26 July 2011
1QFY12 Results Update | Sector: Real Estate
Godrej Properties
BSE SENSEX
S&P CNX
18,518
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
5,575
GPL IN
69.8
845/545
14/39/23
55.5
1.3
CMP: INR794
TP: INR744
Neutral
Revenue up 217% YoY, down 60% QoQ:
GPL has reported 217% YoY jump (60% QoQ decline) in revenue to INR1.3b,
as several additional projects began contributing to revenue over FY11. The QoQ drop in revenue is attributable to one-off
boost in recognition during 4QFY11, with Frontier (Gurgaon) and Prakriti II (Kolkata) crossing 20% threshold in that
quarter. During 1QFY12, the key revenue contributors were (a) Garden City (Ahmedabad) - INR380m, (b) Waterside
(Kolkata) - INR323m, (c) Prakriti (Kolkata) - INR232m, (d) Frontier (Gurgaon) - INR176m, (e) Genesis (Kolkata) - INR114m,
and (f) Eternia (Chandigarh) - INR53m.
EBITDA margin declined from 29.2% in 4QFY11 to 15.4%:
EBITDA grew 1422% YoY to INR202m, while EBITDA
margin dropped from 29.2% in 4QFY11 to 15.4%. Higher contribution (~25% of total revenue) from low margin commercial
projects in Kolkata and lower contribution from higher margin Gurgaon projects (Frontier accounted for just 13% of
revenue v/s 23% in 4QFY12) are the key reasons for the decline in EBITDA margin.
Sales booking strong, up 70% YoY; robust launch plan for FY12:
GPL maintained strong growth in sales booking
during the quarter, with ~70% YoY jump to INR2.3b (0.56msf) as against INR1.3b (0.53msf) in 1QFY11. This includes
~0.24msf of sales in Garden City III (Ahmedabad), ~0.12msf in Prakriti (Kolkata), 0.07msf in Frontier (Gurgaon), and
0.14msf in commercial projects at Kolkata and Chandigarh. The management has for a slew of new launches of 7-8msf
over FY12, including new locations such as Hyderabad, Chennai, Kochi and recent acquisitions in Chembur (Mumbai).
Net debt-equity up to 1x; reduction plan linked to commercial monetization:
As at June 2011, GPL's gross/net
debt stood at INR104b/INR9.4b, implying a net DER of 0.1x v/s 0.86x as at March 2011. While a significant portion of
GPL's debt is towards commercial assets in Kolkata and Chandigarh, its deleveraging plan is largely linked to the pace
of monetization of these commercial properties.
Valuation and view:
We estimate GPL's NAV at INR744/share, with core NAV at INR592/share and probability-weighted
option value at INR152/share. The stock trades at ~7% premium to our NAV estimate and at 4.2x FY13E BV of INR189
and 22.7x FY13E EPS of INR38.3. Maintain
Neutral.
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); Tel: +91223982 5436

Godrej Properties
Revenue up 217% YoY, down 60% QoQ
GPL has reported 217% YoY jump (60% QoQ decline) in revenue to INR1.3b, as several
additional projects began contributing to revenue in FY11. The QoQ drop in revenue is
attributable to one-off boost in recognition during 4QFY11, with Frontier (Gurgaon) and
Prakriti II (Kolkata) crossing 20% threshold in that quarter. During 1QFY12, the key
revenue contributors were (a) Garden City (Ahmedabad) - INR380m, (b) Waterside
(Kolkata) - INR323m, (c) Prakriti (Kolkata) - INR232m, (d) Frontier (Gurgaon) - INR176m,
(e) Genesis (Kolkata) - INR114m, and (f) Eternia (Chandigarh) - INR53m.
EBITDA margin declined from 29.2% in 4QFY11 to 15.4%
EBITDA grew 1422% YoY to INR202m, while EBITDA margin dropped from 29.2% in
4QFY11 to 15.4%. Higher contribution (~25% of total revenue) from low margin
commercial projects in Kolkata and lower contribution from higher margin Gurgaon projects
(Frontier accounted for just 13% of revenue v/s 23% in 4QFY12) are the key reasons for
the decline in EBITDA margin.
Key revenue contributors in 1QFY12
QoQ EBITDA margin (%)
Contribution from NCR
projects boosted the margin
Contribution from
High margin Mumbai
projects
Driven by low margin
Kolkata commercial and
initial phase of Garden City,
Ahmedabad
Source: Company/MOSL
Net profit declined YoY due to lower other income
GPL's net profit declined 55% YoY to INR101m due low contribution from other income,
which was boosted in 1QFY11 on account of proceeds from project-level stake sale to
private equity players.
