29 July 2013
1QFY14 Results Update | Sector:
Real Estate
Godrej Properties
BSE SENSEX
19,748
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Financials & Valuation
Y/E MAR
Net Sales
EBITDA
NP
EPS
EPS Gr. (%)
BV/Sh.
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2013
2,858
1,384
17.7
41.3
183.1
9.6
8.6
29.0
2.8
2014E
3,069
1,667
21.4
20.4
199.8
11.2
10.3
24.1
2.6
S&P CNX
5,886
GPL
78.0
40.9/0.8
689/482
-8/-15 /-16
(INR m)
2015E
4,490
2,556
32.8
53.3
227.9
15.3
13.2
15.7
2.3
CMP: INR 515
TP: INR560
Buy
One-off other income drives PAT:
Revenue declined 11% YoY and 35% QoQ to
INR2b, EBITDA grew 0.6% YoY but declined 59% QoQ to INR406b, and PAT grew
130% YoY but declined 26% QoQ to INR395m. PAT growth was driven by surge in
other income, which includes one-off inflow of INR400m due to 49% stake sale in
Sahakar Nagar II
to APG-led co-investment platform. Key revenue contributors: (1)
Godrej One
(30%), (2)
Prakriti,
Kolkata (14%), (3)
GGC,
Ahmedabad (29%), and (4)
Frontier,
Gurgaon (12%). In 1QFY14,
GGC
Phase III C (B) and
Horizon
(Pune) crossed
revenue recognition threshold.
Operating margins contracted sequentially:
EBITDA margin expanded 2.3% YoY but
shrank declined 11.5% QoQ to 20.1%. Assuming EBITDA margin of commercial
project,
Godrej One
(Vikhroli, Mumbai) at ~40%, core EBITDA margin at other
projects contracted 12% QoQ to ~12%. Higher proportion of revenues from low
margin
Garden City,
Ahmedabad (GGC) project and cost escalations across joint-
development projects impacted margins.
BKC commercial posted encouraging response:
New phases of
GCC
(Ahmedabad),
Prakriti
(Kolkata) and
Summit
(Gurgaon) were the key launches in 1QFY14. Adjusting
for JV partners’ stake and DM fees, we calculate GPL’s 1QFY14 presales at 0.49msf
(INR4.2b), flat YoY. Total presales grew 19% YoY to INR6b. The key positive in
1QFY14 was strong sales in BKC commercial, where it sold ~0.14msf (v/s 0.05msf in
4QFY13) at average realization of INR24k/sf. Against the management’s target of
0.25msf annually; cumulative sales at BKC were 0.19msf.
FCFE negative; net debt up:
Operating cash flow (OCF) merely broke even, while
FCFE has been negative in 1QFY14, driven by cash outgo towards (a) deposits on
recently acquired Okhla (Delhi) project, and (b) facilitating HDFC PE Fund’s exit from
Chennai and Chandigarh projects. We estimate negative FCFE of INR1.1b in 1QFY14,
leading to increase in net debt to INR16.1b (1.1x). Cost of debt stood at 11.4% as
against 11.7% in 4QFY13.
10,371 11,404 15,575
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.

Godrej Properties
Revenue growth moderated; core margin down sharply to 12%
1QFY14 revenue stood at INR2b (-11% YoY, -35% QoQ), EBITDA at INR406m
(+0.6% YoY, -59% QoQ), and PAT at INR395m (+130% YoY, -26% QoQ).
Growth in PAT (despite weaker EBITDA trend) was driven by surge in other
income, which includes one-off inflow of INR400m due to 49% stake sale in
Sahakar Nagar II to APG-led co-investment platform.
Key revenue contributors are: (1) Godrej One (30%), (2) Prakriti, Kolkata (14%),
(3) GGC, Ahmadabad (29%), and (4) Frontier, Gurgaon (12%). In 1QFY14, GGC
Phase III C (B) and Horizon (Pune) crossed revenue recognition threshold. Other
operating income of INR143m (v/s INR323m in 4QFY13) includes DM fees from
Vikhroli, Nagpur, Bangalore E-city and Pune project.
EBITDA margin went down to 20.1% (-11.5% QoQ, +2.3% YoY). Assuming EBITDA
margin of Godrej One (Vikhroli commercial) at ~40%, the core EBITDA margin at
other projects contracted 12% QoQ to ~12%.
We anticipate that higher proportion of revenue from low margin Garden City,
Ahmadabad (GGC) project in 1QFY14 and cost escalations across most revenue
contribution JDA project have resulted into sharp drop in operating margin.
Margins disappoints in 1QFY14
(%)
Revenue contribution mix (%)
Source: Company, MOSL
Source: Company, MOSL
Project-wise execution (% completion): 1QFY14 witnessed sequentially slower progress
Source: Company, MOSL
29 July 2013
2

