Bombay Dyeing shares hit 52-week high on land parcel sale

Shares of Bombay Dyeing and Manufacturing Company Ltd (BDMC) jumped as much as 20% on Thursday after the company announced plans to pay its debts by selling a 22-acre land parcel in Mumbai's Worli for ₹5,200 crore.

On Wednesday, the Wadia Group company's board approved the proposal to sell the land parcel to Goisu Realty Pvt Ltd, a subsidiary of Japan-based Sumitomo Realty & Development Company Ltd in two phases.

Reacting to the development, shares of Bombay Dyeing opened 17% higher at ₹166 and then climbed to ₹168 apiece on the National Stock Exchange (NSE).

On completion of the proposed transaction, the company says it will be able to record a pre-tax profit in excess of ₹4,300 crore on account of this transaction, report a strong positive net worth, extinguish all its borrowings thereby saving interest costs and releasing the charge on encumbered assets.

It also plans to pay dividends in the future and have a strong treasury balance to fund realty projects.

Upon approval of shareholders, BDMC will receive about ₹4,675 crore from the buyer for Phase-I. The balance amount of about ₹525 crore will be received upon completion of certain conditions by BDMC and execution and consummation of the definitive agreements for Phase II, the company says in a regulatory filing.

"I am happy to inform that BDMC is entering into agreements with Sumitomo group for sale of about 22 acres of land (along with the associated FSI) in Worli, Mumbai for a total consideration of about ₹5,200 crore," says Bombay Dyeing chairman Nusli Wadia.

The board of directors of BDMC had charted out a strategy in March 2022 to change the company’s trajectory, which envisaged focusing on realty business for future growth and profitability, accelerating sale of flats in Island City Center, Dadar, monetising its land bank, deleveraging the company by retiring its borrowings and improving credit rating. It also included developing the unutilised land parcels of the company.

BDMC was able to generate a net revenue of about ₹1,050 crore between April 2022 and June 2023, through sale of the flats in ICC, leading to a reduction in the company’s borrowings by about ₹900 crore in the same period.

The company’s board has also, in principle, approved the development of the unutilised land parcels available with the company having the potential to create about 3.5 million square feet of residential, commercial property and generate a revenue of about ₹15,000 crore over the next few years.

“The development will be planned judiciously in phases to manage the company’s cashflows efficiently. The company will also evaluate other joint development and partnership opportunities to create a steady pipeline of future revenue and profits,” the filing says.