Raymond Realty

Beyond the Demerger | ZN Research Lab #48

Whom do you really call special in your life? Is it just a tag, or is it someone or something that has actually changed something for you? The way you think, the way you feel, the way you see things around you. Sometimes the impact is obvious, sometimes it is subtle, but there is always a shift. Something feels different after that person enters your life. And maybe that is what makes them special. Not who they are in isolation, but what changes because of them.

If you think about it, markets are not very different. We often use the phrase “special situations” quite casually, almost as if it is a category of opportunities that are somehow better than the rest. But just like in life, calling something special does not make it so. What matters is the change it brings.

A special situation, at its core, is nothing but a moment of change for a business. A defined event around which your entire thesis is built. Something that alters the structure, the perception, or the trajectory of the company. It could be a merger, a demerger, a buyback, an open offer, a debt resolution, or even a regulatory shift. Different forms, but the same underlying idea. You are not just looking at what the business is today. You are trying to understand what it becomes once that event plays out.

And that one shift changes how you approach investing. Because now, you are no longer dealing with open-ended assumptions like growth might come or margins might improve. You are anchoring your view to something specific. Something that has a shape and a timeline. But even here, the event itself is not enough. Just like a person does not become special merely by entering your life, a situation does not become special just because an event is announced.

The real question is always the same. What actually changes because of this? Does the business become more focused? Does management start allocating capital better? Does the market finally start understanding what was earlier hidden inside a larger structure?

This is where demergers become one of the many interesting case studies. On the surface, they look like a normal special situation. A company splits into separate entities, new shares get listed, there is price discovery, and there is often confusion and short-term volatility. It feels like something important has happened. But the real story begins after that. Because a demerger does not create value on its own. It only creates the possibility of value.

If the separation leads to clarity, sharper execution, and the right alignment of capital and management focus, then over time the market starts seeing the business differently. If not, then it remains what it always was, just under a different structure. And that is where most investors get it slightly wrong. They focus on the event. But the opportunity lies in understanding the change behind the event.

Because in the end, just like in life, what is special is not defined by the tag. It is defined by the impact.

And this is where Raymond Realty enters the story. We are not going to talk about the Group, Promoters, Legacy business etc. It is already widely covered in the media. You can refer to that. Today our main focus will be on this newly separated entity.

When you look at Raymond today, the demerger of its real estate business does not look like an isolated event. It was actually one more step in a journey that had already started. The company first sold its FMCG business for ₹2,825 crore and became net debt-free.

Source: The Hindu

Then came the demerger of the lifestyle business.

Source: The Hindu

Alongside this, Raymond acquired Maini Precision and doubled its engineering business to over ₹1,800 crore of revenue, with an entry into aerospace, defence and EV components.

Source: Mint

This is the core business of Raymond Ltd today. So by the time the real estate demerger was announced, Raymond was no longer just talking about simplification. It was already executing it.

This is important because a demerger makes more sense when it is part of a larger pattern. In Raymond’s case, the pattern was quite clear. The group wanted to create a separate listed businesses. Each business should have its own identity, its own management focus, its own capital structure, and its own set of investors.

And that is exactly what happened with Raymond Realty.

The plan was to demerge the real estate business from Raymond Limited into Raymond Realty Limited. Every shareholder of Raymond Limited will receive one share of Raymond Realty for every one share held in Raymond Limited. After this, Raymond Limited, Raymond Realty Limited, and Raymond Lifestyle Limited will become three separate listed entities of the group.

So, in simple terms, the shareholder is now getting it in a cleaner structure.

Earlier, real estate was sitting inside Raymond Limited along with other businesses. That created the usual problem of a holding structure. A textile and lifestyle legacy. An engineering business. A real estate business. All are sitting under one listed company. In such cases, the market might not always know how to value the company. It may like one business and dislike another. It may understand one business but ignore another. And sometimes, a good business remains hidden simply because it is housed inside a larger, mixed structure.

The demerger tries to solve that.

Raymond Realty will now be looked at as a pure play real estate company. Raymond Limited will continue with investments in the engineering business. Raymond Lifestyle will stand separately. In the presentation, the company described this as three distinct vectors of growth: lifestyle, real estate, and engineering. Lifestyle had more than ₹7,000 crore of aggregate sales in FY24, real estate had around ₹1,600 crore of sales, and engineering had proforma revenue of around ₹1,800 crore.

