‘Cash generated will go towards debt reduction,’ says Raymond CFO – ET Retail

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New Delhi: Fabric and fashion retailer, Raymond plans to focus on generating free cash flow across its businesses and use that money for reducing its debt, said Amit Agarwal, group CFO in interaction with ETRetail.

For the quarter that ended December 31, 2022, Raymond’s net debt stood at Rs 932 crore against Rs 1,286 crore as on September 30, 2022. The company reduced its net debt by Rs 354 crore.

“This is the highest net debt reduction in a quarter through internal accrual,” Agarwal said at the company’s investor conference held on February 2.

Raymond’s gross debt and liquidity levels stood at Rs 2,022 crore and Rs 1,090 crore as on December 31, 2022, respectively. The brand generated an operating cash flow of Rs 492 crore and a free cash flow of Rs 416 crore, which was primarily used for debt reduction.

Talking about the company’s cost optimisation strategy, Agarwal told ETRetail that the retailer has reduced its working capital to 60 days from 90-95 days, which was 3-4 years back. This leaves a lot of cash which can be used to reduce debt or grow the business, he added.

Explaining more, Agarwal said that every cost spent in the company has a proper justification attached to it. “We are ensuring that the sustainable cost reduction of Rs 400 crore we took during the pandemic, is still in the books and is not getting diluted.”

Commenting on cash flows, he said that Raymond plans to focus on asset-light growth and not invest significantly in CAPEX. “Whatever cash is generated will go towards debt reduction,” Agarwal stressed.

Raymond has exercised the option of lower corporate tax rate which has resulted in one-time net impact of Rs 73.5 crore in the profit and loss account, the company said in its earning statement.

Raymond’s retail biz & store expansion

The company’s retail business saw robust demand, said Agarwal adding that the average ticket value increased by 25 per cent compared to last year, especially in the wedding market. “We are seeing our customers upgrading to higher ticket products.”When asked if the increased spending is driven primarily by metros, Agarwal said that because of inflation, the ‘need’ consumer is facing challenges. However, the ‘want’ consumer, which is available in both tier 1 and 2 cities, is going out and spending more due to the rise in disposable income.

In the investor conference, Agarwal said that the inflation pressure for the last three quarters has led to a K-curve recovery. Discretionary spend has been impacted for low-income households, while there is an upsurge in consumption in high-income households.

He added that with CPI inflation pressure easing off and a pro-middle-class budget, consumption is expected to improve over the coming months. “In the near future, a large number of wedding days are spread in the month of February and March, we expect the trade channel to gain momentum in anticipation of strong secondary sales, which is expected to drive demand.”

In terms of store expansion, Raymond plans to open 70 stores across the country in the current year primarily driven by its ethnic wear stores under the brand Ethnix.

Raymond has seen a strong recovery post Covid. It also entered the real estate business using its land parcel in Thane and has started other joint development projects in Mumbai. These projects have a net positive cash flow thanks to land ownership and delivery before schedule.

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