Saturday, June 09, 2007

Godrej properties plans for the future

Adi B Godrej, is chairman of the Godrej Group, one of India's largest conglomerates, a leading manufacturer of goods and provider of services in a multitude of categories: home appliances, consumer durables, consumer products, industrial products, and agri products and real estate, to name a few. A recent estimate suggests that 400 million people across India use at least one Godrej product every day. The Godrej Group stands in a strong position today with annual sales in excess of US$ 1.4 billion, a workforce of approximately 20,000, and a strong diversified portfolio.
Holding a Master's degree in management from the Massachusetts Institute of Technology, USA, 65-year old Adi Godrej is also recipient of the Rajiv Gandhi Award 2002, the Globoil India Legend 2002 and the Scodet Life Time Achievement Award 2003.
In its 16 years as a focused real estate development company, Godrej Properties Ltd. (GPL) has established a strong presence in the real estate market. The Godrej Group sees its property development business as a major thrust area. The Indian property development sector is already amongst the fastest growing in the world and in the coming decades, is likely to emerge as one of the largest in the world.
What will be the impact of abolishing ULCRA?
The abolition of ULCRA and freeing of FSI are two steps which will allow for dramatic improvement in the availability of housing and making prices more affordable. ULCRA and restrictive FSI in Maharashtra are responsible for the acute shortage of real estate and mismatch in demand and supply in the city. We need to make changes in real estate regulations and modernise them. All big cities are growing taller. For instance the FSI in Mumbai suburbs is 1 and the island city is 1.33. We need to do away with the antiquated laws. For instance in Hyderabad and parts of Kolkata, the permissible FSI is 3 and six respectively. In places like Hong Kong the limit is 10 and in Manhattan 30. It is a chicken and egg situation and we need to go ahead and build taller buildings as well as take care of the infrastructure.
When are you planning for an IPO?
We are looking at an Initial Public Offer [IPO] in the second part of this financial year wherein we expect to dilute 10% of the total value of Godrej Properties. The money will be utilised for our new projects. The exact amount to be raised will depend on the advice from our merchant bankers. Godrej Properties last financial year was Rs 45 crore.
What would be the benefits if Godrej Properties goes public?
We need to raise capital as otherwise Godrej Properties, a private company, will not be able to grow strongly. We will provide for the residential user a very reliable product. All our projects have a great emphasis on environment and ecology. We will devote space to amenities, recreation, sports in every project. As it grows it will benefit both the shareholder and the customer. We will dilute 10% in the first tranche but in future if we require more capital, we have no reservations about diluting further.
What do you think of the regulator's move to make rating of IPOs mandatory?
Whatever moves SEBI takes to ensure transparency is a good move. However the fact remains that the regulator cannot do everything and the investor has to follow the dictum of 'Buyer Beware,' and look into the reputation and track record of the companies they are investing in. We are quite aligned to the SEBI directives.
As opposed to other industries where there is self regulation, why is this weak in the real estate industry, which needs a regulator to enforce things rather than be amenable to self regulation?
Even as there are companies who have established a name for themselves, brands have not become an important part in real estate. Both consumers and investors need to be conscious about this. For instance, Godrej has established itself as a consumer or FMCG brand in nearly every household and the company would not like to cheat on its products which would affect the image of the brand. The same should be the case in real estate.
Is Godrej planning any townships?
We are looking at building such projects in many different cities. There is a strong demand for this kind of housing and this is the only way to create affordable housing in India. Each township would be from 50 acres to 200 acres in metropolitan areas. We have several residential projects in Mumbai and Pune and are currently building a huge gated community in Bangalore. The Project Godrej Woodsman Estate rests in a large 15-acre area and is located enroute to the upcoming international airport due to which the area is witnessing rapid development activity. Godrej Woodsman Estate rests away from the noise and pollution of downtown Bangalore, yet within a 15-minute drive from premium schools, shopping centres and hospitals.
What are your retail plans given the fact that Reliance, Bharati, Tatas and Birlas have made great forays in this direction?
We have three retail models. One is called Life Space, which is essentially a retail store for Godrej's own consumer durables and some allied products of competitiors. We have about 40 such stores across the country. The other model is Aadhar, which is a rural supermarket, where we sell agri inputs, fertilisers, animal feeds; provide agricultural and veterinary services. We also sell services like insurance, medical services, FMCG products, clothing and durables. We have 46 such stores in eight states. By the end of this financial year, we expect to have about 120 stores. The third and latest model is Nature's Basket, which sells fresh fruits, vegetables and other exotic gourmet products. It is an upmarket store and there are currently only six such stores across the city. We plan to expand further.
Your future expansion plans in real estate?
Currently the company has 20 million sq ft under construction. We are looking to doubling this in the next few months. In five years time the real estate business will be our biggest business. Though we have a strong presence in the western region, we also have big projects in Bangalore, Kolkata and Hyderabad. Currently real estate in India is a 300,000 crore per annum business which is growing at 20% per annum. It is a huge industry with rapid growth, the opportunities are great.


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Upcoming Properties In Delhi said...

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