Godrej Properties - November 2014 Multibagger

Godrej Properties Ltd (GPL)
- Good Management chasing a Huge Opportunity
Content Index
Godrej Properties Investment Snapshot :- Slide #4
Our Research Desks views on the Stock Idea :- Slide #5
Godrej Properties Business Overview :- Slide #13
Investment Arguments :- Slide #33
Godrej Properties Financials:- Slide #52
Concerns & Reasoning :- Slide #54
Conclusion:- Slide #56
Specialists in discovering Multibagger stocks
Our Cumulative Portfolio performance
Godrej Properties Investment Snapshot

(as on November 25, 2014)
Recommendation :- BUY
Maximum Portfolio Allocation :- 4%
Current Market Price Rs. 250

Current Dividend Yield 0.79%
Current Accumulation Range :- 200-260 Rs

Core Investment Thesis :
The company follows a business model of real estate
development which we believe has the potential to create strong
value for shareholders. It has a very aggressive management and
also a strong growth visibility. We believe that the company can
definitely grow at over 30% CAGR over the next 10 years.
While the current Return ratios may not look attractive, we
believe this is a temporary phenomenon and expect the ROE to
inch upwards to about 18% over the next 3 years. While there
might be short-term valuation pressures, the long term story
looks robust.
We certainly believe that the stock has a strong probability of
becoming a Large cap over the next decade and can provide
Multi-Fold returns to existing investors.
Bloomberg / Reuters Code GPL. IN/

GODR.BO
BSE / NSE Code 533150/ GodrejProp

Market Cap (INR BN / USD Mn) 50.60
/806 [1 USD Rs. 62.0]
Total Equity Shares [Mn] 202.6
Face Value Rs. 5

52 Week High / Low Rs. 264 / Rs.154
Promoters Holding
FII
DII
Other Holdings
74.92 %
- 10.98 %
- 1.46 %
- 12.94 %
Our Research Desks views on the Stock Idea

Dear Members,
Indian Markets have had a very sharp rally (especially in the Small/ Mid Cap space). While the Markets on an
aggregate still don't look expensive, the stocks that we are focused on (High Quality - Secular Growth businesses)
are frothy. Most of our earlier high conviction/ Core Portfolio bets - Housing stocks (Cera sanitary ware, HSIL,
Astral Poly, Ashiana Housing), Discretionary consumption (Kewal Kiran, Symphony, PVR, La Opala), Quality
Exporters (Poly Medicure, Mayur Uniquoters, Balkrishna Industries), Fast growers (Dhanuka, Atul Auto, VA Tech
Wabag, Treehouse) along with some Contrarian Bets (NBCC, Wimplast, TCI, Indiabulls Housing) etc - have been rerated sharply and are now quoting at >30 P/E valuations.
Companies with similar characteristics Long run way for growth, Good Management team, Durable Moats,
Capital Efficient and Scalable business model, Huge opportunity Size and high Incremental ROCEs - are all quoting
at valuations that are too high for our comfort. Many of them deserve such valuations for the certainty they deliver
to Investors. Therefore we are not booking profits and are still fully invested in such names but buying them
incrementally is challenging. The Risk-Return doesn't look attractive for an Investor to buy these businesses
currently at these prices where most of the positives are priced in.
We have been writing in a similar tune for the past few months now. There were a few opportunities that were still
available in the secular growth space such as Treehouse and Heritage Foods that have been added to our Core
Portfolios. Currently, we are not able to find any new Idea in which we have enough conviction as a long term
Investor. There are several interesting spots in the Tactical/ Intelligent Speculation space that we utilize as part of
our 1-3 year buckets (Hedge Fund portfolio), but the secular growth ideas that we identify in our Multibagger
service (ahead of the general market) have become too pricey with the sharp rally. We dont want to get into lower
quality Stock Ideas recommendation just for the sake of it. We continue to track/ meet/ understand several new
businesses that we like and incase of a healthy correction, we have our list of stocks to be bought ready.

Investing in Mid-Caps and Small-Caps needs to have a contrarian strategy. When it was hated by Market
participants a few years ago, we were heavy buyers (literally betting every penny on them), but in times like these
in which we find a few spaces extremely frothy we are happy to stay out of the game. We have not been buying
anything significantly in the past several months as our Equity Allocation was higher anyways. The challenge has
been on Incremental allocation for clients with low equity allocations. In such cases, we have been playing safe by
buying businesses that offer tremendous certainty for a long term Investor despite overvaluation.
Godrej Properties has been one of our earlier recommendations in which we are allocating significant capital for
clients with low equity exposures. It is very rare that you find one of your picks that has delivered over 55% return
within a year time span falling at the last place of returns from your last years recommendations (it was
recommended in December-2013 at 160Rs/ Share). That is what current Market Rally has done. Almost 1 in 2
stocks in the Market has doubled and thankfully all our picks have delivered much higher returns than the average.
In such a backdrop, we are happy to re-recommend Godrej Properties for Investors with a 5-10 year horizon.
Godrej Properties is one of our few recommendations that is a real beneficiary of all the Macro positives that has
happened to India over the last year. Compared to last year, there are several positives to the stock.
-Tail Risks have reduced substantially and Visibility for the long term has improved.
- Godrej Properties performance over the last 3 Quarters has been better than expectation.
- A progressive chief Minister elected in GPLs core market in addition to a business friendly Central government.
- Interest Rate reduction looks much more certain.
- Real Estate sentiments have picked up strongly and pent-up demand seems to be coming back.
- GPL has shown the ability to launch and execute projects quickly.
- Brands pull can be seen from the premium in new projects + the strong Pre-Sales in almost all new projects.
- Pan-India expansion ahead of plans. Filling up the vacuum of large distressed leaders (DLF & Unitech).

