Godrej Properties shares fell nearly 10 percent on Friday, continuing to decline for a second straight day. The property developer's stock ended 9.8 percent lower at Rs 1,506.6 apiece on BSE. At the current level, Godrej Properties shares have lost 15.5 percent of their value in two days.

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Brokerage firms Jefferies and CLSA have lowered their target prices for the realty company's stock.

Weakness in the stock comes at a time when Godrej Properties has announced plans to invest Rs 400 crore to acquire around 10 percent in DB Realty, and set up a Rs 600-crore equal joint platform to develop slum redevelopment projects.

With the Rs 300 crore in the platform, Godrej Properties will take its total investment to Rs 700 crore.

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: Godrej Properties plans to invest in DB Realty

In an interaction with CNBC-TV18, DB Realty Managing Director Shahid Balwa said it will be a strategic investment for the company. "There are no special powers. The board composition remains unchanged," he said.

So how is the Street reading Godrej Properties news updates?

Jefferies maintained a 'buy' rating on Godrej Properties but reduced its target price to Rs 2,000 from Rs 2,750, saying the company's investment in DB Realty and the investment in the entity is a near-term de-rating event.

The brokerage said the company's pre-sales in the October-December were disappointed due to launch delays though the March quarter appears to be promising. Jefferies also said Godrej Properties has done well to grow through stressed asset acquisitions.

"The underlying demand for real estate and the underlying fundamentals of the industry are extremely sound, and growing better with every quarter. Maybe one can overlook one or two soft quarters for Godrej Properties given that its prospects for the next 2-3 years are exceptional," Dipan Mehta, Director at Elixir Equities, told CNBC-TV18.

He is positive on Godrej Properties for its:

good corporate governance standard

pan India scale

good brand

good execution

"Although there is a mild disappointment on the earnings front and this news flow (the JV with DB Realty), I am not yet ready to sell out on Godrej Properties. It's the bluest of blue-chip real estate companies, and once you exit the stock, getting into it from a portfolio perspective becomes very difficult," the market veteran said.

CLSA retained its 'sell' call on Godrej Properties, bringing down its target price to Rs 1,424 from Rs 1,563. The brokerage said the company's deal with DB Realty lacks merit, citing a convoluted deal structure and risk-prone slum rehabilitation projects.

It said Godrej Properties' real with DB Realty and its foray into slum rehabilitation projects, which are prone to get stuck, was unwarranted.

Market expert Prakash Diwan told CNBC-TV18 that in his view, the market is overreacting on Godrej Properties, as it "didn't expect something like this from Godrej. But somewhere, I'm sure people will kind of reconcile to that and it might not be as ugly as it seems."

"What came through from the Godrej Properties side was something which the market is not used to. If Godrej has to spread its wings within the Mumbai market, and has have to move beyond this whole JV model, it will have to do something to participate in the mass housing market as well. So I don't see any reason why that should be looked at with such a negative," he said.

Godrej Properties shares have gained 13.8 percent in the past year, as against the Nifty's rise of 18 percent.

During market hours on Thursday, Godrej Properties reported a net profit of Rs 38.9 crore for the October-December period, as against a net profit of Rs 14.3 crore for the corresponding period a year ago. Its revenue increased 63.5 percent on-year to Rs 278.8 crore.

The company's sales value came in at Rs 1,541 crore for the December quarter, up 3.6 percent on a year-on-year basis but down 40 percent sequentially.

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(Edited by : Akanksha Upadhyay)

First Published:Feb 4, 2022 1:44 PM IST