Godrej Properties
BKC presales velocity a positive, overall sales steady YoY
New phases of GCC (Ahmadabad), Prakriti (Kolkata) and Summit (Gurgaon) have
been key launches in 1QFY14.
Adjusting for JV partners stake and DM fees projects, we calculate GPL’s 1QFY14
presales at 0.49msf (INR4.2b), flat YoY, while total presales grew 19%YoY to
INR6b.
Average realizations have improved to INR10,375K/sf (+56%YoY and 5% QoQ)
with higher contribution from BKC. We note individually, realizations across
projects have largely up 0-8% QoQ, barring Prakriti (Kolkata) and E-City
(Bangalore) where prices are up by 18-24% QoQ.
With recent launches in subsequent phases, the presales velocity has improved
significantly in GCC and Prakriti. In GCC, the management has earlier guided for
1msf+ presales in FY14 (1Q run-rate of 0.24msf v/s 0.16msf in 4QFY13 seems in
line). We note that incremental presales have been muted in Mumbai (Vikhroli
and Chembur), Nagpur and Mangalore.
Key positive in 1QFY14 has been a strong sales in BKC commercial, where it sold
~0.14msf in 1QFY14 (v/s 0.05msf in 4QFY13) with average realization of
INR24K/sf. Cumulative sales at BKC of 0.19msf seems to be beating
management’s target of 0.25msf annually. Faster sales in BKC would be a key
driver to improve operating cash flow and resist from putting further pressure
on its leverage as GPL has almost INR11b of cash outgo towards BKC project
over FY14-16.
Pre-sales trend (GPL’s stake adjusted)
Pre-sales trend (Ex JV partner)
Source: Company, MOSL
Source: Company,MOSL
29 July 2013
3

Godrej Properties
Average realizations across projects in 1QFY14
Source: Company,MOSL
OCF break-even, FCFE negative on land advance and PE exits
GPL’s operating cash flow (OCF) in 1QFY14 has been merely broken even. This is
against a positive OCF in FY13, after long history of negative OCF since FY07.
Better cash flow in FY13 was led by minimal capital commitment in most of the
recent acquisitions after BKC-Jet (INR400m-500m outlay in last 8 acquisitions).
However there has been higher land advances (in terms of deposits) in its
1QFY14 acquisition at Okhla, Delhi (deposit of INR0.3b for GPL), which has
resulted into weakness in OCF. Total capital commitment in Okhla was much
higher as GPL has transferred this project to APG-led co-investment platform
(apart from Sahakar Nagar II) to minimize the same to 24.9%.
We calculate the company to have generated negative FCFE of INR1.1b in
1QFY14. FCFE was adversely impacted (despite INR400m of other income) due
to cash outgo pertaining to HDFC PE fund’s exit from two of its projects at
Chennai and Chandigarh. HDFC PMS had invested total INR1b in these two
projects in FY10, with 15-18% assured IRR. Goodwill has increase by INR0.76b
owing to acquisition of stake in Chandigarh, while Chennai transaction will
reflect in 2QFY14.
Negative FCFE led to increase in net debt by INR1.1b to INR16.1b (1.1x). Cost of
debt stood at 11.4% as against 11.7% in 4QFY13.
GPL management expects to post positive annual OCF trend here on. But a
negative OCF in BKC (INR11b+ of capex commitment over FY14-16) could be a
pressure point. Therefore, we don’t expect any moderation in gearing in FY14-
15, rather there could be upward trend if the recent momentum BKC sales
velocity fails to sustain.
29 July 2013
4

