Shares of Bombay Dyeing and Manufacturing Company (BDMC) experienced a significant increase during early trading on Thursday, reaching a one-year high of Rs 168.50 ($1 = Rs 82.92), a near 20% jump. This comes after the company's board approved a plan to sell a 22-acre land parcel located in Worli, Mumbai, a transaction valued at Rs 5,200 crore (Rs 1 crore = $120,594), announced on September 13. The deal value surpasses the company's total market capitalisation.
At around 10:20 am IST on Thursday, shares of the company were up over 15% at around Rs 162 apiece. The company's market capitalisation stood at Rs 2,900.78 crore at Wednesday's close, following a 122% rally over the last six months.
The company plans to sell the land parcel to Goisu Realty Private Limited, a subsidiary of Sumitomo Realty & Development Company Limited. The sale will take place in two phases subject to shareholder approval. BDMC is set to receive approximately Rs. 4,675 crore from the buyer for Phase-I and the remaining sum of roughly Rs. 525 crore upon completion of specific conditions and definitive agreements for Phase-II.
The agreement for the first phase is expected to be signed on or before September 30, 2023, while the second phase is anticipated for completion by Q4 2023 or Q1 2024. To facilitate this move, an extraordinary general meeting (EGM) for the company's members will be convened with a notice circulated in due course.
Market analysts believe that the proceeds from this sale will be utilized to alleviate BDMC's current debt burden, which stands at Rs 3,969 crore. Upon completion of the proposed transaction, the company expects to record a pre-tax profit in excess of Rs 4,300 crore, leading to a strong positive net worth and extinguishing all its borrowings, thereby saving interest costs and releasing the charge on encumbered assets.
In addition to the land sale, the company's board has also approved, in principle, the development of unused land parcels available with the company, which have the potential to create about 3.5 million square feet of residential/commercial property and generate revenue of about Rs. 15,000 crore over the next few years. The development will be planned in phases to manage the company's cash flows efficiently.
Shares of other Wadia group stocks, including National Peroxide and Bombay Burmah Trading Corporation, also saw gains.
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