Godrej Properties: Decent Performance For December 2013 Quarter

The realty sector has been under pressure for quite a long time. The factors like higher interest rates, consistently falling sales volumes and higher debt burden made it sure that the sector as a whole bears the burnt.  It is a known factor that realty is a regional play. With Mumbai realty markets remaining stagnant for a longer period (higher inventory of around six quarters), hardly anything good was expected from the realty players. In such a scenario Godrej Properties has put in a decent set of numbers. Thought the results are not outstanding, it is surely better than the street estimates. 

For the quarter ended December 2014 the company has posted a topline of Rs 253.90 crore and bottomline of Rs 37.40 crore as against Rs 367.80 crore and Rs 35.50 crore respectively in December 2012 quarter. For the 9MFY14 the consolidated topline stood at Rs 808.60 crore and bottomline was at Rs 111.10 crore as against Rs 733.70 crore and Rs 85.20 crore respectively in 9MFY13.

One noticeable factor is, the EBITDA margins have improved significantly in the quarter. To put the figures in perspective, the EBITDA margins for the December 2013 quarter stood at 38.40 % as against 28.60% in December 2012. Even the net profit margins stood at 14.70% as against 13.20% in the corresponding quarter last year.  The reason for higher margins is better realisation on sequential basis.

On the debt front also the company is placed well than its peers. The net debt as on 31st December 2013 stood at Rs 1531 crore and the average borrowing cost was 11.43% (11.77% in the December 2012 quarter).

But there are certain other issues faced by the company. If we take a look at the sales highlights for the quarter, the figures are quite disappointing. For the December 2013 quarter area sold has declined to 5.13 lakh sq ft as against 10.41 lakh sq ft in December 2012, showing a decline of more than 50%. The story for 9MFY14 is not any different as the area sold stood at 1.62 million sq ft a decline of 53 % as compared to 9MFY13.

Further its five projects have already got delayed and the company has already launched six new projects. Commenting on the results Mr. Pirojsha Godrej, Managing Director & CEO Godrej Properties has stated that “Our results over the nine month period have demonstrated our ability to maintain growth in adverse market conditions”. He further added that “We expect 2014 to be our best ever year for new launches with major launches planned in all the top real estate markets in India including a handful of high impact launches in Mumbai. We remain very confident of the reception these launches will receive even in the current market environment”.

We are of the opinion that, though the company has put in a decent performance, the realty sector is still in dire states and hence it is better to avoid any bet in the sector.