Last April, Wadia Group Chairman Nusli Wadia swapped the roles of his two sons giving younger son Jeh Wadia the onus of turning around the fortunes of the group’s flagship company Bombay Dyeing, which has a sales turnover of Rs 2,230 crore.
As the Managing Director of Bombay Dyeing, Jeh Wadia plans a re-launch of the textile division next year. However, the cash cow is the company’s real estate division, Bombay Realty, which going forward will contribute to a majority of the profits.
The younger Wadia scion is also heading the turbulent aviation business with Go Air, the low-cost airline funded by the Wadia family.
Juggling between different businesses is challenging especially with slowdown in consumer demand and increase in costs. In an interview to
Is Bombay Dyeing transforming itself from a textile company to a real estate company?
I wouldn’t say transform but we are focussing on real estate. The company has three divisions: textiles, polyester (PSF) and real estate. but ultimately the focus and the thrust is real estate. We are focusing on transforming our textile assets (which is known as Bombay Dyeing today) into a retail consumer driven asset and converting the real estate assets into mixed use development.
Our two large properties in Dadar and Worli (in Mumbai) will be used for mixed-use development which is a combination of offices, residences and perhaps a school and a hospital as well. We have a large land bank in the group and are looking at new cities like Bangalore, Delhi and Chennai and even places like Thane outside Mumbai for the real estate business.
Bombay Dyeing is still a big brand in the textile industry. What is the outlook for the textile industry? Do you see losses in the textile division reducing over a period of time?
At the moment we are focussing on re-inventing the textile brand with a new identity and product range and are currently restructuring the textile division. We will ultimately take our bed and bath offerings in various other categories targeting SEC A, B and C segments.
We are also looking at refurbishing our shops in terms of the way that we sell, stock and supply. A re-launch of the textile brand has been planned by early next year which should see it foraying into new segments to address different sets of consumers with separate sub brands and offerings. In future we would like to become a home solutions provider.
We expect the textile business to breakeven this fiscal on the back of better product differentiation, higher value and better focus on marketing.
So what is the break up in terms of revenues between the three divisions of Bombay Dyeing?
Today the major revenue would be becoming from the Polyester or PSF division (50 per cent), followed by real estate (27 per cent) and the balance from textiles.
Real estate will pick up due to the construction completion percentage methodology.
After all revenues are based on what you are selling. In mixed development the only segment which gives you instant revenues is residences and this is based on the construction completion methodology.
This is unlike the commercial activity in terms of offices and malls which does not generate revenues instantly as there is a gestation period. Going forward almost 70 per cent of our profits will come from the real estate (the division is called Bombay Realty) part of the business.
How is the aviation business doing with Go Air? Are you planning to increase your fleet size?
We have 92 Airbus ordered on our books out of which we have 13 delivered and the balance will be delivered between now and 2020. We took a decision to ensure that we brought in majority of our capacity commencing 2015. The reason for that is we wanted the market to get more mature in terms of consumerism, demand, frequency of flights per passenger, improved taxes, better infrastructure and policies.
There is no point in bringing in large amounts of capacity in a hurry. By design the first four to five years we have consciously decided to have lower capacity.
What is the kind of market share today and is the aviation business making money?
Go Air was launched in 2005 and today we have an 8 per cent market share. We are not loss making but since we are a private company, the amount of profit cannot be revealed.
Profits go up and down depending on fuel prices. We fly to 22 cities and will be reinforcing our presence in the existing routes and going international over the next few months.
For FDI to come in, the valuation of the company has to be attractive. So will this swing in profitability affect the chances of the company in attracting investment from foreign airlines?
Not really. Ultimately people look at multiples on revenues and EBIDTA. The market in India is at a nascent stage. If you compare a single company like Ryan Air in the US which sold 80 million seats last year, we as an entire country sold only 64 million seats.
There is no shortage in demand. It just takes time in conversion from bus to train to air. Even China has more than 1,500 aircraft flying while we have only 350 aircraft flying.
There is no other industry in India which has so much market potential. All foreign airlines will see this as an opportunity. Things will get better once the fuel costs come down, infrastructure improves and the policies become favourable. We are adequately funded and are not in hurry to get FDI.
There have been reports about the Wadia Group charging the group companies royalty fees for its brand value. Is that justified?
The Wadia Group has been around for 275 years so it comes with the stamp of trust, heritage and integrity which is of great value for the multiple consumer brands that we have.
The group today is predominantly in consumer brands like Britannia, Bombay Dyeing, Bombay Realty and Go Air. As a result, we have done across fertilisation in terms of the usage of the brand identity.