A lot of textile stocks including Raymond, Bombay Dyeing, Century Textiles & Industries, Provogue India, and Alok Industries seem to be rising not because of any change in their fundamental business, but based on the land parcels they own and want to develop — of course, Indiabulls’ extravagant purchase of NTC’s land parcel must have helped. Even so, the pace of the rise in some of the stocks is stunning.
In Raymond’s case, the whole excitement seems to be around a Business Standard report that it will arrive at a new settlement with its Thane mill workers that will allow it to use the mill’s 126 acres for realty development. The mill is non-operational since December. Raymond had wanted to pay the Thane workers Rs1.6 billion while the mill workers are pressing for twice that amount. The Maharashtra government had also stepped in on the workers’ behalf threatening Raymond with nationalisation.
However, a ray of hope has now opened up for both the workers and Raymond in the form of the Thane Municipal Corporation, which is likely to offer it additional floor space index for the redevelopment of some slums on a portion of its property. Raymond will probably agree to pay the mill workers more than it was initially prepared to only out of the proceeds of the redevelopment — but this solution seems to be acceptable to the government, too, which was initially vehemently opposing Raymond’s realty plans. The meeting to discuss this is to be held tomorrow — expect more action around the stock. Around the same time last year, Raymond had announced its realty plans but it had talked of 15-20 acres of surplus land, which was not a part of its factory. However, the stock languished between Rs170 and Rs250 until 5th August, when it started its phenomenal up-move. Since then, the stock has risen from Rs240 to almost Rs400. On 13th August, HDFC Mutual Fund bought 997,596 shares of Raymond at Rs364.
Bombay Dyeing shares started rising a little before Raymond. From 2nd August, the shares have risen from around Rs550 to almost Rs700 now.Chairman Nusli Wadia had said at its AGM last week that the company was focusing harder on its real-estate business and was looking at this business to clear off it Rs18 billion debt. The company’s real-estate business was Rs5.6 billion in FY10, twice as much as in FY09. Bombay Dyeing has a 67-acre land bank in Mumbai. Its textile business has been incurring losses for quite some time now — late June, RIL was said to have purchased its 165,000tpa polyester unit for Rs3 billion. This is not confirmed by the company.
Bombay Dyeing is also believed to have sold property to Axis Bank for Rs7.8 billion in May — again not confirmed by the company. BD has apparently relocated its textile mills to Pune and is planning two real estate projects on the freed land in central Mumbai. The general belief is that it has the potential to develop almost 8 million sq ft of land in central Mumbai.Century Textiles is already in the process of building two commercial buildings on its 16 hectares in Worli in Mumbai.
Alok Industries is planning to sell its real estate in Mumbai to cut its debt and apparently expects around Rs7 billion (expectations may have risen after the recent Indiabulls deal where it bought just 8.3 acres of land from National Textile Corporation in Worli for a whopping Rs15 billion). The shares of Century Textiles have moved up from almost Rs450 to Rs500 while Alok Industries is steady at Rs20. Provogue, which plans to develop real estate in Tier-II cities, has risen from Rs58 to Rs67. Among other stocks with embedded real estate value is DCM. The Punjab and Haryana High Court recently cleared 250 acres of land for sale from its closed unit.s
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