Wadia Group-owned Bombay Dyeing and Manufacturing Co. agreed to sell 22 acres in Worli to Goisu Realty Pvt. for Rs 5,200 crore in one of India's biggest land deals to repay debt and fund future projects.
Upon shareholders' approval, Bombay Dyeing will receive about Rs 4,675 crore from the buyer for Phase I, the retail-to-real estate company said in an exchange filing. The balance amount of about Rs 525 crore will be received upon completion of certain conditions by Bombay Dyeing and execution and consummation of the definitive agreements for Phase II.
Goisu Realty is a subsidiary of Japan-based developer Sumitomo Realty & Development Co.
The plan to monetise the land parcel has been approved with a view to deleverage and strengthen the balance sheet of the company for funding future real estate projects, Bombay Dyeing said.
Upon completion of the transaction, it will be able to record a pre-tax profit in excess of Rs 4,300 crore and a strong positive net worth, the company said in a statement. It will also be able to "extinguish all its borrowings thereby saving interest costs and releasing the charge on encumbered assets" and have a strong treasury balance to fund the future realty projects.
The phase 1 of the deal is expected to be signed on or before Sept. 30, subject to shareholder approval.
Rental income earned in the last financial year from the buildings on the Worli land parcel was about Rs 22 crore, which is 0.8% of total revenue, the company said.
Interestingly, the value of the sale is more than Bombay Dyeing's market cap of about Rs 2,900 crore.
The board has also given in-principle approval for the development of the unutilised land parcels available with the company having a potential to create about 3.5 million square feet of residential and commercial property, and generate a revenue of about Rs 15,000 crore over the next few years.
"The development will be planned judiciously in phases to manage 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 statement said.
Largest Land Deal In India
"A single land deal of this magnitude would be the largest not just in Mumbai but in India," said Gulam Zia, executive director at property consultant Knight Frank India.
According to him, such a prime land parcel in Mumbai can be put to mix use with ample of premium offices and super luxury residences in close vicinity. "With luxury housing projects scaling new highs both in transaction volumes as well as price hikes, this transaction appears to be just right ticking all the check boxes for a record breaking land transaction."
The announcement comes days after Bombay Dyeing executed a conveyance deed in favour of Axis Bank, transferring of 11,541 square metres. This will enable independent and exclusive access to the bank’s headquarters for an approximate sum of Rs 149 crore, it said.
In August, the textile company had reported its standalone net loss widened to Rs 119.8 crore for the first quarter ended June 30 from a loss of Rs 76.8 crore a year earlier. The company attributed it to lower sales in its polyester vertical.
Shares of the company closed 6.93% higher at Rs 140.50 apiece ahead of the announcement on Wednesday compared with a 0.38% advance in the NSE Nifty 50.
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