Godrej Properties
FCFE turned negative in 1QFY14 (INR b)
Net debt at INR16.1b (1.1x)
Source: Company,MOSL
Source: Company,MOSL
Sales trend in key ongoing projects in 1QFY14
Project
GCC, Ahmedabad
Prakriti, Kolkata
Bangalore - Platinum
Palm Grove, Chennai
Serenity, Mumbai
Horizon, Pune
Godrej Summit
E-City Bangalore
Others
BKC
Vikhroli (One)
Total
Volume (msf)
0.24
0.05
0.02
0.03
0.02
0.03
0.03
0.02
0.01
0.14
0.03
0.60
Value (INR m)
810
250
180
120
280
130
210
100
170
3310
510
6060
Realization (INR/sf)
3,407
5,114
7,826
4,444
17,688
5,175
7,729
5,263
23,259
24,135
16,235
10,107
Source:Company,MOSL
Liquidity discomfort to sustain over near-term; maintain neutral
We fail to derive meaningful positive outlook from GPL’s 1QFY14 results due to
P&L weakness, pressure on operating margins, and negative FCFE, which was
adversely impacted by PE exit and high capital commitment in recent
acquisitions. Transfer of existing project to APG-led venture highlights
contraction of its liquidity bandwidth to address projects with higher initial
capital outlay.
Its residential projects are generating RoCE of 14.9%, which needs to improve
further through better margin and faster launches. On the other hand INR15b of
capital employed towards commercial projects have a major drag on capital
efficiency. While recent presales in BKC commercial has been encouraging, we
believe to momentum needs to sustain (or augment) to thwart any further
weakening of liquidity.
Despite bank financing not being a challenge for the company, we remain
cautious about potential liquidity discomfort and sustenance of positive OCF.
This largely due to (1) high capex commitment towards BKC commercial
(~INR11b over FY14-16 including MMRDA premium) on the back of prevailing
weakness in commercial demand, (2) sharp ramp-up in construction required to
support ongoing and planned residential projects, and (3) ~INR1.2b payment to
Godrej & Boyce for Vikhroli land.
5
29 July 2013

Godrej Properties
Proposed right issue could be viewed as higher funding need the management
foresees in the context of possible shortfall in business-level cash generation.
Key operational trigger for re-rating would be (1) positive surprise in BKC
demand, and (2) success in stated launch plan. GPL trades at 16x FY15E EPS and
2.3x FY15E BV. Maintain
Neutral
with target price of INR560.
29 July 2013
6

Godrej Properties
Company name: an investment profile
Company description
Godrej Properties Limited (GPL), established in 1991, is
part of the 113-year-old Godrej group of companies.
GPL, which develops residential and commercial
properties,
recently
entered
large
township
development. The company expanded its footprint into
12 key tier-1 and tier-2 cities, with a land bank of ~400
acres and developable area of ~77msf, where it has
economic interest for over 50msf.
Recent development
HDFC PE fund’s exited from two of its projects at
Chennai and Chandigarh in 1QFY14
GPL transferred 49% stake in Sahakar Nagar II and
75% in Okhla project to APG-led co-investment
platform
Valuation and views
Key investment positives
Focused mid-income housing play with an asset-
light model. GPL's development portfolio is skewed
in favor of JDA projects.
Widely recognized Godrej brand gives GPL the
unique strength to emerge as a true pan-India
player.
We fail to derive meaningful positive outlook from
GPL’s 1QFY14 results due to P&L weakness,
pressure on operating margins, and negative FCFE,
which was adversely impacted by PE exit and high
capital commitment in recent acquisitions. Transfer
of existing project to APG-led venture highlights
contraction of its liquidity bandwidth to address
projects with higher initial capital outlay.
Key operational trigger for re-rating would be (1)
positive surprise in BKC demand, and (2) success in
stated launch plan. GPL trades at 16x FY15E EPS and
2.3x FY15E BV. Maintain
Neutral
with target price of
INR560.
Key challenges
Higher inclination towards joint-development
model caps gains during an economic upswing and
exposes the company to the potential risk of
operational conflicts with JD partners.
High leverage could exert pressure on cash flow.
Comparative valuations
GPL
P/E (x)
P/BV (x)
EV/Sales (x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
24.5
16.0
2.6
2.3
5.1
3.7
18.8
12.7
Prestige
14.3
11.3
1.7
1.5
3.0
1.7
10.0
8.1
Oberoi
12.1
8.5
1.7
1.5
4.7
3.1
8.0
5.2
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
21.4
32.8
Consensus
Forecast
28.2
38.2
Variation
(%)
-24.2
-14.0
Target price and recommendation
Current
Price (INR)
515
Target
Price (INR)
560
Upside
(%)
8.7
Reco.
Buy
EV/EBITDA (x) FY14E
FY15E
Shareholding pattern (%)
Jun-13
Promoter
Domestic Inst
Foreign
Others
75.0
2.0
14.9
8.1
Mar-13
75.0
2.2
14.9
7.8
Jun-12
75.0
2.6
13.6
8.8
Stock performance (1 year)
29 July 2013
7

Godrej Properties
Financials and valuation
29 July 2013
8

Godrej Properties
NOTES
29 July 2013
9

Godrej Properties
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GODREJ PROPERTIES
No
No
No
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29 July 2013
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