Bombay dyeing consists of textile and real estate business. Investors are very much interested in their real estate business as they possess 150 plus acres of clear title land parcels in the heart of Mumbai City. The enterprise value of Bombay Dyeing is to the tune of Rs. 6150 crores which includes debt of around 3500crs. The mgmt. has come on record and stated that the cash flow from the ICC I & II has the potential to generate 2000 crs of free cash flow in the coming fiscal and reduce the debt substantially. In a recent interview the mgmt. has come on record and talked about future plans of real estate division which includes an upcoming project (a commercial project of over a million sq. ft. ) in their Worli Land parcel. This could ensure recurring revenue from real estate which will have much higher margin as key raw material land is owned by the company. Currently, ICC I & II is the only on-going project of Bombay Dyeing. They are expecting OC for the said project in Mar-2019. 1/3 rd of the inventory is unsold which is expected to fetch Rs. 45,000 sq. ft. on carpet which could give sales realization of more than Rs. 1000 crores. Generally after OC, Sales velocity and realization of any project gets much better due to no GST on the flat. GST, at present, on an under-construction property is 5% for flats over and above 45 lacs. In ICC I & II flats starts from Rs. 7-8 Crores. So in absolute number wise 5% on 8 Crs flats comes to around Rs. 40 lacs which is a big number and can influence a buying decision.
I recently visited their project ICC I & II in dadar east to get a feel about their real estate business. Here is my take on the project:
- L&T is the contractor
- Construction work was in full swing and it was happening till late evening till I left the site around 7 PM.
- Sales office was plush to give a feel of luxury project
- Sales Executive was not so keen for discount. They said that they don’t discount beyond 1-2% of the flat cost
- She hinted me about an upcoming project in Worli which will have smaller size flats (2 bhk mainly). (Note- Smaller size flats have much better sales velocity). Project might come during Diwali-2019.
- Ultra net worth People are interested in living in tower with amenities in Mumbai than in a standalone building. People are also buying flats in project to to save tax on capital gains.
- OC is expected in a week’s time.
- Couldn’t see sample flat as the sample flat is showcased only till 5 pm and I came after that.
Disclosure: Already invested and intent to buy more