Strong cash flows, robust pipeline positive for Godrej Properties

 

The pre-sales volume of Godrej Properties (GPL) for third quarter of the financial year 2025 (Q3FY25) declined 6 per cent year-on-year (Y-o-Y) -- down 21 per cent quarter-on-quarter (Q-o-Q) -- to 4.1 million square feet (msf), resulting in a pre-sales value of Rs 5,450 crore, down 5 per cent each Y-o-Y and Q-o-Q.

 

About 77 per cent came from newly launched projects. For 9MFY25, pre-sales were up 48 per cent Y-o-Y to Rs 19,300 crore.

 

In Q3FY25, GPL launched seven projects across four cities, with a total cumulative saleable potential of 2.2msf, and delivered 2.6msf. GPL added four new projects in Q3FY25 with potential saleable area of 5.9msf and an estimated gross development value or GDV of Rs 10,800 crore. Across 9MFY25, GPL added 12 new projects with a saleable area of 16.9msf and to Rs 23,450 crore value, surpassing annual FY25 guidance of Rs 20,000 crore. GPL leased 0.59msf across five assets in Q3FY25.

 

Commercial projects on Golf Course Road, Gurugram, received an occupancy certificate in Q3FY25 and are 40 per cent leased out, while near-completion assets at Koregaon Park, Pune (1.5msf) are 16 per cent pre-leased. GPL reported net operating cashflow of Rs 61.5 crore for 3QFY25, and Rs 3,440 crore for 9MFY25.

 

In Q3FY25, GPL reported revenues of Rs 970 crore, up 193 per cent Y-o-Y with the delivery of 2.6msf. For 9MFY25, revenue was at Rs 2,800 crore, up 74 per cent Y-o-Y. GPL reported an operating profit of Rs 27.6 crore (loss of Rs 41.6 crore in Q3FY24). The operating profit margin was 2.8 per cent. Other income increased 24 per cent Y-o-Y, resulting in a net profit of Rs 160 crore, up 153 per cent Y-o-Y with a margin of 16.3 per cent. For 9MFY25, net profit jumped 276 per cent Y-o-Y to Rs 1,000 crore. 

 

In Q3FY25, gross collections jumped 27 per cent Y-o-Y to Rs 3,460 crore, but operating cash flow or OCF (pre-interest and tax) was down 23 per cent Y-o-Y to Rs 610 crore. The company raised Rs 6,000 crore through a QIP, issuing 23 million shares at Rs 2,595 per share. The funds will be used to expand the project pipeline. The company spent Rs 2,680 crore on new land investments and approvals. After the capital raise, there was a cash surplus of Rs 3,720 crore and net debt reduced to Rs 3,800 crore or 0.2 times of equity (vs. 0.7 times as of Sep’24).

 

Management said GPL achieved pre-sales of Rs 28,800 crore in calendar year 2024 (CY24). The promoter stake reduced to 46.5 per cent following the QIP issue (58.5 per cent in Q2). A Q4FY25 run rate of Rs 7,700 crore would meet FY25 sales guidance of Rs 27,000 crore. Management is confident in meeting FY25 launch guidance of Rs 30,000 crore. Inventory to be launched in Q4 is Rs 6,400 crore. Launches are expected in Hyderabad, Noida, Gurgaon, MMR, Pune, and Indore. Bangalore sales reached Rs 4,800 crore in 9MFY25, twice the sales of Rs 2,400 crore in FY24. Bangalore will remain a key market. In NCR, there is demand and pricing opportunity in premium and luxury segments. Noida is poised for volume growth.

 

Gross margin is between 35-40 per cent for projects recognised in profit and loss account, but scaling up of operations has led to a proportionately higher overhead, compressing operating profits. Sales booked over the last two years with a better margin profile will be recognised in FY26 and FY27.

 

The QIP has led to equity dilution which means EPS must be adjusted down. But good cash flows, strong pipeline and realisations should make a positive difference. Most analysts are positive on the stock.