Godrej to focus on real estate

MUMBAI: The Godrej group, with a turnover of Rs. 7,500 crore, is looking at its flourishing real estate business through group company Godrej Properties Ltd. (GPL) to propel it to the next level.
GPL is a 15-year-old company with around 20 million sq. ft. of land under development in Mumbai and surrounding areas, Pune, Hyderabad, Bangalore and Kolkata. It is in advanced stages of negotiations for projects in several other cities.
Speaking to The Hindu, Godrej Group Chairman, A. B. Godrej, said, "in five years, the real estate business will be the biggest business in our group.'' Last year, the real estate business accounted for 8-10 per cent of the group's profits and Mr. Godrej saw this going up to 20-25 per cent in five years.
However, he clarified that this in no way indicates an `either-or' scenario in terms of business mix. "There is no de-focus on other businesses. Our other businesses like soaps, household insecticides, refrigerators, hair colors and furniture are core to the group and will continue to receive our focus. It is just that GPL will grow much faster and overtake our other businesses in its dimensions.''
GPL operates two business models — one as the classic developer buying land, developing it and selling projects and the other as a joint venture partner with landowners where through a pre-agreement with them, it shares either profits/revenues or the project area.
An increasingly important third model is where GPL will enter joint ventures with other group companies. "We have around 100 manufacturing sites across the country — some in prime locations from where manufacturing will move out and so our older plants have an opportunity to be redeveloped. We will have to go through the regulatory procedures but this model will develop considerably in the future.''
Southern India is a focus area for GPL. "The southern States, with IT and BPOs dominating, have a lot of commercial property and the demand for housing is high. We have operations in Bangalore and Hyderabad but among Tier 1 cities, we do not have a presence in Chennai and the National Capital Region (NCR) and will soon tie up projects in both these areas.''
Also on the cards are special economic zones (SEZ) although the Godrej chairman was skeptical about the soundness of the land acquisition policy. "The State government should complete land acquisition prior to announcing the project. We will not go in for an SEZ where we require government acquiring land for us. In fact, we may put one or two of our large projects where we already have land, as an SEZ.''
In keeping with the trend of real estate companies going public, GPL is planning an Initial Public Offering (IPO). "For the next two to three years, we need about Rs. 1,200 crore and this, most likely, will be raised through a debt-equity mix of 1:1. We are taking two steps to raise capital — through private equity and an IPO.'' Two special purpose vehicles (SPVs) of projects under GPL will first take private equity in the next few weeks and secondly, GPL will be listed during this financial year.
Godrej Industries owns 83 per cent of GPL's equity and 17 per cent is with the Godrej family, which also owns 86 per cent of Godrej Industries. At listing, around 10 per cent of GPL's equity will be offered to public.
At the group level, Mr. Godrej said the growth objective was to sustain an annual 25 per cent rate. "Around 20 per cent of our turnover comes from overseas operations and this should go up. We are looking at acquisition opportunities internationally in the FMCG space.''
http://www.hindu.com/2007/05/27/stories/2007052701201700.htm