Godrej Properties plans QIP for land parcel buy

Looks to raise ~3,750 crore; board has cleared proposal for fundraise

Godrej Properties (GPL), part of Godrej group, has plans to raise up to ~3,750 crore through a qualified institutional placement (QIP) of its shares to fund new land buys and pay its joint venture (JV) partners.

The GPL board has already cleared the proposal for the fund-raise. “It is an enabling resolution for equity raising. When it happens, it will be a QIP,” said Pirojsha Godrej, chairman of GPL.

The funds will be used to build its portfolio and pay JV partners upfront, said Godrej.

“Bigger organised developers have seen positive sales over the past four-five months. We have seen markets beginning to turn. But most developers are facing liquidity issues. There are good land deals available in the market at attractive valuations,” he said.

GPL acquired two land parcels in the third quarter (Q3), with 4-million square (sq.) feet (ft) potential. “If market conditions pick up, land prices will reflect that. Land parcels did not fall much in Q3, but it makes sense to buy at current levels,” he added.

GPL raised ~2,100 crore in 2019 through QIP of shares, and ~1,000 crore through issuance of non-convertible debentures last year for buying land. It has lined up 12 projects for the fourth quarter of the current financial year (2020-21).

Godrej said the firm has built a portfolio of 50 million sq ft in the past two and a half years. Analysts have termed the plans a good move.

“According to the GPL management, any fresh fundraise is proposed to be utilised as growth capital, given the company continues to pursue a counter-cyclical strategy of acquiring land largely on outright basis in a stressed residential market. The company continues to pursue its medium term of capturing double-digit market share in its focus markets of Mumbai Metropolitan Region, Delhinational Capital Region, Bengaluru, and Pune over the next three-four years,” said Adhidev Chattopadhyay, research analyst with ICICI Securities.

With ~1,300 crore of cash and liquid investments as of December 2020, GPL is well positioned to augment its land bank at attractive valuations, said Chattopadhyay.

The company’s net debt has grown ~3,077 crore in December quarter, from ~1,084 crore a year ago. Godrej told PTI recently that the debt is at a “very comfortable” level and borrowings have increased because of investment in project acquisitions.

“Debt might rise further. Our guidance on gearing is that we are comfortable at 1:1. We think zero debt is not a good thing in this sector. Having some debt is good for the overall growth strategy. Our average debt cost today is 7.25 per cent,” he said.

The company’s current debt equity ratio is 0.64.