Raymond Ltd

NSE:RAYMOND

Earnings Call Transcript 2025-Q2

[Operator]

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.

[Biplab Debbarma, analyst]

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. [ Sameer Desa ], Head, Investor Relations.

Without taking further time, I would like to hand over the call to Mr. Agarwal. Over to you, sir.

[Amit Agarwal, executive]

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 focus 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 [indiscernible] 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, and 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 or [ 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 surface 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 cost some premium aspirational brands. We at payment reality of affordable luxury apartments ranging from one to 4 BHK that caters to multiple segments of society.

In a [indiscernible] strategy to sell and construct [ first ], 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 [ 125% ]. 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 the quarter later.

As most of you are aware, we have a 100 acres of land parcel in Thane, which has a total potential of generating INR 25,000 crores revenue. Out of the 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 proximity 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, [ Sian ] 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 JDA 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 towards acquisition, making Raymond group entry into [indiscernible] 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 from INR [ 3,201 ] crores in the second quarter of last fiscal. This performance was driven by the demand from the domestic market for the [ fleet space, wing gear ] and shaft bearing categories, which is the auto component.

However, engineering consumable category continued to be impacted with the sluggishness in domestic and export market on account of weak demand and geopolitical. In 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 issued by one of the largest aircraft manufacturer, leading to delays in shipments.

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 plus of INR 685 crores, an increase of cash of INR 184 crores since March 2024. The total gross 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 rising interest cost can be attributed to the following factors. Interest costs of INR 14 crores on account of acquisition debt for Mining Precision as well as working capital debt at Mining Precision. And another interest, INR 4 crore interest cost is for the deferment of the approval cost payment [ toward Sumahada and PMC ].

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 [ and previous scheme ] automatic listing, according to the scheme of arrangement, each shareholder of Raymond Limited will receive one share of Raymond Reality limited for every share held in Raymond Limited. This will position Raymond Reality to pursue its growth trajectory as an independent pure fleet 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 team of arrangements, one focused on aerospace and defense, the other on auto components and engineering consumables, each carving 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, the residential real estate continues to demonstrate sustained demand. We are focused on future expansion through a capital-light business model via JDA and targeting 20% to 25% growth in booking value year-on-year. Further, we are currently in discussions to finalize 2 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 [ sales by one of the ] largest aircraft manufacturers leading to delays in this purchase. However, with the post addressing labor concern, 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]

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

[Unknown Analyst]

Am I audible?

[Amit Agarwal, executive]

Yes, yes.

[Unknown Analyst]

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?

[Amit Agarwal, executive]

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 one or 2 quarters, we see a stronger recovery there as well. I hope that clarifies.

[Unknown Analyst]

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?

[Amit Agarwal, executive]

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 that's 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.

[Unknown Analyst]

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

[Amit Agarwal, executive]

So if I look at it, roughly 15% comes from the aerospace and 65% comes from the auto components.

[Unknown Analyst]

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 concern, right?

[Amit Agarwal, executive]

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. That 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, too, with the other supply to different parts of the world.

[Unknown Analyst]

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

[Amit Agarwal, executive]

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, [indiscernible] anything? Yes.

[Harmohan Sahni, executive]

Yes. So this year itself we'll be crossing about [ same amount ], 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 4,000.

[Operator]

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

[Biplab Debbarma, analyst]

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, really strong numbers for Raymond in Q3?

[Harmohan Sahni, executive]

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.

[Biplab Debbarma, analyst]

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?

[Harmohan Sahni, executive]

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. Bombay that way is doing well. And I think it will continue to do well at least for the foreseeable future.

[Biplab Debbarma, analyst]

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 upcoming launches?

[Harmohan Sahni, executive]

In this quarter itself, it is the running quarter towards 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 the 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.

[Biplab Debbarma, analyst]

Okay. So you have one launch incoming, one launch outside, sir?

[Harmohan Sahni, executive]

That's right.

