Investors come hard on Godrej Properties shares after company announces investment in DB Realty; know what led to price correction?

Godrej Properties is one of the top trading stocks on Friday. Its stocks today opened at a discount of  10 percent from the Thursday closing price, though it has manged to shed some losses around the middle of the trading session.  At around 1 pm, the Godrej Properties stocks were trading at Rs 1521.75 on the NSE and were down 8.7 percent around this time.

Why Godrej Properties is in focus after the results? Why did the stock break after the results? Which news put pressure on Godrej Properties? Zee Business' Devanshi Asher explains the fall.

There were two big reasons and the results which were declared yesterday were not very good, Asher explained and that was reflecting in the performance of stock on Friday. The results have been a bit weak, due to which we saw some pressure on other realty companies as well, Asher added.

She further said that the most important thing is that the company has made a deal with DB Realty Ltd. An agreement has been signed for the development of slums and rehabilitation in Mumbai. For that Godrej properties will invest Rs 700 crores in DB Realty. For Rs 400 crores, 10% equity will be bought and the remaining Rs 300 crores will be seen investing through JV (Joint Venture).

DB Realty and Godrej Properties together will be seen investing Rs 300-300 crores, Asher mentioned, So JV is of Rs 600 crore. There is a plan from both the company's side to invest Rs 700 crores of total and the market is not liking it much.

She also pointed out DB Realty's brand value and the association with Godrej Properties has not gone down too well with the investors as former's name propped up during the 2G scam. Moreover, DB Realty also has many defaulting projects under its belt. So, a little bit of risk is visible here, she further added.

On the other hand, Godrej properties falls into luxury segments. They made affordable properties too. But the slum development project seems to be a bit unnecessary for the analyst and that is also the reason that the public is not liking this deal, she said.

She also added, the way the complex structure is being built by the companies, some analysts are also not in favour. The Godrej Properties will be seen holding 10% equity. 

Along with this, DB Realty is raising funds from its promoter and also from non-promoters. 
Godrej Properties will have a stake of 10% and the promoters are also increasing their share. So, DB reality has an overall advantage but there is a slight risk looming for Godrej Properties. That's why CLSA has cut its targets to Rs 1424 and jefferies has also reduced its targets from Rs 2000 to Rs 2750, she concluded.

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