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OctoberQuest Conference

Naresh Kumar Katariya (@KhivrajNaresh) 06th October 2016

+ Equivalent of “Free Hit” in Investing? 2

OctoberQuest: Naresh Kumar Katariya

+ Investment Strategy: G-O-V Model 3

OctoberQuest: Naresh Kumar Katariya

+ Investment Strategy: G-O-V Model 4

Deep Insight of Industry/Company, to enable: •  Right Position Sizing •  Realizing the full potential

OctoberQuest: Naresh Kumar Katariya

+ Tell Me Where I am Going to Die, So I Won’t Go There – Charlie Munger

5

Key pitfalls which I watch out for and avoid:

n  Prone to Disruption – New Technologies/Business models

n  High Receivable Days – Financier in the garb of Manufacturing?

n  Low Dividend Payout Ratio – One-sided relationship?

n  High Valuations – Investors’ propensity to overpay

OctoberQuest: Naresh Kumar Katariya

+ Investment Idea 6

n The investment idea is more to explain my investment strategy, rather than a stock recommendation

OctoberQuest: Naresh Kumar Katariya

+ Sleeping Giant Awakens 7

OctoberQuest: Naresh Kumar Katariya

+ 8

OctoberQuest: Naresh Kumar Katariya

+Raymond: Market’s Concerns

n Management Quality

n Growth concerns

n Valuations

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OctoberQuest: Naresh Kumar Katariya

+ Raymond: Addressing Market’s Concerns

n Management Quality

n Growth concerns

n Valuations

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OctoberQuest: Naresh Kumar Katariya

+ New Management Team 11

OctoberQuest: Naresh Kumar Katariya

Promoter role reduced significantly – Professionals in charge now

+ Aggressive Insider Buying over last 6 Quarters 12

40.20 40.20 40.20

40.61 40.81

41.52

42.24 42.40

42.95

39.50

40.00

40.50

41.00

41.50

42.00

42.50

43.00

43.50

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

Raymond Promoter Shareholding %

OctoberQuest: Naresh Kumar Katariya

+

n Management Quality

n Growth concerns

n Valuations

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OctoberQuest: Naresh Kumar Katariya

Raymond: Addressing Market’s Concerns

+ Raymond Business Segments

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OctoberQuest: Naresh Kumar Katariya

Extremely profitable Branded Textiles with fast growing Apparel

18% EBIDTA Margins

+ New Initiatives: Made-to-Measure Factory-finish, but Custom-made

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OctoberQuest: Naresh Kumar Katariya

+ New Initiatives 16

OctoberQuest: Naresh Kumar Katariya

+ Store Renovations is pushing growth momentum 17

OctoberQuest: Naresh Kumar Katariya

From FY16 Q4 Concall

+ Growth Potential of Branded Apparel in India 18

OctoberQuest: Naresh Kumar Katariya

+ Growth Push in Apparel 19

OctoberQuest: Naresh Kumar Katariya

+Growth Push in Apparel

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OctoberQuest: Naresh Kumar Katariya

+ Google Search Volume for various “Raymond” terms Usually Peaks in Oct/Nov, but much higher this time already

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OctoberQuest: Naresh Kumar Katariya

Google Search Volume at September

+ Real-Estate Unlocking 22

OctoberQuest: Naresh Kumar Katariya

+ Real-Estate Unlocking: Slide in June 2016 Presentation 23

OctoberQuest: Naresh Kumar Katariya

+ 24

Ideas 20-20: Naresh Kumar Katariya

Real-Estate Unlocking

+ 25

Ideas 20-20: Naresh Kumar Katariya

Real-Estate: GSK Land behind Raymond Thane

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n Management Quality

n Growth concerns

n Valuations

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OctoberQuest: Naresh Kumar Katariya

Raymond: Addressing Market’s Concerns

+ Valuation of Raymond Apparel Division 27

OctoberQuest: Naresh Kumar Katariya

829.51 897.11

1,010.63

1,193.61

1,408.46

500.00

600.00

700.00

800.00

900.00

1,000.00

1,100.00

1,200.00

1,300.00

1,400.00

1,500.00

FY13 FY14 FY15 FY16 FY17E

Raymond Apparel Sales (Cr.)

n  ABFRL trades around 1.98X EV:Sales. Indian Terrain is at 1.83X

n  Raymond’s Apparel profitability less than peers. Hence, 1X Sales could be reasonable valuation.

n  That would give a EV of around 1200 Cr.

+ Potential for Margin Improvement in Apparel

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OctoberQuest: Naresh Kumar Katariya

From FY17Q1 Concall

Apparel growth is accelerating, but currently unprofitable. Expected to achieve profitability in coming couple of years

+Valuation Summary: Raymond

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OctoberQuest: Naresh Kumar Katariya

Current  Valua+ons  (per  share)   FY20E  Valua+ons  (per  share)  Tex+les    360.00     15x  FY17E  EPS  of  24   Tex+les  +  

Apparel        1,170.00     15  4mes  FY20E  EPS  of  78  Apparel    196.72     1  4mes  FY16  sales  Realty    98.36     600  Cr,  1/4th  Land  Value   Realty    163.93     1000  Cr,  40%  of  Land  Value  Total    655.08         Total    1,333.93        

FY16   FY20E  Segment   Sales   EBIT   Sales   EBIT   Remarks  Tex4les    3,573.00     497.88    5,043.58      702.80     9%  CAGR  in  Sales  &  EBIT  

Apparel    1,194.00     -­‐28.77    2,088.31      104.42     15%  CAGR,  5%  EBIT  Margins  Other  Income                80.00        Total  EBIT                887.21        Interest                200.00        Tax                206.16        PAT                481.05        

EPS       20.7   EPS    78.86        

+Tailwinds for Company

n  Consumption push from Monsoon, Pay Commission, OROP

n  Ongoing growth in Branded Textiles

n  Growth of Apparel, and move to Profitability

n  Land Monetization / Development

n  Possible hive-off or sale of Auto Ancillary business

n  Debt (around 1800 Cr), but should benefit from expected drop in Interest Rates

n  Under-owned stock by Institutions. Only one major Fund house owns around 2.2% (in June 2016), which is down to 1.5% as of Aug 2016.

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OctoberQuest: Naresh Kumar Katariya

+Points of Caution/Consideration

n Lack of focus from promoter

n GST: Currently, Textiles are Tax-exempt. Readymades at 2% Excise only.

n Delays in turning Apparel profitable

n Delays in monetisation of Realty

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+ 32

n Q n A

OctoberQuest: Naresh Kumar Katariya

+

Thank You

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OctoberQuest: Naresh Kumar Katariya