Gautam Hari Singhania and Raymond could be the models for the theory of Core Competency. Though he has many interests in life, Singhania is clear that the focus of his business has to be the growth of Raymond. And Raymond itself cannot move into unrelated areas, even if there are opportunities. In a conversation with Business Today's Editor Prosenjit Datta, Managing Editor Rajeev Dubey and Senior Editor P. B. Jayakumar, the Chairman of Raymond Ltd. explains his plans for the company. Edited excerpts:
Of late, Raymond's focus has been on improving efficiencies, market share and margins. When do you complete this transformation, and what is your long-term strategy?
Our aim is to become a total lifestyle company. To move in this direction, we have started new verticals - shirting, linen, bed & bath, ethnic wear, etc. The Raymond brand can support the different verticals. Over the next five to 10 years, we plan to start many verticals. The opportunities are infinite. Made to Measure (MTM) was started five years ago and took time to stabilise because it is a unique product/ service. Now we are getting into the next level by introducing Made to Fit. Each new vertical takes time. Shirting took a few years to stabilise. Linen started last year and is already generating big business. Like this, we plan to expand the value of the brand.
The Raymond brand encompasses some of the most affordable fabrics as well as some of the most expensive in the world. Have you stretched it too far between the affordable and premium? Would it have been better to have separate brands for low-end, mid-market and high-end fabrics?
It is the only brand in the world that transcends a thousand times in price points. Other brands aspired to do it, but failed. Take Toyota - it could not stretch beyond a point and had to introduce 'Lexus' for luxury. Nokia, too, had to create 'Vertu'. Similarly, Ritz and Four Seasons...it is a matter of pride that a single brand can transcend to this level. There are no parallels.
Which companies will you compete with five years down the line, when Raymond becomes a full-fledged lifestyle brand? Will it be service-led companies such as Italian design houses Canali or Armani, or product-led companies that specialise in suiting fabrics?
We are a product-led company. Today, the element of marketing in the sales price is low. Take a Canali or Zegna: there is high cost to marketing. We offer value for money at every price point - from Rs 50 a metre to Rs 3,00,000. In any brand research, Raymond stands for trust.
Textile is a tough business. Warren Buffett bought textile company Berkshire Hathaway, but could not continue with it in textile. Were you ever tempted to move out of textile and get into new-age businesses?
Textiles is our core business. Having predominant market share and profits, why should I move out? We know the business, and we have serious competitive advantage. We are very focused. We see tremendous opportunity in textile and still can do a lot more. Temptations and opportunities do come for investing in other areas - for buying businesses, funding start-ups or getting into non-related businesses. Let me answer in two parts. First, we have not done it so far because we have not needed to; and second, I have to differentiate between Raymond - the company - and Gautam Singhania - the promoter. The promoter could get into new businesses because the capital he might have is not adequately consumed. If Gautam Singhania decides to get into some other business, it will have nothing to do with Raymond, a professionally run company.
What about digital plans? What technologies would you like to bring to the market in fabrics and in manufacturing?
New breakthroughs are happening in textiles, some promising to change the textile industry forever. We have been doing a lot of things and many are on the drawing board. I cannot divulge details. At Raymond, technology is the top end of our focus. We are working on different fabrics and that requires newer technologies.
How do you see e-tail as competition? Will you compete with them or do things differently?
We have different strategies. We are keeping it close to our chest right now.
What is core to Raymonds longevity?
Quality, trust and excellence. Any company that delivers quality for 90 years will survive. We are a continuous product development company. MTM came because we strived to do the next level. We are the only company in the world to make 250s. We want to show to the world that we make the best...Super 250 is an outstanding fabric. In 1988, my father did that micro light flight, and to commemorate that we came out with a fabric called microlight. That time, the best was Super 120s. Then, we said why can't we make 130s and 140s? And so began the quest to create the best. We started using exotic fibres. You may be surprised how many different fabrics we use. Probably, this is the most complex textile company in the world. Nobody makes this quantity with this complexity. In Europe, all the mills are specialised, but in one product. We do everything, and that is a competitive advantage.
So after 250s, are you looking at making 260s or 300s?
You cannot. In fact, 250 is determined by wool availability. Wool for it is in the 11.3 to 11.8 microns range, imported from Australia. This is available only in extreme cold conditions. The last bale came three years ago. The wool for 250s is 11.6 microns, the fineness is one third of your hair, which is typically 35 microns. Manufacturing is determined by availability, and wool below 11 microns is very rare. Most of the 240s and 250s were sold in India. We do not export. We make 60 suit lengths or 80 suit lengths and sell only in India. Foreigners buy from Indian shops.
What is the longer term plan with the brick-and-mortar stores? Has it slowed down with e-tailing?
We have about 1,000 stores. Personally, I am not convinced about e-tailing. Right now, there is too much money chasing it. If you are buying my product for Rs 100 and selling it for Rs 60 and discounting Rs 40, then I am not happy about it. But you are using my brand to bring customers to your e-tailing platform. I don't want to be there. Frankly, the valuations these companies are getting are really scary.
How happy are you with the rate of growth of Raymond as a company and some of the businesses that havent grown?
Yes, you can always grow faster. But it should not just be growth for growth's sake. We want a good balanced growth and profitability, and most importantly, liquidity. We have dominant market share, strong brand, market leadership and strong cash flow, low debt and big plans ahead.