Raymond Ltd

NSE:RAYMOND

Earnings Call Analysis

Company Aims for Strong Growth and Synergy Benefits

Company executives discussed expectations of high teens revenue growth and over 20% EBITDA growth in the coming 3-4 years, driven by strategic cost synergies from business integration. These synergies, including improved negotiation capacities on commodities like steel and shared best practices, are anticipated to enhance EBITDA margins by 250 to 300 basis points. The company's access to top auto OEMs is viewed as a considerable advantage. Consolidation of these benefits is expected to begin in the fourth quarter of FY '24, subject to regulatory approvals.

Market Context and Company Momentum

The quarter under review was marked by subdued consumer demand and seasonality, as inflationary pressures and high commodity prices dampened discretionary spending. A shift in the festival calendar also influenced consumer behavior, with events like weddings being postponed to later in the year. Despite these headwinds, Raymond maintained its growth trajectory, marking the ninth consecutive quarter of reporting its highest-ever revenue and EBITDA. Revenue grew by 27% quarter-on-quarter to INR 2,321 crores and 6% year-on-year, while EBITDA reached INR 382 crores, a remarkable 52% increase from the previous quarter and a modest 7% year-on-year growth.

Branded Textile and Apparel Segments' Performance

The Branded Textile segment experienced marginal growth, generating INR 933 crores with healthy EBITDA margins, despite the market slowdown. The Branded Apparel segment, however, exhibited robust growth of 18% to INR 437 crores, driven by new product offerings and a focused expansion strategy, leading to the opening of approximately 100 new stores across India. The EBITDA margin in this segment improved significantly due to premiumization and operational efficiencies.

Retail Expansion and Garmenting Capacity Augmentation

Raymond continued to expand its retail footprint with the addition of 63 new stores, including 40 branded outlets. The company is also executing on its strategy of enhancing garmenting capacity by a third to capitalize on the shift in global brand sourcing strategies. The segment's sales grew by 18% to INR 312 crores, although EBITDA margins were slightly lower due to costs associated with capacity expansion and employee upskilling.

Engineering and Real Estate Business Insights

Despite a slump in the engineering consumables sector, Raymond sustained its EBITDA margins and also bolstered its business with the acquisition of Mini Precision. In real estate, the launch of new projects in Thane garnered strong customer interest, with over 40% of the inventory sold. The real estate segment's performance was outstanding, with double the booking value compared to the same quarter last year, illustrating strong market receptivity to Raymond's developments.

Financial Health: Working Capital, Cash Flow, and Debt

The company's working capital increased due to inventory buildup ahead of the festive and wedding seasons. This resulted in higher net working capital and a net utilization of INR 171 crores in free cash flow due to CapEx and other outflows. Despite this, Raymond continues to maintain a strong liquidity position, with cash and cash equivalents of INR 1,712 crores. The total debt stands at INR 2,851 crores, which includes an NCD issuance viewed as a temporary measure pending the completion of a demerger.

Future Outlook and Guidance

Looking ahead, Raymond forecasts a strong consumer demand starting from November, continuing through the winter wedding season. The company plans to expand its retail network by opening nearly 200 stores in the next 12 to 18 months using an asset-light franchise model. The Garmenting segment anticipates sustained demand, with strategies in place to meet it through capacity expansion and strategic relationships, although raw material prices for linen are trending upwards.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the earnings conference call of Raymond Limited, Rosebank and Antique Broking Limited. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Ms. Priyanka river from Antique Stock Broking. Thank you, and over to you, ma'am.

[Aliasgar Shakir, analyst]

Thank you. On behalf of Antique Stock Broking, I would like to welcome all the in the earnings call of Raymond Limited. I have with me Mr. Jay Mukul, who is the Head of Investor Relations of Raymond Limited. Without taking further time, I would like to hand over the call to Mr. Mukund. Over to you Mukund.

[J. Mukund, executive]

Thank you, Priyanka. Good evening, everyone, and thank you for joining us for our Q2 Fy '24 earnings call of payment. I hope you would have received a copy of our results presentation. I would like to urge you to go through this along with the discover slides.

Today, we have with us from senior management of Raymond, Mr. S.L. Pokharna, who is Director of Raymond Limited; Mr. Amit Agarwal, Group CFO; Sunil Kataria, CEO of Lifestyle Business; Mr. Harmohan Sahni, CEO of Realty business. and Mr. Jatin Khanna, Head, Corporate Development. Now I would like to hand over the call to our group's CFO Amit, who will give you the summary of the company's quarterly performance before we open up for Q&A. Over to you, Amit.

[Amit Agarwal, executive]

Thank you, Mukund. Good evening, everyone. Thank you for joining us today for the earnings call to discuss the results of the second quarter of fiscal '24. Let me start with a brief overview of the market for the quarter.

The quarter witnessed subdued demand consumer demand and seasonality. The discretionary spending was impacted primarily due to inflationary pressures and continued higher commodity prices. Additionally, this calendar year also had a big mark which pushed the festival ceremonies and wedding towards the end of the year. With Petachperiod concluding in the middle of October, all festivals have been delayed, especially weddings have been pushed to November -- late November onwards.

Now let us get into the consolidated financial results for the second quarter of fiscal '4. Had the inflection point of its transformation journey, Raymond continues to attest its growth momentum with strong quarter-on-quarter performance and second quarter fiscal '24 was the ninth consecutive quarter that reported highest ever performance both in terms of revenue and EBITDA despite being in quarter impacted because of subdued demand, consumer demand.

Raymond reported revenue of INR 2,321 crores in the second quarter of fiscal with a growth of 27% on a quarter-on-quarter basis as compared to INR 1,826 crores in the first quarter fiscal '24 and by 6% on a year-on-year basis, over INR 2,191 crores in the second quarter of fiscal 2023.