But structure alone does not explain why the demerger was done at that time.

Management clearly said that they could have done it earlier, but at that time, the JDA business had not really started. They had only one JDA project then. Now they have four JDA projects. That gave them more confidence that the business could stand on its own feet and run as an efficient independent business.

Source: Raymod Ltd, 5th July concall

A demerger just for the sake of demerger does not mean much. But a demerger after the business has reached scale is different.

In FY24, Raymond’s real estate business reported revenue of ₹1,593 crore, a growth of 43% year on year, and EBITDA of ₹370 crore. In the concall, management also mentioned booking value pre-sales of ₹2,250 crore for FY24. This was no longer a side business. It had reached a scale where it could stand on its own.

Source: Raymod Ltd, 5th July concall

And the business model underneath is interesting to understand.

Raymond Realty has two engines. One is the development of its own Thane land. The other is the asset-light JDA model in the Mumbai Metropolitan Region.

The Thane land is the heart of the story. The company owns around 100 acres here, with an overall potential revenue of roughly ₹25,000 crore. Out of this, about 5.8 million sq. ft. is already under development, carrying a revenue potential of around ₹13,200 crore. Within this, close to 1.3 million sq. ft. has already been delivered, while around 4.5 million sq. ft. is currently under execution. The remaining ~5.6 million sq. ft. is still to be developed, with an additional potential of about ₹11,800 crore.

Source: Q3FY26 Presentation

So Raymond Realty already has a large owned land bank to execute.

But… what makes the story more interesting is that the company is not depending only on owned land. Alongside this, it has been steadily building an asset light model through JDAs. As of now, the JDA portfolio itself has reached around ₹14,000 crore of revenue potential, spread across six projects in the MMR region. These are largely concentrated around key micro markets near BKC, including Bandra, Mahim, Sion, and Wadala. Individually, projects like Bandra and BKC carry a potential of around ₹2,000 crore each, Mahim projects are in the range of ₹1,700 to 1,800 crore, Sion is around ₹1,400 crore, and Wadala is larger at close to ₹5,000 crore. Together, this gives the company a second growth engine, beyond the Thane land, but without requiring heavy upfront land investment.

Source: Q3FY26 Presentation

If you put both pieces together, the picture becomes clearer. The Thane land itself carries a potential of around ₹25,000 crore, and the JDA portfolio adds another ~₹14,000 crore. So the current opportunity size is now closer to ₹40,000 crore.

Source: Q3FY26 Presentation

The Thane land is already partly under development, with the rest to be launched over time. On the JDA side, projects move through a typical cycle. After signing, it takes around 12 to 15 months to reach launch, and then another five to six years for full execution.

Source: Raymod Ltd, 5th July concall

So when you look at it this way, this ₹40,000 crore is not something that will come in one phase. It is spread over several years, with a fairly clear development and monetisation cycle attached to it.

The quality of execution so far also matters. Raymond Realty has already delivered projects ahead of the RERA timeline.

In fact, if you go back to the early days of the business, there is an interesting incident. One of the first projects, Ten X Habitat in Thane, had its initial towers delivered 24 months ahead of the RERA deadline. Two years early. In a sector where delays are common, that stands out. It tells you how the company approaches execution. Over time, this starts reflecting in faster sales, better collections, and stronger buyer trust. Which is why this matters.

Source: Company Notification

Management repeatedly highlighted this cycle. Build fast. Sell fast. Collect fast. Deliver ahead of time. Then use that credibility to get more projects and scale through JDAs.

That is why JDAs are important here.

In a JDA, the developer does not usually buy the land outright. The landowner brings the land, and the developer brings the execution capability, brand, approvals, design, sales, and project management. This reduces the need for large land capital, but it increases the importance of trust and execution. For Raymond Realty, this model becomes a way to scale without putting a huge amount of capital into land acquisition.

But asset light does not mean zero capital.

Management clarified this well. A JDA may not require buying land, but it still needs initial cash outlay. For a project with around ₹2,000 crore of topline in Mumbai, peak investment can be around ₹300 crore to ₹350 crore. This money goes into approvals, early construction and other project requirements before collections start coming back after launch.

