IIFL recommends buy Bombay Dyeing

Bombay Dyeing :Poised to unlock value
Bombay Dyeing owns two prime mill land properties in central Mumbai, one of which has received the
commencement certificate (CC) for launch. The first phase will be launched by December 2010, and
would likely generate revenues of over Rs20bn. With losses in its textiles business down c50% YoY in
FY10 and its PSF business expected to breakeven at the EBITDA level in 2QFY11, we expect the
company to register earnings CAGR of c80% over FY10-13ii. The company’s stock trades at a discount
to our NAV estimate of Rs827/share. We recommend BUY with 30% upside.
Launching 1m sq ft of prime residential in central Mumbai: Bombay Dyeing owns 9.5m sq ft in Worli
and Wadala in central Mumbai. Of this, it has received CC to launch 1 m sq ft residential development in
Wadala. The project is expected to be launched by December 2010, and we reckon it will generate over
Rs20bn in revenues over FY11-14ii. It has also received approval for incentive FSI to provide public parking
in Wadala.
Polyester business expected to break even in FY11; losses down in textile business: The Group’s
textile and polyester businesses have been making losses since FY06. Management expects the polyester
business to achieve EBITDA breakeven in 2QFY11 on improving utilisation, better realisations and lower
energy costs. Losses in the textile business have been cut c50% YoY in FY10. Hence, lower loss-funding
requirement from real-estate cashflows will aid faster monetisation of the land bank.
Strong earnings growth in FY10-13ii; BUY for 30% upside: The imminent launch of over Rs20bn
worth of real estate in Wadala will drive c80% earnings CAGR over FY10-13ii. Even after assigning negative
equity value to textiles and PSF businesses, our assessment of NAV is Rs827/share. We recommend BUY
with a 30% upside from current levels.