Signage of Bombay Dyeing sits at one of its outlet in Bengaluru, India. (Photographer: Anirudh Saligrama/ BloombergQuint)

Q4 Results: The Reason Behind Bombay Dyeing’s Stellar Fourth Quarter

Bombay Dyeing & Manufacturing Company Ltd. had an unbelievable fourth quarter as its revenue surged more than threefold and profit soared 11,000 times. But a change in accounting standards is the reason behind its stellar run.

The Wadia Group company reported a profit after tax of Rs 1,253.33 crore in the quarter ended March, according to its May 2 exchange filings. That compares with a profit of Rs 10.95 crore a year earlier. Revenue jumped 267 percent on a yearly basis to Rs 2,791.08 crore.

The company switched to Ind Accounting Standard 115 in the quarter. Its revenue would have been lower by Rs 1,883.05 crore at Rs 908.3 crore under the earlier standards, according to a note in the financial statement. That represents a growth of 18.66 percent from the year-ago period.

Profit before tax will fall by Rs 1,033.65 crore to Rs 227.32 crore under the old accounting standards compared with Rs 4.95 crore in the fourth quarter of the previous fiscal.

The tax outgo, computed under the provisions of the Income Tax Act, will stay the same irrespective of the changes in accounting standard.

Ind AS 115 changed the way a company recognises revenue from April 1, 2018. And real estate firms have seen the biggest impact.

Earlier, realty companies could recognise revenue based on the percentage of the project completed. Under the new standard, it’s generally recognised on completion or when the occupancy certificate is granted. The impact is visible on Bombay Dyeing’s real estate business, which reported a revenue of Rs 2,353.75 crore and profit before interest of Rs 1,407.2 crore in the quarter ended March.

The company reduced the retained earnings contributed by the incomplete projects since the beginning of FY19 on its balance sheet to comply with the accounting standard. And as the projects were completed in the three months ended March, full revenue was recognised during the quarter, boosting its revenue and profit figures.

Bombay Dyeing’s full-year revenue jumped 62 percent to Rs 4,469 crore, while it reported a net profit of Rs 1,228.21 crore compared with Rs 35.18 crore in the previous fiscal.