This year-on-year growth was driven by our branded apparel and Garmenting segment and well supported by the Branded Textile segment. At the EBITDA level, we recorded the highest-ever quarterly EBITDA of INR 382 crores with a healthy EBITDA margin of 16.5% in the second quarter of fiscal 2024 with a growth of 52% on a quarter-on-quarter basis as compared to INR 252 crores in the first quarter of fiscal '24 and by 7% on a year-on-year basis, over INR 358 crores in the second quarter of fiscal 2023.

Also during the quarter, the company recorded a cost of about INR 4 crores during the quarter and recorded an equivalent liability under the share options outstanding account in other equity. This is according to the Raymond ESOPs scheme 2023 granted in the first quarter of the cafes call.

Excluding the ESOPs cost of INR 3.9 crores, the EBITDA would have been higher to the tune of INR 386 crores with an EBITDA margin of 16.6%. During the company -- during the quarter, the company also recorded an exceptional item of INR 23 crores relating to the voluntary retirement scheme in our engineering business.

Post this exceptional item, we reported net profit of INR 160 crores during the quarter compared to INR 159 crores in the second quarter in the previous year. Excluding this exception item, the net profit would have been INR 177 crores, which is 11% growth over the second quarter of the previous year. Now let me discuss about the segmental performance for the second quarter of fiscal 2024.

The Branded Textile segment reported a steady top line of INR 933 crores in the second quarter, a small growth of over INR 912 crores in the second quarter of last fiscal year. The EBITDA margin continued to be healthy at 22%, which is marginally lower compared to 22.3% in the second quarter last year. Here, I would like to point out that despite being a slow quarter with market witnessing lower offtake due to delayed festivals and wedding dates and Hindu calendar also had Adik mass additional months this year.

In the suiting business, we were able to garner some traction in the wood blended category by expanding the product portfolio across multiple sales channels. However, the B2C shirting business witnessed stable top line at the backdrop of new launches in the cotton blend category with growth driven in the multi-brand outlets channel.

Now let me talk about the Branded Apparel segment. The Branded Apparel segment showed a very healthy sales growth of 18% to INR 437 crores as compared to INR 370 crores during the second quarter of the previous year. There are a couple of reasons for this growth. One is our distinct product offerings with a new collection for the season that includes vast range of casual wear and increased premiumization.

Second, our focused approach of increasing our footprint and reach of our apparels brands, we have rolled out about 100 stores in the first half of the year across Metro Tier 1 to Tier 4 towns in Pan India business. Additionally, we have also increased number of doors in the multi-branded outlets and large format stores.

The growth was witnessed across all brands with Park Avenue, ColorPlus, Raymond Ready to Wear, leading the front and well supported by Park and Ethnix by women. The segment witnessed healthy EBITDA margin of 12.2% in second quarter of fiscal '24 as compared to 9.7% in the previous year.

The improvement is mainly due to premiumization and operational efficiencies. Now let us talk about the retail network. We continue to strengthen our retail footprint by opening 63 new stores during the quarter. With a focus to expand our chain of EVO's 40 branded outlets were added to our existing portfolios across all brands.

Ethnix by payment being the majority with 17 new stores for the quarter, taking it to a total of 92 stores for the brand as of 30th September, 2023. Although during the quarter, we have closed 17 stores, which is mainly a combination of relocation of stores and the closure of some past Park TVO as we are focusing on expanding the brand outreach through MBOs, LFS and online channel in line with our stated strategy.

As of 30 September, 2023, our retail store network stood at 1,453 stores spread across 600,000 town and cities in India. Now let us talk about the garmenting segment, which we explained earlier that we are expanding our garmenting capacity by about 1/3 in order to take the advantage of China plus 1 adopted prior to global brands.

Also, this capacity augmentation is in line with comments India's Make-in-India initiative. We continue to acquire new customers, and we are getting increased size of order from our existing customers. Accordingly, our sales have consistently grown over the last 2 years and in line with the trend in the quarter, we reported INR 312 crores, which is a robust growth of 18% as compared to INR 266 crores in the previous year.

As we supply to marquee global brands, product quality remains at the forefront as far as customer service is concerned. Therefore, we train our staff well to deliver the same. And as we undertake the capacity augmentation, upskilling of our employees is an ongoing process leading to a buildup of cost. This resulted in the EBITDA margin for the quarter to be at 7.3%, a tad lower as compared to 8.7% in the previous year.

In high-value cotton shirting seg, the top line was stable at INR 211 crores compared to the sales in the previous year. In the current environment of subdued consumer sentiment, the demand was stable for our cotton and linen fabric offerings by our B2B customers in the domestic market. EBITDA margin for the quarter at 13.2% also maintained as well as compared to the same in the previous Q.

Now coming to the performance of the engineering business, which is consolidated under JK File and Engineering Limited on an aggregate basis. The sales was -- stood at INR 201 crores in second quarter as compared to INR 228 crores in the second quarter of last fiscal. The sales in the engineering consumer category continued to be impacted by the existing sluggish export markets.

However, we continue to cater to the growing automotive segment, both in India and export market. In line with our stated strategy of business expansion, market consolidation and overall margin improvement, we have acquired the business of Mini Precision, which has a strong presence in the automotive segment and as well as into the sunrise sectors of aerospace, defense and electric vehicle components.

We will discuss about the same later in my remarks. Despite the challenging -- challenges in the engineering consumable sector, we were able to maintain the EBITDA margins at 12.7% for the quarter as compared to 12.8% in the previous year. Now let me talk about the real estate segment. In the second quarter, we launched new projects in Thane of over 1 million square feet with over INR 2,000 crores revenue potential.

