Wadia group-promoted Bombay Dyeing reported 75 per cent jump in the fourth quarter net profit in the last financial year, mainly due to a turnaround in the polyester business. In an interview to Wadia group-promoted Bombay Dyeing reported 75 per cent jump in the fourth quarter net profit in the last financial year, mainly due to a turnaround in the polyester business. In an interview to Raghavendra Kamath and Sharleen Dsouza, Joint Managing Director and Chief Financial Officer Durgesh Mehta and Chief Executive Officer Debashis Poddar talk about the performance and plans. Edited excerpts:, Joint Managing Director and Chief Financial Officer Durgesh Mehta and Chief Executive Officer Debashis Poddar talk about the performance and plans. Edited excerpts:
Your polyester business saw a growth of 76 per cent and textiles grew 37 per cent, but real estate slipped 62 per cent in the last quarter. Do you think the trend will continue?
No, real estate is a different kind of business. It depends on the number of transactions, top line and bottom line fluctuations. We hope to have good growth in that business as we bring more and more property to the table.
In polyester, last year we saw significant increase in our capacity utilisation; and in textile, we have been witnessing continuous growth, especially in the domestic market.
Analysts gave a lot of weightage to your real estate business. But do you think times have changed? Is textile taking over real estate?
No, not in terms of the bottom line. Real estate is still a significant contributor to our bottom line. It is, in fact, a product of our textile business. We are developing our mill land as real estate. In terms of value, real estate has a huge potential to unlock huge opportunity, which the company will do over the next five, seven or 10 years, depending on the market and our ability to convert.
On the other hand, the business of textile is for the long haul. The company is basically a textile company with 130 years of history, and our objective is to expand this business. That is what we will continue to focus on.
Operating margins in the fourth quarter of the last two financial years were stagnant. What are the reasons?
In 2009-10, real estate was a major contributor. Also, our operating margins in polyester and textiles had improved significantly. Real estate generated close to Rs 100 crore. Last year, the situation was different. Real estate was the lowest contributor, but polyester and textiles contributed heavily.
What is your debt situation at the moment?
We have reduced it from Rs 1,800 crore to Rs 1,200 crore.
What is your debt-equity ratio?
Our debt-equity ratio is very misleading. On the paper it is 1:4 now, but the real value of the share holders, which is the value of the land, is not shown in papers. If I have to put in the value of land which, on a conservative estimate, is worth Rs 5,000 crore, our debt equity ratio should then be 4:1 instead of 1:4.
Currently, what is the total area under development?
We have land in two places in Mumbai — Worli and Dadar. The land in Worli is 25 acres and Dadar is 42 acres. We have constructed one residential tower, which is more or less ready and also constructed a commercial building, that was sold to Axis Bank last year. We are now planning to launch two more residential towers, sometime in this year in Dadar.
What gives you the confidence to launch new projects when there is stagnancy in the market?
The land is of zero cost to us. So, we have a greater staying power than others who have paid for the land. We are not in a hurry to develop. We have a huge land parcel, which we have to develop over a period of time. So, our objective is to improve and get better than average realisation by continuously being in the market. Yes, there are times when the market is a little depressed.
After launching the first residential tower in Dadar, we sold the flats for Rs10,000 per square foot. In 2008 we peaked and sold at Rs 30,000 plus per square foot. Then prices came down and we did some transactions at Rs 20,000 to Rs 25,000 per square foot. Now again, we are selling at Rs 30,000 to 35,000 per square foot.
We are planning to construct buildings as high as 60 to 70 stories over a period of four to five years, so in a year we will be selling some part. Even in a stagnant market we sell around 10 flats a month.
In the next two to three years, what will be the percentage of the real estate business?
It is very difficult to predict. In terms of top line, real estate will not be very large, but in terms of bottom line it will be disproportionately high. In the long-term, we want to drive growth in textile, which is our core business. We have a tremendous brand strength and excellent design capability. We have one of the best reach, particularly in home textiles. We have 400 exclusive retail outlets and our materials are available in 2,000 outlets, which is by far three to four times our nearest competitor.
Your competitors are launching a variety of home textiles. How are you differentiating yourselves?
Competition is always welcome, but the consumer has to decide what to buy and at what price. We have two or three advantages. We have a very strong name and for 130 years are known for quality. We have reach and have designs in our favour as we come out with 400 to 500 designs every six months. Our home textile business is worth Rs 400 crore. We sell five million bedsheets a year.
Will you bring down the prices of finished products as raw material prices have eased?
We had increased prices a little, and reduce the price wherever necessary.
