Making ‘The Complete Man’ And More

As we sit marvelling the view outside the Glass House — the sprawling corporate office of Raymond amidst its vast campus in Thane — we are snapped out of it as a very dapper looking Gautam Singhania walks in a racing T-shirt and denims. He is just out of another interview with a French TV network.

“I am in my sportswear; another side of my life,” begins the man behind India’s most successful textile brand “The Complete Man”, referring to his passions — racing, fast cars and flying.

Singhania is the chairman and managing director of the country’s largest branded fabrics manufacturer and fashion retailer Raymond. But it wasn’t always this way. The company has seen many ups and downs in the last few decades.

His analytical skills turned around the once-beleaguered Raymond group. He led a major restructuring of the inherited business, which had lost focus with unrelated diversifications and amassed losses.

He, however, credits “the amazing Indian consumption story that now keeps us busy, with capacity building, technology adoption and network expansion”.

With the group back on a growth trajectory after divesting its non-core businesses and reducing losses, Singhania is set to roll out the next phase of pruning and growth. Under this, he wants to give Raymond a broader lifestyle tag by creating more product verticals and brands and expanding retail network and formats. There would also be a second round of pruning of the unrelated segments as the company wants to focus more on its core textile legacy.

The Changing Paradigm
In 2000, after taking over the Raymond group from father Vijaypath Singhania, as chairman and MD, Gautam Singhania brought about several changes in the 90 year-old group. Among these, the most crucial was the divestment of its loss-making cement and steel businesses. Both cement and steel units were sold the same year.

Exiting the non-core businesses allowed Singhania to focus on the core competence model. He shifted focus to textile manufacturing, apparel brands, men’s toiletries and prophylactics. In order to enhance capabilities and reach, he entered into joint ventures with international companies such as Gruppo Zambaiti of Italy to set up a greenfield facility to manufacture cotton and cotton linen shirting fabric at Kolhapur, and with Belgian denim major UCO NV for manufacturing denim in India.

Raymond group, which still has a diverse range of portfolio from fabrics and apparel to male-groom accessories and engineering products, has been constantly on the lookout for strategic moves to climb up the value chain.

The restructuring exercise also saw the transformation of the traditional textile business — which according to industry analysts was difficult to sustain — into a complete male-grooming brand over the period.

The company also inducted fresh talent in the senior level management. The professional team under the new CEO Sanjay Behl contributed significantly to the company’s current visibility in terms of branding, retail presence and creation of new verticals.

While making changes, the company ensured that it maintained the core manufacturing strength by focusing on technology to optimise efficiency and global competitiveness. At the front end, it experimented with innovative market approaches including new brands, custom tailoring and e-tailing.

The strategic expansion of the worsted fabrics and suitings leader into branded apparel and bed and bath linen, among others, along with creation of new verticals including Raymond’s Ready to Wear, Parx, ColorPlus, Makers and the latest Made-to-Measure and Made-to-Fit brands, have extended its reach to a much broader lifestyle market.

The Road Ahead
While its maiden international manufacturing footprint in Ethiopia enhanced its export capabilities to the US and the European markets using the special trade treaties between the countries, the company is also going strong on its local capacity building. Raymond’s new manufacturing commitment during the Make-in-India campaign, for instance, will almost double its textile and garment manufacturing capacity in the country.

In April, the company laid the foundation stone for its largest integrated textile and garment manufacturing unit at the textile park announced by the Maharashtra government in Amravati district, where it intends to invest at least 1,400 crore. “The Amravati project is in line with our future strategy to expand manufacturing footprint. The location is strategic not only because it is the largest cotton producing region but also due to the availability of labour, especially female workers as part of rural women empowerment,” says Behl. At present, Raymond has a built-up capacity for manufacturing 41.5 million metres of suiting fabrics at its two plants at Vapi and Chinddwara. Its Kolhapur plant has a capacity of some 26 million metres of shirting a year and 44.5 million metres of denim at its Yavatmal unit.

The other key areas of focus are expansion of product categories for key brands, brand building and expansion and modernisation of its retail network.

“We have many more new verticals on the drawing board, but I can’t reveal them now. As you know, every new segment takes its own time from concept to profit,” says Singhania.

As part of the broader lifestyle focus, Raymond has already launched women apparel under its Made-to-Measure vertical. And, this segment will be expanded in future.

“Raymond’s initiatives towards updating its apparel portfolio; removing product overlap in all four brands — Raymond Premium Apparel, Park Avenue, Color Plus and Parx; and focusing on aggressive product-centric marketing should continue to drive 17-18 per cent annual growth (CAGR) over FY16 to FY18,” says Alisagar Shakir, an industry analyst with brokerage Elara Securities India.

Creating a digitally-immersed company through its “omni-channel strategy” along with a unified and digitally-enabled customer loyalty programme are also being considered in the future growth plan, although Singhania is not ready to buy the current euphoria around e-commerce based on aggregator model.

“I don’t want to use my products to drive traffic to the discount-oriented aggregators’ business,” he says.

While the transformation into a marquee lifestyle brand through continued investment is the aim, Singhania’s thrust is on improving the return on capital employed. Hence, there will also be focus on re-engineering the manufacturing and supply chain to drive cost efficiencies, enhancing store performance and profitability and higher working capital efficiencies.

For his next restructuring targets, he is taking cue from the latest results. During the year 2015-16, especially the Jan-March quarter, the numbers in textile and apparel business moved on a high growth trajectory (Q4 net profit at Rs 56 crore was 162 per cent up against the previous quarter), despite heavy investments for retail expansion. But, the engineering business, the tools and hardware and the auto components units, remained on a negative track.

“The year 2015-16 was challenging due to subdued consumer sentiments and difficult global economic environment. However, we ended the year on a positive note driven by good growth in revenue and profitability, especially in the lifestyle business,” says Singhania, adding that the company’s sustained investment in brands, expansion and modernisation in retail network coupled with operational efficiencies are producing desired results. “We are also taking corrective steps to improve the performance of our other businesses.

When asked whether he will consider a new round of pruning for the non-performing businesses, he said “Why not? But, at a price.”

unni@businessworld.in; @unni_bw