We received an overwhelming response from the customers and sold over 40% of the launch inventory in these projects during the quarter. Overall, the real estate business showed a stellar performance during the quarter and reported a total booking value of over INR 650 crores in the second quarter of fiscal '24 across all of our projects, which is double the booking value as compared to the second quarter of last fiscal.

Also, I would like to highlight that we have sold more than 85% of the total units in the first 2 projects in Thane, namely Ten X Habitat and the address piece. We have around 100 acres of land in Thane, of which about 40 acres is under development with a estimated revenue of INR 9,000 crores.

The ballot plan of about 60 acres has a potential revenue of INR 16,000 crores, which can be developed over the next 2 years. Consistent that the land in Thane is finite, we have taken a leap forward by expanding our presence beyond Thane in the MMR region and will now be developing 3 residential projects based on the joint development foot.

Now the first project, which we all know is in Bandra with a potential revenue in excess of INR 2,000 crores. Last week, we announced the second project under the JDA out, where Raymond reality has been appointed as a developer for redevelopment of a prominent housing society located in Mihales spread over -- across INR 3.6o crores. The project is estimated to have a revenue potential of more than INR 1,700 crores over the project period.

Today, we have also announced that Raymond Reality has been selected as a preferred developer for redevelopment of a prominent society located in Science East, Mumbai spread over 4.3 acres. And we estimate revenue potential from this about INR 1,400 crores during the project period. First together, the revenue potential from these joint development projects in Memar outside of our Thane land is in excess of INR 5,000 crores.

Now let me give an update on the construction status of all projects. The construction momentum in all the 5 projects is going quite well. And especially in the Ten X Habitat project, first 3 towers have been delivered, which is 2 years ahead of the RERA timeline in December 2022.

In Tower 4 and installation is under progress, Tower 5 to 8, internal finishing is under progress. Tower 8 and 9, 37 and 36th flats has been completed respectively. In the adverse IVF project, 18 and 10 flats have been completed, respectively in Tower A and B. In the Ten X Eda project, the foundation has been completed for Tower B and [indiscernible] has been completed for Tower C. In the [indiscernible] season 2 and invested 5G project for this expiration is under process.

The business delivered a sales revenue of INR 243 crores, which was marginally lower by 2% as compared to INR 247 crores in second quarter fiscal '23. The revenue recognized during the quarter is not compatible with the previous quarter as we followed the percentage of completion method for revenue recognition, which is based on the incremental percentage of completion of different towers in different projects.

The EBITDA margin of 19.5% for the quarter as compared to 25.6% in the same quarter last year. The margins are lower due to initial launch costs for the new project be addressed by GS season 2 as well as the index 5G. Now let me talk about the working capital and the cash flows. As explained earlier, the festivities and winter weddings have been pushed towards the back end of the calendar year due to [indiscernible] .

Within the fact that majority of the facilities and weddings are in the second half of the financial year, inventory is made available across all channels in the second quarter in order to cater increasing demand in the second half of this fiscal year. Accordingly, the net working capital stood at INR 1,927 crore as on 30th September 2023, higher by INR 344 crores as compared to INR 1,583 crores as on 30 June, 2023, and higher by INR 435 crores as compared to INR 1,492 crore as on 30th September 2022.

In addition to the above seasonality and with the expansion of Ethnix by Raymond and other branded exclusive brand outlook, the inventory was higher during the quarter. As you are aware, we do primary sales to our sales channel partners, including wholesalers and franchising of our stores to cater to the festive season requirements post the construction in early October resulted in increase in receivables.

Also, the 2 new real estate projects being launched this quarter, there has been an increase in inventory due to construction costs as well as approval costs. Now regarding cash flow, due to the increase in the net working capital for the quarter, our operating cash flows have been utilized to the tune of INR 53 crores.

During the quarter, we also incurred a CapEx of INR 36 crores, mainly in the ongoing capacity expansion in the garmenting and engineering business and maintenance CapEx across our various plants in various businesses. With the increase in the net working capital and for CapEx and interest cost related outflows, our free cash flow for the quarter was a net utilization of INR 171 crores.

Now let me talk about the consolidated debt position. Our total porject stood at INR 2,851 crores, which comprises of external project of INR 1,151 crores and NCD issued by Raymond Limited to Raymond Consumer Care Limited of INR 1,700 crores.

We continue to maintain liquidity with cash and cash equivalents of INR 1,712 crores as on 30th September, 2023. I wanted to highlight that the issuance of INR 1,700 crores NCD by Raymond Limited to RCCL is a temporary arrangement, which will be netted off at the completion of the demerger. The demerger will result in 2 independent net debt-free pure-play listed entities for B2C-focused lifestyle business and real estate business, engineering business with significant liquidity surplus at the group level to spur the future growth.

The interest cost in the quarter is INR 89 crores, which is higher by INR 26 crores on a year-on-year basis as compared to INR 63 crores in the same quarter last year. The interest cost has increased on account of the following that there is an interest cost of INR 38 crores on the NCD issued to RKPL, which will be netted off at the completion of the demerger as the effective date of demerger is first April 2023.

Higher interest and lease liabilities on account of increase in the stores which are open has been taken on an mental basis. Now let me discuss the current status of the operations and outlook. As stated earlier, the onset of activity effectivities and weddings are delayed this calendar, we are leading to limited secondary sales.

[indiscernible] from the third week of October, we witnessed a progressive uptick in the consumer demand driven by festive calibrations and the start of the wedding season. we expect the momentum to maintain with a winter wedding season, which has started from November till February and March.

In line with our stated guidance, we are on track to expand our retail footprint and we'll be adding almost 200 stores in the next 12 to 18 months and will follow the asset-light franchise model. This will be driven by large store network expansion for Ethnix by Raymond to cater to fast-growing ethnix [indiscernible] markets.

