The transaction is set to be one of the biggest land sale deal in the countrys financial capital, spread across two phases, enabling the company to go debt-free.
Upon shareholder approval, Bombay Dyeing will receive about INR 4,675 crore from Goisu for Phase-I.
The balance amount of about INR 525 crore will be received upon the completion of certain conditions by the company and consummation of agreements.
Bombay Dyeing said in a regulatory filing after market hours that the agreement for Phase I is likely to be signed by September 30, while the agreement for Phase II will be done by the fourth quarter of the next financial year.
The sale for Phase I is expected to be completed in October and for Phase II in the fourth quarter of 2023-24.
Commenting on the proposed transaction, Nusli Wadia, chairman, said while Bombay Dyeing has entered into agreements with the Sumitomo group, on completion of the deal the company will be able to record a pre-tax profit in excess of INR 4,300 crore.
Mr Wadia also added that the company will also report a strong positive net worth, extinguish all its borrowings, thereby saving interest costs. It will also be in a position to pay dividend in the future and have a strong treasury balance to fund the future realty projects.
Bombay Dyeing said its board had drafted a strategy in March 2022 to change the companys trajectory, which envisaged focusing on realty business for future growth and profitability, accelerating sale of flats in Island City Center (ICC) at Dadar in Mumbai, monetizing its land bank and improving its credit rating.
Developing the unutilized land parcels of the company and exploring joint development opportunities were also part of the plan.
The company board has given an in-principle approval for the development of the unutilized land parcels available which could potentially create 3.5 million square feet of residential and commercial property and generate a revenue to the tune of INR 15,000 crore.
Bombay Dyeing said it was able to generate a net revenue of about INR 1,050 crore between April 2022 and June 2023, through the sale of the ICC flats, which reduced debt by INR 900 crore in the same period.
The company added that the decision to monetize the Worli land parcel was taken with the view to deleverage and strengthen its balance sheet and fund future real estate projects.
Shares of Bombay Dyeing are locked in a 20 percent upper circuit and hit INR 168.60, over the development.
Reacting to this development, shares of other Wadia-Group companies are also trading higher and the market capitalization of Bombay Dyeing crossed INR 3,000 crore.