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Shares of India's Bombay Dyeing surge on $627 million land sale; peers, realty index up

Reuters
Updated ·2-min read

BENGALURU (Reuters) -Shares of realty-to-textile firm Bombay Dyeing and Manufacturing jumped as much as 20% on Thursday on a $627 million deal to sell land, pushing up the stocks of peers on hopes of a pickup in the realty market.

The sale of the 22-acre plot in Mumbai to a unit of Japan's Sumitomo Realty and Development Co would help the company become debt-free, it said, and comes as parent Wadia Group faces troubles with its Go First airline filing for bankruptcy in May.

Bombay Dyeing's stock hit its highest level since Sept. 27, 2018.

The deal, announced on Wednesday, signals investor optimism, while the location of the land parcel presents immense development prospects, said Shishir Baijal, chairman and managing director of Knight Frank India.

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Shares of peers Godrej Properties, Indiabulls Real Estate and Oberoi Realty are up between 1.6% and 2.6%, driving the Nifty Realty index up 1.6%.

Anarock Group Chairman Anuj Puri attributed the rise in realty stocks to subsiding inflation in India, likely due to a prolonged rate pause by the Reserve Bank of India (RBI) and improved sales momentum due to the upcoming festive season.

"The present inflation figures suggest that the RBI is likely to maintain its current interest rate stance, a factor that is reflected in the strong performance of listed developers," Puri said.

U.S. data showing a moderate increase in consumer prices in August also aided sentiment, cementing expectations that the Federal Reserve will leave interest rates unchanged in September.

The sale will help Bombay Dyeing record a pre-tax profit of more than 43 billion rupees ($518.24 million) and help "extinguish all its borrowings," the Mumbai-based company said.

Bombay Dyeing shares were last up 15.9%. The stock has more than doubled so far this year, compared to a nearly 37% climb in the Nifty Realty index.

($1 = 82.9725 Indian rupees)

(Reporting by Varun Vyas in Bengaluru; Editing by Mrigank Dhaniwala, Janane Venkatraman and Sonia Cheema)