In the Garmenting segment, export liver continues to be China plus 1 strategy, and we are focusing on building new strategic customer relationships and gearing up for the increasing demand with the capacity expansion, which is well under progress. In terms of our raw material prices, while the wool cotton and [indiscernible] continue to remain stable, however, prices of linen flat seed have also been on an increasing trend.

In the real estate sector, the strong consumer response or recently launched premium residential projects that addressed by CSPIs and tools and existing has been overwhelming in the current quarter as well, and we are witnessing strong booking momentum in our Hanek porject. In our Bandra redevelopment project, the initial work demolition of the existing buildings has been initiated and we'll be launching the project in due course of time.

In the Engineering business, as we announced last week, we have followed into the sunrise sectors of aerospace defense EV components through acquisition of business of Mining Precision Products Limited. This acquisition of many precision aligned seamlessly with our business strategy of business expansion, market consolidation and overall margin improvement.

As far as the business expansion is concerned, it's a strong foothold in aerospace component manufacturing since 2004, MTPL has integrated 3 sub-verticals, aerospace engines, aircraft systems, aerostructures. The extensive experience positions NPPL to supply the aerospace industry, leveraging long-standing relationships with international customers. And furthermore, NPPL has borrowed into defense programs planning across land, airports and naval platforms to collaborate with media differences in the U.S., Europe and Isreal.

With the acquisition, we will be complementing customers to scale up auto component business. Together, we'll be catering to global top auto OEMs in multiple geographies. We will leverage our existing relationship to sell MTPL products by enhancing our product portfolio and utilize NPP-existing global customer base to sell our existing products of JK files and engineering group. Margin improvement, the consolidation would help in driving synergies and operational efficiency.

We'll be building operational efficiencies across manufacturing, supply chain process, sourcing, product development and other operating cost synergies to supplement revenue and earnings growth for both the businesses.

Along with the above strategy, we have an experienced and focused strong management team in place. MPPL Founder, Mr. Gautam Maini, with his entrepreneurial mindset will be leading the consolidated engineering business, driving growth and create larger value for the overall engineering business.

With this acquisition, Raymond engineering business will emerge as a large scale provider of engineering, automotive, EV, aerospace and defense components definitely positioned to target high-growth precision engineering segment with a significant presence across domestic as well as international markets. Raymond Group has always believed in making India initiative.

And this acquisition will also provide an impetus to the China plus 1 strategy that has been benefiting us. Let me provide an update on the demerger of the Lifestyle business. Currently, it is in the approval stage with the regulatory authorities with SEBI, and we expect the process to complete in the first quarter of next financial year.

To conclude, I would like to reiterate that Raymond Group will continue to have 3 distinct vectors of profitable growth that will create shareholder value for each of the business. To achieve this, we have taken affirmative steps in the form of selling the FMCG business, demerging the lifestyle business and shaping the scalable real estate business and consolidation of engineering business.

With strong free cash flow and no major CapEx requirement, Raymond Group will remain net cash positive post the transaction. Now we would like to open the floor for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Priyanka Trivedi from Antique Stock Broking.

[Priyanka Trivedi, analyst]

So my first question is on our branded textiles business. So the growth of 2% that we have seen, what has been the volume-led growth and what has been the realization growth in this segment?

[Amit Agarwal, executive]

Sunil?

[Sunil Kataria, executive]

This is Sunil there. So I think we have seen a good hiding mix in our suiting business of polyol, which have done pretty well. So in the suiting business, we have seen a healthy positive volume growth, led, in fact, by the polyol fabric. And in case of the shutting BTG business, we have seen a flattish volume growth in line with the market.

So overall, I think if you see our EBITDA margins are pretty healthy. And one of the reason is that our mix has improved a lot with a large volume was being driven by [indiscernible] fabric.

[Priyanka Trivedi, analyst]

Okay. And if you have to look at our first half performance in the textile business, we have grown at almost 4% level. So what is the early guidance for the textile business in terms of the growth?

[Amit Agarwal, executive]

Look, first of all, we are not going to give a specific guidance. But as we have demonstrated so some of the growth sector, which you see very consistently delivered in the quarter with clearly the branded apparel segment, which witnessed 18% growth.

Second is the garmenting. Again, we are putting INR 200 crores of CapEx in this segment in order to expand the capacity by almost 1/3. So I think these 2 segments, we are very, very bullish that these 2 segments will give a significant growth. And overall, as we have always talked about that it is not just a question of 1 quarter or the other quarter.

Over a 5-year period, what we are seeing is in terms of revenue growth to the tune of early teens. And in terms of the profitability, we are seeing mid teens growth across the 5-year period in the Lifestyle business.

[Priyanka Trivedi, analyst]

Okay. And sir, my third question, you highlighted that the linen prices have been increasing. So what would be the impact in terms of the margins in our B2B shirting business, any guidance on that front?

[Amit Agarwal, executive]

Actually, we have been very fortunate in terms of -- because of our brand presence and the quality of fabric, which we made is like very high nature. Therefore, we have been consistently been able to pass on the cost increases, especially on the raw material side.

The last 2, 2.5 yeaars we have witnessed, the cotton price increase from INR 32,000 candy, it went to almost INR 85, 000, INR 90,000 a candy, but we have been able to contain and deliver consistently the margins because of the reason that we could pass on the raw material increased to the customer.

[Priyanka Trivedi, analyst]

Okay. And sir, lastly, my question is on your profitability in our JDA business versus our own land projects in the real estate business. And post that, I'll come back in queue. Japan?

[Amit Agarwal, executive]

Harmohan.

