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Gautam Singhania on affordable housing foray, schools and expanding Raymond into small towns
The Economic Times  |  February 14, 2019

Ajaya Sharma ET Now

Singhanias want to monetise the Thane land they own. The first project will be a 20-acre affordable housing project together with a school where 10,000 children can study. As retail company they are present in over 505 towns and they are penetrating markets, which are not only tier-2, tier-3, tier-4 but even tier-10 cities. Gautam Singhania, CMD, Raymond, in a chat with Ajaya Sharma of ET Now.

 

Edited excerpts:

 

What are your plans for venturing into real estate?

 

The market is fully aware that we have got a lot of land in Thane where the original factor was. As we have stated, we need to monetise this land and that is why the factory was originally moved. It has taken us a little while to get all the permissions for the land to get cleaned up.

 

As you are aware, historically in India all land has got some issues. Having done that, we have always stated as policy that we want to monetise the land and that will only enhance shareholder value. The first project on 20 acres, will be an integrated development to monetise the land and obviously see what best real estate project we can do there. We have done the Bhumi Pujan which has been announced. As a company, we rather do and then talk, rather than talk and then do.

 

Next, to meet our CSR requirements obligations, we really want to set up a very large school and I am very enthusiastic about it. There was a WhatsApp campaign going around on this. The principle sent out a WhatsApp for a briefing on what is going on. 15,000 parents came in. That is the brand equity of the Singhania School. It is touching the real estate project. It will be a very large school with eventual capacity to have 10,000 children in that school.

 

So between that school and our existing school, almost 16,000-17,000 children will be studying in Thane. It would become the largest education destination probably in the world.

 

Brand Raymond  is something everybody resonates with being in India. Over the years, we have seen how it has only grown. You want to leverage this brand even in real estate, in a integrated township model with a school, quality residential hospital and all that...

 

We are not doing a hospital. The old hospital is actually getting converted into a school. We have lost the expertise in the hospital which we had 25 years ago but we do have expertise in education. We are doing well in education with the school being amongst the best schools in the country. I want to leverage on that.

 

Number two, a school project is more synergistic with a residential project because people buying 1BHK, 2BHK apartments, want quality education. The school becomes a big added advantage to a mixed use development that is right next to it. You talked about the Raymond brand. Whatever Raymond does, it is just on the fabric side. We are the only company that sells from Rs 200 meter to about Rs 10 lakh a meter. It is 5000 times in price point. Raymond stand for, Raymond stands for trust. The Rs 200 a meter guy gets trust, the Rs 10 lakh a meter guy gets trust.

 

Where are you going to position your real estate offering?

 

We have volume to move. We want to do affordable housing which is for the masses. We have got a good product and if you do it correctly, I have to move volume.

 

Number two, I have got two or three advantages We have designed a product for the masses. I am not making four and five and six BHK flats. Also, we have got the best location. Number three we are giving a very good club house, a five-acre garden in the middle, very good facilities which go with the Raymond brand. And number four, we have got a school, sharing a common boundary wall. Effectively, you will have swivel gate between the housing complex and the school. For a parent, a child is going to school without having left the compound.

 

Talk to me about the strategy there because there are indications that one parcel of 20 acres will be sold off and the proceeds will be utilised to come up with the funds required for development there. How much are you going to develop initially?

 

We have announced the development of 20 acres in phase one. At the end of the day, we are there to monetise the total land. If somebody made me an offer for the whole land tomorrow, hey listen, we are in the business of creating shareholder value but we see a lot of value coming out of this project. I am always looking at ways of monetising the land, obviously I cannot say anything till things are done but I am always looking at that.

 

What is the potential over there? You had initially spoken about the five year plan of a couple of towers of 2 BHK apartment.

 

Thane is a growing market and people want to live in Thane. The quality of life has become better, connectivity has become better, roads have come, metro is coming. If you see the infrastructure projects, the road that will go north will eventually come down to Pokhran and there. Thane is no longer a real suburb. With the infrastructure coming in, it is not going to be very far.

 

From the eastern highway, you get there faster than from the western side now. So it is a big consumption market. As per the philosophy of Raymond, we will make the right product at the right price and we will be able to move our volumes.

 

How are you planning to focus on increasing the reach and distribution in tier-2, tier-3 cities and about the retail end of the business?

 

Most people come to India and see Mumbai, Delhi, Kolkata and Chennai and say this is India but that is not India. There is a desire from 1.2- 1.3 billion people in this country that live in the smaller towns and our strategy of going to smaller towns has always paid off.

 

I will never forget when once many years ago I held a sales conference of the distributors, there was a guy who came from Punjab and he said I have got to thank you. I said for what? He said for showing me the sea. I had never seen the ocean before. So there is that India out there that does not travel. Either they come to you to Mumbai and buy your products which 99% of India is not going to do, or you go to them, you go their market. It is akin to foreign brands coming to Mumbai to sell. They come to Mumbai because a lot of Mumbaikars can buy their products but they do not necessarily travel and exposure creates demand.

 

Today as a retail company we are present in over 505 towns and we continue to penetrate the markets it is not only tier-2, tier-3, tier-4 but we are even going to tier-10.

 

How is the margin profile of operating in these kind of cities? What kind of growth are you observing right now?

 

We are growing through a franchisee route and obviously the franchisee is getting a good return on his investment or he would not invest. We do not change the margins in the market but the fact that we have done 300 franchise stores shows it is a workable model.

 

Your non-core end of the business have also turned around. What is the strategy there?

 

We have our core businesses and we have non-core businesses. It is good that we are focussed on our non-core businesses and they are doing very well. However, it comes back to shareholder value creation, if somebody pays me a good price, then there is nothing wrong in that and we are always looking at how to create value.

 

Now that you have come out clearly with a strategy, execution plan, you have got RERA registration as well, how do you see this business grow the next five, seven years compared to overall numbers?

 

The first phase itself has got a lot of potential. I do not want to make any future comments so far because we are just getting into and it will be wrong of me to give you a guidance. If you ask me this question three months down the line when I have a little more experience, I will be able to give you a better guidance. I do not want to take a shot in the dark&hellip

 

There is a lot of existing inventory in Thane. Big players are there. How do you analyse the comparative landscape and also the industry dynamics?

 

See, the biggest advantage I have today is I have sunk in land cost, historical land cost, as opposed to a builder who has probably gone and bought land there. That is my biggest advantage. Now either you make money or you make a lot of money, but I want to move volume, that is where I am going to be.