Prefer Godrej Properties for long term: Rajen Shah

Rajen Shah, CIO of Angel Broking told CNBC-TV18, "Godrej Properties came out with an Initial Public Offering (IPO) four years back about Rs 500 and then it came out with a rights issue at Rs 325; 8 shares for 29 shares and then it came out with a split. So, the average price is about Rs 231 and the stock is at about Rs 165. So, it is actually down 30 percent from IPO price and that too in four years.”

“If one sees any Godrej company whether it is Godrej industries or Godrej Consumer, these companies have over the past 12 years delivered returns in excess of 30 percent and they have beaten the Sensex by the substantially by higher margin. So, this is one company where there is a dip in market cap by 30 percent over four years. I see this getting reversed significantly because the company is going to see solid product launches in the coming months and coming quarters.”

“In this quarter, I am expecting the company to sell eight lakh vis-a-vis 6 lakh square feet. In the first nine months the volume is down by 50 percent, I am talking about the area booked actually, down 50 percent from 34 lakh square feet to about 17 lakh square feet but in the last quarter despite the real estate industry going through tough times , the management is very hopeful,” he added.

“The landmark deal which this company has signed with the parent company Godrej and Boyce will result in profit of four times the current market cap over then next 35-40 years. This is the kind of valuation which Godrej Properties is commanding. They have got 1500 acre and on one acre if you are able to develop one lakh square feet, you can develop actually 15 crore square feet and if you see the agreement, 10 percent of that will be flowing; 10 percent of revenue from the 15 crore square feet which would be developed probably about 35-40 years. The profits from this project itself will be at least Rs 12000-15000 crore whereas the current market cap is Rs 3300 crore. So this is not for a person who wants to invest for one month, six months or one year, this is a long term story probably will play out for three-five years."