While short term earnings/ valuations pressure seems imminent the conviction on the real long term story is
building up well. Investors who can comprehend the BIG picture can see the rationale behind this Investment. We
have enough reasons to strengthen our long term projections as compared to last year.
-Management team has shown contrarian thinking to launch and execute projects in a difficult environment.
- Over 25 Million Sq.ft of project additions over the past 2 years. Improved mix towards high ROE projects.
- Consistent sales volume of over 1 Million Sq.ft every month over the past 3 Quarters (tough environment).
- Ability to improve prices by over 15% across projects during Phase-2 development.
- Building a strong team across sales, marketing, execution divisions to scale up the business over the next decade.
Management is clearly having huge ambitions and are building this business for the long term. They are focusing on
improving the process consistently and are setting up the building blocks of a successful organization. Lets
understand a few important Investment drivers.
- The Big Picture : (How do we see this Business in a decade from now ?)
Godrej Properties current revenue size of around 1000 Cr is miniscule when compared with the market size for
quality Real estate development. Godrej group chairman Adi Godrej believes, GPL will be the groups fastest
growing business and will be the biggest contributor to the groups profits in a decade from now. There is also an
internal growth target of around 40% CAGR over the next 10 years which should take the business to a size of
>20X from the current size. While all of these targets may look Aspirational, we believe that the company is in fact
getting well positioned to grow at such high rates for a long period of time with the strong focus from the Godrej
group on this line of business. With a strong capital backup from the group, a huge market opportunity, healthy
project pipeline, ambitious Management, improving operational bandwidth, large land bank of Godrej group
companies and a mix of asset light business models the company is well positioned to grow its operations multifold in the coming decade as it aims to be amongst the Top-3 Real estate players in India. Looking at the companys
performance over the last many years we certainly believe that it is a achievable dream.

- Strong Visibility for growth : (Will the companys Business Model allow a rapid scale-up in Operations ?)
GPL follows a mix of development strategies such as JV model (Revenue Sharing, Profit Sharing, Area Sharing),
Development manager fee model (10% revenues with no capital investment), Re-Development projects and CoInvestor platform projects for developing real estate projects across the country. GPL doesnt follow a land bank
model and the companys preference for tying up with local Land owners whose responsibility is to get all the
approvals in place for the project, allows the company to scale up across the country in a business where local
connections are extremely important. Its Pan-India brand value and Companys model of outsourcing contracting
work also facilitates the rapid scale up without much technical glitches.
Capital is not a constraint for GPL as it uses relatively asset light business models. The promoters strong capital
backing and preference for tying up with external investors on Asset heavy projects (Private Equity Partnerships
Slide 32) allows the company to scale up its business multi-fold without any capital constraints.
Companys rapid scale up in new project addition (Slide-19 & 43) and the huge opportunity of developing Godrej
groups own land bank (Slide-28) offers strong growth visibility to the company for many more years. All of these
makes us believe that the company can certainly grow at a healthy CAGR of at least 30% for the next 10 years and
hence the more valid question should be to understand as to how profitable would this growth be, how much of
this growth would be un-diluted and how much wealth creation can accrue to the existing share holder. It is here
that we believe that the Markets are mis-reading the quality of incremental growth in the business.
- Improving Quality of Growth : (Will the companys growth be Shareholder friendly ?)
We believe that the companys current low returns Ratios doesnt reflect the true nature of its business model
and a more normalized Return on Equity should be in the range of 15-20%. We believe that the current low ROE is
distorted by a few temporary factors such as, (also look at Slides 36,37)