Sales booking robust, up 70% YoY; robust launch plan for FY12
GPL maintained strong growth in sales booking during the quarter, with ~70% YoY
jump to INR2.3b (0.56msf) as against INR1.3b (0.53msf) in 1QFY11. This includes
~0.24msf of sales in Garden City III (Ahmedabad), ~0.12msf in Prakriti (Kolkata),
0.07msf in Frontier (Gurgaon), and 0.14msf in commercial projects at Kolkata and
Chandigarh.
During the quarter, GPL launched another residential tower in Garden City III, with
saleable area of 0.3msf and a second residential project, Godrej Crest, at Airport
Road, Hebbal, Bangalore (0.09msf). In addition to this, the company has recently
(2QFY12) launched Phase-IV of Garden City project (~0.8msf).
26 July 2011
2

Godrej Properties
The management has for a slew of new launches of 7-8msf over FY12, including new
locations such as Hyderabad, Chennai, Kochi and recent acquisitions in Chembur
(Mumbai). We expect robust response to the new launches, which would boost sales
momentum, going forward.
Almost 7.8msf is in FY12 launch radar
Project
Prakriti
Garden City -IV
Palm Groves
Genesis
Godrej Solitaire
Garden City -V
Capsulation, Chembur
Kochi
Godrej Avalon
Hyderabad New JV
Total
Location
Kolkata
Ahmedabad
Chennai
Hyderabad
Mumbai
Ahmedabad
Mumbai
Kochi
Maganlore
Area(msf)
0.8
0.8
1.0
1.0
0.2
1.0
0.1
0.5
0.5
2.0
7.8
Source: Company/MOSL
Guided launch date
2QFY12
Launched
2/3QFY12
2/3QFY12
3QFY12
2HFY12
4QFY12
4QFY12
Re-launch in 3QFY12
FY12
GPL has witnessed steady traction in construction for all its ongoing projects. However,
its Chennai project, Godrej Palm Groves is behind schedule due to delay in government
approvals. Its project in Hyderabad is awaiting approval for land conversion (from IT
SEZ to residential).
QoQ project completion status (%)
3QFY11
100
75
1.3
50
0.7
25
0
0.5
0.2
0.2
0.2
0.8
0.5
1.2
1.3
2.2
4QFY11
1QFY12
Saleable area(ms f) RHS
Garden City III has w itness ed increas e in
s aleable area to 2.2ms f
Source: Company/MOSL
Net debt-equity up to 1x; reduction plan linked to commercial monetization
As at June 2011, GPL's gross/net debt stood at INR104b/INR9.4b, implying a net
DER of 0.1x v/s 0.86x as at March 2011.
During 1QFY12, net debt increased by ~INR1.5b, largely to address working capital
needs. The management has guided no major mandatory repayment (INR200m) in
FY12.
While a significant portion of GPL's debt is towards commercial assets in Kolkata and
Chandigarh, its deleveraging plan is largely linked to the pace of monetization of these
commercial properties.
26 July 2011
3

Godrej Properties
New acquisitions in growth markets a key focus area; traction in MoU with
group companies
GPL follows a joint development agreement (JDA) model of land acquisition. The
management has indicated that the company is evaluating several new acquisitions
through the JDA route in key growth markets such as Mumbai, NCR, Bangalore,
Chennai and Pune. The management sees immense potential in redevelopment projects
in Mumbai. It has created a separate SPV to focus on this vertical.
During the quarter, the company entered into a joint venture with Capsulation Services
to develop a property at Chembur, Mumbai (0.1msf saleable area) with an economic
interest of 47.5%.
In 2QFY12, the company entered into a profit-sharing joint venture with its group
company, Godrej & Boyce to develop residential projects in Hyderabad and Thane.
During its IPO, the company had disclosed three MoUs with Godrej group companies
to develop ~185acres in Hyderabad, Bangalore and Mohali. The current development
is related to the Hyderabad MoU and a new JV in Thane.
Details of newly formed JVs
Limited liability Partnership
Acres
Godrej Buildcorp LLP (GB LLP)
Godrej Property Developers LLP
Location
9.2 Moosapet, Hyderabad
3.0 Thane
Area
2.0
0.3
GPL's
Nature of deal
Profit sharing
Profit sharing
35
32
( m s f ) stake (%)
Expects Hyderabad and Thane projects to account for ~INR15/share of NAV
Assumption
Area (msf)
GPL Stake (%)
Incubation
Probability factor (%)
NAV contribution (INR/share)
Net impact (INR/share)
Hyderabad Project
Old Est.
New Est.
