Do not subscribe to Godrej Properties IPO: Kim Eng Securities

MUMBAI: Kim Eng Securities India has advised investors not to subscribe to Godrej Properties’ public offering based on expensive valuation.

“Godrej Properties (GPL) is expecting to sell 9.4m shares at Rs 535/sh (results in 13.5% EPS dilution, MCap will be US$790m). Proceeds of Rs 5 billion will be used to fund land payment dues and repay debt.

We are concerned over next year’s CF shortfall of Rs 4 billion. GPL presold Rs 4.4 billion over the last 2 years and has a backlog of only Rs 600 million (0.4x FY10F revenue). It could miss our FY10F EPS of Rs 4.1 (down 65% from FY09) as 60% of earnings are dependent on new launches. Subscription opens on 9 December and closes on 11 December. We recommend NOT SUBSCRIBE to this IPO based on expensive valuation,” the recommendation said.