Raymond Limited (RAYMOND) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Raymond Limited Q3 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 Debbarma from Antique Stockbroking. Thank you, and over to you, sir.

Thank you. On behalf of Antique Stockbroking, I would like to welcome all the participants in the Q3 FY '25 Conference Call of Raymond Limited. Today, we have with us from senior management of Raymond, 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, Amit sir.

Thank you, Biplab. Good evening, everyone. Thank you for joining us today for our third quarter fiscal '25 results conference call. At the outset, I would like to wish you a very Happy New Year to all of you and your families. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on the stock exchanges as well as the company's website. Now before I start my discussion on our third quarter fiscal '25 performance, I would like to provide a brief update on the same. As we enter on the third quarter of fiscal '25, the Indian economy continues to demonstrate resilience and growth despite global economic uncertainty. India's GDP growth is projected to remain robust at around 6.5% for fiscal '25, driven by strong consumption and investments. The government's focus on infrastructure development and manufacturing is expected to further bolster economic activity. Inflation is expected to moderate, aided by stable food prices and effective monetary policy by the Reserve Bank of India. Now before discussing our performance for the third quarter of fiscal '25, I would like to update you on the status of the demerger of our real estate business. I'm pleased to announce that we have received the creditors as well as shareholders' approval earlier this week and remain on track for listing this business as a separate entity in the next 6 to 7 months. The real estate market in Thane and Mumbai continues to exhibit robust growth driven by a combination of infrastructural development, increased demand for residential and commercial spaces and favorable government policies. In the Thane market, supply has kept pace with demand, ensuring a balanced market. We continue to remain optimistic on both the markets of Thane as well as Mumbai and expect sustained growth supported by strong demand, strategic infrastructural development and favorable market conditions. Investors and homebuyers can look forward to a dynamic and promising market landscape in the near future. In the Engineering business, the auto ancillary segment witnessed growth in the domestic market. However, export markets were weak for our auto ancillary and Engineering consumables segment due to slowdown in European auto market as well as the Red Sea crisis. Further, we expect our aerospace business to grow post resolution of the production issue faced by one of the largest aircraft manufacturers, which led to delays in the orders. Raymond Limited delivered a steady quarterly performance in the real estate as well as in the Engineering business, reporting a revenue of INR 985 crores in the third quarter of fiscal '25, which reflects a growth of 36% on a year-on-year basis over the INR 727 crores. Delivering an EBITDA of INR 169 crores in the third quarter of fiscal '25 with a margin -- EBITDA margin of 17.2%. Our EBITDA grew by 33% on a year-on-year basis. Overall, the company has reported the profit after tax from continuing operations of INR 71 crores, making a 71% increase compared to INR 41 crores in the previous year. Just wanted to bring to your attention that the above performance includes the acquisition of Maini Precision business completed in March 2024. Now let me talk about the segmental performance. With the real estate in the third quarter of fiscal '25, the company achieved a booking value in the real estate business to the tune of INR 505 crores, primarily driven by the demand for the Address by GS 2.0, Ten X Era, sale of retail shops in Thane as well as JDA project of the Address by GS in Bandra. The construction momentum across all of our projects, both in Thane as well as Bandra is progressing well, demonstrating our commitment to timely delivery and adherence to high-quality standards. In all our projects, we are ahead of construction time lines and a comprehensive update on the construction cater to our projects is provided in our investor deck. We have launched a new tower in Thane during the quarter and Raymond Realty also launched its residential tower by Address by Season 2.0 at Thane, which received an overwhelming response. Further, we also witnessed continued traction in our Park Avenue High Street reimagined retail project launched in the previous quarter. This is a first of its kind high street retail in Thane that will host premium aspirational brands. We at Raymond Realty offer affordable luxury apartments