Raymond’s investors grapple with uncertainty as a dispute between CMD Gautam Singhania and his estranged wife Nawaz Modi plays out in the open 
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Raymond’s investors grapple with uncertainty as a dispute between CMD Gautam Singhania and his estranged wife Nawaz Modi plays out in the open The last few weeks have not been easy for Gautam Singhania, the 58-year-old Chairman and Managing Director of Raymond. A very public spat between him and his now estranged wife, Nawaz Modi Singhania, has not gone down well with the stock market, sparking a 14 per cent fall in share prices in November.
The family battle has a professional angle, since Nawaz Modi is a non-executive director of Raymond. Singhania has requested privacy, but there are concerns.
A recent note by proxy advisory firm Institutional Investor Advisory Services asks how “private” the lives of listed company CEOs ought to be. “A CEO’s divorce can affect the company in many ways. First, a divorce may impact the CEO’s efficiency. There is a growing body of work that suggests that family conflict often spills onto the workplace,” it said. Then, there is the impact on ownership, where a CEO holding a substantial ownership stake in a company “may need to sell or transfer a portion of this stake to meet the conditions outlined in a divorce settlement.” Per reports, Nawaz Modi has sought 75 per cent of Singhania’s wealth, estimated at $1.4 billion.
The firm’s independent directors, meanwhile, have hired legal counsel and have assured shareholders that they will protect the interests of all stakeholders.
The head of research at a domestic brokerage says the dispute is worrying. “Ultimately, investors put their money behind individuals and back them. When we are dealing with issues related to ethics around the family, it does spill over to the business and has a very adverse effect on the shareholders.”
The dispute’s impact on the company’s fortunes is not clear. In FY23, its consolidated revenue stood at Rs 8,337 crore with a net profit of Rs 537 crore, which was twice that of the fiscal preceding it.
The business is broken into six segments: branded textiles, apparel, garmenting, high-value cotton shirting, engineering, and real estate. The sharpest revenue spike is in real estate, which has grown from a modest Rs 20 crore in FY19 to Rs 1,115 crore in FY23. The company has 120 acres in Thane, Maharashtra, of which 24 acres are currently being developed. On July 11, Singhania told Raymond shareholders that three projects are underway in Thane with the permissions received for a fourth.
It appears to be in good health in other respects, too, especially after the slump sale of its FMCG business consisting of brands like Park Avenue (deodorant) and KamaSutra to Godrej Consumer
Products last financial year for Rs 2,825 crore. “Recently, we announced the sale of our FMCG business, which has enabled us to become net debt-free at the group level. The sale of deodorants and [the] sexual wellness portfolio along with the Park Avenue and KamaSutra trademarks, to Godrej Consumer Products is a move in this direction,” Singhania said in a letter to shareholders.
The other big news was a demerger of the lifestyle business to simplify the group structure. Consequently, the currently-listed Raymond Ltd will primarily be a real estate firm with investments in engineering and denim. Raymond Consumer Care, the lifestyle business, will be listed and house the textiles, apparel, garmenting, and shirting businesses with the ColorPlus, Raymond, Park Avenue (shirting), and Parx brands, among others.
A report by Motilal Oswal Financial Services in September, much before the dispute became public, outlined that Raymond is an established brand, but its penetration remains significantly underexplored. Over the last two to three years, the company has been revitalised through strategic initiatives and a strengthened senior leadership team. Plus, the restructuring will drive growth, it said. “These efforts are likely to be the key growth drivers going forward. We expect consolidated revenue/PAT growth of 10 per cent/19 per cent over FY23-25.” Specifically on real estate, it said steady execution has resulted in a pre-sale of Rs 4,200 crore since its launch in FY19. “We believe the large opportunity size, healthy balance sheet, strong cash flow potential, and emphasis on capital allocation should aid in achieving the annual project addition targets of Rs 2,500-3,000 crore.”
Investors will hope that this earlier optimistic scenario will continue in the changed circumstances.
@krishnagopalan
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