Godrej Properties likely to launch 17 new projects

Leading real estate player Godrej Properties would invest up to Rs 600 crore in developing a residential complex in Gurgaon over the next five years.

The project - Godrej Summit, will be developed in partnership with Zara Sanya under an area sharing agreement, in which GPL will hold 65% stake. This is company's second project in the National Capital Region.

Also Read: Godrej Properties sells entire 1st phase of Godrej Summit in one day

Pirojsha Godrej, MD & CEO of Godrej Properties told CNBC-TV18 that Phase I, which comprises of 50% of the whole project has been sold on the first day itself.

The average rate was under Rs 6,000 sq ft and the company hopes to rake in Rs 1,200 crore revenue from this project. Going forward, they are planning a launch of 17 new projects. The stock shot up more than 3% today.

Below is the verbatim transcript of the interview

Q: Can you quickly take us through the response you have seen for 'Godrej Summit' and what is the kind per square feet (sq ft) you are selling in on an average?

A: We are very pleased yesterday we announced the launch of the project. Within one day sold out entire phase, which comprised 50% of the whole project. We sold about a million sq ft, which is 695 apartments. The average rate was just under Rs 6,000 sq ft.

Q: What kind of operating margins are you looking at for this project? What kind of revenue you think you can generate?

A: We don’t like to specifically guide on operating margins, it does depend on how costs move over the duration of the project, how successful we are in taking prices up in the next phase of the project. But, the kind of volume and demand we have seen is very encouraging.

This project has been launched at a fairly good price. So, this project will give us margins much above most of our recent projects. We are quite confident that the margin profile of the project will be very positive, but I wouldn’t like to put a specific figure to it.

In terms of bookings, we expect about Rs 1,200-1,300 crore of bookings from the project. It is of an area sharing arrangements about 65% of that will accrue to us over a period of time.

Q: The reason I am asking about the margins because this Rs 6,000 per sq ft is much higher than what most analysts were pegging it at and they were talking about a 50% operating profit margins as well. Do you think that is something that you can achieve with this particular project?

A: I think 50% is a little bit higher than we think we will achieve. It really does depend on how successful we are in taking prices up on further phases of the project. What is very encouraging about this is, with such a strong response, we can look at taking prices up quite substantially.

Now we can focus more on ensuring we take margins even higher. But what is very encouraging is that even though costs have risen during the time, we even at the launch have bee able to sell volumes that will allow us to achieve a very good margin.

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Q: When will phase II be launched?

A: I think we are planning to do it around Diwali. But we haven’t finalised that decision yet.

Q: What is the total launch target that Godrej properties have set out for FY13?

A: The way we have looked at is more by way of number of projects we would like to launch. The exact size of each phase is something we decide much closer to the launch depending on what we see as the likely demand depending on a variety of other factors.

So, this project now is the fourth project we have launched so far this financial year. We expect to launch a total of 17 projects or phases of projects. So, they won’t all be new projects. Out of the 17 projects, for example, the second phase of this project would be counted as another launch.

Q: Moving from your P&L to your balance sheet because some people have been concerned about how your debt has been escalating because of some payments you made for the land in Vikhroli. Where does the debt currently stand at and what is your strategy to pare of your debt in this particular fiscal?

A: Our current debt is about Rs 17,050 crore and our debt-equity today or at the end of last quarter was 1.2:1. If you compare that to even the start of this calendar year, the end of Q3 of last financial year, we had debt-equity of 2:1 and even a higher total debt figure.

We have been very successful in paring that. We have raised some equity at a difficult period in March through India’s first ever institutional placement programme (IPP). We have actually always guided that we are quite comfortable operating with a debt equity ratio of 1 to 1.5:1. Given our strategy, given our cash flows we have seen from projects like Vikhroli, we do think that is the range we are comfortable in.

We have also have said that given the number of launches we have this year, given the strategies we have and also given that we are looking now to monetise some of our commercial assets - we do see an opportunity to further strengthen the balance sheet. But we are not at the current movement very concerned about where things stand.

Q: What are the commercial assets you are looking at monetising and by when do you think they can happen?

A: We have five commercial projects currently underway. Three are in tier II cities in Chandigarh and Kolkata. We have a headquartered building we are doing in Vikhroli. It is going to be largely used by our own group companies and that monetisation have happened.

Half of the project is already sold. The other half will be sold in the coming months. Then we have a large asset in Bandra-Kurla Complex, which we are doing as a joint venture. That project we hope to see some traction on the monetisation of that in the next two quarters.