Apparel major Raymond has offered a voluntary retirement scheme (VRS) to over 300 employees at its Thane manufacturing unit as part of a cost rationalisation exercise.

The VRS is being offered across the board, including managerial staff, a person close to the development said. The employee strength of the Thane plant is around 6,000.

According to a Raymond spokesperson, management staff "whose performance has been unsatisfactory" were among those offered the VRS. "A critical review of positions that have outlived their utility and cases of management staff whose performance has been unsatisfactory across all the businesses and locations have been undertaken. Accordingly, these positions have been abolished, or separated through a VRS," he said.

However, he added, separation on account of unsatisfactory performance is not in excess of 300. "This move will help make the company competitive and cost effective," he said.

Company watchers said the rationalisation plan might also see Raymond unlocking shareholder value by developing real estate projects on the unused land at its 160-acre Thane plant. However, the spokesperson said production at Thane is going on, and there are “no immediate concrete plans to unlock the land value”.

Raymond has another state-of-the art manufacturing unit at Vapi. “In case of real estate development at Thane, the manufacturing operations of the company will continue to run smoothly, since a backup facility has been created at Vapi,” said Unmesh Sharma, senior analyst, property and consumer, Macquarie Capital Securities. Another analyst at a domestic brokerage, who did not wish to be named, said the proceeds from any unlocking of land value could be used to retire debt.

Raymond’s total debt stood at Rs 1,345 crore as of March 2009. The interest outgo of the company, which suffered a net loss of Rs 50 crore on a total income of Rs 2,586 crore, stood at Rs 85 crore in fiscal 2009. Raymond’s product portfolio includes brands such as Manzoni, Park Avenue, ColorPlus, Parx, Be: and Zapp.

Mumbai has recently seen textiles companies shifting their manufacturing base to smaller cities. It helps them save on cost and unlock shareholder value by developing commercial real estate projects on the city land.

The latest such case was of Century Textiles, which shifted its Worli plant, to Bharuch, Gujarat. The BK Birla group company is investing Rs 600 crore to set up real estate projects at its Worli facility. Bombay Dyeing also shifted its Mumbai home textile operations from Mumbai to Ranjangaon and Patalganga. Per-employee wage cost in Mumbai is around four times that of smaller cities, according to a Fitch Rating research.

Source: Economic Times