[Amit Agarwal, executive]

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

[Harmohan Sahni, executive]

You can hear the static also. The one we get from static. [Technical Difficulty] started.

[Operator]

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.

Ladies and gentlemen, the management has been connected back. Please proceed, sir.

[Amit Agarwal, executive]

Sure. Sorry for the -- I didn't finished the answer and maybe somebody else on the queue can ask the question.

[Operator]

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

[Abhinav Bhandari, analyst]

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 macro 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?

[Harmohan Sahni, executive]

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.

[Abhinav Bhandari, analyst]

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

[Amit Agarwal, executive]

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 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 [ profiles ].

[Harmohan Sahni, executive]

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 a cycle which each project, every location, every developer will experience. It's not unique to us.

[Abhinav Bhandari, analyst]

Sure. The numbers are actually from your presentation, sir, you give 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. The...

[Harmohan Sahni, executive]

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.

[Amit Agarwal, executive]

Yes, what you're seeing, as I mentioned, is 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 because I think we launched end of February, the 20th or...

[Harmohan Sahni, executive]

End of February.

[Amit Agarwal, executive]

And so you will see 3, 4 months very large number of bookings. And then as Harmohan said, first, 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.

[Harmohan Sahni, executive]

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 one 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, which 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.

[Amit Agarwal, executive]

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.

[Abhinav Bhandari, analyst]

Got it. Fair. The other question was on the 3 other projects that we have, Mahim, [ Sian ], and I think one more in Bandra. So these projects are at what stage today in terms of approval, registration, et cetera. And broadly, what we would take as timeline for launch for all these 3?

[Harmohan Sahni, executive]

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

[Operator]

We have next question from the line of [ Ujwal Lal ], who is an individual investor.

[Unknown Analyst]

Can you clarify that after the demerger in this company will -- exactly how it will be transferred?

[Amit Agarwal, executive]

[ JK House ] is the property of Raymond Limited and [ Stale ] and Raymond Limited.

[Unknown Analyst]

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?

[Harmohan Sahni, executive]

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 product in Thane they've been there for over 10, 15 years. In fact, we are the new ones.

[Unknown Analyst]

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

[Harmohan Sahni, executive]

Sorry I didn't get the question.

[Unknown Analyst]

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

[Amit Agarwal, executive]

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

[Operator]

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

[Unknown Analyst]

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

[Harmohan Sahni, executive]

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

[Unknown Analyst]

Do we have any internal targets to share in terms of revenue for the [ electric ] business?

[Amit Agarwal, executive]

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.

[Unknown Analyst]

Likewise, like in this quarter, we are able to grow significantly. So that is why I was asking like it [ is not going ] to be significantly well as compared to 20% to 25% growth that we are targeting.

[Amit Agarwal, executive]

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.

[Unknown Analyst]

Understood. And based on the earlier conversation, like you mentioned about automotive is going to be slightly weak in 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?

[Amit Agarwal, executive]

No, it should be better. Understood.

[Operator]

We have next question from the line of [ Prakasha ] from [ Anubati Advisors ].

[Unknown Analyst]

Sir, my question is with respect to the land bank. So currently, we possess the 100 acres of land. So -- and we have announced [indiscernible] of land projects affordably. 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 the in JDA format only going forward?

[Harmohan Sahni, executive]

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.

[Unknown Analyst]

Okay. Got it, sir. And sir, just one bookkeeping question with respect to this land bank. So this land back to 100 acre is line in our or it is in the fixed assets?

[Amit Agarwal, executive]

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]

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

[Unknown Analyst]

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

[Harmohan Sahni, executive]

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.

[Unknown Analyst]

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

[Amit Agarwal, executive]

Export is almost 2/3 is the spot. And as far as EV is concerned, it is a very small portion, very, very small 1%.

[Operator]

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

[Amit Agarwal, executive]

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

[Operator]

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.