Godrej Properties to cut Rs 525 cr debt from rights issue

Realty firm Godrej Properties, which plans to launch Rs 700 crore rights issue in September, would utilise Rs 525 crore from the net proceeds to reduce its debt.

In the draft prospectus filed with market regulator Sebi for the proposed rights issue, Godrej Properties, part of Godrej Group, said it would utilise Rs 525 crore from the net proceeds towards repayment/pre-payment of certain loans availed by the company and its subsidiaries.

In early May, the company's board had approved the issue of equity shares of the face value of Rs 10 each to the existing equity shareholders of the company on a rights basis aggregating up to Rs 700 crore.

"We believe that such repayment/pre-payment will help reduce our outstanding indebtedness and our debt-equity ratio," the company said in the draft document.

At the end of 2012-13 fiscal, the company had a gross debt of about Rs 1,700 crore.

The company believe that its leverage capacity would improve significantly to raise further resources in the future for further growth of the company.

In a conference call to analysts, company's Managing Director and Chief Executive Officer Pirojsha Godrej had said that the purpose of the rights issue is to ensure that the company has the capital to add new projects at a rapid pace without in anyway stretching balance sheet.

"Given that the promoter holding in the company is 75%, 3/4th of the capital for the rights issue will be committed by the promoters and we believe a strong vote of confidence in the growth prospects of Godrej Properties. From a timeline perspective, we hope to complete the exercise around the end of the second quarter," he had said.

This will be the third major fund-raising exercise by the Godrej Properties. The company had launched its initial public offer in December 2009 to raise Rs 468 crore. It had also raised Rs 470 crore last year through Institutional Placement Programme.

Godrej Properties is developing residential, commercial and township projects covering about 85 million sq ft in 12 cities.