Mumbai based, leading real estate development company, who are one of the top ten builders in the country, is entering the capital markets, to raise around Rs 500 crore, with public issue of 94,29,750 equity shares of Rs 10/- each in the price band of Rs 490 -530. The issue will open on 09-12-09 and close on 12-12-09. ICICI Securities limited, Kotak Mahindra Capital Company. IDFC- SSKI LIMITED and Nomura Financial Advisory Securities Pvt limited are the Book Running Lead Managers to the issue.
The company is promoted by Godrej Industries Limited, which holds around 80% of equity share capital. Godrej Industries Limited is the listed flagship company of the Godrej group of companies, which is one of the leading business conglomerates in the country.
Godrej Group is engaged in diverse business segments, spanning Home appliances, FMCG, Consumer products, Industrial products , Oleo chemicals, Animal feed, Real estate development and Oil palm plantations.
Godrej properties limited (GPL) has real estate development projects in 10 cities in India, which are at various stages of development. Currently, the business focus is on residential, commercial and township developments. GPL is a fully integrated real estate development company involved in all activities associated with the development of residential and commercial real estate.
GPL, as of October 15, 2009, has Land Reserves of 391.04 acres aggregating approximately 82.74 million sq. ft. of Developable Area and 50.21 million sq. ft. of Saleable Area, located in or around prominent and growing cities across India, such as Mumbai, Pune, Bengaluru and Ahmedabad. As on the same date the company has completed a total of 23 projects comprising 16 residential and 7 commercial projects, aggregating approximately 5.13 million sq. ft. of area for development.
OBJECT OF THE ISSUE
The company plans to raise around Rs 500 cr, intends to use Rs 203 cr for acquisition of land development rights for forthcoming projects, Rs 75 cr for construction purposes, Rs 172 cr repayment of loans and the rest for general corporate purposes.
FINANCIALS
(Rs in crores)
09 08 07
Operating income 247.38 227.50 137.26
Profit after tax 76.62 74.85 28.72
RoNW 25% 41% 48%
EPS (In rupees) 12.53 12.78 4.97
VALUATION
GPL is promoted by reputed Godrej group, which has very strong brand equity. Excellent financial track record. Leaders in corporate governance. In the price band of Rs 490-530 the stock is valued at about 40 times of its earning for FY-09. ICRA has awarded grade 4 for the IPO indicating above average fundamentals. The high valuation is justified considering the strong financials, brand equity and future business prospects.
CHALLENGES AND STRATEGIES
The company’s ability to successfully compete in new segments across different geographies is yet to be demonstrated. Due to general recession, proportion of un-booked space in the on-going commercial projects exposes it to market risks. Further slowdown in real estate segment may affect the demand and resultant decline in property prices. This coupled with oversupply situation in many pockets can affect the prices further, which will have cascading impact on financials.
As per CRISIL estimate, the annual additions in units are expected to grow from 70 million units in 2008 to reach 81 million units in 2014. Estimated annual additions in units in rural areas are to grow from 174 million units in 2008 from 198 million units in 2014. GPL with selective acquisition of land parcels in strategic locations, also enter into development agreements with land owners to acquire development rights to their land in exchange for a pre-determined portion of revenues, profits or developable area generated from the projects. The Godrej brand name and the reputation associated with it contribute in attracting potential joint development partners . This business model enables undertaking more projects without having to invest large amounts of money towards purchasing land. Hence, GPL is able to limit risk through project diversification while maintaining significant management control over our projects. A SURE WINNER FROM THE GODREJ STABLE. APPLY.
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