[Harmohan Sahni, executive]

Yes. So the profitability -- this is Harmohan. The profitability on our online has been quite stable. If you look at our gross margins and the EBITDA margin that we have, it has ranged between 23%, 25%, depending on which quarter we are in and how because we follow percentage completion. So it grows 1% or 2% here and there in terms of consistency. As far as JDA model is concerned, JDA

model also will give similar profitability in the range in early 20, from deal to deals, it can be different but it will be in a similar range.

[Operator]

[Operator Instructions] The next question is from the line of Varun Pratap Singh from ICIC Securities.

[Unknown Analyst]

So my first question is on branded April segment, wherein we have seen a very strong growth number. I mean, if we compare it with other companies, the number of peers are very, very healthy and strong. I just wanted to understand that what would be the same-store sales growth FSD numbers into this segment if you wish to call out that.

[Sunil Kataria, executive]

Yes. Okay, I think same-store growth would be in mid-single digits, it's like in that range. I think which, again, if you see the trend which we have seen of the industry in the second quarter, has been mostly negative to flat. So I think we have outperformed the industry also in the same-store, same-store like-for-like growth also.

And the 2 factors which have really contributed to a strong barrel growth is, one is, we have kept the focus in terms of our casualization journey that has happened across most of our brands. So I think that has started -- has the some of the growth. Second, obviously, our distribution outreach, where we are actually taking a very aggressive go-to-market approach in EBOs as well as expanding our large-format store and MBA footprint.

[Unknown Analyst]

Understood, sir. Very clear. And sir, my second question is on Ethnix. Now that we are close to 92-odd stores, which is quite a healthy number. Sir, like if you want to highlight the health of the business with regards to SSD revenue performance. So I mean anything in this segment, sir, this.

[Sunil Kataria, executive]

So I think we, as you have seen that we have ramped up the stores between January to really October. -- until now. And this is a period -- really, the wedding season has been very, very lean. And what we are seeing is that it's a good thing that we have now got a reasonable threshold level of stores the season has just begun around 20 days back. And I think this -- 20 days are telling us some very, very healthy signs that the way our sales per square feet is ramping up. It's a very progressive pace, but I can tell you we'll in a much better shape, maybe around 6 months down the line to really give some indication on the health of the business.

But what we are seeing 3 things which are really giving us good thing is that our product assortment is getting very, very strong reviews across consumers. So we think we have been able to map up a very, very clear positioning in terms of high-quality products that are very good pricing. Secondly, our field look experience that I think has also worked very well with consumers.

Now the third thing which is really happening is we are seeing the business scaling up as soon as the season has come up. You know that this business is very heavy thing to festive wedding business. I think this is the season which is really for season for us in that set.

[Unknown Analyst]

Understood, sir. And sir, one last question, if I may -- in the Lifestyle business, like if we break down our performance in terms of geography here, how would we compare revenue growth in Tier 1 and 2 compared to Tier 3 and 4 cities?

[Sunil Kataria, executive]

Which segment are you talking about within Life style?

[Unknown Analyst]

Sir, branded apparel.

[Sunil Kataria, executive]

Yes. So if you see our presence in Tier 4 and 5 and 6 is primarily through TRS, the Raymond stores, and we are focusing through our EVO route on primary Tier 1 and 2. So that's a very clear demarket strategy because we have a very large footprint already of 1,000-plus Raymond stores, which pan across some 60-plus cities in the country anyway.

So if I see that differentiation, I think we would really see that Tier 1 and 2 have performed well, which is in line with a little bit of take-up, which we've seen across the country. And I think that's panning out across Tier 1, 2 have done well. It's not a Tier 4 or 5 are bad, but I think there's clearly a difference between the 2 segments that we -- and now what we expect is see, a lot of our Raymond stores also are dependent on heavy skew towards wedding season because that's the time that gifting takes a very large play.

And we know that Raymond is part of almost -- I mean, you can't have a very complete without Raymond, it's almost a Jersey kind of thing. I think we expect this curve to flatten out a little bit more for us, and we'll see growth happening more uniformly across clusters and that's what is there.

[Operator]

The next question is from the line of Aliasgar from Motilal.

[Aliasgar Shakir, analyst]

So first question is on Bank. So you did mention you point on nicer, but would you be able to just tell you the kind of growth you have seen in Branded Apparel. How much of that would be contributed from Ethnix wear? And just that, what would be the growth in rest of the brands?

[Amit Agarwal, executive]

Ali, the Branded Apparel what we reported the number for the second quarter is that revenue. And revenue in the second quarter from Ethnix cannot be meaningful because we had no wedding, no festivity, Diwali, the share is not there. So what happens, everything what we have done is we have put the store, created the stores and make it available for the customer.

What I can tell you is that the Puja and the Diwali sales, which has been seen and which is not the expensive sherwani testing. In the kurta and all, we have seen that our product is liked by everyone so much. And the sales, what has been seen in the last 10 days is good compared -- better than what we had even expected. So I think true testimony of our wedding collection will be seen from now till end of December and then further more from February till May and all.

So as Sunil pointed out, that truly the -- how our Ethnix has performed, not performed, we'll come to know in 6 months from now, then we know exactly because soever,everybody likes our collection, but not -- next important is that the customer has to walk in, buy our product because the suit team any case is in to buy from us because that is a natural destination for any wedding. So this is an extension, we feel, and there is a significant believe with our franchisees and our trade partners that this would also do well.

[Sunil Kataria, executive]

And we have also in line with the fact that now we have a pretty healthy threshold level of stores, given this wedding season, we also upped our investments planned Ethnix, we clearly believe that it's a strong strategic opportunity for us, and we'll continue to build awareness for this brand.

