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| 'Raymond believes in creating markets ...we are long-term players' | | Q&A: Deepak Khetrapal, COO, Raymond Ltd |
| Raghavendra Kamath & Sarath Chelluri / New Delhi Oct 07, 2009, 00:39 IST |
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 Apparel major Raymond Ltd is planning aggressive expanion through franchisees in tier-IV and V towns, to take its store count to 800 in the next 18 months. The company ended last year with a net loss of Rs 231 crore on revenues of Rs 2,586 crore. Raghavendra Kamath and Sarath Chelluri caught up with Raymond's chief operating officer DEEPAK KHETRAPAL to understand the growth plans. Excerpts:
Why are you keen on expanding in tier-IV and V towns when there are concerns about consumer spending in these towns?
It is a much larger market than we have thought. Raymond, as a group, believes in creating markets and not in creaming markets. When we entered tier-III towns, others followed. We are expecting the same in tier-IV and V markets. If we want to make money in the short term, we could have stuck to metros, but we are long-term players and have always believed in serving our customers wherever they are.
How will you tweak your strategy to make your stores profitable in these towns?
We have created formats that require lesser investments and lesser costs than in metros. We will host shows relevant to such towns to create awareness about fashion and trends. We know we can’t spend the kind of money we spend in cities such as Mumbai in smaller towns. We will find less expensive interior decorators and carpenters to do stores there. But it is less expensive to do business in smaller towns than in metros, due to lower rentals and costs.
Some of your joint ventures, like that with GAS, have suffered huge losses and fallen apart. What went wrong? Is the problem with partners?
We have written down the cost of shareholding to reflect the true value. When you do business, some ventures work, some don’t. Our JV with GAS is not working, but others such as Raymond Zambaiti Pvt Ltd which is into manufacturing of high-end cotton shirting, and JK Ansell Ltd which makes KamaSutra condoms, are working very well. It did not have to do with partners or ownership pattern, but with business models not working to expectations.
Last fiscal, the company posted a net loss of around Rs 231 crore. What are you doing to make the company profitable this year?
Operationally, we did not lose money even last year. Last year, we made losses on account of forex covers and writing down the value of our investments in Jvs and subsidiaries. W do not need to write down these investments again. We have not postponed our forex losses as per the new norms of the Institute of Chartered Accountants of India, though many other companies did that. We thought we need not defer the booking of these losses under the new accounting standards and took the whole hit in 08-09.
Why did you see degrowth in the readymade segment?
There are so many players selling apparel at 50-80 per cent discount, taking hits on margins and profit. We will rather slow our sales than go in for losses. We would go for only profitable growth.
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