Bombay Dyeing falls on govt's flip-flop on land clearance

Stock lost 14% in intra-day trade, but clawed back to end 7.6% lower

Traders pounded shares of Wadia group-owned Bombay Dyeing and Manufacturing Co on the bourses on a report that the company had not received the mandatory approval from authorities to develop a mill land in central Mumbai.

The report said the Maharashtra government had filed an affidavit in the Bombay High Court in response to the company’s petition, challenging a notice issued by the Brihanmumbai Municipal Corporation (BMC) in June 2012 to stop work.

The government, according to the report, said no official approval was granted to the company to modify its development proposal. The affidavit said the section officer in the textile department issued permission to the company in August 2004 even before it was approved by the state textile minister and the chief minister.

Analysts said investors were caught unawares by the bear attack on the stock mid-way through the trading on Tuesday, as the report had appeared on Monday. Traders took advantage of the confusion surrounding the matter, dragging the stock down as much as 14 per cent earlier in the day to Rs 99.80. But the stock erased part of the losses and ended 7.6 per cent lower at Rs 106.10, thanks to some short covering.

But the matter is far from resolved. “The government may take a relook at the proposal and accordingly, take a future course of action,” a source in the government said.

The urban development department is also expected to explore further options and may take legal action against the company. In response to a query, a Bombay Dyeing spokesperson said: “The company is not in a position to comment on the issue since the matter is sub judice.”

A company official said the matter would not impact the project. “We had already communicated to all our customers that the project is safe.”

Analysts tracking the company said it should provide more clarity on the situation. “The company has not thrown any light on the situation and the project may face temporary halt based on the reports out so far. But more clarity is definitely required,” said Param Desai, research analyst at Nirmal Bang Securities.

The disputed property, a 38-storey residential-cum-commercial building is called Spring Mills. An approval was obtained to utilise 33,545 sq m of its 41,895 sq m land in Mumbai for commercial development.

The chairman of a property consultancy said: “It will definitely slow down the project. They have faced slowdowns in the past and it will delay things.”