Detailed Rationale

CRISIL Ratings has revised its outlook on the long-term bank facilities and fixed deposits of The Bombay Dyeing and Manufacturing Company Limited (BDAMCL) to ‘Positive’ from ‘Stable’, while reaffirming the rating at ‘CRISIL BBB+’. The rating on the short-term bank loan facilities is reaffirmed at CRISIL A2+.

 

The outlook revision factors in CRISIL’s expectation of improvement in business profile driven by steady growth in revenue and improvement in operating margin in the polyester stable fiber (PSF) business. The expected improvement in operating margins is driven by cost efficiency measures being undertaken to save power costs and improve realizations through value addition. Reasonable investments in capex in the cost efficiency projects through fiscal 2025 and fiscal 2026 is expected. The company has achieved Rs. 733 cr revenues with negative EBIT from the PSF segment in H1 fiscal 2025 and is expected to achieve growth in revenues with positive EBIT for full fiscal 2025. The EBIT margins are expected to be much better in H2 as compared to H1 and will continue to improve in FY 2026 as well with improved realizations and significant cost benefit projects. Sustained improvement in the operating margins in the PSF segment will remain key monitorable.

 

Further, the company is expected to launch fresh real estate project in H1 FY 2026 and customer bookings and response and hence cash flows from it will also be monitored. The company has already completed ICC I and II which has aided the cash flows. The company does not intend to leverage itself majorly for the upcoming real estate projects and, if required, will take up Rs.400-500 crores of external debt. Even so, financial profile and liquidity continues to be strong with no debt and surplus cash and cash equivalents including liquid investments of about Rs 1300 crores as on September 30,2024, with significant cash remaining on the books even with the launch of the real estate projects in FY 2026.

 

The ratings reflect diversified revenue profile and experience management, strong market position in the polyester staple (PSF) segment, healthy track record of executing real estate projects, and strong financial risk profile. These strengths are partially offset by it low operating margins in PSF segment, susceptibility to volatility in raw material prices and forex fluctuations, and exposure to cyclicality inherent in the Indian real estate industry.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of BDAMCL along with its 97.36% owned subsidiary, P.T Five Star Textiles, Indonesia (PT Five).

 

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Diversified revenue profile and experience management: BDAMCL is promoted by Wadia Group which commenced its operations in 1879, one of the oldest conglomerates in India with presence in several diversified industries, including FMCG, real estate, textiles, chemicals, and food processing.  Further, the promoters and management team are well qualified and experienced in this business. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers across segments. BDAMCL has three business divisions viz, real estate division, polyester staple fibre division (manufacture of 100% virgin polyester staple fibre & textile grade PET Chips) and retail division. 

 

• Healthy track record in executing real estate projects: The real estate division of BDAMCL has completed two major real estate projects in Mumbai including the Island City Centre (ICC) residential project and WIC Worli - Axis Bank HQ (Commercial Tower). In addition, the company has increased its focus on the real estate segment over the past two to three years and has also brought in new management with extensive experience in the real estate sector. As a result, the company sold more than 99% of the units in the existing ICC project (ICC I and II). The healthy sales velocity indicates the strong brand positioning the premium segment. The strong track record of the initial phase at ICC and portfolio of owned assets should limit the implementation risks of the next phase of the project leading to timely execution and help the company sustain high profitability. The company is planning to launch the next phase in H1 FY 2026.

 

• Established market position in the PSF segment: BDAMCL is an established player in the PSF segment with significant market share of more than 10%, catering to diverse end markets. Key end markets include apparel and home textile, automobiles, geotextiles, hygiene products and industrial products. The company further benefits from established relationships with key customers and suppliers in this segment which ensures repeat orders. With capacity utilization of around 85-90%, overall net revenues have remained stable in the range of Rs 1414-1670 crores over the past 2 years from this segment. Established customer relationships ensuring repeat orders and strong market position should continue to support the business risk profile of the company.

