Thursday, August 04, 2011

Bombay Dyeing moves into Real estate, Retail

Parsee business and trusts like Bombay Dyeing, Godrej, Tata hold vast amounts of prime land in Mumbai. These guys are are now unlocking the land value by developing these land parcels and selling these outrageously priced apartments to black money holders. The airline GoAir which is run by Jeh Wadia is a flop airline. I wonder how CNBC TV18 touts it as a successful aviation business. In fact Jeh Wadia had made some disparaging remarks on the poor kids when he started the airline promotions at 500 Rs per seat to Goa. I wonder if he will say the same things about the rich luxury apartment owners who will still be living in 'below the poverty line' apartments as compared to a rich trust fund baby.

On the retail front with the imminent arrival of supermarket chains like  Walmart, Tesco and CarreFour into the top 6 metro cities of India, I am expecting a big jump in prices for  rentals/outright sales of shops in all major neighborhoods. Indian cities are just the right model for Tesco Express stores (1000-5000 sq ft)  which stock Kirana style items while maintaining high quality standards of goods and customer service. A Tesco Express/Walmart express in every neighborhood is not unthinkable as these guys have the processes and knowhow defined to handle large scale operations smoothly

Project ‘ Bombay Dyeing Makeover’ has begun under the leadership of Jeh Wadia, the man behind Wadia group’s successful aviation business. CNBC-TV18’s Tanvi Shukla reports that the two key takeaways from the first annual general meeting (AGM) after Jeh Wadia took over as joint Managing Director of Bombay Dyeing is one, their focus on real estate and two, de-focusing from textiles and focusing more on retail part of the business.
To begin with, real estate is something that management has been talking about. Today they updated the shareholders that construction work has finally begun at the Dadar Spring Mill project. They are also going to be developing the Worli property.

In an interview Wadia says that high interest rates will put pressure on people buying apartments. “But fortunately for us we don’t have very high volumes, we have low volumes. Also, we are in the luxury end of the spectrum. So I don’t see much of a shortage as far as sales are concerned” he added.

Talking about the Group’s retail business, Wadia said that the company will now focus on opening more number of stores and introducing higher value added products. He aims at an entire revamp of the retail business, which would probably give them higher margin profitability, something that they haven’t really seen in the textile business for quite a while.
So Bombay Dyeing seems to be shifting from a textile giant to a company whose core focus will now be in real estate and in retail.

230 comments:

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Anonymous said...

"No one sells gold to buy a house. A businessman may sell gold to start a business but never to buy a house. "

I didn't say people would sell gold to buy homes, rather that they will NOT sell their homes because they have gold. First there is the wealth effect that increasing gold prices has on household consumer confidence. Secondly, even if people lose their jobs, they can afford to pay their EMIs by selling off just a little of their Gold. In such an environment, downturns like the US, Spain or Dubai are impossible to envisage. Indians have vast stores of personal savings, unlike Americans, Spaniards or British.

"In any case, an average Indian household will not be able to realize more than 10% of the house cost by selling all their gold. Rest 90% still needs to be paid through recurring income. "

Are you sure about that? I spoke to my office tea boy the other day and apparently his family has saved 900 grams of gold. At current prices, that is almost 24 lakhs. This is far more than a 10% downpayment even with current prices. Mind you this is just a tea boy.

"NRIs are no longer the force they once used to be."

In South India, I can tell you that almost every family is an NRI family in that there is at least 1 or more members of the household abroad. IT IS FOOLISH TO SUGGEST THAT NRIs ARE NOT A BIG PORTION OF THE HOUSING MESS IN INDIA.

"HNIs may want to buy in London, Dubai or wherever else they see value. But then this is contrary to point above. NRIs can invest in these places today so why are they coming to India then?"

I was talking about Indians based in India not NRIs. It is Indians who are prohibited from investing overseas, not NRIs. I thought this much must have been apparent.

