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Raymond share price rises 20% on demerger announcement, debt reduction plan

BusinessToday.In     November 8, 2019

Raymond share price rose almost 20% intraday to Rs 808.4 today after the textile-focused conglomerate announced demerger of its lifestyle business into a separate entity that would be listed through a mirror shareholding structure, meaning every shareholder of Raymond will be issued shares of the new company in the ratio of 1:1.

Furthermore, the textile sector company said it would use the entire net proceeds amounting to Rs 350 crore from land sale of JK Investo Trade (India) Ltd (JKIT), an associate company, to repay debt thus deleveraging its balance sheet.

Raymond stock opened with a gain of 3.16% on the BSE and later rose up to 19.99% to the intraday high of Rs 808.4. The stock has traded in a wide range of Rs 113.4. The 'textile group' stock with Rs 10 face value trades higher than its 5, 20, 50, 100 and 200-day moving averages.

Although the stock price of the small cap stock with market cap of Rs 4,512 crore has fallen 4% year-to-date, it has risen over 36% in last week and 47% in one month, respectively.

Volume-wise, shares amounting to 5.12 lakh and 80 lakh shares changed hands on BSE and NSE counters, both above 5, 10 and 30-day average volume traded. Raymond shares traded 9.4% away from the 52-week high of Rs 885.

As per market depth data available with the BSE, there is 92% buying against 85% selling on the current stock value.  

The demerger will create a clear demarcation of lifestyle and other businesses leading to the simplification of the group structure, the company said in its regulatory filing.

The new company will have the businesses of branded textiles, branded apparel and garments while the existing company will retain real estate projects, Thane land bank, B2B shirting business, engineering businesses of auto components and tools and hardware, denim and FMCG businesses.

In another development, Raymond announced the allotment of equity shares and compulsorily convertible preference shares (CCPS) worth Rs 225 crore and Rs 125 crore respectively to JK Investo Trade (India) Ltd (JKIT), an associate company, against the infusion of net proceeds of JKIT land sale that was announced in October 2019.

The allotment of equity shares and compulsorily convertible preference shares (CCPS) was done at Rs 674 per equity share value. The total of Rs 350 crore will be used to repay debt thus deleveraging the balance sheet of Raymond. The decisions are subject to the approval of the shareholders, the filing added.

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