[Aliasgar Shakir, analyst]

Correct. So I understand, in fact, that was my point that if our H1 has done somewhere about close to 17% growth, certainly 3Q, 4Q 1 because of the festive shift? And second, because Ethnix wear where you have, in the last 1 year added a very significant...

[Sunil Kataria, executive]

Quality to Ethnix is pretty much not meaningful.

[Aliasgar Shakir, analyst]

Current -- and that you, in the last 1 year, you have added a very sizable number of stores. So both contribution should drive H2, right? So H2 should be meaningfully higher than what we have seen in H1 in terms of the growth for Branded Apparel right?

[Amit Agarwal, executive]

Yes. That's absolutely the plan.

[Aliasgar Shakir, analyst]

Got it. Okay. Second, on the margin front for Branded Apparel. Now I just want to understand the trajectory from 2-point of view. One is that I understand raw material prices have softened. So how have we managed it, have we passed it on? Are we retaining some, given that we had taken really sharp price increases when the normal prices were going up.

And secondly, given the fact that you will be now in a heavy festive season and as you mentioned that marketing costs will be aggressive. So how will you manage both? And what is the kind of margin trajectory we should see for the apparel business in probably next couple of quarters and beyond?

[Amit Agarwal, executive]

Yes. So actually, I think we have discussed that our apparel margin is a question of achieving a certain scale because the operating leverage kicks in. And as you continue to open stores, which we talk to you in the next 3 years, 3 to 5 years, we are opening almost 500 stores. So every time you open a store, there is a small investment, maybe not so much tariff investment, but advertisement is there to bring the product and the customer to come in, it takes a while.

Second thing, as we want to expand the apparel category, Ethnix category in a very dramatic manner, these categories require a significant amount of advertisement. And as you would watch over the next few days, starting that we will come back with a very strong ad campaign. And we are going to invest behind the ad campaigns across the 4 Apparel brands plus Ethnix by Raymond in the next 3 years in order to create a sizable because this is an investment.

In the plant and machinery, you do CapEx in the branded business, I think that the investment is by creating the brand and putting the advertisement and market outreach. I think that is why you would see that our margins would stay around a similar level. I think anything between 10% to 12%, we would be seeing further coming quarters to see. And then over the next 4 years, I think we have always spoken that over the 4 years year, we should get to 14%, 15% of appeal margins.

[Aliasgar Shakir, analyst]

Got it. And what about the raw material price softening, how are we playing that? Have we fully passed it on? And has that played out in the existing inventory?

[Amit Agarwal, executive]

So after we look at the price softening, as I said, it is such a thing that we have been able to negotiate. We need -- we start making combinations, we making blends and so on and so forth. So effectively, in our business, we have not seen much of an impact because of dip and price increase, maybe 100 basis points here or 50 basis points here and there, it can happen from one quarter to another quarter.

But over the 1, 2 quarters, it gets stabilized. So I'm not so much seeing that the price increases because we also don't want to give a shock that if I were selling a trouser for INR 3,000, I make it to INR 3,500 and the next month, next season, I bring it down to INR 3,000 because that hurts the customer sentiment. So therefore, we are trying to maintain more or less the price parity. But we are also -- through operating efficiencies and other things, we are able to also maintain the margins in the business.

[Aliasgar Shakir, analyst]

Okay. Got it. And last on the textile business. So we have very clearly highlighted our strategy of both suiting business where we are expanding in the premium jackets and the shirting piece where we are kind of filling the gap in shirting price point that we have not been available.

And because of those 2 factors, our growth should be in the high single digit, which is something that we did in 1Q, but 2Q was an aberration maybe for the reason that you already indicated. So should we expect this strategy to enable us to do that high single-digit growth, probably maybe in the third quarter onwards. And you did mention October, late October has already started showing traction. So is that playing out well?

[Sunil Kataria, executive]

Yes. So I think 2 things would happen in this. I think from a midterm first to long-term perspective, the strategy stays true for us. Very clearly, we see that we'll do a lot of premiumization in the suiting segment.

We're already seeing Polyvore fair we're investing with new products as well, ensuring as you already rightly mentioned, and good to see that you recall that, that we are filling up the gaps in terms of mask-to-mask premium price points. And parallelly, we are also expanding our outreach, which we think that is a huge scope to grow that in the shirting business.

Now what will happen is in going forward in quarter 3, quarter 4, I think as the season picks up, I would say this mid-single-digit strategy should pan out between the 2. There could be a quarter here and there of some base effects, which may come in because of primary, secondary mismatches of the 2 quarters.

But as I'm saying, we are a 6-month period, 1-year period, yes, we stayed true to this projection that we have given. Plus one thing which is also panning out well for us is, as we said, that we also are looking -- we also started introducing a shirting business some very differentiated products like print.

Now we're finding casualization is a theme which is not ready made apparels. It is a theme which is make across way to stick segment as well. So I think that in other segment, you'll see some of the maybe in coming quarters, some campaigns will also happen around that, where the product development is already rolling out in the market. plus, hopefully, in the next quarter, we also will tell you something new product developments and new segments that we are creating within our suiting business in line with the premiumization strategy. To cut the very short, we'll hold true to this mid-single-digit kind of growth for a period of to 12 quarters, definitely, we should do that.

[Aliasgar Shakir, analyst]

Understood. This is very clear. Understood. And just last question is on the demerger process. I mean, there are we on that and when should we expect that to conclude?

[Amit Agarwal, executive]

Yes. Ali, you know that in India, any demerger from the time of announcement is a 12- to 14-month process. We have announced end of April. Based on our processes, we look very comfortable. In the first quarter of next year, which is 12, 14 months, we should be able to achieve the demerger. I think the process is completely on.

