From setting up a suit-making facility in Ethiopia to venturing into real estate business, Raymond has been testing out various strategies to enhance shareholders value. The home-grown luxury brand has clear plans to tap the mass market segment even while catering to the needs of movers and shakers.
In conversation with BusinessLine, Gautam Hari Singhania, Chairman and Managing Director, Raymond, shares his thoughts on the way forward for the diversified group. Excerpts:
You are venturing into the real estate business but wanted to sell the land parcel earlier. What changed in between?
I think we looked at the options of selling the land. The total land parcel is 140 acres and we are developing only 20 acres ourselves right now. We find this the best way to create shareholder value.
Our pre-launch sales were beyond expectations. About 98 per cent of the apartments are 505 sq ft and 645 sq ft. There is no commercial segment in the first phase.
So, out of 3,000 apartments, only 150 apartments are 3- and 4-bedroom.Everything else is two bedrooms.
You are entering real estate business when the sentiment is low. How do you see it?
I look at it differently. I am the latest entrant into real estate. So, my opinion really does not matter.
We have a historical land cost. We are really trying to increase the NPV (net present value) of the land by developing it ourselves. We are looking at a revenue of ₹4,000 crore when the total project is done.
We target to complete the project in 42 months, but will push to do it earlier. I have to move volumes and can take lower prices because the component of land costs in my books is zero as opposed to somebody who has just bought land.
Why did you opt out of joint venture plans in real estate?
I believe that you end up leaving too much on the table for the joint venture partner.
Real estate business is in three parts – statutory approvals, design execution and sales. Now, all approvals are in place. We will get a reputed contractor for execution. Design is already done. If the product is right, there will be sales.
Why should I leave so much for a joint venture partner? Selling the land parcel to settle a part of debt is still an option.
It is a work in progress. We have not taken our eyes off it. The plans to exit non-core auto engineering, which is about ₹600-crore business, is also being considered.
Do you think most real estate developers have focussed only on the luxury segment?
I have to move volumes. I am committed to create affordable housing. When you have 3,000 apartments in phase one, I have no ego to go for either 500 sq ft or 2,500 sq ft.
I will not get a significant advantage the way I see it, except to my ego, which is not making money.
How difficult it was for you to take a step back and professionalise the organisation?
If you are committed to your vision, then it’ll happen.
Obstacles are what you see when you lose sight of the target.
If you had asked me five years ago if I would see myself here today, the answer would be no.
Today, I do what is right for the organisation, which is now dynamic. There are a lot of things you cannot predict. You got to adapt to it.
Do you think promoters should take a larger role instead of sticking to day-to-day operations?
My job is really to find somebody to do my job. There is a difference between giving up day-to-day operations and not working.
I am busier than I have ever been. It is just that I am doing different things.
Today, I do not need to look after production, but maybe one day I will. Eventually, my job is to create shareholder value and look at different strategies.
How do you see the demand for your FMCG products?
Any product that is priced well will find a market.
For instance, in our real estate project, we target affordable homes of 505 sq ft and 645sq ft. In Raymond, you can buy fabrics at ₹250-₹300 (a metre) and also for ₹10 lakh (a suit length).
That’s the power of the brand. Last year, we opened 300 stores, and our target is 250-300 additional stores this year.