 

• Healthy financial risk profile: With the recent sale of its land parcel at Worli, BDAMCL has received ~ Rs. 4,686 Cr from the buyer as per first tranche in October 2023 and received the second and final tranche of proceeds of – ~Rs.538 Cr in August 2024. The profit from sale of land will result in healthy improvement of Net worth by the end of fiscal 2025. Currently as on September 30,2024 the company has no debt. Management’s stance on remaining debt averse should support the comfortable capital structure over the medium term. The capital structure is expected to remain comfortable as total outside liabilities to adjusted networth ratio expected to remain below 0.6 times over the medium term.

 

Debt protection metrics are expected to be healthy as the company has no debt. Company is expected to maintain strong debt protection metrics over the medium term supported by healthy accruals and no major debt plans.

 

Weaknesses:

• Susceptibility to volatility in raw material prices and forex: The entities in the textile manmade segment have limited price negotiation capability with their suppliers due to high dependence on them. Prices of raw materials as well as energy costs, the two major input costs for the PSF division are significantly dependent on crude oil prices. Changes in oil prices could lead to an impact on margins and profitability. Therefore, margins are susceptible to variations in raw material prices, as reflected in its fluctuating operating margin. Thus, fluctuations in the value of the rupee against the US dollar may affect realizations and margins of the entities in the segment.

 

However, exports revenues in the PSF division providing natural hedge to the company and protection to the company against volatility in raw material prices and forex.

 

• Exposure to cyclicality inherent in the Indian real estate industry: The real estate sector in India is cyclical and affected by volatile prices, opaque transactions, and a highly fragmented market structure. Hence, the business risk profile will remain susceptible to risks arising from any industry slowdown.

Liquidity: Strong

The company has built strong liquidity with the sale of Worli land leading to surplus cash and cash equivalents including liquid investments of about Rs 1300 crores as on September 30,2024. Further, cash accruals are expected to be healthy against nil debt obligations in fiscal 2025. CRISIL Ratings expects about Rs 500-600 crore funds to be maintained free of any encumbrances by the company over the medium term. The same should be further supported by customer advances from the upcoming real estate projects. Low gearing and healthy net worth support its flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Positive

CRISIL Ratings believes that BDAMCL’s business profile will strengthen driven by improving operating margin through cost efficiency projects and launch of real estate project.

Rating sensitivity factors

Upward factors

• Significant and sustained improvement in operating profitability leading to higher net cash accruals of above Rs. 85 crores, mainly driven by PSF segment.
• Timely launch of new projects and adequate customer bookings leading to substantial cash flow from operations.
• Sustenance of financial risk profile and liquidity surplus.

 

Downward factors

• Low cash flow from operations because of subdued response to, or delay in execution/launch of upcoming project weakening the business risk profile.
• Significant weakness in profitability or higher than expected debt levels leading interest coverage below 3 times from fiscal 2025 onwards.
• Any large cash outflows in form of capex, dividends or group support depleting the liquidity surplus from expected levels.

About the Company

BDAMCL is a flagship company of Wadia Group and was incorporated in August 1879 by Mr. Nowrosjee Wadia. BDAMCL is engaged in three business divisions, i.e., manufacturing polyester staple fiber (PSF), real estate and textile retail business. BDAMCL is listed at BSE Limited (BSE) and National Stock Exchange of India Ltd (NSE).

 

Currently, the  Company is headed by Mr. Nusli N. Wadia as a Chairman,  Mr. Ness N. Wadia and Mr. Jehangir N. Wadia are   Director on the Board of the Company,  along with  a team of professionals. In addition PT Five currently has no operations.

Key Financial Indicators

As on/for the period ended March 31	Unit	H1 2025	2024	2023
Operating income	Rs.Crore	831.6	1685	2649
Reported profit after tax	Rs.Crore	408	2948	(516)
PAT margins	%	49	174	-19.5
Adjusted Debt/Adjusted Networth	Times	-	-	(2.86)
Interest coverage	Times	1.64	0.19	0.11

 

Any other information: Not applicable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
The Bombay Dyeing and Manufacturing Company Limited	Full	Parent Company
Pentafil Textile Dealers Limited	Full	Subsidiary Company (97.36%)