1.5
60
FY14
60
7
2
35
FY13
100
12
5
Thane Project
0.26
32
FY13
100
3
3
Source: Company/MOSL
We believe traction in existing MoUs with group companies is a key positive for GPL.
The remaining MoUs at Bangalore (~100acres) and Mohali (~75acres), along with
huge potential in Vikhroli (500-600acres), offer further value unlocking potential.
Valuation and view
We estimate GPL's NAV at INR744/share, with core NAV at INR592/share and
probability-weighted option value at INR152/share. The stock trades at ~7% premium
to our NAV estimate and at 4.2x FY13E BV of INR189 and 20.7x FY13E EPS of
INR38.3.
We expect GPL to trade at premium to NAV due to its strong growth visibility, brand
equity and increasing visibility on development of other group entities' land bank. The
key catalysts which could further re-rate GPL are (i) traction on other disclosed MoUs
and clarity on BKC land deal with Jet, (ii) continued momentum on new third party
JDAs, and (iii) strong response to its launches. Maintain
Neutral.
26 July 2011
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Godrej Properties
NAV calculation
Particulars
Residential
Commercial and Retail
IT parks
Hotels
Option Value to MoU in Progress
Mohali (75 acres)
Bangalore (100 acres)
Vikroli (100 acres)
Gross Asset Value
Less: Debt
Add: Cash
Less: Other Op Exp
Tax
Land cost
Net Asset Value
INR m
44,416
21,906
3,881
5,228
1,431
5,270
9,348
91,481
9,449
1,632
8,233
22,870
600
51,960
NAV/share
636
314
56
75
20
75
134
1,310
135
23
118
327
9
744
% NAV
85
42
7
10
3
10
18
176
18
3
16
44
1
100
% GAV
49
24
4
6
2
6
10
100
10
2
9
25
1
57
Source: MOSL
Location-wise GAV analysis (%)
32
21
17
10
6
5
4
3
2
2
1
Source: Company/MOSL
26 July 2011
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Godrej Properties
Godrej Properties: 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 10 key tier-1 and tier-2 cities,
with a land bank of ~400 acres and developable area of
~85msf, where it has economic interest for ~51msf.
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.
GPL entered into MoUs with group companies to
develop ~185acres, which offers huge option value.
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.
Heavy dependence (~21% of GAV) on Ahmedabad real
estate market can hamper GPL's growth prospects in
case of a downturn and an extreme economic situation.
Key news flows / triggers to watch
Going forward, the key catalysts that could re-rate GPL
are: (i) further traction on disclosed MoUs, (ii) visibility
on development of Vikhroli) and (iii) continued
momentum on new third party JDAs.
GPL management indicated that they are in the process
to finalize a deal with Jet Airways to develop ~2.5msf
at BKC, Mumbai, which could add 4-6% to its GAV.
Valuation and view
We estimate GPL's NAV at INR744/share, with core
NAV at INR592/share and probability-weighted option
value at INR152/share.
The stock trades at ~7% premium to our NAV estimate
and at 4.2x FY13E BV of Rs189 and 20.7x FY13E
EPS of Rs38.3.
Sector view
RE sector has been a major underperformer over the
last 12 months with multiple operational and non-
operational headwinds such as volume slowdown (due
to declining affordability), monetary tightening, pilling
liquidity pressure etc. However, with a buoyant macro-
picture, increasing focus on execution and ongoing
revival in the commercial and retail segments, we
believe the outlook will improve going forward.
Comparative valuations
GPL
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY12E
FY13E
FY12E
FY13E
FY12E
FY13E
FY12E
FY13E
30.0
20.7
5.1
4.2
8.4
5.8
31.8
20.1
IBREL
19.9
14.6
0.5
0.5
4.5
3.0
18.5
10.7
Mah Life
10.9
7.6
1.3
1.1
2.3
1.9
7.2
5.8
EPS: MOSL forecast v/s Consensus (INR)
MOSL
Forecast
FY12
FY13
26.3
38.3
Consensus
Forecast
24.1
35.1
Variation
(%)
9.1
9.2
Target price and recommendation
Current
Price (INR)
794
Target
Price (INR)
744
Upside
(%)
-6.3
Reco.
Neutral
Stock performance (1 year)
Godrej Property
Sens ex - Rebas ed
Shareholding Pattern (%)
Jun-11
Promoter
Domestic Inst
Foreign
Others
26 July 2011
83.8
2.0
5.6
8.6
Mar-1 1
83.8
2.0
5.6
8.6
Jun-10
83.8
3.5
5.7
7.1
860
770
680
590
500
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
6

Godrej Properties
Financials and Valuation
26 July 2011
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Godrej Properties
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26 July 2011
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