Godrej Group IPO Expected in Late 2007

Sees its property development business as a major thrust area

By Vipin Agnihotri

Theoretically speaking, Godrej Group is one of India’s largest conglomerates, a leading manufacturer of goods and provider of services in a multitude of categories: home appliances, consumer durables, consumer products, industrial products and agri products and real estate, to name a few.

A recent survey has come to the conclusion that 400 million people across India use at least one Godrej product every day. The Godrej group stands in a strong position at this point of time with annual sales in excess of US $1.4 billion, a workforce of approximately 20,000 and a strong diversified portfolio.

In its 16 years as a focused real estate development company, Godrej Properties Limited (GPL) has established a strong presence in the real estate market. The Godrej Group sees its property development business as a major thrust area. It is worth mentioning in this regard that the Indian property development sector is already amongst the fastest growing in the world and in the coming decades is likely to emerge as one of the largest in the world.

The Company believes that the abolition of ULCRA and freeing of FSI are two steps, which will allow for dramatic improvement in the availability of housing and making prices more affordable. If experts are to be believed, ULCRA and restrictive FSI in Maharashtra are the main factor behind acute shortage of real estate and mismatch in demand and supply in the city. “We need to make changes in real estate regulations and modernize them. All big cities are growing taller. We need to do away with the antiquated laws,” pointed out Adi Godrej, Chairman, Godrej Group.

It has come into the notice of The India Street that company is looking at an Initial Public Offer (IPO) in the second part of this financial year wherein Godrej Group is expecting to dilute ten percent of the total value of Godrej Properties. The money will be utilized for new projects of company. In theory, Godrej Properties last financial year was Rs 45 Crore.

“We need to raise capital as otherwise Godrej Properties, a private company, will not be able to grow strongly. We will provide for the residential user a very reliable product. All our projects have a great emphasis on environment and ecology. We will devote space to amenities, recreation, sports in every project,” pointed out Godrej.

The pivotal factor here is that even as there are companies who have established a name for themselves, brands have not become an important part in real estate. In short, both consumers and investors need to be conscious about this. Godrej Properties is planning to build townships in metropolitan areas. Initial signs are that each township would be from 50 acres to 200 acres.

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Godrej Properties to raise up to Rs600 cr through IPO

Will offload 10% equity held by family and Godrej Industries; eyes Chennai, NCR, Kochi and Goa markets

Source LiveMint

Godrej Properties, which is currently developing 20 million sq ft of real estate space across the country, will go for an IPO to offload 10% of its equity, expected to fetch Rs400-600 crore for fuelling its expansion plans.

“We will be offloading 10% in the second-half of this fiscal. Currently, Godrej Industries owns 82% stake while the family owns 18% in the company,” Godrej Group chairman, Adi Godrej, told PTI in an interview here on 10 June.

With the offloading, Godrej Industries’ holding will come down to 75% and the family’s to around 15%, Godrej said, adding that merchant bankers would be appointed shortly. “We are in discussions with three or four of them and a decision will be taken very soon,” he said, without revealing their identities.

While Godrej declined to reveal the issue size, saying “it is too early to talk about this”, industry sources feel it could be anywhere between Rs400 and Rs600 crore. While not totally ruling out any pre-equity placements, Godrej, however, said that it was not on the radar at present.

Elaborating on the company’s expansion plans, Godrej said property development would be a thrust area for the group and in five years Godrej Properties could emerge as the largest player within the group.

As a part of its expansion plans, Godrej Properties is eyeing new markets such as Chennai, Kochi, the National Capital Region (NCR) and Goa. The company is presently active in Mumbai, Pune, Kolkata, Bangalore and Hyderabad.

Godrej said that one-third of the real estate development was residential while the rest was commercial which included offices, IT parks and malls.

The company is presently engaged in the development of the tallest residential towers in the country comprising of of 50-storeys. Five such towers are being built in the posh Mahalakshmi area of Mumbai, he said, adding “of course, taller towers are now being planned in places like Hyderabad.”

On the proposed repealing of the Urban Land Ceiling Act by the Maharashtra Government in the near future, Godrej expected it to greatly benefit property development in the already-congested metropolis as vast areas of land would get released for development.

He said that both the Centre and practically all states barring Maharashtra, Andhra Pradesh and West Bengal had repealed the Act. Calling for the immediate scrapping of both the Urban Land Ceiling Act and octroi, Godrej said that their continuation severely handicapped the economic progress of the state. “It is high time Maharashra abolished them,” he said. States which have done away with these outdated laws have progressed far ahead of Maharashtra which was once the citadel of industry in the country, he said.

On floor space index (FSI), the area that is allowed to be developed by the authorities in a given plot, Godrej said that “the present restrictions are ridiculous and should be done away with soon.”

“Maharashtra has the most restrictive FSI in the country and India the most restrictive in the world,” he said, adding that while Maharashtra has a FSI of 1.3, Hyderabad 3 and Kolkata 6, other places such as Hong Kong and Shanghai had FSIs of 10 each and Manhattan in New York, even higher at over 20.

He disputed claims Godrej Properties was developing residential accommodation only for the top-end segment of the population, saying that there were several properties on the outskirts of Mumbai like Thane and Kalyan which were very much in demand by the middle-class.

Asked about the existence of under-the-table transactions in the real estate industry, Godrej said that as far as his company was concerned, every transaction was cheque-based. Confident that the high economic growth momentum would be maintained in the future, he said that he did not expect any slowdown in property requirements.

“Real estate prices are now stabilising and in certain areas, falling marginally, but demand is expected to only grow,” he said.

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