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Godrej Properties Ltd (GPL) is one of the leading real estate developer in India
based in Mumbai with parent Godrej Industries Ltd (GIL) holding 69.9% stake in the
company. GPL is focused on developing residential, commercial, retail and IT
projects across cities like Mumbai, Ahmedabad, Chandigarh, Pune, Bangalore,
Kolkata and Hyderabad. The company is a fully integrated real estate development
company having strategic tie-ups & MOUs to develop 185 acres of land in Group
companies namely Godrej Industries, Godrej & Boyce, Godrej Agrovet through Joint
Development Agreement (JDA).
Mid-Income Housing Player with an Asset-Light Model: GPL is a focused mid-income housing player, with a pan India
presence and a differentiated business model. Almost ~77% of GPL's land bank of ~50msf comprises of Joint Development
Agreement (JDA) projects. The JDA approach allows GPL to enjoy a low risk, low capital intensive business model & avoids
intricacies of land acquisition. The advantages of GPL's model are reflected in its superior RoEs (18-20%).
Contract with Larsen & Toubro offers execution comfort: GPL has appointed L&T as its single pan-India contractor for
all its upcoming projects giving its projects superiority over others on the quality front without much of project delay. This
helps GPL in mitigating the concerns of execution ramp up & lowering its risk on escalation cost or work disruptions.
Focus on new acquisitions & launches: GPL has recently launched & sold nearly 300 premium residential flats in booking
at its Godrej Frontier Gurgaon project. Also, GPL is on track to launch projects in NCR, Kochi and Chennai in H2FY11.
Further, the company via a 50:50 JDA with Bombay Footware is set to develop a residential project of 0.15mn sqft (on 1.34
acres land) in Chembur, near Sion-Trombay Highway which again reinforces its strategy of venturing into metros for new
deals. We expect news flow on new project agreements and launches to remain strong in the near term with couple of deals
like the BKC deal with Jet Airways (2.5 acres land) and formal launch of its Ahmedabad city project
Rich valuations: Given the kind of unique asset light business model & visibility of strong cash flow with JDA, GPL
commands rich valuations to its peers & trades at a premium to its NAV of ` 570. At the CMP of ` 718, we recommend a
“BUY” on the stock with medium to long term view.
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