Japan’s Sumitomo Realty & Development has agreed to buy a 22 acre (8.9 hectare) land parcel in central Mumbai from Bombay Dyeing and Manufacturing for INR 5,200 crore ($626.3 million).
Bombay Dyeing, a unit of India’s Wadia Group conglomerate, said Wednesday in a stock exchange filing that payment will be made in two phases, with the company receiving INR 4,675 crore upon shareholder approval of the deal and the remaining INR 525 crore once certain conditions are met.
Bombay Dyeing did not disclose Sumitomo Realty’s plans for the plot, but local media described the transaction as Mumbai’s largest-ever land deal in terms of value. Chairman Nusli Wadia said the disposal would enable his company to record a pre-tax profit in excess of INR 4,300 crore and “extinguish all its borrowings”, thereby saving interest costs and releasing the charge on encumbered assets.
“Considering the scale and impact this transaction will have on the future prospects of the company, we seek support of all the stakeholders to ensure that the company delivers sustainable shareholder value as we move forward,” Wadia said.
Projects in the Works
The land acquisition by Sumitomo Realty would be at least the third major purchase in central Mumbai by the property arm of Sumitomo Corporation.
In 2019, the group led by CEO Masayuki Hyodo made a splash by paying $323 million for a 3 acre plot in Mumbai’s Bandra Kurla Complex. The price of INR 746 crore per acre made the land acquisition the country’s most expensive ever on a cost per acre basis, beating the previous record set nine years earlier by Lodha Group.
Last November, Nikkei Asia reported that Sumitomo had spent JPY 35.1 billion (now $240 million) to acquire a further 12,000 square metres (129,167 square feet) of land in the Bandra Kurla Complex, with plans to construct two large-scale buildings with a floor area of 130,000 square metres each.
All told, Sumitomo plans to invest $3.58 billion in office building projects in India, according to Nikkei Asia.
Deleveraging Through Land Sales
The latest land deal is part of a strategy launched last year by Bombay Dyeing, the Wadia Group’s textile flagship, in order to monetise its land bank, focus on realty business and deleverage the company.
Similarly, listed developer Ajmera Realty and Infra India has sought to monetise its Mumbai land bank with a view to paying off debt. The company has about 12 million square feet of land in different parts of India’s most populous city.
The company is working on a plan to cut its corporate debt by 90 percent in three years and keep it minimal, Ajmera executives told Moneycontrol.