- Companys loss making old Commercial Projects :
The extremely bad commercial real estate demand has made sure that GPLs commercial projects are making
losses and are delivering low returns on the locked-in capital, resulting in a distortion in the overall return ratios.
The ROEs of projects excluding these Commercial projects are already at 15%. With the slow run down in these loss
making projects and a improved mix of Residential projects, there is enough indications of a improvement in ROE.
- Longer maturity profile for the companys large Projects :
Some of the companys important projects such as Vikhroli and Godrej Garden city are large projects with
timelines for these projects extending for the next 8-10 years. In such large projects, the initial phases are always
used to establish a strong neighborhood and bulk of the projects profits are back ended as the later phases of
development fetch strong margins. Hence the current Margins should improve over time and boost return ratios.
We also believe that the companys consistent focus on Capital efficiency (Management doesnt miss a chance to
speak about the focus on Return on capital in all their Concalls and Interviews) and an intent to deliver ROEs
above 20% should serve as an indicator for an improvement going forward. We believe that the changing mix of
projects towards High ROE models such as Development Manager Fee model (Slide 46) and Profit sharing model
would help the company to have larger incremental returns on capital. Our research indicates that the new projects
can generate EBIDTA of around 1500 Cr on little capital employed (Slide 36) which shows the inherent strength of
GPLs business model. DM Model is the preferred model for working with group companies. Looking at the project
visibility at the group level, we certainly believe that GPL will transform to a high ROCE business over the next
decade from the current sub-10% ROEs that it earns.
We also believe that the company is learning from some of its mistakes and there are indications of them
rectifying it, as any credible Management does. While there would still be glitches, our understanding is that the
companys structural business model definitely allows for generating 20% ROE on an incremental basis. We believe
that the improving quality of growth would help investors achieve dis-proportionate returns over time.

- Seamless Web of deserved Trust : (How does the company stand out among other big Developers ?)
Real Estate sector has always been a murky sector where there is a lot of distrust among Market participants.
Godrejs credible brand built over a 100 years has helped the company establish trust among various stake holders
of Real estate business in a extremely short period of time. Godrej is largest brand in the number of Indian people it
touches on a daily basis. GPL can successfully capitalize on this strong brand to attract more customers.
Companys strong reputation also provides it with other advantages such as, Low cost of debt (11.2%) which is a
solid 100-300 bps cheaper than its competitors. Its cost of Equity is the cheapest among all Real Estate players and
Investors are ready to invest in the company despite a weak Real Estate environment as seen from the huge
subscription for its Recent Rights Issue. Company has also been able to tap the Private Equity network efficiently to
raise capital. The companys unique structure of a Co-Investment platform also is an indication of the companys
ability to tap into different sources of capital to keep itself asset light. We believe that the low cost of Capital is a
result of the deserved trust which the Group commands.
The companys takes its reputation as customer friendly very seriously and makes sure that it continues to build
on to that brand image. This has helped the company to generate strong customer interest for its projects even in a
dull environment (Slide 30). This trust combined with Godrej groups DNA in marketing helps the company out
beat its Peers and create strong value for its projects. This can be easily verified with the consistent increase in the
share of Development Manager Fee model where the company mainly does Project design, Planning, Marketing
and Sales of a project and does not commit any capital. We believe that the companys ability to receive more than
10% of the projects revenue by just engaging in such 0 Capital investment activities demonstrates the real strength
of GPLs Operations. As its strength improves, so does its negotiating power with its various partners.
We believe all these positives create a strong reinforcing loop which allows the company to tap into the best
Land bank partners, Private Equity investors, Cheap debt and a stronger customer connect. This would only
strengthen going forward as the company improves on its Project Quality and gets financially stronger. The
companys strong base of Operational excellence can be seen from the numerous recognitions for its projects (Slide
41, 42). We believe that GPL has all the ingredients to emerge as a large quality real estate developer which
deserves a premium for its projects.

A Few Realistic concerns about Godrej Properties :
1.) Valuations are costly but the long term story provides confidence !
The current valuations of 5000 Cr equity value (2400 Cr of Debt) for a company with an expected PAT of around
260 Crs next year is costly. Also the stock is quoting around 2.5X Book Value which is not attractive by any
Investment standards. As we have been saying, this stock should be seen as a 10 Year bet where most of the returns
would be back ended. We have estimated the companys Net Asset Value in Slide (51) to be around 215 Rs/ Share.
We are definitely buying the stock at a >15% premium to its intrinsic value, but it hardly matters when the
Investment horizon is a decade.
2.) Company has made mistakes in its Project selection & its execution strategy
GPL had done early monetization in a lot of its projects and where there has been cost escalation over the last 2
years, resulting in lower Margins. The company has now shifted more towards Profit Sharing (rather than Revenue
sharing) and covers for cost escalation during its initial sales. The companys commercial projects and even its
recent large project like BKC doesnt look attractive from a Return on Capital point of view.
While we can give a benefit of doubt based on its young execution history, the company should improve its
project selection and execution skills to consistently earn strong returns on its deployed capital. Companys rapid
scale up in the number of projects it handles would also make it vulnerable to a lot more errors. Considering the
number of variables involved, we believe that the company would develop stronger expertise going ahead in
selecting a better project and would become more choosy.
3.) Aggressive Accounting practices & Optimistic guidance of the Management
GPL follows a relatively aggressive accounting policy to book revenues and also in booking profits during sale
of stakes in projects to its Private equity partners. We believe that the company has been optimistic in several
estimations which can be seen from the hit the company has taken on few projects where it has provided for a
assured IRR to PE investors. We believe mistakes like these are costly and creates doubts in the minds of Investors
about the guidance on its future profitability.

