just one bookkeeping question with respect to this land bank. So this land bank to a 100 acres is lying in our inventory or is it in the fixed assets?

So very clearly, what happens is whenever you launch a project, it moves from a fixed asset to a current asset, is part of the inventory. And whatever is in the unlaunched project, which is our land, it stays as a fixed asset.

[Operator Instructions] We have a question from the line of [ Ujjwal Lal ], who is an individual investor.

So the management had indicated a wish to also enter the Pune realty market. So any progress on that front that you can share?

So we are currently studying the market and actively looking at quite a few deals, but nothing to report as such. Once we sign something, we will definitely share with you.

And another question, can you share on the engineering side, how much percentage of revenue is from EV and what percentage is export?

The export is almost 2/3 is export. And as far as EV is concerned, it is a very small portion, very, very small, 1%...

Ladies and gentlemen, since there are no further questions, I now hand the conference over to Mr. Amit for closing comments.

Thank you very much and look forward to talking to you in the next quarter. Thank you.

Thank you so much. On behalf of Antique Stockbroking, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.