Godrej Group hikes stake in Sobha to 10%

Godrej Group has increased its stake in Bengaluru-based property developer Sobha to 9.99 per cent in the June quarter of this financial year, from 1.08 per cent in the March quarter of 2019-20.

Privately-held Godrej family arm Anamudi Real Estates has acquired the stake in Sobha, which is valued at ~223 crore based on Tuesday’s closing. While emails seeking comments from Godrej Group did not elicit any response, real estate analysts said it could be no more than a portfolio investment by Godrej Group.

“They have bought it from the market, not from us. We are not in any talks with them. They must have liked the firm. Otherwise, we don’t have any plans to sell any stake,” said a senior executive from Sobha.

Godrej family office has done couple of investments in real estate in the last years. In May 2017, Godrej family office and Anand Piramal, son of Ajay Piramal, invested in a real estate firm to build high-end luxury holiday homes in Goa, and the Nilgiris in Tamil Nadu.

Same year, it bought the Godrej Fund Managment, the fund arm of Godrej Properties for an undisclosed amount.

Godrej Group’s real estate company, Godrej Properties, has already indicated it will look to increase its market share and add new projects despite the challenges posed by Covid-19.

“The most important opportunity will be to gain market share. Our strong business development over the past few years has ensured our launch pipeline is the best it has ever been. We will be agile and ready to launch these projects and thereby gain share while most of our peers are focused on liquidating their current inventory,” said Pirojsha Godrej, chairman of Godrej Properties, in the latest annual report.

“Despite these headwinds, we believe we are well placed to maintain our growth momentum in the current financial year... We are prepared to withstand a possible downturn in the sector — however, bad it gets,” said Godrej.

However, some analysts such as A K Prabhakar, head of research at IDBI Capital Markets, said both companies can use their synergies in South India. “Sobha is one of the biggest developers in the South and major contractor for many commercial buildings. Godrej can bring in the land parcels and Sobha’s construction capabilities,” said Prabhakar.

Sobha’s stock has declined 41 per cent since the beginning of the year, while Godrej Properties’ stock has fallen 10 per cent.

The Covid-19 issue has hit Indian real estate. Residential sales fell 67 per cent in the June quarter of this calendar year and launches have fallen 81 per cent during the same period, according to real estate analytics firm Propequity.

“The real estate sector, which was slowly reviving in March, was hit by a complete halt in construction and sales in the last week of March. We believe larger developers with low debt leverage will ride the storm and do reasonably well by the third quarter onwards within the context of the new normal,” said Samir Jasuja, founder and MD, Propequity.

Real estate analysts said it could be no more than a portfolio investment by Godrej Group