Raymond Limited
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Now let me talk about the working capital and the cash flows. As explained earlier the festivities and winter weddings have been pushed towards the fag end of the calendar year due to Adhik maas. Given the fact that majority of the festivities and the weddings are in the second half of the financial year, inventory is made available across all channels in the 2nd Quarter in order to cater to the increasing demand in the second half of this fiscal year. Accordingly, the networking capital stood at ₹ 1,927 crores as on 30th September, 2023 higher by ₹ 344 crores as compared to ₹ 1,583 crores as on 30th June, 2023 and higher by ₹ 435 crores as compared to ₹ 1,492 crores as on 30th September, 2022. In addition to the above seasonality and with the expansion of Ethnix by Raymond and other branded exclusive brand outlets, the inventory was higher during the quarter. As you are aware, we do primary sales over sales channel partners including wholesalers and franchise of our stores to cater to the festive season requirement post Pitrupaksh in early October resulted in increase in receivables. Also with two new real estate projects being launched during the quarter there has been an increase inventory due to construction costs as well as approval costs. Now regarding cash flows: Due to the increase in the net working capital for the quarter, our operating cash flows have been utilized to the tune of ₹ 53 crores. During the quarter we also incurred a CAPEX of ₹ 36 crores mainly in the ongoing capacity expansion in the garmenting and engineering business and maintenance CAPEX across our various plants in various businesses. With an increase in the net working capital and post CAPEX and interest cost related outflows, our free cash flow for the quarter was a net utilization of ₹ 171 crores.
We are not going to give specific guidance but the branded apparel segment witnessed 18% growth. We are putting ₹200 crores of CAPEX in garmenting to expand capacity by almost one third. Over a 5-year period, we expect revenue growth in the early teens and mid-teens growth in profitability across the lifestyle business.
We have been fortunate due to our brand presence and high-quality fabric, allowing us to pass on cost increases to customers. Despite cotton prices rising significantly, we have managed to maintain margins by passing on raw material increases.
Same store growth would be in mid-single digits, outperforming the industry which has been mostly negative to flat. Our growth is driven by our casualization journey and aggressive distribution outreach.
We have ramped up stores recently, and while the wedding season has just begun, we are seeing healthy signs in sales per square foot. Our product assortment is receiving strong reviews, and we expect to be in a better position to assess the business in about six months.
Tier-I and II cities have performed well, while Tier-III and IV cities are not performing poorly but show a clear difference. Our strategy focuses on expanding our presence in Tier-I and II, especially during the wedding season.
Revenue from Ethnix in Q2 was not meaningful due to the lack of weddings and festivities. However, recent sales during Puja and Diwali have exceeded expectations, and we anticipate a clearer picture of Ethnix's performance by the end of December.
Our apparel margin is tied to achieving scale, with a target of 10% to 12% in the coming quarters and a goal of 14% to 15% over the next four years. We have managed raw material price softening through negotiations and maintaining price parity to avoid shocking customer sentiment.
Our strategy for premiumization in the suiting segment and expanding outreach in shirting should enable us to achieve high single-digit growth. There may be some quarterly variations, but we remain confident in this projection over a 6 to 12-month period.
We expect to complete the demerger and listing of the two businesses by the end of Q1 FY24, around June 30, 2024.
The Bandra launch is imminent and should happen within this year or early next financial year. The other two projects will take about 12 to 14 months to hit the market.
There are two phenomena happening in India: a wave of premiumization and down-trading. We play in the mass premium to premium end and see huge growth potential across our brand through expansion, casualization, premiumization, and entering adjacent categories like ethnics. We believe we have enough room to grow without shifting our strategy to the value segment. Our Parx brand will focus on multi-brand and large format stores instead of exclusive brand outlets.
We sold our FMCG business, which was in the personal care segment, but we believe there is significant growth potential across our existing businesses. The branded apparel market is projected to grow significantly, and we see opportunities in our current segments rather than venturing into beauty.
The increase in receivables is due to dealers and franchisees expecting a strong second half of the year based on festivities and the wedding season. This year, purchases were delayed until mid to late September due to the Pitrupaksh period, which typically ends earlier. This is a seasonal pattern, and we expect to normalize working capital in the coming quarters.