From Drop to Circuit: What Happened to Raymond Shares Today?

If you checked your portfolio this morning, Raymond’s share price may have looked like a plunge straight out of a suspense thriller—the stock opened at nearly a third of its previous closing price. But here’s the twist--it was not a free-fall in the counter. In fact, it was the opposite, as the stock had hit its 5% upper circuit and was locked there.

Shares of Raymond closed at Rs 1,564.30 in the previous session, but opened at Rs 525 on the NSE on May 14. This was almost 66% below yesterday’s close, and also coincided with the ex-date of the demerger of the company’s real estate business. So was this demerger the disaster that triggered the sharp downturn in Raymond’s stock?

Are Raymond Shares in a Sell-off Spiral?

At first glance it may seem so, but in reality, this is just a technical adjustment that’s at play. The drop in the opening price of the stock from its previous closing price was not due to any negative triggers, instead the share price adjusted due to the demerger of its real estate business.

Today is the record date for the purpose of determining the eligible shareholders of Raymond to whom the equity shares of the Raymond Realty would be allotted in terms of the scheme. Hence, today onwards, the share price of Raymond Ltd stopped factoring in the value of its real estate business to reflect the split. It is therefore that we see a sharp drop in its share price.

In fact, shares of the company have actually hit the upper circuit today on the NSE as it rose 5% over today’s opening price.

Raymond Demerger

The demerger between the real estate arm and Raymond marks the second demerger for the parent entity. Earlier, its lifestyle business got demerged and separately listed as Raymond Lifestyle in September last year. Raymond announced the plan of demerging its real estate business into Raymond Realty in July last year. The proposed scheme was later approved by the National Company Law Tribunal in March this year and the demerger came into effect on May 1.

The company had earlier announced that its shareholders would receive one share in Raymond Realty for every share held in Raymond, meaning that the demerger ratio was 1:1. The real estate business, housed in Raymond Realty, will likely join the bourses in the September quarter.

The demerger plan aims to utilise the growth potential of the real estate business and attract a fresh set of investors and strategic partners to participate in the real estate business. Raymond Realty has a strong outlook with a land bank of 100 acres, offering potential revenue of Rs 25,000 crore. It also has joint development assets with a gross development value of Rs 14,000 crore.

Financial Snapshot

The real estate business has delivered a strong growth during the March quarter. Its revenue grew 13% on year during the quarter, while it has delivered a 34% CAGR (compound annual growth rate) between Q4 FY22 and Q4 FY25.

On the other hand, its operational performance has shown much better growth in the said period as EBITDA has grown at a 51% CAGR. The business recorded a booking value of Rs 636 crore in the March quarter. Going forward, the company expects a 20-25% growth in the booking value of its real estate business.

Meanwhile, the engineering business of the group, housed in Raymond, also reported a robust March-quarter performance. Both revenue and EBITDA for the vertical more than doubled on year during the quarter under review.

The company also boasts of a market leading position in key precision engineering products. It commands an over 60% market share in steel files and about 25% in flexplates in India, according to Raymond’s investor presentation. The vertical’s market share for ring gears of passenger vehicle was at a dominant 55%, while that for ring gears of commercial vehicles stood at 45%.