Godrej Restructuring Gives Clarity On Vikhroli Land, Says CLSA
The restructuring puts speculation to rest, and also rules out potential option value that could have emerged from the Vikhroli land for Godrej Properties.
Godrej & Boyce Manufacturing Co. will own the Vikhroli land, and Godrej Properties Ltd. will manage its development as part of the Godrej Group restructuring, according to CLSA. The cross-holdings in the group companies have been eliminated, the research firm said in a May 2 note.
The group has been working on this restructuring for the past few years, and there has been speculation regarding the split of the prime Vikhroli land (3,000 acres) between the two entities.
"Both family groups will have a non-exclusive right to adopt, use, own and register the 'Godrej' name and brand in connection with the real estate businesses," it said.
Godrej Properties has previously stated that it will serve as the development manager for the Vikhroli land. There had been speculation on the split of the prime land between Godrej & Boyce and Godrej Properties, because of The Trees — a premium real estate project in Vikhroli East — especially due to its large scale. For the project, Godrej Properties had a joint development agreement with Godrej & Boyce. Godrej Properties later bought it.
The restructuring puts this to rest and rules out any potential option value that could have emerged from the Vikhroli land for Godrej Properties.
No Change In Valuation Or Estimates
As a result of the slow pace of development at Vikhroli, possibly due to the restructuring overhang, CLSA has considered Godrej Properties as the development manager for the land. Thus, the research firm has not assumed any option value arising from Vikhroli land for Godrej Properties.
CLSA maintains a 'sell' rating on Godrej Properties, citing its rich valuation. It has a target price of Rs 2,110 per share.
Godrej group stocks were trading mixed on Thursday, with Godrej Agrovet Ltd., Godrej Consumer Products Ltd. and Astec Lifesciences Ltd. trading in green. While Godrej Industries Ltd. and Godrej Properties were in the red.
