By 05 March, 2012

Godrej Properties Ltd (the listed real estate arm of Adi Godrej-led Godrej Group), which is set to raise Rs 500-600 crore through an institutional placement programme (IPP), met with tepid response during its road show in London last week, sources close to the development said.

According to one of the sources, “They are doing the road show to get a sense of what investors are thinking. But some investors are not ready to come in and invest at the current market price. They have asked for a discount on market price if they are to invest in the share sale.”

Godrej Properties has hired Kotak and UBS as the lead managers for the placement of shares.

In response to queries from VCCircle, the company stated, “We evaluate various fundraising options as per the requirements of respective companies in the group, from time to time, including through issuance of equity shares. As and when such opportunity arises, we attempt to take advantage of the same in line with our strategies, business requirements and other commercial considerations. Further, as a matter of policy, we do not comment on market speculation."

At present, promoters of Godrej Properties own 83.79 per cent stake in the company and according to SEBI regulations, promoters with more than 75 per cent stake in the company will have a window till June 2013 to reduce their stake.

According to analysts tracking the company, it has a debt-to-equity ratio of 2:1 and after the stake dilution, it will be brought down to 1:1 ratio. Godrej Properties’ net debt increased by 65 per cent at the end of the October-December quarter to more than Rs 1,900 crore, compared to the previous quarter when it stood at Rs 1,152 crore. It had also announced the dilution of 49 per cent stake to real estate PE fund Sun-Apollo in its Gurgaon project.

 “If the share sale takes place at the current market price, it will be very difficult to bring in new investors,” an analyst said on condition of anonymity. “Also, there are other companies who are trading way below Godrej’s share price,” he added.

The company has notified the BSE today that it is looking to raise money by various means which include institutional placement programme, rights issue or private placement or a combination thereof, in one or more offerings or tranches. The company does not want the public shareholding to increase more than 10 per cent.

At the end of the day, shares of Godrej Properties were trading at Rs 659.95 a unit, down 1.52 per cent from the previous close.

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