"Totally impractical thought. But this is not going to happen in any sane environment. "

EXCUSE ME????!!! Did you even READ the last sentence in my post? Here it is again: "The chances of any of the above 4 scenarios happening: NEXT TO ZERO."

Pawan said...

I was talking about Indians based in India not NRIs. It is Indians who are prohibited from investing overseas, not NRIs. I thought this much must have been apparent.

On one hand you are saying Indian overseas are causing bubble in India and on the other hand you say Indians should be allowed to invest outside. If investments outside India are so lucrative then why are Indians settled abroad are investing in Indian RE. They have all other options available to them. That is the contradiction I pointed to.

Current RE prices are so high that an NRI no longer has the purchasing power he once used to have. That is a FACT.

And then the tea boy example supports my point. The tea boy can never buy RE because he may be able to pay 25% down payment with gold instead of 10% but the recurring income part is still absent.

Anonymous said...

"On one hand you are saying Indian overseas are causing bubble in India and on the other hand you say Indians should be allowed to invest outside. If investments outside India are so lucrative then why are Indians settled abroad are investing in Indian RE. They have all other options available to them. That is the contradiction I pointed to."

Both NRIs and resident Indians have contributed to the bubble. As noted earlier, NRI and resident Indian families are not always distinguishable. In the South, 99% of families are "NRI families" in the sense that at least one of their members are in UK, Europe, Australia or the Gulf.

"And then the tea boy example supports my point. The tea boy can never buy RE because he may be able to pay 25% down payment with gold instead of 10% but the recurring income part is still"

The tea boy was just a low end example. The salaried middle class has far more gold savings and have a comfortable level of ongoing salary to afford EMIs for a long, long time.

Real estate crash? In India? Not in our lifetimes.

Pawan said...

NRI and resident Indian families are not always distinguishable.

Then none of your points regarding rupee appreciation, NRIs getting priced out and allowing Indians to invest outside make any sense.

The salaried middle class has far more gold savings

For every such household I can show you 10 who don't.

Real estate crash? In India? Not in our lifetimes.

Correction is overdue, crash we don't want.

Anonymous said...

Next Post Please :-)

Anonymous said...

"Then none of your points regarding rupee appreciation, NRIs getting priced out and allowing Indians to invest outside make any sense"

NRI income is only one factor in the rise of RE prices.

NRIs will first want to make dead sure they first have a house lined up in their hometown before they buy a house in Chicago or Sydney.

In a sense, I do agree with your earlier comments that NRIs are priced out of the market already at current RE rates. However, that is only for outright purchase. NRI salaries can easily afford ongoing EMIs in mortgages with a sizeable downpayment.

Anonymous said...

Rs 6 lakh for a night of dance, booze and sex in Mumbai

http://timesofindia.indiatimes.com/city/mumbai/Rs-6-lakh-for-a-night-of-dance-booze-and-sex-in-Mumbai/articleshow/9802426.cms


Now, who are these people who can afford pay 6 laKHS for f.ck and s.ck.

My guess is Raheja, Hiranandani, Ministers, Industrialists etc etc.

We are here talking about 1 cr flat, a lifetime dream. Now see the travesty

Where is Anna Hazare

Anonymous said...

"Now, who are these people who can afford pay 6 laKHS for f.ck and s.ck. "

I'm not at all surprised at this article.

The fact of the matter is that the number of nouveau rich is pretty plentiful in India. In a country of 1 Billion people with gross disparities of wealth and with the Super-rich in bed with the Government, there must be literally millions of people who are wealthy beyond imagination.

MODERATORS! NEW THREAD PLEASE. THIS ONE GETTING PRETTY FULL!!!!!

Anonymous said...

Pawan, Polt et.al.

RE is going to fall by 50% and more. Whatever theories you come up with about gold, USD/INR, Sensex, interest rates etc., RE will still have to come to sustainable levels. It is just a matter of time. These are year 2030prices that we see today.


VIK:

New post please.

Anonymous said...

"RE is going to fall by 50% and more. "

Do you have anything other than your own subjective opinion to base this on?

