Can Raymond Triple Its Value to Compete with Vedant Fashions? A Comprehensive Analysis

Raymond Limited, one of India’s oldest textile companies, is on the cusp of a significant transformation. As the company approaches its 100th anniversary in 2025, the question on many investors’ minds is whether its stock price could potentially rise threefold to compete with the much younger and high-performing Vedant Fashions, the parent company of the popular ethnic wear brand Manyavar.

In 1965, Warren Buffett turned Berkshire Hathaway, a struggling textile business, into a thriving holding company. Yet, he often referred to his early investments in textiles as a mistake, noting that textile companies often resemble “chronically leaking boats”—despite capital injections, they reward investors only in occasional spurts.

Raymond has demonstrated this pattern over time. Despite its rich history and strong brand recognition, the stock’s real value surged only in the last three years, returning an impressive 1,085%. But before that, it delivered minimal returns. On the other hand, Vedant Fashions, listed just two years ago, has already returned 40% to its investors while trading at lofty valuations of over 75 times earnings.

The Brand Power Behind Raymond and Vedant Fashions

It’s important to understand that neither Raymond nor Vedant Fashions fits the typical profile of a low-margin, debt-heavy textile company. Both brands have strong identities in the menswear market, with Raymond recognized for its premium suits and Vedant Fashions for its dominance in the wedding wear market. Both companies maintain debt-to-equity ratios below 1, further distinguishing them from traditional textile businesses.

Raymond is undergoing significant restructuring, with plans to spin off two of its key businesses—Raymond Lifestyle (which handles worsted fabrics) and Raymond Realty—into separate entities. This dismantling of its conglomerate structure is aimed at unlocking the value of each business, which could potentially lead to higher stock valuations.

Vedant Fashions, meanwhile, continues to expand its market share in India’s highly unorganized celebration wear market. It operates an asset-light franchise model, outsourcing most of its manufacturing while retaining strict control over design, fabric procurement, and quality control.

Changing Dynamics in the Global Textile Industry

The global textile industry is in flux. Post-pandemic, textile brands have been reassessing their reliance on outsourced manufacturing, especially from China and Bangladesh. Political instability and supply chain disruptions have caused major players to look toward countries like India, Vietnam, and Sri Lanka to diversify their supply chains.

However, India’s textile industry is still operating at only 72-75% capacity, with growth remaining muted. The sector is expected to regain pricing power only when capacity utilization climbs to 80-90%. While India leads in exporting products like terry towels and bed sheets to the U.S., logistical challenges such as the Red Sea crisis and soaring freight costs have dented margins for many manufacturers.

Despite these challenges, both Raymond and Vedant Fashions have managed to perform well. Raymond, with its diversified business portfolio spanning from aerospace to fashion, has strategically positioned itself for future growth. Meanwhile, Vedant Fashions continues to rely on its asset-light model and robust franchise network to keep its balance sheet lean.

Raymond’s Corporate Restructuring: A Game-Changer?

Raymond’s restructuring plan could be a pivotal moment for the company. By listing Raymond Lifestyle and Raymond Realty separately, investors will have a clearer view of the company’s true financial standing. Raymond Lifestyle, in particular, could thrive in the men’s formal wear and wedding wear markets, competing directly with Vedant Fashions and other key players like Aditya Birla Fashion & Retail.

Raymond already boasts a robust retail network with 1,590 stores across India and 49 international outlets. The company’s recent sale of its FMCG business to Godrej Consumer has helped reduce its debt and improve cash flow, providing a strong foundation for future growth.

Vedant Fashions, on the other hand, has built a dominant presence in the wedding wear segment. The company operates a centralized manufacturing process, ensuring high-quality control while maintaining an asset-light model. This approach has allowed it to consistently outperform its peers in terms of margins and return on equity.

Financials and Valuations: Raymond vs. Vedant Fashions

A key point of intrigue for investors is the stark difference in price-to-earnings (P/E) ratios between the two companies. While Raymond’s P/E multiple stands at 25x, Vedant Fashions commands a much higher multiple of 75x, reflecting the market’s strong belief in its future growth potential.

Some investors speculate that Raymond’s P/E multiple could rise threefold if its restructuring leads to value unlocking. However, it’s essential to approach such assumptions with caution. The separate listing of Raymond Lifestyle will certainly provide more clarity on the company’s financial health, but it remains to be seen whether this will result in the kind of re-rating needed to rival Vedant Fashions.

The Future of Indian Textile Giants

The Indian textile sector is evolving, and companies like Raymond and Vedant Fashions are well-positioned to capitalize on new opportunities. While Raymond’s stock has already seen a significant surge in recent years, its ongoing restructuring could unlock additional value for shareholders. Vedant Fashions, with its strong brand and asset-light model, remains a formidable player in the wedding wear segment.

The key to Raymond’s future success will lie in its ability to differentiate itself from traditional textile companies, maintain strong pricing power, and continue expanding its presence in the premium menswear market. Vedant Fashions, meanwhile, must navigate the challenges of maintaining its lofty valuations while continuing to grow its market share.

In conclusion, while it’s possible for Raymond to achieve a threefold increase in its stock price to rival Vedant Fashions, investors should remain cautious. The textile industry is notoriously volatile, and only time will tell if Raymond’s restructuring efforts will lead to the kind of sustained growth needed to justify such a valuation re-rating.