Godrej Properties sets IPO price band

Godrej Properties, the realty arm of Godrej Group, is coming out with an initial public offer to raise up to Rs500 crore by offloading 13.5% stake. The issue is open between December 9 and December 11, with a price band of Rs490-530 per share.

The company had earlier decided to go for a pre-IPO placement which has now been cancelled after Sebi’s Issue of Capital and Disclosures Regulation (ICDR), and has opted for an anchor investor who would subscribe to 18% of the issue. 

Uday Kotak, head, Kotak Investment Banking, said, “The issue size is Rs462-500 crore which is not a big, thus there would be no discounts to the retail investors.”

The company is banking on its unique realty business model wherein it does not buy land but gets into agreements to develop the land parcels. It plans to spend Rs203 crore from the IPO proceeds for land acquisition and development rights its three major projects.

Godrej Garden City, a 330 acre, or 40 million square feet, project at Ahmedabad will receive Rs132 crore. According to the DRHP filed with the regulator, 1.23 million square feet saleable area in this project is under litigation. The other projects include Kalyan and Pune townships where Rs20 crore and Rs50 crore would be invested, respectively.

The company would spend Rs75 crore from the IPO funds on Godrej Eternia, Chandigarh. The rest of the proceeds, Rs172 crore, will be used for repayment of debt taken for working capital. At present, the debt-to-equity ratio of the company is 2:1, which will come down to 0.6x after repayments. The total debt is around Rs800 crore.
Godrej on its own has less than 3 million square feet of the 82 million square feet land bank in its portfolio.

It also has an MoU with Godrej and Boyce for land development at Mohali and Hyderabad with 75 and 10 acres each. Adi Godrej, chairman, Godrej Group, said, “We are not going to do any land bank acquisition, all the developments would be undertaken in joint ventures.”

Though the company has a presence in ten cities, it is aggressively looking at north India.
Godrej Properties vice-president, finance & accounts, Rajendra Khetawat, told DNA Money, “We are looking at more presence in the North aggressively.”

Two analysts, whom DNA Money spoke to, were sceptical about the IPO. They said the company does not have its own land bank and if the company’s major portfolio is in Ahmedabad, and other small town at present, then it will take years to get returns from the projects. A township model takes 5-7 years for completion.  It is the first IPO after the recent financial crisis and company might get away as the money raised is low. Also, if they are looking at North, there are already big players like DLF, Unitech, so how are they planning to position themselves, the analysts asked.