Pawan said...

Last two anons:

In my small investing life I have just learnt one useful thing: Never Chase anything (on its way up). I am not chasing RE.

Anonymous said...

"Never Chase anything (on its way up). I am not chasing RE."

What about Gold then? Would you consider buying and at what entry point?

Anonymous said...

In my life of seeing greedy people and their end fate (which is always bad) i have learnt..

NEVER TRUST ANYTHING that is too good to be true..

If its too good to be true.. WAIT..
i always says "Patience is a virtue" and that will never fail

Pawan said...

What about Gold then? Would you consider buying and at what entry point?

I will never buy gold. At least not till I am 50 at which point I may want to diversify. Reason - I do not know how to value it!

polt said...

@Anon - "if its too good to be true.. WAIT.."

A small edit. "If its too good to be true, then it is too good to be true" WAIT :)

For the last few years, RE was the easiest way to make money. Lever up, buy a plot of land or an apt and just sit on it. Voila - Inflation thrashing gains like magic.

@Pawan - I am sure many of us on this list are considering buying homes and see prices rising all around us. But (and I have said this before several times) price/rent ratios are way too inflated. This wont last for ever. Fundamentals WILL reassert. Patience and conviction in your investment knowledge will reap you rewards.
Absolutely nothing wrong with renting. I personally am prepared to do it for a looong time if need be.

Anonymous said...

"For the last few years, RE was the easiest way to make money. Lever up, buy a plot of land or an apt and just sit on it. Voila - Inflation thrashing gains like magic. "

The problem is that the Central Banks worldwide has made it abundantly clear that they will continue to steal from savers and give to leveraged debtors by printing money.

As long as the current central banking paradigm of ultra-Keynesianism prevails wordwide, there will be competitive devaluations of currencies accompanied by massive inflation. This will strongly benefit highly-leveraged debtors and harshly punish foolish savers.

And no, RBI/GOI won't do a fig about inflation. They haven't given a rat's behind about it for the past 10 years, they're not going to start now.

kerala property sites said...

Sensex to go down by 500-600 points today based on global cues. This time party really seems to be getting over. I hope no more money is printed.

Anonymous said...

India is different and Indians are certainly most intelligent on the face of earth. As soon as people get salary they go and buy gold and in remaining salary buy food. Food is not good investment, it is just waste of money. It will never appreciate and causes tons of health problems like high sugar, weight gain, heart problem etc. And in most of the Indian religion fasting is recommended for healthy living. So all these people with huge amount of gold make sure that gold prices will never come down and also RE else their sacrifice will go for toss. Please invest in gold and RE and encourage others to do it. Help each other to prospect.

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Unknown said...

The party's only over when the tallest tower is built. This is how it has ended everywhere, right from the Biblical Tower of Babel to the Burj Khalifa. Is there any such plan in India, or maybe it was the Commonwealth Wealth Games that did India in, similar to the Olympics in Greece.

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Buy Villas said...

Bombay Dyeing seems to be shifting from a textile giant to a company whose core focus will now be in real estate and in retail.

skeptic optimist said...

@Anonymous who said NRI hand to mouth

Not necessarily - assuming a take home salary of 3-5k USD

In many places in US you can live comfortably for 1500$ a month 600- rent 200 car and 200 groceries and 5oo for fun - I have a BMW and my own apartment in that much money - the rest is invested. However this is not true if you are married and have kids.

Some of my married friends who dont have kids can invest entire spouse's equal income - so if wife makes 4-5k US$ all that is saved.
Some invest locally or some buy home/land in India.
In fact drop in home prices and oversupply has let them get really good deals.

With uncle Ben Bernanke's presses running borrowing is cheap -

one can basically borrow for 3-5% interest to buy anything from a house to a yatch.

Real Estate Amherst NH said...

Buying a new house or property is one of the biggest investments you will make and should be taken seriously.

Mac said...

Bombay has been doing good in real estate business. i just wish and hope that it would continue until the next 12 months.







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