Raymond Lifestyle Limited — Q3 FY25 earnings call

Call held 31 Jan 2025

Management summary

Raymond Lifestyle Limited reported a mixed Q3 FY25, with overall revenue up 2% to INR1796 crores, but EBITDA margin compressed to 12.3% due to weak consumer demand, scale deleverage, and upfront investments. While branded textiles saw a 6% decline, branded apparel and garmenting segments showed growth. The company remains focused on strategic expansion into new adjacencies like ethnics, sleepwear, and innerwear, and anticipates a return to strong growth and a sustainable 15% EBITDA margin in FY26.

Highlights

  • Revenue of INR1796 crores, up 2% YoY.

  • EBITDA at INR221 crores, with an EBITDA margin of 12.3%.

  • Branded Textile segment revenue declined 6% to INR856 crores, with EBITDA margin at 18%.

  • Branded Apparel segment revenues grew 5% to INR458 crores, with EBITDA margin at 9.6%.

  • Garmenting segment revenue increased to INR309 crores, with EBITDA margin at 7.8%.

  • Net debt-free position with net cash of INR61 crores.

  • Net working capital improved to 89 days (INR1,553 crores) from 97 days (INR1,692 crores).

  • Expects to return to growth trajectory in FY26 and achieve 15% sustainable EBITDA margin.

Concerns

  • Weak consumer spending and urban discretionary spend pressure.

Key financials

  1. Revenue ₹1,796 Cr +2%YoY
  2. EBITDA ₹221 Cr
  3. EBITDA Margin 12.3%
  4. Net Cash ₹61 Cr
  5. Net Working Capital ₹1,553 Cr
  6. Net Working Capital Days 89 days

What they filed

Q1 FY27: revenue up 0.5%, net profit down 1650.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,315 1,340 1,143 1,106 1,457 +11%1,466 +9%1,327 +16%1,111 +0%
EBITDA172 152 5 73 183 +6%203 +34%84 +1580%51 −30%
Net profit26 53 -64 -2 65 +150%49 −8%-61 +5%-35 −1650%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹1,824 Cr Total
  • Branded Textile ₹856 Cr 46.9%
  • Branded Apparel ₹458 Cr 25.1%
  • Garmenting ₹309 Cr 16.9%
  • High-value cotton shirting ₹201 Cr 11.0%

Guidance & targets

Profitability

  • Sustainable EBITDA Margin Profitability · once retail expansion stabilized · High confidence 15%
    we clearly see a sustainable EBITDA margin of around 15% odd for us, once the whole retail expansion is stabilized and that we are pretty confident.

    — Sunil Kataria

  • Full EBITDA Margin Recovery Profitability · FY26 · High confidence —
    we will start seeing a gradual recovery happening clearly on EBITDA margins and I think we will see the full recovery happening in FY26.

    — Sunil Kataria

  • Branded Textile EBITDA Margin Profitability · steady state · High confidence 20-21%
    our branded textile business will drive the EBITDA margins which would be in the range of around 20% to 21% kind of margin which we had maintained till now, till a couple of quarter back. And that is a margin which we have actually, if you see, increased over the last 2 years pretty substantially and we are pretty confident of holding on to 20%-21% kind of a steady state there.

    — Sunil Kataria

  • Apparel EBITDA Margin Profitability · over a period of time · Medium confidence 13-14%
    we also see over a period of time apparel EBITDA margin to be also settling down in the range of around 13% to 14% over a period of time.

    — Sunil Kataria

  • PAT Profitability · FY26 · Medium confidence —
    next year FY26, we are looking at strong growth. So we should see kind of a much better PAT definitely as compared to current year.

    — Sameer Shah

  • EBITDA Margin Profitability · couple of years · High confidence 15%
    we are pretty confident over a period of couple of years, we will reach 15% EBITDA margin.

    — Sunil Kataria

Growth

  • Return to Growth Trajectory Growth · FY26 · High confidence —
    We will be back to the growth trajectory clearly in FY26 and we continue to build on our initiatives to deliver sustainable growth and value to our stakeholders.

    — Sunil Kataria

New Categories

  • Ethnix Revenue New Categories · this year · High confidence 100 crores
    For example, Ethnix is a brand which has been 2 years into the making right now. We are going to be crossing 100 odd crores threshold level this year on Ethnics.

    — Sunil Kataria

Capacity

  • Suit Maker Ranking Capacity · once expansion complete · High confidence 3rd largest worldwide
    Once this expansion is complete, we expect to become the third largest suit maker worldwide, paving the way for further growth and customer acquisition.

    — Sunil Kataria

Long-term Plan

  • EBITDA Long-term Plan · FY28 · Medium confidence 2200 crores
    our aspiration remains a course in that ballpark. I wouldn't say that it's exactly 28, but I think we definitely remain in the aspiration of reaching there, but maybe this could happen 12 months to 18 months later, given this because nobody saw at that time that India would get into a suddenly like all companies talking of the headwinds earlier.

    — Sunil Kataria

Market context

  • Garmenting EBITDA Margin Profitability · Medium confidence double-digit
    our garmenting business also because there is a strategy playing out will come back to a double-digit EBITDA margin.

    — Sunil Kataria

Risks & concerns

  • Weak consumer spending and urban discretionary spend pressure.

    high

    Persistent weak consumer spending and urban discretionary pressure impacted Q3 performance and is expected to continue in January.