Source: Raymod Ltd, 5th July concall

This also explains why the company wants the real estate entity to have its own balance sheet and capital access.

Raymond Realty had more than ₹500 crore of cash in the business that time. Management said they do not see any significant capital raising requirement, given the projects they have and the cash flow visibility from existing sales. But they also said that a real estate company should be prepared to raise capital at the appropriate time if needed.

Source: Raymod Ltd, 5th July concall

That is a sensible point.

Real estate is a business where liquidity matters. Even if the project is good, a delay in approvals, construction, or collections can create stress. Raymond’s management said they do not want any business to be starved of liquidity because that can delay execution. They even gave the example of COVID, when they kept 500 people at the site to continue construction. That gives you a sense of how they think about execution.

Source: Raymod Ltd, 5th July concall

The company also seems disciplined about project selection. Management said that in the last three years they evaluated close to 700 projects in the MMR region. They do not take everything that comes their way. They look at their return criteria, investment philosophy, boundary conditions and risk management before taking a project.

Source: Raymod Ltd, 5th July concall

This is important because the danger in real estate is always the same.

Growth can look attractive. But undisciplined growth can destroy value.

And now management’s focus for now is very clearly tilted towards JDAs. They said that focus is on building JDA capability, unless something very attractive comes up for outright land purchase. The reason is simple. There are enough opportunities available in JDAs, and the company believes Mumbai itself has a very large long-term JDA opportunity.

Source: Q3FY26 Presentation

In 9MFY26, Raymond Realty reported pre-sales of ₹1,504 crore, customer collections of ₹1,210 crore, total income of ₹1,864 crore and EBITDA of ₹242 crore. In Q3FY26 alone, pre-sales stood at ₹743 crore, which was meaningfully higher than ₹505 crore in Q3FY25. Total income for the quarter was ₹766 crore, up 56% year on year.

Source: Q3FY26 Presentation

For a real estate company, pre-sales matter a lot. Reported revenue tells us what has been recognised in the books. But pre-sales tell us what customers are actually buying today. It is like looking at the pulse of the business before it fully appears in the P&L. If pre-sales keep growing, it means demand is strong, projects are getting accepted, and future revenue visibility is improving. That is why the jump in pre-sales is more important than just one quarter’s accounting profit.

The launches also tell the same story. The Q4 momentum came from Ten X District 9 in Thane, Park Street in Thane, The Address by GS in Thane, Wadala and Sion, and the ultra-luxury Invictus by GS in BKC. The company also mentioned that Ten X District 9 saw strong bookings within the opening days of launch, Wadala got strong traction, and Invictus by GS in BKC received a good response in the ultra-luxury segment.

Source: Company Notification

This is important because Raymond Realty is not trying to sell only one type of project. It is trying to create brands across segments. Ten X is the aspirational product. The Address by GS is the premium product. Invictus by GS is a luxury product. The company is trying to make the project brand carry weight, not just the location.

Source: Q3FY26 Presentation

The balance sheet is still being managed with some discipline. As of Q3FY26, the company had gross debt of ₹713 crore, gross cash of ₹483 crore and net debt of ₹230 crore. It also showed pending collections from sold inventory of around ₹2,997 crore, estimated value of unsold inventory of ₹7,118 crore, and estimated surplus from project cashflow of ₹4,135 crore.

Source: Q3FY26 Presentation

And if you look at how the year actually ended, it gives a slightly clearer picture of the momentum.

In Q4FY26 alone, Raymond Realty reported pre-sales of ₹1,519 crore, compared with ₹636 crore in Q4FY25. For the full year FY26, pre-sales stood at ₹3,023 crore against ₹2,314 crore in FY25, a growth of 31%. Collections for the year were around ₹1,725 crore.

Source: Company Notification

This means the company did almost as much pre-sales in one quarter as it had done in the first nine months of the year. This tells us that the launches started converting into bookings, and the business got strong momentum just after becoming a separate entity.

So instead of looking at trailing reported earnings, it makes more sense to look at a forward operating base.

If we assume FY26 revenue of around ₹2,800 crore and take two simple margin scenarios, the picture becomes clearer.