While we believe that these are important concerns, we are not very much worried about the companys
consistent negative cash flow generation as we are sold on to the Managements vision of Investing aggressively
during the current bad environment which would help it to reap rich rewards going ahead. The companys balance
sheet strength and backing from its Parent should help it to tide over any balance sheet related stress.
We believe that any long term Investor should not miss this opportunity to buy into a high Growth business which
has a strong probability of being 20X of its current size in next 10 years, which is run by a credible Management,
which has a business model to capture those returns efficiently for a share holder and which is available at
reasonable valuations. We believe Markets would love this high structural growth business and we expect the
company to become a 18%+ ROE business over the next 3-5 years. All of this would ensure that the companys stock
would gain not only from the companys earnings growth but also from the potential re-rating which would help us
get strong Multibagger returns.
We would like Investors to take a dipping stake into the stock and add on to it aggressively in case the stock
corrects significantly from the current levels.
Regards,
[ Gokul Raj . P, Director & Head Investments ]
Godrej Properties Business Overview
10 Year Performance Snapshot
Godrej Properties Core Execution Model
.
GPL uses the joint development model for developing properties, which entails entering into a development agreement
with the owner(s) of the land parcel(s) sought to be developed and developing the project jointly with the land owner.
projects.
GPL is typically, entitled to share in the development property, or a share of the revenue or profits generated from the sale
of the developed property, or a combination of both entitlements .
GPL in some projects offer and sell equity interests in project-specific companies to long-term investors. This business
model enables to hold fewer assets, be more capital efficient, achieve higher returns on investments in the projects and
undertake more projects without investing large amounts of capital towards the purchase of land.
Business Model
GPL focuses primarily on residential projects. In residential project portfolio, GPL develops projects that
are focused on the higher end to mid-level range of the real estate market. Residential projects constituted
approximately 82.39% of our total Saleable Area.
GPL entitled to share in the development property, or a share of the revenue or profits generated from the
sale of the developed property, or a combination of both. GPLs joint development model allows them to be
more capital efficient and hold fewer assets.
GPL in some projects offers and sells equity interests in project-specific companies to long-term investors.
This business model enables the company to rapidly scale up and use its capital efficiently. GPL is able to
limit its risk through project diversification while maintaining significant management control over these
projects. The company usually sells these equity interests for a premium leading to healthy profits.
GPL also undertakes the development of projects as a development manager on a fee basis - where it
ideates, designs, markets and sells the project. There is no capital commitment and this model is highly ROE
accretive. The Value addition of the company is very much visible in this model.
GPL has also created a residential development financing platform of 10,725 million under which a Dutch
co-operative representing a group of overseas investors and an Indian investor commit equity investments in
GPLs residential projects. The platform intends to focus primarily on the development of FDI-compliant
residential projects in Mumbai, the National Capital Region, Bangalore, Chennai and Pune. The platform will
enable the company to capture outright land purchase transactions without deviating from GPLs asset light
model. This will also add to the ease of capital access for GPLs projects.
GPL Among the only 3 Pan-India real estate developers

GPL is a focused mid-income housing
player, with a pan India presence and a
differentiated business model.
GPL is currently present in 12 cities i.e
Chandigarh, Chennai, Mangalore, NCR,
Ahmedabad, Mumbai, Nagpur, Kolkata,
Pune, Hyderabad ,Bangalore and Kochi.
GPL will be able to expand to more
cities and towns across India which can
be easily penetrated given the brand
loyalty enjoyed by the company on a
Pan India basis.
GPL is currently executing a total of 4
projects on a Pan India basis with
potential developable area of 88.7
million sq.ft.
The projects are a mix of residential,
commercial and Townships which
provide long term visibility.
Strong Pipeline of projects
Godrej Properties Ongoing Residential Projects
Godrej Properties Forthcoming Residential Projects
Godrej Properties Commercial Projects

Ongoing Commercial Projects
Forthcoming Commercial Projects
Strong Revenue Visibility

Projects
Location
Garden CityPhase5A & AFS
Ahmedabad
0.6
2950-3450
1.3
Garden CityPhase5B
Ahmedabad
0.5
3400
1.1
Platinum
Kolkata
0.17
22000
1.7
Shahakar Nagar
Mumbai
1.35
12000-14000
15.8
Palm Springs
Mumbai
0.13
17000
Horizon
Pune
0.54
5700
1.5
Panvel
Mumbai
5500-6000
1.9
Oasis/Moosapet
Hyderabad
0.5-1
3500
0.3-2
4.5-5
3500-17000
24-25
Total
FY14 Launch Area(msf)
Realization(INR/SF)
GPL's Revenues(Rs.Bn)
Important Projects of Godrej Properties
Godrej Garden city - Ahmedabad

Godrej Garden City is a township development
planned in Ahmedabad which is located in Jagatpur
village in the northwest region of Ahmedabad and is
located within the Ahmedabad Municipal
Corporation administrative limits.
The project is expected to feature a clubhouse, fulltime security and a mix of apartments, villas and row
houses.
Garden City Project Details

Location
Type of Development
Developable Area(Mn.Sq.Ft)
Saleable Area(Mn Sq.Ft)
Project Starting Year
Project Mode
Project Value(Rs.Cr)
NAV Per Share
The project has a developable area of 23.72 mn

