Godrej Properties shares hit a new record high: Here's a chat with the CEO

This is the verbatim transcript of the interview:

Q: Tell us more about the fourth quarter of FY24 and how do you see growth going ahead.

A: When we look at FY25, a few things give us confidence about being able to meet the ₹27,000 crore booking value guidance we provided, which is about a 20% year-on-year (YoY) growth. Firstly, of course, the market itself is providing us with a lot of support, we are seeing consistently across several new launches, very robust demand levels. Last quarter, for example, we had two of our best-ever launches one Gurugram called Godrej Zenith where we sold over ₹3,000 crore of inventory in just three days, and another called Godrej Reserve in Mumbai, where we sold about ₹2,700 crore worth of inventory in March. So, we are seeing very robust responses to projects by credible developers, and we feel that the kind of business development we did, over the last three or four years has left us well-positioned to have a launch pipeline in FY25 that can support this kind of growth.

The second thing I would add is that in FY24, we have seen a couple of our regions really perform outstandingly well, in the Nation Capital Region (NCR), for example, we had sales growth of 180% and we were able to cross ₹10,000 crore in bookings. In Mumbai, we saw an over 100% growth to ₹6,500 crore. But a couple of our other key markets like Bengaluru and Pune actually had only kind of moderate growth levels. And when we look at our portfolio this year, we feel very confident that all four of our existing major regions will be seeing strong growth and that creates a couple of additional geographies through which we can grow rapidly. Another thing I would like to point out is that in Q4, we entered the Hyderabad market for the first time through the addition of two projects there with a potential booking value of about ₹5,000 crore. So, we have several new geographies that we think can show substantial growth over last year, and even the ones that did perform very well last year, like NCR and Mumbai, given the plans this year, do have the opportunity to grow. So, a combination of all of those things leaves us quite confident that we can meet this relatively large booking value number of ₹27,000 crore.

Q: Your sales have gone up three times - that is just in the last three years, of course, we are talking about the big real estate cycle boom that we saw, do you think growth rates will stabilise now from hereon and the three times number that I spoke about will take a longer time for you to reach?

A: Yes, three times in three years on this larger base might be challenging, but I would not put it totally out of the realm of possibility. I think the sector is booming. We do have a strong project portfolio. I would also like to take this opportunity to say the new CEO for Godrej Properties, Gaurav Pandey is doing an absolutely fantastic job in identifying the way that Godrej Properties must go about leading the sector in terms of growth rates. So, with all of those in place, I do think the an opportunity for rapid growth ahead as well. But of course, execution on this higher base will be much tougher. And we have to be aware that the cycle may change, at least in some markets. So, we have to be ready for all possibilities. And certainly, sustaining the kind of growth rate we have seen in the recent past on this higher base will be challenging. But overall, we have guided that through the cycles, we would expect kind of 20% growth rates, and certainly we would like to see at least that over these next few years, even on this higher base.

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Q: We were speaking to other real estate players as well. And they indicated that maybe prices will stabilise from hereon because there has been a massive increase already. Do you think that is a possibility, or we will continue to see a minimum amount of price growth every year?

A: I think it's probably going to be a little different from market to market because what we have seen to date is quite different across markets. So, if I take say NCR and Bengaluru, those two markets have seen the most pricing growth over the last one or two years as compared to somewhere like Maharashtra where Mumbai and Pune have not seen the same kind of pricing growth. So, it would not surprise me if you saw more moderate growth in NCR and Bengaluru for a while and you saw Maharashtra catching up a little bit.

Q: Talk about cash flows and debt. I wanted to understand when you think the company will be able to see a situation where operating cash flows are exceeding the business development expenses. And if it does, what does it do to your debt it has reduced now, what kind of levels are you comfortable with when it comes to debt?

A: I am happy to share we actually saw exactly that situation in the fourth quarter. So, we had a very strong quarter for business development. We added two new projects, as I mentioned in Hyderabad, with a potential booking value of about ₹5,000 crore, we added an exciting new project in the Noida market that has about ₹3,000 crore of booking value and another project in Bengaluru that we had in our system, but we sort of inactive for 10 years, and that has been revived, and that has another potential ₹5,000 crore booking value. So, despite that kind of very strong business development during the quarter, we saw net debt reduce by ₹700 crore due to very strong operating cash flows. We had collections of about ₹4,700 crore in Q4, which is the highest-ever quarter for the company. So, we have already demonstrated in a small way over a short period of a quarter that that is possible, we are very confident that operating cash flows will grow rapidly. You mentioned the growth rate in bookings. But our operating cash flow growth rate over the last four years has been even faster. We have been compounding at about 50% a year to over ₹4,000 crore of operating cash flows in FY24. FY25 looks to be another very strong year for operating cash flows, and we do think that will give us the opportunity to considerably invest in business development. The one thing that we hesitate to talk about too much is whether net debt over the short periods will increase or reduce because our business development numbers are never kind of set in stone, we have that directionally what we would like to do and how we are viewing markets. But then how much actual business development happens as a function of the kind of opportunities we are seeing in the market and how many of them we are able to successfully close.

Q: There has been a development so in terms of you being, the Godrej Properties company being, the development manager for the group's large Vikhroli land, what do you think it would mean for Godrej Properties in terms of future aspects? What would it mean in terms of addition to your own books?

A: It is not a development because we have been the development manager for the Vikhroli land for over 10 years now. But it's very important that that was clarified that that relationship will continue exactly as is. It's a very important and valuable project for Godrej Properties. The Vikhroli land bank owned by Godrej & Boyce is one of the most attractive land parcels anywhere in the country. So, for Godrej Properties to continue to be associated in its capacity as development manager creates a huge opportunity for the company. It's a project I am personally very passionate about because, in addition to the financial opportunity it provides, I think it's a wonderful opportunity to really look at urban development at scale, looking at how we can think about sustainable development and look at how we can hopefully have a positive impact at the city level for Mumbai. So really looking forward to continuing to be associated with the Vikhroli development. And very happy to note that we launched our first project under that agreement after several years in the March quarter and saw a good response to that. So hopefully now with greater clarity, we can see a pickup in the pace of activity in development in Vikhroli.

The market capitalisation of Godrej Properties is around ₹76,187.53 crore. Its shares have gained close to 104 % in the past year.

For the entire interview, watch the accompanying video

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