Godrej Properties plans Rs1,000 crore placement

Godrej Properties is preparing for a qualified institutional placement (QIP) of shares to help fund expansion. It is looking to raise Rs500-1,000 crore through the QIP, over the next
18-24 months.

“The quantum of fund-raising would depend on the approvals we would get for these projects. In fact, the approval process is cumbersome and we can’t talk about them at this point,” Adi Godrej, chairman of the Godrej group, said.

Godrej sees property development becoming a key growth contributor in the years to come and at some point even surpassing revenue from all its other business streams. “The property development business is growing quite rapidly. It is our fastest-growing business and we think in 5-10 years, it could be our largest business. This is because of very strong demand for property,” he said.

“Unlike in other businesses, like FMCG, the competitive pressure is not much in this activity,” he said.

The focus will be on affordable housing, which the group has internally defined as an apartment for less than Rs25 lakh. “There are houses being sold in Delhi and Mumbai for Rs5 crore. But, they are not in the affordable class. In the segment we are focusing, there is significant demand,” he said.

Though the group has not quantified the land bank available with it, monetisation of properties is quite the intent.

“We are not looking at a capital-intensive model in property development. We want to enter into joint ventures with the land owners for development. Similarly, Godrej Properties will also enter into JVs with various group companies that have land for development. The JVs will be similar either with the private land owner or the group companies,” said Godrej.   

Currently, Godrej Properties has a development plan for 90 million sq ft. “Most part of the property development will be for housing and some of it would be commercial. For example in Hyderabad, we have some land and we were keen on developing a project targeting IT sector. But, with the changed market conditions, we are now converting it into residential. Our biggest project in housing is coming up at Ahmedabad,” he said.

Currently, the group operates in six categories. While FMCG accounts for 25% of sales, office and consumer durables contributes about 20%, industrial portfolio about 17% and home appliances about 10% of sales. Real estate accounts for about 14%.

While the expectations are for a growth of about 25-30% at the group level, Godrej said the organic growth would be about 10-15% and another 10% would come in through inorganic means.

“We are looking at acquisitions. Our first objective would be to look at acquisitions in India. But there are not many businesses to acquire. The next objective would be to look at acquisitions in developing world. We are not interested in acquisitions in developed world since the growth is limited there and the ability of companies like ours to add value there is also limited. Our hands are a little full for now. I don’t expect any acquisitions immediately but in 2-3 years there is a likelihood of something coming up,” he said. The acquisitions are likely to happen in FMCG and consumer durable segments.