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What impressed the Street was the improvement in cash flow.
What impressed the Street was the improvement in cash flow.

Godrej Properties rallies as debt falls

  • Godrej Properties also contained expenses as there were hardly any launches during the quarter and therefore outflows towards project-linked approvals were also lower
  • The focus was on completion of existing projects

Shares of Godrej Properties Ltd rose 8.2% on Monday despite clocking weak sales in the December quarter. While the total area sold during the quarter fell by 44% year-on-year, in value terms too the bookings were 22% lower.

What impressed the Street was the improvement in cash flow. Operating cash flow increased to 1,131 crore, from about 900 crore in Q3 FY19. Further, this helped the company trim debt to 1,093 crore, from 1,795 crore a year ago. Its debt-equity ratio has dropped to 0.23 times, from 0.69 in Q3 FY19 and 2.1 times about two years ago.

Godrej Properties also contained expenses as there were hardly any launches during the quarter and therefore outflows towards project-linked approvals were also lower.

The focus was on completion of existing projects. In comparison, the year-before quarter was dotted with several new projects. In fact, over half the bookings so far in FY20 came on the back of inventory liquidation at projects in advanced stages of completion. This also helped the company improve operating profitability in Q3.

That said, a continued weakening of sales may take a toll on financials. For now, all eyes are on the premium RK Studio project in Chembur, Mumbai, which will be launched soon. “This can generate over 1,000 crore revenue over the next three to four years," says a report by ICICI Securities Ltd.

On the flip side, such premium projects also increase the risk profile of the realty firm. Any slack in sales can weigh on the stock price.

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