Sq.Ft with a saleable area of 20.60 mn Sq.Ft. Godrej
Properties - economic interest in Phase I-IV is area
based at 73.6% and from Phase V onwards it is
Ahmedabad
revenue based at 67.6%.
Residential Township
3.5 The current rate per square feet for the project is
2.62 around Rs.4400 per Sq.ft.
2010 Till June,2013 about 4.62 mn Sq.ft of the project
Area, Revenue Basis had been sold .
1688
64
Godrej BKC Project - Mumbai

GPL launched its landmark commercial project
Godrej BKC located at the centre of Indias most
prestigious commercial project Bandra -Kurla Project.
The project is being developed on 2.5 acres of land
and is expected to have approximately 1.2 million sq.
ft. of office space. The project is located
approximately six and nine kilometers away from
Mumbais domestic and international airports,
respectively, and has access to both the western and
eastern express highways .
BKC Project Details
Location
Type of Development
Project Ending Year
Project Mode
Profit Sharing Basis
NAV Per Share
The project has a developable area of 1.26 mn Sq.Ft

Mumbai with a saleable area of 1.20 mn Sq.Ft. GPL has
Commercial entered into a profit sharing with 50% profits.
1.26
1.2 The current rate per square feet for the project is
Mar-13 around Rs.25,800 per Sq.ft.
2015
Profit Sharing Till June,2013 about 0.19 mn Sq.ft of the project
50% had been sold .
1375
76
Godrej Frontier - Gurgaon

GPLs Godrej Frontier is a
development located in Gurgaon.
residential
The project is expected to feature threebedroom and four-bedroom homes in addition

to 19 penthouses. The project is expected to
include a health club, jogging track, swimming
pool, gymnasium, indoor games area and a
variety of landscaping features .
Frontier Project Details

Location
Type of Development
Project Ending Year
Project Mode
NAV Per Share
Gurgaon
Residential
1.35
0.82
Oct-10
NA
Profit Sharing
70%
47.6
26.8
The project has a developable area of 1.35 mn

Sq.Ft with a saleable area of 0.82 mn Sq.Ft. GPL
has entered into a profit sharing with 70%
profits.
The current rate per square feet for the
project is around Rs.5800 per Sq.ft.
Till June,2013 about 0.79 mn Sq.ft of the
project had been sold .
The Trees - VIKHROLI Project

The Trees is expected to have approximately
3.5 million sq. ft. of office space, residential
apartments, retail and hotel space.
GPL is the Development Manager for the
project. GPL is required to provide expertise
and advice FSI/FAR regulations and project
feasibility, design and marketing plans.
Vikhroli Project Details

Location
Type of Development
Project Ending Year
Project Mode
NAV Per Share
Mumbai
Residential,Commercial
3.5
2.62
Oct-11
NA
Development Manager
10%
117.8
23.5
GPL has to bear all costs related to

management, sales and marketing and entitled
to receive 10% of the money received for the
sales of units plus all related statutory levies.
GIL is responsible for arranging financing,
obtaining all necessary development approvals
and permissions, performing all construction
work and for bearing all costs related to
development.
The current rate per square feet for the
project is around Rs.15950 per Sq.ft.
Advantages of a Strong Parentage
Vikhroli Land Bank A Cash Cow

Godrej & Boyce the holding company of all
Godrej group companies, owns ~3,500acres in
Vikhroli (Mumbai). The management has
indicated that while a large chunk of this land
(~2,200acres) comes under mangrove area and
cannot be developed, it plans to commercially
develop the remaining ~1200 acres over the next
10-15 years.
The Vikhroli project has a development potential
of about 25 residential projects which offer huge
upside potential over the next several years and
will be a cash cow.
The estimated revenues for developing 36 acres
of land is about Rs.3000 Cr which translates to
about Rs.83.33 Cr per acre which signifies the
potential of the land bank.
Further as these projects are developed over a

period of time there is scope for increase in
realizations as it has been proved that realizations
improve at the later phases of the projects
Agreement with Godrej group companies
GPL has entered into limited liability partnership agreements with Godrej & Boyce and Godrej Industries
Limited for the joint development of certain real estate projects (the LLP Agreements). Under the terms of
the LLP Agreements, GPL and the counterparties are required to contribute certain amounts as fixed capital
contributions and are entitled to certain shares of the partnership profits.
For the Thane project GPL is entitled to profit sharing of 32% while the rest will go to Godrej & Boyce
where there are 3 acres.
For the Hyderabad project GPL is entitled to development manager fee of 10% while the rest will go to
Godrej & Boyce. For the Vikhroli project (discussed separately) GPL is entitled to profit sharing of 40% while
the rest will go to Godrej & Boyce.
Good Response to Projects
GPL has had good response to its projects with most projects have pre-sales which is a testimony to their
brand and timely execution of projects. GPL in H1FY14 had 11,09,732 Sq.Ft of booked area which is valued
at Rs.944 Cr which provides revenue visibility for its projects.
Strong Performance in recent Quarters

Robust Pre-Sales Momentum
Margins trend
Debt Ratios
Consistent Access to Private Equity

