Scripscan:Bombay Dyeing & Manufacturing Company Ltd
Code:500020
Cmp:335
Story:Bombay Dyeing owns two mill land properties in Central Mumbai-25 acres in Worli (obtained on a 999 year lease from Mah Govt in 1870s) and 42 acres at Wadala (owned on free-hold basis). In CY06, the company had shifted its textile manufacturing facilities to Ranjangaon near Pune and commence real-estate development at Worli and Wadala. The two properties put together have potential to generate 9.5 million sq ft of saleable area having mix of residential and commercial space.This development of real estate would result in huge profit generation over next 8 years which is not reflected in present valuations of the stock. After touching high of Rs 692, Bombay Dyeing appears a very attraftive buy at current Rs 370/. At an average rate of Rs 18,000 per sq ft, real estate development can generate revenues of nearly Rs 17,000 crores although company may sell Residential space and commercial space may be leased out and not sold.Group's textile and polyester businesses had been making losses since FY06 which , however, turned around in Q4 FY11. Hence, loss-funding from real-estate cashflows has ended.Last major land deal in Mumbai was purchase of 8.40 acre plot from NTC by Indiabulls @ Rs 180 crores per acre. Even if we take Bombay Dyeing land value @ Rs 140 cr per acre, value of land alone works out Rs 9400 crores which gives value of Rs 2300 per share.Bombay Dyeing had received CC to launch 1 mn sq ft residential development in Wadala which was launched in 2010. It has also receievd approval for incentive FSI to provide public parking in Wadala. This project should generate revenues of Rs 1700 cr over FY12-14. It is reliably learnt that company has launched the next phase of 1mn sq ft of residential apartments . These two phases put together should contribute Rs 3600 cr in revenues over FY12-15. This should drive very strong improvement in cash flows. Bombay Dyeing should develop entire developeable area over next 7 years. Assuming average selling realisation of Rs 18,000 per sq ft and average construction cost of Rs 3500 per sq ft and legal/approval/compliance/marketing expenses of Rs 500 per sq ft, PBT of Bombay Dyeing should be in range of Rs 14,000 per sq ft.It is very very difficult to project realistic Revenue and Profit estimates for Bombay Dyeing due to construction period (ranging from 3 years to 5 years), selling estimates (when and how many sq ft is actually sold).Company has a debt of Rs 1600 crores and Textile/Polyster business can be valued at Rs 600 crores (45% discount to Net Assets).Scrip holds tremendous value for long term investors.