ranging from 1 BHK to 4 BHK that caters to multiple segments of society in a stated strategy to sell and construct fast, leading to quick completion of projects and faster revenue generation, which has resulted in a revenue of 488 crores in third quarter of fiscal '25 versus INR 439 crores in the third quarter of fiscal '24, recording a growth of 7%. The segment reported an EBITDA of INR 116 crores in the third quarter of fiscal '25 compared to INR 97 crores in third quarter of fiscal '24, which is a year-on-year growth of 19%. EBITDA margin stood at 23.8% in fiscal -- Q3 fiscal '25 versus 22.1% in third quarter of fiscal '24. Raymond Realty continues to focus on delivering projects within permitted time lines given our track record of delivering projects ahead of time line, which was well appreciated by our customers and resulted in increased customer confidence. Total potential revenue from our current real estate business is approximately INR 32,000 crores plus, which includes INR 25,000 crores from Thane Land, [ Parcel ] and INR 7,000 crores from the 4 JDAs, which we have signed. We remain optimistic about the continued growth in the real estate market overall. Our pipeline of projects continues to remain robust with several developments scheduled for launch in the coming quarters. As most of you are aware that Raymond completed the acquisition of Maini Precision business on 29th of March, 2024. Starting from first quarter of fiscal '25, the company has consolidated the performance of its Engineering business to include the Maini Precision business. The segment sales stood at INR 433 crores in the third quarter of fiscal '25 as compared to INR 217 crores in the third quarter of last fiscal. This performance was driven by the demand from the domestic market for the flex plates, which is an auto component. However, the engineering consumable and auto component category continued to be impacted by weak demand in the export sector. During the quarter, the business reported an EBITDA margin of 12% in third quarter fiscal '25 versus 13.8% in third quarter fiscal '24, mainly due to changes in the product mix. In order to get more efficient and benefit from synergies, we are consolidating auto components and engineering consumables business into a new subsidiary of Raymond Limited, where the aerospace will be another subsidiary via scheme of arrangement, which is expected to be completed in the next 3 to 4 months. Now let me talk about the debt and the cash position at Raymond Limited. We continue to remain a net debt-free business with a net cash surplus of INR 696 crores, an increase of net cash of almost INR 194 crores since March 2024. The total gross debt stands at INR 886 crores, which includes the debt taken for the acquisition of the Maini Precision business as well as the existing working capital facilities at Maini Precision business. Additionally, we maintained strong liquidity with cash and cash equivalents of INR 1,582 crores as of 31st December 2024. Now let me give you an update on the demerger. The proposed real estate demerger is well on track as we have received the stock exchange approval and shareholders and creditors approval. Upon completion of the process, the new entity will see 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. We expect to complete the listing in the second quarter of fiscal '26. In the Engineering business, as mentioned earlier, 2 new subsidiaries of Raymond Limited will be created through a scheme of arrangement, one focused on aerospace, defense and the other on auto components and engineering consumables, each charting its own path for growth and primary objective of value creation. Currently, we have filed the restructuring scheme with the NCLT. Now let me consider about the current status and the operations and the outlook for the business. In the real estate market, residential real estate market continues to demonstrate sustained demand. We are focused on future expansion through a joint development route and targeting 20% to 25% growth in booking value year-on-year basis. 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 is showing signs for growth, which got impacted by ongoing production issues faced by one of the largest aircraft manufacturers, leading to delays in dispatches. However, with the post addressing concern, we have witnessed signs of recovery. Additionally, recent softness in the auto component sector due to weaker market may impact the growth in the near term. Looking forward, we remain optimistic about our growth prospects. Our diversified business portfolio, strong market position and strategic initiatives will continue to drive value for all our stakeholders. Thank you once again for joining, and we would be happy to take your questions. Operator? Please ask for the questions.

