Godrej Prop to sell 10% promoter stake via IPP: Chairman

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Godrej Properties is looking to dilute promoter stake in the company through the institutional placement (IPP) route. CNBC-TV18 caught up with Adi Godrej, the chairman of Godrej Properties to get the details.

He says that the target is to dilute 10% stake by the end of FY12. "This will bring down promoter holding to 75% as per Sebi guidelines and will also help bring down debt-equity ratio to 1.2 times," he says.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Can you detail to us what is the game plan? You are going to use the Institutional Placement Program (IPP) route?

A: Yes. As you know, SEBI requires all companies where promoter holding is above 75% to bring it down to 75%. They have brought in the new IPP route to do so. We are going to use the IPP route and soon bring down our promoter holding to 75%.

Q: What kind of dilution can we expect and by when?

A: It will be around 10% dilution which will bring the promoter holding to about 75% and we expect it to be completed before the financial year end.

Q: Any other equity raising that you would like to undertake because the board has approved something like the rights issue or possibly a QIP as well?

A: That board resolution is an enabling resolution. Currently it will be just this fund raising. We don't need further fund raising. This would bring our debt equity ratio to a very reasonable level and also it will meet the SEBI guidelines.

Q: What a reasonable ratio would be for the debt equity level or what the plans would be on the debt-equity side?

A: Around 1.2:1, we consider is reasonable.

Q: And this would be done in small tranches over many days?

A: No I don't know the exact procedure, I am not an expert on that, but I think it's similar to a QIP, it's all done on one day.

Q: What is your sense about what money you all may be making because of the fresh issue of shares?

A: That depends on the price at that stage. As you know, QIPs or IPPs will be around the market price. The current price of the share is around Rs 650.

Q: What do you do with the money?

A: The money will be used to pay down the debt of the company and that will bring the debt-equity ratio to reasonable levels and some of it will get deployed into the normal project.
The company has several projects. We have signed eight new projects this year itself. We just launched a new project a couple of days ago in Mangalore. We will be announcing the launch of a new project in South India tomorrow. So there are huge developments in Godrej Properties.
Our sales this year running at almost double the level of last year despite the slowdown in the general property development category. So we are growing very rapidly. Thus, this will fill our dual purpose. It will bring in the funds that we require for our rapid expansion, and it will also help us meet the SEBI guidelines of having a maximum 75% promoter holding.

Q: Debt is what Rs 2400 crore now?

A: I don't know the exact number, I think it's a little less than that. It's around Rs 2000 crore.

Q: Can we expect some amount of private equity deals in this quarter as well?

A: Private equity deals we do at the SPV level, not at the entity level. So in each project, we do take some private equity. That process in each SPV will continue and we may loss some more in the next 12-15 months.

Q: Just an update on the BKC land?

A: That's a large project, it's a joint venture with Jet Airways. It will be a project of about Rs 3500 crore, and that will be implemented very soon.