Moneycontrol Bureau
Mumbai realty major Godrej Properties on Wednesday announced the sale of its Bandra Kurla Complex (BKC) commercial space for Rs 1,480 crore. While this deal was in the works for a few months, its impact will be extremely huge for the company.
Brokerage firm CLSA has said this deal will boost the company's balance sheet in a stellar manner as the value of the deal is almost 50 percent of its net debt.
The brokerage says, "Godrej expects to receive a majority of deal cash flows upfront. With the project already 72 percent completed and set for delivery in H1FY17, we assume the Rs 1480 crore deal consideration to be received by then. This should drive down Godrej’s net debt below Rs 2000 crore by March 2017 (Rs 2900 crore at June 2015), taking net gearing to sub-0.7 times versus 1.5 times as of June 15."
CLSA believes the pricing is a positive surprise in this deal thanks to rising office rents as demand-supply situation for office properties has improved. The higher pricing should improve BKC project margins to mid-teens versus barely break-even, the report adds.
Speaking to CNBC-TV18, Managing Director and Chief Executive Officer , Pirojsha Godrej said he is hopeful the company can crack more such deals in the current year.
Owing to these factors, the brokerage has raised the target price for the stock to Rs 315 per share.
"Timely de-leveraging provides Godrej an opportunity to acquire new projects at a low point in the property cycle paving the way for future earnings upgrades and residential property sector market share gains," it adds.
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