Year
FY11
FY12
Project
Godrej developers
private Ltd
Godrej Realty Private
Ltd
Godrej Waterside
Private Ltd.
Happy Highrises
Godrej Estate
Developers
Godrej Sea View
Godrej
Properties(Gurgaon
Project)
Godrej Properties
FY12
FY12
Godrej Properties
Godrej Landmark
FY12
Godrej Properties
FY09
FY10
FY10
FY10
FY10
FY10
PE Partner
% stake Deal Size
Redford India RE Babur
49% Rs.0.42 Bn
HDFC Ventures
49% NA
HDFC Ventures
Milestone RE Fund
49% NA
49% Rs.0.70 Bn
HDFC Asset Management

HDFC PMS
49% Rs.0.45 Bn
49% Rs.0.55 Bn
Sun Apollo India Real Estate Fund

APG Group of Investors
Government of Singapore
Investment Corporation (GIC)
ASK Property Investment Advisors
APG(Dutch Pension service provider)
& Sparinvest property Funds
49% Rs.45 Cr
NA 140.8 Mn USD
Top 5 PE Deals in 2012
NA 98.2Mn USD
49% 20 Mn USD
NA 141 Mn USD
GPL has been using the PE route to de-risk itself from negative operating cash flow and the company has
adopted early monetization strategy as a part of its business model.
GPL has been able to leverage its brand which has helped it to strike deals with PE players at a substantial
premium to its peers. While DLF had entered into deals at 3x its Book Value, GPL has been able to enter
deals at 5x its book value. During 2012 - 2 of the top 5 PE deals were done by GPL valued at USD 239 Mn.
The deal was done to foreign investors one of which happens to be with Government of Singapore
Investment corporation(GIC).
Godrej Properties Investment Rationale
Groups ambitions from Godrej Properties
Focused & Contrarian Managing Director
Highly Profitable Projects in Pipeline

Projects
FY14 Launch
GPL's
Location Area(msf)
Realization(INR/SF) Revenues(Rs.Bn)
Shahakar Nagar,Phase 1 & 2 Mumbai
Cost(Rs.Bn) EBIDTA(Rs.Bn)
1.35
12000
14.6
6.8
7.8
Malad
Mumbai
0.1
12000
1.1
0.5
0.6
Undri
Pune
1.5
4200
2.5
1.2
1.3
Ghatkopar
Mumbai
0.2
14000
2.7
1.3
1.4
Byculla
Mumbai
0.3
NA
0.5
0.1
0.4
Curry Road
Mumbai
0.1
30000
0.4
0.1
0.3
Panvel
Mumbai
3.5
5500
6.7
3.1
3.6
28.5
13.1
15.4
Total
7.1
GPL management has indicated that they are likely to do 7 large projects in FY14 in profit sharing model
which is likely to generate revenues of Rs.28.5 Bn.
GPL has plans to launch in these 87areas an area of about 7.1 Mn.Sq.Ft with realizations ranging from
about Rs.5500 14,000 per square feet.
GPL management is expecting cost for these projects to be at Rs.13.1 Bn and is expecting EBIDTA of
Rs.15.4 Bn from these projects.
Commercial Projects distorting real ROCE
GPL has evolved plans to improve its ROCE which was dragged by commercial projects. GPL plans to focus
on residential segment for the next two to three years, fast monetization of its recent acquisitions and
better sales in commercial projects.
GPLs commercial developments in Kolkata and Chandigarh remain a concern. The management is
confident of the BKC project which has been a better performing project in Mumbai in a sluggish commercial
environment, despite severe concerns from the Analyst community on this project.
GPL expects steady monetization of BKC commercial projects where it plans to complete the construction
in 3 years with annual sales of 0.25 Mn.Sq.Ft from FY-14
GPL plans to bring in PE funds to offload partial stake if the markets turns favorable failing which they
would funding can be done through internal accruals.
Rising share of Residential Properties
GPL had in FY14, a revenue share of 80% from residential segment while the commercial segment
contribution was around 20%.
GPL had lower margins and profitability on account of commercial projects which were hit by a slowdown
in the economy.
Going forward GPL is likely to see increased contribution from Residential projects which will improve its
margins and profitability. GPL had in FY13 sold about 4.56 Mn.Sq.Ft of residential area and 0.83 Mn.Sq.Ft of
commercial area and its forthcoming projects are likely to sell 29.2 Mn Sq.Ft of residential area and 3.59 Mn
Sq.Ft of commercial area.
Strong Back-Ended Cash Flow in its long gestation projects
Makings of a Quality Real Estate developer
Makings of a Quality Real Estate developer
Strong Project Addition Better ROE Mix
Accounting Policy
Improving Mix of Projects
Better Project Mix will lead to sustainably high ROEs
Development Manager Fee projects A Huge Positive

