Textile mills ride realty boom
The country’s top textile firms are generating additional revenue streams by developing or selling precious real estate as land rates rise in a buoyant economy.business Updated: May 31, 2010 22:58 IST
The country’s top textile firms are generating additional revenue streams by developing or selling precious real estate as land rates rise in a buoyant economy.
Bombay Dyeing & Manufacturing, Century Textiles & Industries, Provogue India and Alok Industries are some of the firms intent on developing or selling valuable land parcels to boost cash flow and cut debt.
Property rates in major cities, such as Mumbai and Delhi, have nearly doubled in the past year, as home and office buyers return and mortgage rates remain in single digits.
Mumbai is rated among the most expensive office locations in the world.
“There are a lot of companies who have huge land banks. But the issue is (the) market gives valuations to only those companies which have come into the market for development of these landbanks,” said Kishor P Ostwal, chairman of brokerage CNI Research.
Ostwal has a ‘buy’ rating on both Bombay Dyeing and Century who have premium large tracts in central Mumbai.
Bombay Dyeing, which has around 9 million square feet in Mumbai alone, recently sold a property to Axis Bank for Rs 780 crore, according to a statement by Shree Nath Commercial & Finance, the broker to the deal.
The firm has relocated its textile mills outside the island city near Pune and the land freed has been earmarked for two real estate projects in central Mumbai, Ostwal added.
Century Textiles, with 16 hectares in Worli in central Mumbai, is constructing two commercial buildings to be completed in 12-15 months.
Most old mills in Mumbai received huge tracts of land “almost free of cost” during colonial times from the British, who were keen on developing the city as a textile centre for cotton because it had the right conditions, said urban development expert Chandrashekhar Prabhu.
“A number of mills had got land for a nominal lease for industrial use,” making Mumbai an important textile producing centre, Prabhu said.
A crippling industrial strike in the early ’80s saw the textile sector collapse and mills silenced. Over the past five years the state government of Maharashtra allowed more land from textile mills to be used for real estate development.
Analysts said mill owners are finally getting to reap the benefits of this provision with land rates on the rebound.
“It is a strategic move. It would unlock financial value for the mills and help the city as well, because you would have real estate coming onto the market,” said Devangshu Dutta head of Third Eyesight, a textiles consultancy.