Godrej Properties shares fall 10% intraday; know why brokerages have cut target price of this stocks

Godrej Properties limited (GPL) slumped to 10 per cent to touch a day’s low of Rs 1,502.35 per share on the BSE intraday on Friday amid two reasons: investment in DB Realty and mute Q3 earnings. 

The company’s board approved an investment of Rs 400 crore in DB Realty (DBR), to acquire around 10 per cent stake through the issue of warrants. Similarly, it reported a subdued December quarter results as its pre-sales volumes declined 7 per cent year-on-year/ 39 per cent on a sequential basis. 

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As per the company’s filing to exchanges, “GPL will subscribe to warrants convertible into Equity Shares aggregating to approximately 10 per cent of the issued and paid-up capital of DBR for an aggregate amount of approximately Rs 400 crore. GPL and DBR will each contribute an additional 300 crore towards the equity platform focused on redevelopment opportunities in Mumbai.” 

Brokerage firm CLSA gives sell call on Godrej Properties, while reducing the target price to Rs 1,424 per share from Rs 1,563 apiece earlier. Terming the deal lacks merit, CLSA concerned over convoluted deal structure and risk-prone slum rehab projects Godrej Prop, as it’s unwarranted. 

Meanwhile, Jefferies mentioned that investment in DB Realty and stake purchase in entity is a near-term de-rating event. The brokerage still maintains a Buy call however reduced the price target to Rs 2000 from Rs 2750 per share earlier. 

It pointed out that the Q3 pre-sales disappointed on launch delays, though Q4 is promising, as the company has done well to grow through stressed asset acquisitions. 

On the similar lines, Zee Business research analyst Devanshi Ashar also noted, “DB Realty's brand value and the association with Godrej Properties has not gone down too well with the investors as former has many defaulting projects under its belt.” 

At around 01:32 pm, the counter was trading over 8 per cent lower to Rs 1,532.2 per share, as against 0.19 per cent fall in the S&P BSE Sensex. The stock of the Mumbai-based real estate firm has tanked 16 per cent in the past two trading sessions.