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About company
1) Godrej Properties Ltd (GPL) has evolved into an integrated real estate development company with projects in 10 cities across India.

2) It develops properties both in the residential and commercial real estate space on a joint development basis. It plans to build around 82 million square feet of developable area in the next 8-10 years.

Company has adopted new strategy
1) Land component constitutes around 60 per cent of the project cost for real estate companies. The surge in realty prices pushed up land costs, and a lot of companies used debt to fund their projects. While the decline in the property market hit valuations of companies. In order to insulate itself from the movement in land prices, GPL follows an asset light strategy.

2) In this strategy the company makes no substantial investments upfront to acquire land, but ties-up with owners to jointly develop their land. Around 85 per cent of the total area being developed by GPL is through such arrangements. In exchange of development rights of land, GPL gives a pre-determined portion of the developable area or a share in revenues or profits generated from the projects at a later date. This model is different
from the land acquisition model that most other realty players follow.

3) The asset-light strategy helps de-risk the business and enables it to undertake more projects without having to invest large amounts of money towards purchasing land. The model has served them well in the recent downturn as well. Other companies took a hit on account of higher interest costs and a crash in real estate prices; comparatively, GPL fared better with stable margins and flat top line growth.

Company's construction Background
1) From a Mumbai-based realty developer, GPL is broadening its wings into other regions. It has already developed 5 million square feet (sq ft), a majority of which were premium properties. Going ahead, it would focus more on mid-income properties, a segment where demand is estimated to be huge, which would ensure better volumes.

2) The company intends to spend around 40 per cent of the IPO (which it recently raised in the month of Decemeber 2010) proceeds towards acquisition of land development rights for its forthcoming projects.

3) The company plans to develop 32 million sq ft of area through its on-going projects that are slated to be coming on board in the next few years. In the near-term, GPL is likely to launch its biggest ever project, Godrej Garden City in Ahmedabad, which is slated to complete by 2017.

Returns Expected
Revised date - 11 July 2010 - The stock price went down till Rs 415 during Mid of May 2010.
Current Price - Rs 642

Buying price a given on 08 Jan 2010- Rs 536

Buying price - Try to buy near Rs 400.

Instead of buying shares in bulk, buy in steps and keep averaging as the stock price falls down.

Expected returns - 50 to 60%
Duration - 2 to 3 years

Profits and Revenues
GPL’s revenues and net profits have grown at an average rate of 35 per cent and 60 per cent, respectively in the last three years.

What to do?
Due to economic recession the real estate sector did not perform well in the year 2008 and some small recover happened in the year 2009. Going forward as the real estate sector recovers the company GPL which is having good growth strategy, past performance and good brand will help to deliver healthy returns in long term.

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