    Management acknowledged

  • High inflation and sticky food inflation.

    medium

    CPI remained elevated and food inflation sticky, impacting discretionary spending.

    Management acknowledged

  • Delay in achieving long-term EBITDA target.

    medium

    FY28 EBITDA target of INR2200 crores may be delayed by 12-18 months due to unforeseen macroeconomic headwinds.

    Management acknowledged

  • Red Sea crisis leading to higher freight costs.

    low

    Caused small one-off freight increases, impacting garmenting segment EBITDA.

    Management acknowledged

Areas of evasion (2)

  • Specific booking growth numbers (competitive data)
  • Exact run rate of other expenses

Q&A highlights

1 direct
Subdued growth and market share loss in branded textiles. Direct
I think that's the only difference. Otherwise, I don't see anything else of whether we have lost out to anyone, whether there is any market share loss nothing of that sort. And we track that pretty closely. And we have seen these things also in the past it just shifts over a period of two quarters and then it plays out.

Directly addresses concerns about competitive performance and market share in a key segment, with management asserting no loss.

Asked by Naitik

High interest costs despite being debt-free. Partial
So the interest also actually breaks in rental expenses because as per the statutory P&L, the renters' expenses part of them sit in interest as well as in depreciation, but you are right. I mean, being a net cash company the delta interest is relatively on the lower side.

Reveals a nuance in financial reporting (rental expenses classified as interest) that impacts perceived cost structure, though full clarity on the remaining INR34 crores is not provided.

Asked by Sanjay Parekh

Feasibility of FY28 EBITDA target of INR2200 crores given current headwinds. Partial
First of all the long-term plans have to be kept in mind given a couple of market conditions. But I think our aspiration remains a course in that ballpark. I wouldn't say that it's exactly 28, but I think we definitely remain in the aspiration of reaching there, but maybe this could happen 12 months to 18 months later, given this because nobody saw at that time that India would get into a suddenly like all companies talking of the headwinds earlier.

Management acknowledges a potential delay in achieving a previously stated long-term target, attributing it to unforeseen macroeconomic headwinds, which is crucial for investor expectations.

Asked by Sanjay Parekh

3 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview and Macro Headwinds

Raymond Lifestyle Limited reported a 2% year-on-year revenue increase to INR1796 crores in Q3 FY25, with EBITDA at INR221 crores and an EBITDA margin of 12.3%. This margin compression from 13.9% in Q3 FY24 was attributed to weak consumer demand, scale deleverage, upfront investments in retail expansion and advertising, and an adverse segment mix. Management highlighted persistent macroeconomic challenges, including a projected GDP growth of around 6.5%, weak consumer spending, lower capex, and elevated, sticky food inflation impacting discretionary purchases.

Segmental Performance and Margin Pressures

The Branded Textile segment saw a 6% revenue decline to INR856 crores, with its EBITDA margin falling to 18% from 21.6% in Q3 FY24, primarily due to scale deleverage. Conversely, the Branded Apparel segment grew 5% to INR458 crores, driven by new product launches and brand-building efforts, though its EBITDA margin compressed to 9.6% from 13.9% due to upfront investments in retail store expansion and advertising. The Garmenting segment's revenue increased to INR309 crores, but its EBITDA margin dropped to 7.8% from 11.3%, impacted by a product mix shift towards lower-margin entry products for new client acquisition and higher freight costs from the Red Sea crisis.

Strategic Expansion and New Adjacencies

The company is pursuing a 3-5 year strategy focused on expanding its distribution network, premiumization, casualization, and strong brand building. Key growth categories include branded apparel, ethnics, and garmenting. Raymond Lifestyle also entered new adjacencies: SleepZ (launched a quarter ago) and Park Avenue Men's Innerwear (launched in late December), which are expected to provide multiplier growth. Ethnix by Raymond, launched two years ago, is on track to cross INR100 crores in revenue this year, validating its proof of concept in the evolving Indian wedding wear market.

Financial Health and Working Capital Management

Raymond Lifestyle Limited achieved a net debt-free position with net cash of INR61 crores as of Q3 FY25. The company also demonstrated improved working capital management, with net working capital days reducing to 89 days (INR1,553 crores) in December '24 from 97 days (INR1,692 crores) in September '24. This improvement was primarily driven by a reduction in trade receivables and effective inventory control, reflecting a continued focus on optimizing financial efficiency.

Outlook and Margin Recovery Trajectory

Management expressed confidence in a gradual demand recovery, with positive trends observed in textile and apparel bookings for the next year. The company anticipates returning to a clear growth trajectory in FY26 and aims for a sustainable EBITDA margin of approximately 15% once retail expansion stabilizes. This recovery is expected to be gradual, with full margin recovery projected for FY26, supported by the anticipated return of branded textile margins to 20-21% and apparel margins settling at 13-14%.

Long-term Targets and Potential Delays

While the company's aspiration for an FY28 EBITDA target of INR2200 crores remains in the 'ballpark,' management indicated a potential delay of 12-18 months. This revision is attributed to unforeseen macroeconomic headwinds, including the urban discretionary spend pressure, which were not anticipated when the original long-term plan was formulated. The company is committed to its strategic investments in brand building and store expansion but will proceed in a calibrated manner, adapting to environmental challenges.

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