Raymond Group demerger: The hidden lesson for Indian family businesses

livemint.com:

Subscribe to enjoy similar stories. Earlier this month, the ₹9,300 crore Raymond Group announced plans to demerge into three separate entities: Raymond Ltd, Raymond Lifestyle, and Raymond Realty. As part of the demerger plan, the company intends to list all three companies over time.

Demerger has become a popular route for Indian businesses seeking to sharpen strategic focus and unlock shareholder value. Over the past year, about a dozen companies have either announced or completed demergers. This list includes heavyweights like Reliance Industries, Tata Motors, ITC, NIIT, GHCL Ltd, Motherson Sumi, Edelweiss Financial, and the Shipping Corp.

of India. The market has responded positively, with rising share values for these demerged entities. Raymond's demerger appears aligned with this trend, signalling a strategic move in the right direction.

Read this | Merger or demerger—what's the better route to unlock value? Another key driver for demergers is the desire to return to core business operations. The late professor C.K. Prahalad introduced the concept of core competency in 1990, but following the liberalization of India’s economy in 1991, companies expanded rapidly into diverse ventures.

A decade later, many of these diversifications proved unsuccessful, reinforcing the importance of sticking to core strengths. Similarly, in the past decade, fuelled by both domestic and global growth, Indian conglomerates once again diversified significantly. Now, ten years later, many are realizing the need to refocus, making demerger the right strategic approach.