Raymond Ltd., a prominent player in the textile and real estate sectors, has recently seen significant volatility in its share price due to the demerger of its lifestyle business. As of early September 2024, Raymond’s stock experienced a sharp decline, opening at ₹1,906—down nearly 40% from its previous close—following the demerger. However, the stock showed resilience, recovering to ₹2,009 by the end of the day.
Understanding the Price Movement
The demerger has resulted in existing shareholders receiving four shares of the newly formed Raymond Lifestyle for every five shares of Raymond Ltd. This corporate action has temporarily impacted the stock price, with market analysts estimating Raymond’s fair value around ₹1,415 post-demerger. This includes ₹1,200 per share from its real estate arm and ₹215 from its engineering business. Meanwhile, the lifestyle business, now a separate entity, is anticipated to list at approximately ₹2,930 per share.
Investor Outlook
For investors, the key lies in evaluating the sum-of-the-parts (SOTP) valuation. The demerger is expected to unlock significant value, with Raymond Ltd. focusing on its core real estate and engineering businesses, while the lifestyle business charts its growth path independently. Analysts suggest a cautious approach, keeping an eye on the upcoming listings and the performance of the newly formed entities.
In conclusion, while the current volatility presents risks, it also offers potential opportunities for long-term investors. Monitoring the market’s reaction to the demerger and upcoming financial results will be crucial in making informed investment decisions.