[Operator Instructions] The first question is from the line of Garvit Goyal, from Nvest Analytics Advisors.

Congrats on the good set of numbers. My first question is on Engineering segment. Can you share the demand environment that you are witnessing in Engineering segment like the kind of order flows and which subsegment is contributing meaningfully to our growth in this segment? And where are we facing the challenges, sir?

Yes, I can take that. Okay. So the first thing is that in the last 2, 3 quarters, our efforts have been to look at all the businesses in a more integrated and combined manner and combine synergies that we have across the businesses. And in coming so, we also recently had an inauguration of some capacity expansions. We do see that the first -- the last 2 quarters were a little bit impacted, but I think the Q4 is definitely showing signs of recovery in terms of the market. It will take a little bit longer in some of the product ranges, but definitely, the trend is going to get better. We will see better exports in Q4 as well in some of the markets. We have, in particular, seen that the hybrid market in the European region has grown while the EV markets have slightly been dampened. And we are -- we have a lot of products in the hybrid market, and we're going to see that growth come this quarter as well. So overall, I would say we are in the right direction of growth in terms of that. In terms of our own tools and hardware business, also, we are seeing a lot of traction. We are looking at introduction of several new products into this section as well. And therefore, we would see better numbers in Q4.

And like you didn't mention about the order flows, like I'm trying to understand in Engineering segment, what are those key areas like it can be aerospace or defense. What are those key ideas from where we are seeing the biggest order flows that are going to give us a visibility for the upcoming quarters?

So the order flows are definitely -- you see what happens, most of our contracts are long-term contracts between 3 and 5 years, sometimes 10 years. So the orders are available. 2, 3 things happen. Depending on the market pull, you start to get more orders or less orders depending on the market pull. The main thing is to ensure that the new product development is at a high, which is what we are targeting at, where the new products are developed quickly and those further ramp up, and therefore, you get new products, new markets and new ramp-ups. And that's where the major business comes from. Boeing strike is called off. So we are -- there are inventories, which will be eaten away over the next 2, 3 months. And we are already seeing forecast numbers from April to be much higher. So we generally receive a 12-month forecast, so we can see where the markets are. And in some of the areas, we are also getting an additional market share. So let's say, our market share was 30% or 35% on some products. We are already seeing that they will take us to 60% or 65%. So in those cases, we will be able to increase just our current production significantly, especially in aerospace, which will also show us better numbers. Also, in the meantime, we are seeing a much healthier RFQ pipeline, which means that the conversion -- once we convert those, we will also see healthy orders going forward. So all trends point towards a much better Q4, but also a much better next year.

Understood, sir. And secondly, on the real estate segment, like are you people witnessing any kind of slowdown in terms of infrastructure CapEx from the government side in the upcoming budget? Or do you still believe like government is continuing to increasing the allocation towards this area?

I think that question is best answered by the government itself. But whatever we have seen in terms of lead indications, we don't see -- as of now, we don't see any kind of slowdown in decision-making for infrastructure projects. But rest is, I think, probably the government officers are best suited to answer this.

[Operator Instructions].

Sir, related to real estate, I just have 2 questions. First question is regarding demand side, I personally am very optimistic about real estate demand. But on ground, you are [ sharing ] some mixed signals that -- so just wanted to understand how is the demand situation on ground? And how is January? Is there any demand things moderating? Do you see any sign of demand moderating in Thane and Mumbai or any other market in MMR? That's my first question sir.

So I mean, to answer your question squarely, we have not seen any speed bumps in any of our projects so far. Well, you read the same media reports as we do. So media currently is giving mixed reports. Some people are saying that it's [ gung ] go and very bullish. Some people are saying it's slowing down. I don't know based on who you read, which paper you read, you form a view. But on ground, we have not seen any slowdown in any of our projects. We had given a guidance of about 20% booking value growth for the current year over the last year. And so far, we are on target on that and continuing to be even in January also. So I mean, that's our experience.

So that's very good news. And sir, I believe that you have launched a new project, GS 2 in Thane. How is the response are in that project?

Yes. So we launched one more tower in our GS 2, which is Tower E, which we launched recently, less than a month ago. And 30% of that inventory is approximately already sold on launch itself. So the response has been good.

And what was the ticket size of those typical ticket size of that launch, that Tower E?

Ticket size, meaning per apartment you're saying?

Yes, sir, yes sir, yes sir.

Yes, approximately INR 3 crores, depending on which inventory, which floor where you are at, but on an average, approximately thereabouts.

That's a great news, sir.

[Operator Instructions] The next question is from the line of Ishita Lodha from [ Svan ] Investments.

My question is with respect to the real estate business. how is the approval process shaping up? Is it becoming more harder to get approvals to launch the towers? Or has it eased out in the last few months?

Actually, there has been no change event for us to say that before or after because it's the same government, which has continued. So there is no significant change anywhere. So I mean I really don't know how to answer this as to what period should I take before or after. I mean we haven't faced any difficulty in any of the approvals so far. I mean we, in any case, as a matter of philosophy, do not go for any special dispensations from the government. It's -- everything is as per policy when we take on a project, it's under the current policy itself. So we haven't seen any difficulties in that.

[Operator Instructions]. As there are no further questions from the participants, I now hand the conference over to Mr. Amit Agarwal. Group CFO, for closing remarks. Over to you, sir.

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

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