Godrej Properties IPO – should you invest?
The initial public offering (IPO) of Mumbai based Godrej Properties has been fully subscribed on the first day of issue opening. Qualified institutional investors’ portion got subscribed 1.5 times, reports CNBC-TV18. Its issue is of 9,429,750 equity shares of Rs 10 each and price band is at Rs 490-530 per share. The issue will close on December 11, 2009.
The company has already roped in anchor investors and collected nearly Rs 90 crore from them at Rs 530 per share.
Experts believe that the issue looked expensive at price band of Rs 490-530 and advised to look at other stocks in same sector in secondary market. Investment Advisor, SP Tulsian is not impressed at all with Godrej Properties’ IPO. Manish Bhatt of Prabhudas Lilladher said Godrej Properties looked highly priced at issue price, so one should avoid. Sanju Verma, CEO of Institutional Business at Proactive Universal Group said Godrej Properties’ IPO looked expensive and would prefer Peninsula Land.
SP Tulsian
“I am not impressed at all with Godrej Properties’ IPO. For example for the six months ending September 2009, the company has posted a profit after tax (PAT) of Rs 48 crore on topline of Rs 125 crore, which has come from the sale of long-term investments to the extent of Rs 58 crore. That means they have not earned a single rupee from their core business.”
He further said, “If you take the comparative performance of Peninsula Land or maybe Marathon Nextgen Realty, which have good presence in Mumbai for the quarter-ended September, have posted a PAT of Rs 85 crore and Rs 40 crore. So firstly for their core business you are not seeing these kind of profits, same bottomline has contributed largely by long-term investment sale in FY09 also.”
“And if you take their overall market capitalization which is likely to be at Rs 3,700 crore you have so many companies available and at a marketcap of Rs 1,000-2,200 crore in which I will include Peninsula Land, Brigade Enterprises, Mahindra Lifespace and Marathon Nextgen Realty-all these companies have been posting very good profits. They have a very good presence in their respective field because all these builders are termed as realty developers. They have been giving quality. So honestly I am not convinced when you have umpteen opportunities available in the secondary market and so many issues having lined up. Honestly I don’t see how one can really get convinced with a valuation of Rs 490-530 price tag for this company”, he said.
Sanju Verma
Godrej Properties’ IPO looks expensive and will prefer Peninsula Land. But joint development model will hold Godrej Properties in good stead.
Amit Dalal of Amit Nalin Securities said one needs to invest in Godrej Properties for 2-3 years period and then one could earn capital gains from this investment. “I would look at Godrej Properties though it is not cheap. I wish they had not priced it so aggressively, but even so I like the business model a lot. They have a good plan for next 3-4 years on how they are going to build ‘X’ amount of square feet and sell and what is going to be the profitability three years down the road.”
Brokerages views
Bonanza
Pricing of IPO looks stretched, as bigger players in the listed space are trading at much better valuation. There are better opportunities available in listed space. However, given the interest in Godrej group, listing gains may accrue.
Swastika Investmart
the company seems to have overpriced its issue comparing the P/E multiple at which other established players in the industry are already trading. So, we recommend avoiding IPO as the shares may be available at 10-20% discount to the issue price, in medium term”, says Swastika Investmart.
Angel Broking
The IPO is fairly priced and keep a neutral view on it. However, investors can look at alternate, existing listed players like Anant Raj, which have a debt-free balance sheet, land at prime locations and is trading at a significant discount to one-year forward NAV.
About the issue
The issue will constitute 13.5% of the post issue paid-up capital of the company. Parent company, Godrej Industries currently holds 80.26% of equity share capital in the company.
It is in the business of real estate development in India. It currently has real estate development projects in 10 cities in India, which are at various stages of development.
The proceeds of the issue will be used for acquisition of land development rights for forthcoming projects; construction of forthcoming project and repayment of loans. In an IPO press conference, the company said would use 30% of IPO funds to repay debt.
The company has land reserves of 391.04 acres, developable area of 82.74 million sqft and saleable area of 50.21 million sqft (including 27 million sqft in Ahmedabad).
The equity shares are proposed to be listed on the BSE and NSE. For the year ended March 31, 2009, the company reported profit after tax of Rs 74.74 crore on total income of Rs 188.13 crore. As on June 30, 2009, it has debt of Rs 745.78 crore on its books.
Global Co-ordinators and book running lead managers to the issue are ICICI Securities Limited and Kotak Mahindra Capital Company Limited. The book running lead managers to the issue are IDFC – SSKI Limited and Nomura Financial Advisory & Securities (India) Private Limited. Karvy Computershare Private Limited is the registrar.
Thanks: CNBC-TV18 / www.moneycontrol.com
