Raymond seeing phenomenal rerating; positive on stock: Harendra Kumar

In a chat with ET Now, Harendra Kumar, MD-Institutional Equities, Elara Capital, talks about the reasons why he likes garment company Ramyond.

ET Now: You have a liking for Raymond. What is the strategy behind?

Harendra Kumar: Fundamentally, we love businesses that are undergoing changes. New management generally brings in fresh vigour. The risk premium attached to the Raymond stock was very high and investors on the Street were not so confident about the company, even as they were confident about the brand. But now we see new levers, and confidence in the company re-emerging, with the new management. The whole of portfolio rejig in terms of brands, stores and new service offerings have been exactly or what we anticipated. So that gives us more confidence. The story is just developing.

WIth India being a large consuming economy, we have a top-down approach to the ideas that we select. So Raymond fits the bill in that package. This is exactly what happened with Bata India. The management was changed when the stock was ruling at Rs 90. The company had a great brand value and the new management came up and refurbished the story. It increased the same store sales (SSS) growth and since then the rerating is phenomenal.

In a consuming economy, you cannot create new brands so in our view Raymond has some marquee names and it has to monetise those brands. We believe that it will be a structural earnings as well as the PE rerating story, progressively, from here on.