We are expecting very shortly the NOC various people and then launching with NCLT. And after the demerger is a traditional 35 to 45 days to take for listing. So I think first quarter, 30 June, 2024, should be possible to complete the demerger and the listing of the 2 businesses effective.

[Operator]

The next question is from the line of Pritesh from Motilal Oswal.

[Unknown Analyst]

Firstly, congrats on the delisted business for ramping up your non-Thane in the pipeline. Safe to say all these 3 projects that we have acquired, including the older one, which was being Bandra, would be launched in the next 12 months.

[Harmohan Sahni, executive]

So as far as Bandra is concerned, Bandra launch is imminent, and we set the last stage of approval. So it should happen either within this year or early next financial year. But as far as our plan is concerned, we are budgeting it for it to happen in this financial year itself. So that's Bandra.

As far as the other 2 projects are concerned, they both come to us now. And by the time we finish all the planning and approval process, it is going to be easily the 12 to 14 months and not before that, we will be able to hit the market. So typically, in a real estate project, as you know, I mean the time to market is about 18 to 24 months. But of course, we work slightly differently than we in current shot. So for us, it is going to be about 14 months or so.

[Unknown Analyst]

Sure. So I mean, what I meant was FY '25, we should see all these 3 projects coming online and contributing towards presales residential pieces.

[Harmohan Sahni, executive]

Yes, definitely.

[Unknown Analyst]

Okay. Okay. And just from your broad estimates, since you are closer to launch Bandra, right, the revenue potential that you indicated for Bandra even for the recent new 2 new projects, any upside potential in terms of pricing that we might have assumed when we have underwritten these projects versus probably where the market is right now, specifically Bandra was at least 1, 1.5 years back. And since the prices have increased a bit. So any sort of divisions that you expect in terms of pricing?

[Harmohan Sahni, executive]

Give us the pleasure of surprising you positively.

[Unknown Analyst]

Hopefully,yes. Sure. And just lastly, I think on the P&L side, we have one line item, which is which is cost towards the end of property, which is in this quarter, a little unusually high while in the presentation, you have mentioned that we are still on the 19.5% EBITDA margin. I mean crop 19.5% to margin. So is this INR 284 million crores all related to the residential segment? Or there is some other amount also included in this?

[Amit Agarwal, executive]

All our residential and basically, what we mentioned in if that basically, when you launch a project, there is an advertisement cost, there are certain onetime approval costs which you need to incur, and that is a P&L item, and that is why it is respected into this. And therefore, the margin of normal 24%, 25% is reflected in this quarter to the tune of 19.5%.

[Harmohan Sahni, executive]

So we've launched project.

All around the same time. So the marketing expenses are a period cost and they don't get amortized over the life cycle of the project like all the other costs. And since their period cost, they come and hit upfront. And the bulk of the cost goes right up front because at the time of launching, we have to make the market aware of the product being available. So that's really the impact that you're seeing. It will kind of even out over the next couple of quarters.

[Unknown Analyst]

Got it. But just I was -- I mean got that point, but I was just wondering, we had net sales -- I mean, net revenue in the listed business of INR 243 crores while this expense item is INR 284 crores, right? So -- and still we are saying 19.5% was this EBITDA margin. So where is that disconnect?

[Amit Agarwal, executive]

Out of that, INR 100 crores plus is the win right cost. So P&L impact is late, INR 160 crores only.

[Harsh Shah, analyst]

Okay. Okay. So yes, there is some item which is netting of about [ INR 164 crores ] prefund that is where it's getting interest go for it. Fair enough. Yes. That is from my head all the best for all the upcoming launches. And Happy Diwali to you and you whole team.

[Operator]

The next question is from the line of Varun Pratap Singh from ICF Securities.

[Unknown Analyst]

Sir, my question is on engineering business. I understand our guidance of high teens revenue growth and 20% plus EBITDA growth for next maybe 3, 4-odd years. But just wanted to understand that given like we mentioned about cost synergies between the existing business and the new business.

So like how do we objectively measure with regards to the so-called cost synergy between the 2 business also, I mean, given that auto is a common element between the 2 things, between the 2 pieces of business. But if you can give some understanding about the cost, the synergy element and as a consequence, the EBITDA margin improvement, et cetera, into the consolidated numbers.

[Amit Agarwal, executive]

Sure. Well, look, fundamentally, what we are saying is the synergy between the 2 business would deliver me 250 to 300 basis points improvement on synergies. Now the way the synergy will work out. For example, both of us both the businesses by a lot of steel. There is a clear possibility to negotiate on the steel.

In terms of manpower, the way we are structured, that is there a way we can create a common deal so that would also help. Third thing, in terms of exchanging better practices that there has been a lot of innovation on both the sides. We can exchange the practices, good efficient practices on both the sides, which will help us reduce the cost.

So plus -- for example, right, clearly, we keep the warehouses, wing plus keep the warehouse, even mining keep the warehouse in different parts of the world, maybe we can share together a warehouse so that the space utilization can improve and the rental can receive. So there is a plethora of activities which we have identified, which will enable us to get to the synergy benefit.

And on top of it, I think the fundamentally the biggest thing, which I mentioned in my prescript was that you see we supply to some of the top auto OEMs and mining supplies to some of the other top OEMs. If we get an access in these together, we can cover practically all the top auto majors, which is the single biggest achievement which one can do.

And you know it is very difficult to enter into an auto OEM if you don't have an earlier relationship. And that is, in my opinion, one of the very large synergy benefits, which will come into this business.

[Unknown Analyst]

Understood, sir. And second question is by then -- I understand like we have given a guidance that by FY '24, we are expected to close the transaction. But still, like by the end of Q4 or by when are we expected to start consolidating the numbers?

