Godrej Properties

Adi Godrej, Godrej group Chairman said Godrej Properties' (GPL) initial public offering (IPO) would be launched in 3 months. The market regulator SEBI (Securities & Exchange Board of India) has cleared GPL's draft red herring prospectus (DRHP).

The company will offer 3.5% stake in pre-IPO placement and to offer 10% stake via IPO. 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.ICICI Securities and Kotak Mahindra are bankers to the issue. Godrej Industries currently holds 80.3% in GPL.

Real estate developers are optimistic about a turnaround in the downturn. While the listed companies were the first to raise funds through QIPs, it's time for the unlisted ones. Godrej Properties IPO will come out within the next three months while Oberoi Constructions IPO will be here by early next year. And the main reason for fund raising is future growth plans. For Godrej, affordable housing is one of the focus areas.

Said Adi Godrej, Chairman, Godrej Group, “We have announced projects in Ahmedabad, Calcutta, suburbs of Mumbai and we will announce more. To my mind all the conditions for affordable housing to succeed in India have come into place for the first time.”

The share of the Real estate in the total revenues of Godrej Ind was to the tune of Rs. 7 Cr & profits of Rs. 5 Cr for Q1FY10. For the entire year FY08-09, revenue contribution was Rs. 31 Cr & profit was Rs. 21 Cr.

Godrej Ind. Holds around 83% stake in Godrej property. Godrej Property has landbank of around 450 acres (around 20 million sq ft) in various parts of the country. Interestingly, major portion of the land is in city area. So even if you take an average of Rs. 2000 per sq ft rate, the valuation comes to around whopping Rs. 4000 Crore. Whereas market cap of Godrej Ind is Rs. 4100 Crore. Apart from real estate business, the company is having interest in many other businesses & group companies. Also promoter of the company, Mr. Adi Godrej (who holds 78% in Godrej Ind) has announced buyback upto Rs. 275 per share, aggregating around Rs. 100 Cr. This shows the confidence of the promoter in the company.

All these factors taken into account, I see Godrej Ind as a multibagger & recommend to buy on every dip.