Tuesday, December 8, 2009

[Investors] Godrej Properties IPO - Rs.490 to Rs.530 per equity share, Issue period: December 9 - 11, 2009

Godrej Properties IPO Opens Today 

Should you invest? 

By Deepak Sahijwala

Godrej Properties will enter the capital market today, with an initial public offering (IPO) of up to 9,429,750 equity shares of Rs 10 each in a price band of Rs 490-530 per share, to raise around Rs 500 crore. The issue closes on December 11, 2009. 

The proceeds of the issue, says Adi Godrej, Chairman, "will be used to acquire development rights for its forthcoming projects as well as for repayment of loans." 

The company is a leading real estate development company established in 1990 and is amongst the first real estate company to have obtained an ISO certification. Its business focuses on residential, commercial and township developments. It currently has projects in 10 cities across India and holds an estimated saleable area of 50 million sq. ft, of which only about 4 per cent is from its own land reserve. It has so far completed 23 projects, selling about 3.2 million square feet of residential and commercial property, mostly in Mumbai and its adjoining cities.  

On the positives is the fact that the company's brand name and image are impeccable. Further its joint-development strategy which is not reliant on holding a large land bank, could turn out to be a model strategy for the real-estate industry, with a lean structure that does not lock into land cost in a volatile sector. 

On the concern front, the pricing seems slightly high. At the current offer price, the stock would trade at 32 times its estimated earnings for FY-10 on an expanded equity base. However, this discounting does not take the company's future potential and may not potray a correct picture. More so, because the long term looks bright for the sector. 

Infact, CARE has assigned the issue an IPO Grade 4. The Grade 4 indicates above average fundamentals. All said and done, the fundamental positives and the pricing make it a primary issue that merits investment for the long term.

   IPO Summary:

    Issue period: December 9 - 11, 2009

    Face Value: Rs 10

    Price Band: Rs.490 to Rs.530 per equity share

    Issue Size: 9,429,750 Equity Shares

    Net issue size: Rs 500 crore

    Bid Lot: 13 Shares and in multiples thereoff

           Listing At: BSE, NSE

Courtesy : The Afternoon Newspaper - December 09, 2009

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