Development Manager Projects
On Going Residential
Project Name
Electronic City
Godrej Platinum
Godrej Anandam
Forthcoming Residential
Projects
Location
Bengaluru
Mumbai
Nagpur
Est. Saleable
Area(Mn.Sq.ft) Economic Interest
1 DM Fee - 11% of Revenue
0.6 DM Fee - 10% of Revenue
2.76 Upto 784790 Sq.ft DM Fee-400/Sq.Ft & remaining area revenue based
Project Name
White Field
Godrej & Boyce,Moosapet
Godrej Sky
Currey Road
Location
Bengaluru
Hyderabad
Mumbai
Mumbai
Bhugaon Township
Forthcoming Commercial
Projects
Pune
Est. Saleable
1 DM Fee-11%
2.22 DM Fee-10% + Lumpsum payment-Rs.15 Cr
0.3 DM Fee ` 500 million, with upside promote to GPL
0.12 DM Fee-10% of Revenue
DM fee 11.09% + 162.00 / sq. ft., profit sharing if profits exceed certain
9.28 threshold
Location
Pune
Est. Saleable
2.36 DM Fee-11.09% +162.00 / Sq. Ft., Profit Sharing if profits exceed certain threshold
Project Name
Bhugaon Township
GPL is executing several projects as development manager for which it is generally entitled to about 1011% of revenues a s development manager fee.
Going forward GPL will benefit from more number of development projects on account of the groups land
bank for which they are the preferred developer. GPL is currently developing 4.36 Mn Sq.Ft of its ongoing
commercial projects while forthcoming residential and commercial projects are likely to have about 12.92
and 2.36 Mn. Sq.Ft respectively.
Area Sharing based projects

Area Based Projects
Project Name
On Going Residential
Projects
Location
Est.developable Est. Saleable

Area(Mn Sq.ft) Area(Mn.Sq.ft)
Economic Interest
Godrej Palm Grove
Chennai
2.69
Area based 70.0% (for 12.57 acres),

2.51 68.0% (for 4.82 acres)
Godrej Summit
Gurgaon
2.59
2.04 Area based 65.0%,
Godrej Palms
Mumbai
0.13
0.13 Area based 47.5%
Godrej Alpine
On Going Commercial
Projects
Mangalore
0.83
0.58 Area based for residential area 71.5%
Godrej Waterside
Kolkata
2.17
1.81 Area based 61.0%
GPL is executing about 4 ongoing residential area based projects with saleable area of 5.26 Million Sq.Ft.
Godrej Palm grove is the largest of the four ongoing residential projects which contributes about 47.76%
while Godrej summit contributes about 38.79%.
GPL is currently developing 1.81 Mn Sq.Ft of its ongoing commercial projects on the basis of area. The
proportion of residential to commercial mix of projects done on the basis of area is about 75:25%.
Redevelopment Projects
GPL has entered into redevelopment projects in
a major way as they offer tremendous scope in
Mumbai where land is a scarce commodity and
redevelopment eases pressures of housing in the
city and creates a Win-Win situation.
Redevelopment in Mumbai offers a tremendous
opportunity with at least 16,000 buildings to be
redeveloped in the next decade.
GPL plans to capitalize on the tremendous
opportunity available in the Mumbai
redevelopment market and has incorporated a
wholly-owned subsidiary, Godrej Projects
Development Private Limited.
GPLs redevelopment projects having seen good
traction as the company was able to add two
projects in this space during the past 5 quarters.
GPL s redevelopment projects also suits its asset
light business model as that will allow them to
enter into JV deals for such projects.
Profit Based projects better cost structure

Project Name
Location
On Going Residential Projects
The Trees
Mumbai
Godrej Edenwoods
Mumbai
Godrej Horizon
Pune
On Going Commercial Projects
Godrej BKC
Mumbai
Forthcoming Residential Projects
Panvel Township
Godrej & Boyce Lawkim, Thane
Undri 2
Forthcoming Commercial
Projects
Godrej Oasis
Profit Based Projects

Est.developable
Est. Saleable
Area(Mn Sq.ft)
Area(Mn.Sq.ft)
Economic Interest
3.5
0.03
0.69
0.88 Profit based 60.0%

1.26
Mumbai
Mumbai
Pune
3.5
0.12
1.43
Profit based 35% with upside promote to JV

3.5 partner
0.27 Profit based 32%
1.5 Profit based 40%
Hyderabad
7.19
0.44 100% of Profits
GPL is executing about 3 ongoing residential profit based projects with saleable area of 4.22 Million Sq.Ft.
The Trees is the largest project with saleable area of 3.5 Million Sq.Ft. The segment share is about 25%.
GPL is executing 3 forthcoming profit based projects with saleable area of 5.05 Million Sq.Ft. The share of
forthcoming projects is about 31% in this segment.
GPL is executing a large commercial project in Hyderabad with saleable area of 7.19 Million Sq.Ft. GPL has a
economic interest of 100% profits on this project which has the highest share of about 44%.
Current Net Asset Value (NAV) of Godrej Properties

Project
Value(Rs.Mn)
NAV
Residential
31,360
155
Office
17,850
88
Retail
2,600
13
Hospitality
330
1.7
Value from Group MOUs
6,000
29.7
Total GAV
60,140
298
Net Debt
-24,000
-119
NAV
36,140
179
Vikhroli Land
9,600
48
Net Asset Value
45,740
226
NAV Discount
2,800
13
Fair Value
42,940
212
Financials
Earnings Projection P&L Account

