When you say real estate, the first thing that comes into mind is black money and if you are worldly wise, the word “cheat” will be a close second. However, say “Godrej Properties” and a picture of a well made township flashes through your mind.The other two culprits are not even close.
This is pretty much the crux of my recommendation on Godrej Properties. All that follows in this post is simply reasons to justify my natural reaction to the name Godrej Properties.
- Godrej Properties does not hold land. It is merely a construction company. Then again it does not do the construction. Huh !?! They are basically a construction company on paper. The actual construction is outsourced to companies like Shapoorji and L&T.
- Godrej primarily uses two models
- The Joint – Development model &
- Contractor model/ Management Fee Based
- A recent development is the platform with APG where Godrej might purchase a small stake in land for immediate development with APG being the major land owner. Fund size is between 1800 – 3000 cr. APG recently signed up with the Piramals for a 1Billion$ infra-fund.
- Adi-Godrej’s son Pirojsha is full time into the company and boy, he is brilliant.
- With presence in 12 cities today they have about 10 crore square feet either signed or already under development. Assuming that they do develop all of this in the next 10 years with an average sale price of 7,000/- rs a soft and have a meagre 10% PAT its a whopping profit of 7,000 cr. FY2014 profit was 160cr.
- In the last 2 years 2012 and 2013, the company sold 5000cr worth of real estate.
- The company currently has 47 projects under construction and no murky land deals like DLF 🙂
- Godrej is the country’s second most trusted brand and that brand is now selling real estate.
- Godrej Industries has over 4000 acres in Vikhroli, which is one on first refusal basis given to Godrej Properties. They are coming up with the “Trees” in Vikhroli which is a full fledged city. Forget Lavasa, this is worth watching as the archaic laws of this land are changed in the future.
- Godrej Properties also has 148 acres with a minimum of 50,00,000 sqft in Panvel. A new airport, rail line and bridge to the mainland from Nhava Shewa- Sewri is set to change the landscape of Panvel in the future.
- The new definition of “Affordable housing” has now been changed to 60 lakh per unit from 15 lakh per unit bring quite a few projects in places such as Ahmedabad, Kolkata, Panvel into the subsidised schemes of the government.
- Godrej has categorically also stated that they won’t be doing the following
- Purchasing land.
- Senior or assisted housing
- Low-Cost housing under the current norms.
- Another very positive development is the lowering of the FDI bar from 50,000 sqmt to 20,000 sqmt, which will allow the company to raise project level FDI.
- The APG partnership has already invested into 3 residential projects.
- Some of their long pending projects are also seeing green shoots
- Their commercial project in Kolkata is now completely monetised. The project was sold at a throwaway price, but the important thing is that this capital can now be used for better yielding projects.
- The Rallis/TATA land at Hyderabad is in the last stage of being de-notified from an SEZ and will then become a residential project.
- The Chennai OMR project has a final 2016 launch date.
- With the Maharashtra state elections to happen soon which will most probably result in a BJP victory , the companies 17 projects in Mumbai will get a Modi-Boost.
- Old laws around the sanjay gandhi national park, pending sea-links, new air-ports and CRZ norms are likely to get crystallised soon and will throw open a lot of real estate in Mumbai. Land owners will suffer, builders will prosper.
- The push that the government is giving REITs will also help unlock the capital locked up in Godrej’s BKC and other commercial properties.
All in all, Godrej properties in moving in the right direction with great momentum. If the Modi-Govt lasts two terms i see the company having a MCap of 40,000 – 50,000 cr. Yes this is not a typing error, it is 10 – 12x from here.
CMcap – 4500 cr CMP – 228 PE – 27