At the assumed run-rate, with 13 to 15% EBITDA margins, earnings look closer to ₹210 to 260 crore, depending on margins. At ₹2,962 crore market cap, that puts the stock around 11x - 14x earnings

This is where the story now stands. Interesting right?

The risks, however, cannot be ignored.

The first risk is scale. It is one thing to execute well on one large land parcel where the company has spent years building familiarity. It is another thing to take the same discipline, speed and customer experience to multiple projects across different micro markets. Real estate is never as clean on the ground as it looks in a presentation. So the real question is not whether Raymond Realty can sign more projects. The real question is whether it can scale without weakening the very execution quality that has helped it build trust so far.

The second risk is approvals. This is a business where growth does not depend only on demand. It also depends on whether new inventory can come to the market on time. A few months of delay in approvals or RERA registration can push back launches, bookings, collections and revenue recognition. That matters even more now because the company’s future growth is tied not only to Thane but also to newer JDA projects. The pipeline is visible, but the timing of that pipeline is still important.

The third risk is concentration. Raymond Realty is still largely an MMR story. That has worked beautifully in the current cycle because Mumbai and Thane have seen strong demand, especially for branded developers. But concentration cuts both ways. If demand slows in this region, if affordability worsens, or if buyer sentiment weakens, the company does not yet have a large geographic cushion to absorb the impact. The same market that gives it depth can also become a vulnerability.

Then there is the risk of the cycle itself. Real estate demand has been strong. Buyers have shown a preference for quality, transparency, and reliable developers. But housing is still a large ticket purchase. Sentiment matters. Interest rates matter. Job confidence matters. Liquidity matters. And because Raymond Realty operates more in the aspirational to premium segment, demand can look very strong in good times, but can also soften when buyers become cautious.

The JDA model is another important area to watch. On paper, it is attractive because it reduces the need to buy land and improves return on capital. But it also brings complexity. In a JDA, the developer does not own the land fully. The success of the project depends on the landowner relationship, legal title, agreement structure, sharing terms, approvals and stakeholder alignment. One poorly structured project can create delays or margin leakage. So while JDAs make the model capital light, they also make execution more dependent on coordination.

Margins may also not move in a straight line. Real estate profitability depends on the stage of the project, launch costs, construction progress, sales velocity and product mix. A premium residential project, a retail project and a JDA project may all carry different margin profiles. So investors should not assume that every quarter will look smooth. The long term direction may be healthy, but the journey can still be uneven.

There is also construction risk. This is easy to ignore when projects are moving well. But delivery is the heart of Raymond Realty’s brand promise. If labour availability, contractor performance, raw material costs (especially in the current scenario), or regulatory issues create delays, the impact is not limited to financial numbers. It can affect trust. And in real estate, trust is not just a soft factor. It is one of the reasons customers pay a premium.

Capital allocation is another risk. Today, the balance sheet still looks manageable, and the JDA model reduces the need for aggressive land buying. But real estate businesses often get tested after early success. Strong sales can tempt a developer to chase more projects, stretch the balance sheet and grow faster than the organisation can handle. So the important thing to watch is whether Raymond Realty remains selective when opportunities increase.

One more risk is technical in nature. After the demerger, shares were given to all shareholders of the parent company. But not every shareholder of Raymond may want to own a real estate company. Some may exit simply because this is not the business they wanted exposure to. This can create selling pressure for some time. The shareholding pattern also shows this churn, with FII and DII holding declining between June 2025 and December 2025, while public holdings increased. Interestingly, the number of shareholders also reduced, which suggests that some investors are exiting while others may be accumulating in size.

Source: Screener

So the story is not risk free.

But then no special situation ever is.

The demerger has done its job. It has made the business visible. It has given Raymond Realty its own identity, its own balance sheet, and its own investor base. What happens from here will depend on something much more basic. Can the company keep selling well? Can it collect on time? Can it deliver before time? Can it scale JDAs without losing discipline? Can it convert a large opportunity into real cash flows?

That is the real test now.

In life, the people we call special are not defined by the moment they enter. They are defined by what they continue to do after that.

Markets are not very different.

A demerger can make a situation look special. But over time, what matters is whether the business keeps creating that impact.

Because in the end, what stays is not the event.

It is what follows after it.

SEBI RIA Disclosure: No holding, No Recommendation

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