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Shanthi Venkataraman

INVESTORS can consider fresh exposures to the stock of Raymond at Rs 286. The stock has gained smartly in the past couple of weeks and trades at price-earnings multiple of about 16 times its trailing earnings. The scope for appreciation in the near term is, therefore, limited. Cautious investors may, therefore, consider buying the stock on declines.

From a one-year or two-year perspective, however, Raymond enjoys good growth prospects. While foreign exchange losses and one-time expenses have dragged performance in the last two quarters, there has been a pick-up in turnover across divisions, which augurs well for the company.

The denim segment holds promise. Robust demand should drive growth in the coming quarters; volumes would also get a boost from the additional capacities that would be operational from FY06. The performance of the textile division is also expected to improve this quarter, with the new suits and trousers facility becoming operational.

Raymond has also opted to exempt itself from excise duty for its textile division, the benefits of which should kick in the next few quarters. Its garments business would particularly benefit. Raymond's brands operate in the premium market and the company is less likely to pass on the benefits of excise exemption to its customers.

Margins have been under pressure recently, but this too, is likely to ease, as the prices of cotton and wool are on the decline. Increasing steel prices would, however, continue to depress the margins of its files and tools division.

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