Godrej Prop to raise equity via IPP route in few months

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Realty developer Godrej Properties has reported sharp 84% year-on-year rise in net profit at Rs 28.61 crore for the quarter ended December 31. Total income for the quarter rose to Rs 149.7 crore against Rs 48.18 crore a year ago.

Speaking to CNBC-TV18, Adi Godrej, chairman of Godrej Properties said, the company is planning to bring down its debt-equity 1.2:1 in the coming year. He also expects margins to improve considerably from current levels.

The company has a debt-equity ratio of 2:1 currently.

Godrej said the realty major expects to raise equity via the institutional placement programme (IPP) route in the next few months. "We have plans to launch four projects in the coming quarter," he added.

Below is the edited transcript of his interview with CNBC-TV18's Ekta Batra and Latha Venkatesh . Also watch the accompanying video.

Q: There was big of surprise or maybe shock on the margin front, it came in lower than many people expected. Is it that the properties you sold were not most value added of properties?

A: Our net profit was up by about 85% over the same period of the previous year. Our margins also improved. But if you takeaway the private equity deal done in this quarter then the margins reduced slightly. The main reason is that commercial properties provide a much lower margin these days than residential properties. So, there was bit of higher part of commercial properties.

As you know because of the market situation, margins have been affected to a certain extent. But our overall net profit was up 85% over the same period of the previous year. So, we are very clear as we go on, it is not necessarily that the percentage margin that would be important, it would be very important for us to see that our absolute profits grow tremendously.

We are very confident that over a period of time with strong growth in the realty sector, we see over the next three-five years, this will take place.

Q: What is the debt level now? You'll had indicated that you want to improve the debt equity ratio so what is the plan on equity raising?

A: Debt equity ratio currently is about 2:1. We have several plans to bring it down very considerably. All companies where promoter holding is beyond 75% are obliged to bring it down. A new institutional placement programme (IPP) process has been brought in which makes doing this much simpler.

It is very good for Godrej Properties. In the next few months we expect to raise equity. That itself will bring debt equity ratio down very much. We are also looking at private equity and other infusions in some of our SPVs, which will further help it. Not too distinct future, we expect to bring our debt equity ratio back to what we consider comfortable level around 1 or 1.2: 1.

Q: When could we expect something to fructify on the private equity for SPVs? How much would the possible quantum be?

A: We announced one where we received Rs 45 crore of private equity in one of our Gurgaon projects in the December quarter. We expect to announce further one. The big one that we are currently negotiating is our JV with Jet in the Bandra Kurla Complex in Mumbai.

Q: That deal is worth around Rs 500 crore, how much would you be looking to offload within the BKC deal with Jet that you have?

A: That whole project is around Rs 3,500 crore. We are looking at different aspects of it with different players, but we hope to announce something in the not too distant future.

Q: Can you give us an idea on how sales are progressing in the second half especially what visibility you have in the fourth quarter as well what visibility you have on margins? Should we expect to be able to improve it from 17.5% that you have notched up in the current quarter also the run rate on sales?

A: Our sales growth is very significant. Our sales growth in December quarter over the same quarter of the previous year was a 150%. Despite the fact the sector itself when the economy are not doing too well because we have launched several new projects, our growth has been very good. We expect to continue very strong growth into the future because we are adding very considerably to our portfolio.

As the economy improves, as the sector improves we feel this growth will be even further. As real estate development sector improves, which we expect it will start over the next few months as interest rates start coming down, mortgage rate starts coming down, we expect margins also to improve considerably.

Q: Your launches in Chembur, Hyderabad, Chennai they have been pushed back a bit when will they start?

A: I don't have the exact details of when each of the launches starts; we are planning to launch at least four projects in the March quarter including one at Chembur. The regulatory permissions have been delayed for the past few months across the real estate sector, but we want to launch the project.

All our project delays are because of regulatory reasons. Every time we have received the regulatory permission we have launched the project and done well. Nothing has been withheld because of the market conditions, it has entirely to do with regulatory reason.