Particulars
Net Sales
FY 14
FY 15E
FY 16E
1179
1440
1880
14
22.13
30.55
Total Expenditure
896.4
1190
1437
EBITDA
282.6
250
443
23.9
17.36
23.5
Interest
4.5
10
Depreciation
5.8
10
11
PBT
347
307
501
159.4
180
265
13.5
% Chg
EBITDA Margins(%)
Adj. PAT (Consolidated)

EPS
Concerns & Reasoning

1.) Lack of ownership rights and clean title :
Certain parties granting development rights may not have acquired ownership rights or clear title in
respect of land that the company has categorized as part of Land Reserves. Parties granting development
rights may also have litigation, bankruptcy or such other proceedings pending with respect to such land. Any
legal issues pertaining to ownership and title will impact the company.
2.) Suspension or Abandoning of Projects :

Disputes may arise between the company and development partners which may cause delay in
completion, suspension or complete abandonment of a project, which may adversely affect the business,
financial condition and results of operations .
3.) Delay in project completion will impact the company :
The company in certain developments commit to complete the developments within specified time
frames, failing which, we are required to pay liquidated damages to our customers at specified rates for the
delay. Further the company provides warranties for a period of up to three years from the completion of
construction for construction defects and may be held liable for such defects that occur, if any. Any such acts
will adversely impact the company s financials.
4.) Rising Input Cost to impact the company :
GPL has procured building materials such as steel, cement, flooring products, hardware, bitumen, sand
and aggregates, doors and windows, bathroom fixtures and other interior fittings from third party suppliers.
Any steep increase in the prices of these materials may impact the margins and profitability of the company.
Price Chart
Share Holding Sep

%
2014
Jun
Mar
Dec
2014
2014
2013
stock has rallied recently in line with the overall Market

up move since the start of the year.
Promoters
74.95
74.96
74.96
10.98 11.48
12.49
14.30
The stock did have a sharp fall last year, when we

released our BUY recommendation on this stock first.
FII
74.92
DII
1.46
1.52
1.46
1.22
Others
12.94
12
11.09
9.52
GPL has corrected over the years since its IPO. The
The Institutional exposure in the stock is still quite low,

especially the domestic institutions.
Conclusion
We have always loved businesses where a credible Management chases a huge opportunity and where
there is a shareholder friendly business model to capture the business growth into Value creation for
shareholders. We believe that Godrej Properties perfectly fits this bill with the incremental improvements in
its business operations and the huge ambition of becoming Indias Top real estate developer.
Godrej Properties like NBCC and Ashiana Housing, generates profits from increased volume of real
estate development and not from increasing realizations of their Land bank. While the execution of Godrej
Properties is nowhere comparable to the strong track record of Ashiana housing, the ambition levels and the
huge scale up in GPLs operations will definitely compensate for the lack of operational excellence. We look
at Ashiana housing as a company which can generate strong return ratios with a moderate growth and
Godrej Properties as a company which can grow at a stupendous rate with moderate return ratios. We
believe that both companies provide strong returns potential for long term investors.
We believe that Investors are underestimating the structural return potential of GPLs business model
and also the improvement in its quality of projects going forward. With a right intent, a strong team and a
good business model, its only a matter of time before GPLs starts generating consistently high returns on its
capital employed. The companys advantages over its Peers and strong Parentage would certainly help the
company to achieve its ambition of becoming a large profitable Real estate player. We certainly believe that
the stock has a large probability of becoming a Large cap over the next decade and can provide Multi-Fold
returns to existing investors.
THANK YOU

Godrej Properties - November 2014 Multibagger

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Godrej Properties Ltd (GPL)

- Good Management chasing a Huge Opportunity

Conclusion:- Slide #56

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Our Cumulative Portfolio performance

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Godrej Properties Investment Snapshot

Maximum Portfolio Allocation :- 4%

Current Market Price Rs. 250

Current Accumulation Range :- 200-260 Rs

Bloomberg / Reuters Code GPL. IN/

BSE / NSE Code 533150/ GodrejProp

Face Value Rs. 5

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Our Research Desks views on the Stock Idea

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Godrej Properties Business Overview

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10 Year Performance Snapshot

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Godrej Properties Core Execution Model

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GPL Among the only 3 Pan-India real estate developers

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Strong Pipeline of projects

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Godrej Properties Ongoing Residential Projects

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Godrej Properties Forthcoming Residential Projects

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Godrej Properties Commercial Projects

Forthcoming Commercial Projects

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Strong Revenue Visibility

Garden CityPhase5A & AFS

FY14 Launch Area(msf)

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Important Projects of Godrej Properties

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Godrej Garden city - Ahmedabad

Garden City Project Details

The project has a developable area of 23.72 mn

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Godrej BKC Project - Mumbai

The project has a developable area of 1.26 mn Sq.Ft

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Godrej Frontier - Gurgaon

The project is expected to feature threebedroom and four-bedroom homes in addition