[Amit Agarwal, executive]

In Q4, we will start consolidating. But obviously, it is subject to some of the [indiscernible] as we mentioned, that there is a certain external approvals are acquired. So post that, we will be able to consolidate and we expect that to happen during the fourth quarter.

[Unknown Analyst]

Okay. Okay, sir. And sir, last question is, again, in the apparel segment. So there has been one common observation that the premium price point maybe not growing as fast as the value price point. As a consequence, we see several old or several companies entering into the value format.

For example, Soperton entered into the Zudio kind of a market at the price point Reliance has entered into the same market, Arvind exist in the same market now maybe ramping up their plants, et cetera. And also, I mean, for example, if we say last 4, 5 years, there has been examples of few companies not growing maybe the store expansion, for example, Zara would not have added much stores over the last 3, 4 years.

So having said that, I understand our portfolio is relatively strong, robust, and we have all price points also which we are catering to. But having said that, given so much of excitement, for example, trends result also, it has been quite strong and so much excitement around this so-called value format, given that we have entered into Ethnix, do we also not aspire to maybe enter into this very segment where there is this much of excitement?

[Sunil Kataria, executive]

Okay. So I think first of all, I think there are 2 parts to happening -- there's 2 phenomena very clearly happening in India. India is seeing a very large wave of premiumization which is very clearly panning out that every segment that you take, whether it's automotive, whether it's real estate, whether you see, there's a large piece happening that the premiumization is playing out.

So people who always have money, who actually have the money disposal, they're actually spending more and more on high value items. And that's where we are obviously a trend very clearly product portfolio. Second trend, which is happening is, yes, there's a takeup happening in the mark trends, there's a down trading happening. So both prevention down trading are playing out. In down trading, you're seeing this trend at the players who are below 500, 600 segment that also you see some deals happening.

Now the question for us is a very clear large player already possible. We play in the mass premium to premium end. So I think there's a huge scope for us across our brands on multiple vectors of growth. One is that we are going through an expansion of go-to-market, which is standard across brands.

Second, we are going through casualization. Third, we are going through premiumization. So I think -- and forth factor is getting into a new adjacent category like ethnic. So for us, there's enough large market to grow that rather than change our strategy or looking at it to a sub-60 kind of value for money segment, we don't see that as a critical area for us.

We have enough room to grow across between mass present premium and through adjacencies. And that is something which we're doing. Having said that, our park brand anyway, that's a conscious call, which has happened in the past strategy that part will not do EBOs because there we -- it's a value brand. It is not a 500 minus brand. It's a brand which is, I would say, mass brand I would say.

And that segment we are catering to the past. And we think there, we would rather not spend money on EBOe rather go and spend outlet to multi-brand and large garment stores where there is an automatic flow of consumers. So that we can partisan there.

[Amit Agarwal, executive]

And also just to add that look as Raymond, we have got 12 million CRM base. And the way the affluence is coming in our country, this will always show that people moving up the value chain. If we are able to cater to even that much of a segment, even 50 million customers, if we are able to cater to, I think the revenue has a full potential to grow in high teens or even crossing 20% plus growth in the apparel segment. It is such a big market.

[Abhijeet Kundu]

Understood. Understood. And sir, what about Beauty segment? For example, we have seen a listing of some of the beauty companies also. And as -- like Raymond has been relatedly under indexed in the beauty side. So will be also not aspire to enter into this very segment and kind of exist with the lifestyle or apparel dominated plus the category symptom that we are doing? That's my last question, sir.

[Amit Agarwal, executive]

Yes. Look, at the end of the day, you see we get sold over business, which was into the personal care. Now there is a reason why we sold the business. Though we have absolutely no noncomp available. We can start the FMCG business from today to tomorrow.

However, what I want to add is that we believe there is a significant growth potential across our all businesses; b, is the branded fabric, through big way in asserting. Second thing on the branded FRL, our revenue, even if you take the INR 1,500 crores, INR 1,600 crores, this is a $50 billion market, growing to $75 billion market over the next 5 years.

So there is a huge opportunity and the whole shift is happening from an unorganized sector to an organized sector. That opens a lot of space for people like us. So therefore, we feel that there is significant opportunity in our own segment to cater to, and we can do a much better business, which you know, and you have done it for so many years.

[Sunil Kataria, executive]

And also within the Lifestyle current business mandapas itself, there are so many adjacencies which are possible, which we can nurture I would rather focus where we have a right to win, which is so obvious to us rather than getting into segments where you can say, okay, is our right to and really, very clear.

[Operator]

The next question is from the line of Robin Matthews from Equity Intelligence India Private Limited.

[Unknown Analyst]

I just had a quick question on the financials. Can you share a little bit more light on why there was an increase in the receivables? And maybe on this segment, is it primarily for the branded apparels? If you could just give a little bit of explanation on that, that would be good.

[Amit Agarwal, executive]

Sure. Look, as we talked about that the dealers and the franchisee are expecting a very strong second half of the year based on the festivities as well as the wedding season. So normally, what happens when they buy the product, they bought the product mid- to late September, and that stood as receivables in our portfolio. So this is primarily for the Lifestyle business. And it is a classical case because of seasonality. Every year, the same thing happens.

Now this time, it is slightly more delayed because the Pitu continued till 15th of October. Otherwise, you would have seen by 14th of September, 15th of September, the [indiscernible] over. So people start to take the material in mid of August, whereas this year, they started to take mid to late September. And that's the simple reason, which we believe can be during the quarter -- this quarter and the next quarter, we will be able to bring back to the normalcy to the working capital.

[Operator]

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Amit Agarwal, Group CFO, for closing remarks.

[Amit Agarwal, executive]

Thank you very much, and we convey our wishes of happy Diwali and prosperous New Year to each 1 of you, and we will talk in the next year. Thank you.

[Operator]

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