Godrej Properties IPO will push up price of Godrej Ind

I am very much bullish on Godrej Industries due to its stake in Godrej Properties.
Godrej Industries currently holds around 83% in GPL while the rest 18% is held by Godrej Family. (Also Read Godrej industries - Multibagger)

Godrej group's real estate company, Godrej Properties (GPL) is coming out with an IPO of Rs 600 crore in 3 months and sell 13% stake via this IPO, It is likely to issue 9 crore shares via IPO. The company is going to sell 3% stake to domestic funds in Pre-IPO sale.

Godrej Properties had filed DRHP (draft red herring prospectus) in June, 2008. As per the DRHP filed in 2008, IPO proceeds will be used for acquisition of land development rights for forthcoming projects, construction of forthcoming projects and repayment of loans.

Godrej Properties and parent company Godrej Ind has an agreement for charging royalty for usage of the Godrej brand. Godrej Properties has been granted the non-exclusive rights by Godrej Ind to use the recently refurbished 'Godrej' trademark and logo upon a payment of royalty of 0.5% of the GPL’s gross turnover per annum. On Godrej Properties' consolidated total income, the royalty payment would come to a little over Rs 1 Cr per annum.

Godrej Properties has a land bank of around 450 acres (19 million Sq Feet). The company is mainly into the high and middle-segment of the residential property space. It plans to get into the affordable-housing segment, which is least affected by the economic slowdown. It has already developed several properties in Mumbai, Pune, Kolkata, Bangalore, Hyderabad, and Ahmedabad. It now plans to expand its operations to Chennai, Kochi, the National Capital Region and Goa.

With the burgeoning aspirational Indian middle class looking at affordable housing in and around mega cities and tier I-II, Godrej Group is set to invest a whopping Rs 5,500 Cr on affordable housing scheme in Ahmedabad.

As per the signed MoU with the Gujarat government during the Vibrant Gujarat Global Investors’ Summit 2009, Godrej Properties will set up the mega residential cum commercial project between Ahmedabad and Gandhinagar, GPL will invest $1 billion on affordable housing project in the state that would come up between Ahmedabad and Gandhinagar. The project spread over 30 million square feet will have close to 30,000 units priced around Rs 25 lakh, also will have certain commercial units in the same project.

As per the MoU, the project expects to generate employment for 1000-odd people in the state. The company has been working on multiple affordable housing projects across Maharashtra, Karnataka, Tamil Nadu, West Bengal, NCR and Punjab. “With mortgage rates likely to come down in future, the demand for affordable housing would pick up across cities,” Adi Godrej said. Godrej Group expects to record a turnover of Rs 10,000 Cr in 2008-09, 20% more than the last fiscal, he added.