The amount of revenue that would have come in as royalty is not so large that it would have shifted the needle and we have looked at the overall picture, says Gautam Singhania, CMD, Raymond Group. Excerpts from an interview with Neha Bothra of ETNOW.
The last time we talked, we had talked about how you were seeking feedback on the issue of royalty payment by newly demerged Raymond Lifestyle to the old company — Raymond Ltd. What happens now?
Originally there was a royalty agreement. After hearing everybody’s comments, we have decided that the ownership of the Raymond brand will remain with the demerged new lifestyle company. “Raymond’ brand ownership for all the other businesses (except for Raymond Lifestyle Businesses) will remain with Raymond Ltd.
What were the shareholders’ concerns?
Investors were saying that if the new company is operating in a product category, the brand should belong to it. That is a fair request and the management has taken that on board and acted in line with that.
In an earlier interview you had said that you wanted to go ahead with the royalty arrangement because you wanted to keep a steady stream of revenue for the old company. What is going to happen to that?
First, the amount of revenue that would have come in as royalty is not so large that it would have shifted the needle and we have looked at the overall picture. We are not going to win everything all the time. Looking at the overall picture, we will figure out another way to deal with the issue. This is a more important issue and we took the decision.
What kind of alternate arrangements will be made for the old company?
We will deal with it when we come to that problem. I am sure we will find an answer.
Apart from that, any savings that you will make because of this arrangement that you are going to have?
The royalty that would have been paid by the new company to the old company, would not be there. There will be no savings per se.
What do you mean when you say that certain things will come up because of this, especially for the real estate business?
I said when we deal with problems, we have to look at the totality of a picture. We see the merit in what we want to do and life is a dynamic situation. You cannot have answers to everything, you got to move on.
Coming to the old company, in the next five years — Rs 4,500 crore revenue will come from the business. But till that comes in, do you have enough funds?
We will deal with the problem when it comes. Right now we are comfortable.
FMCG is a big part of the old company and what we have been hearing is that an IPO could soon be on the cards. Would that help?
I never ever said soon or on the cards. Eventually we want to unlock the shareholder value. We will do what is required at the right time.
The fact that the lifestyle business doesn’t have to pay royalty to the old company is a new thing. The trend so far has been an arrangement between the parent company and new company.
We have studied this in detail. In the case of Tatas, Tata Sons holds the brand and it extends it to various companies. In our case, Raymond old company held the brand. This is not a subsidisation of a company, it is a vertical demerger. So effectively some part of the brand is held by each company and we saw the merit and that is what we have done.