Godrej Industries is India's leading manufacturer of oleochemicals and makes more than a hundred chemicals for use in over two dozen industries. It also manufactures edible oils, vanaspati and bakery fats. Besides, it operates real estate. GIL is a member of the Godrej Group, which was established in 1897 and has since grown into a US$1.875 billion conglomerate.
Godrej Industries , well known name for value investors and keeping excellent corporate governance in its all activities. it’s a complete play on the Indian economy. It is into FMCG via its 20% holding in Godrej Consumer.
It is into property via 70% holding into Godrej Properties ltd . It is into agricultural via 75% holding into Godrej Agrovet. It is also into confectionery via its 42% into Godrej Hershey plus it is into chemicals which are used by various industries. And besides small other businesses now, it’s a value stock and a growth stock.
If you see Godrej consumer , in which this company owns about 21%. Godrej company has been the fastest growing FMCG company in the country. If you see the PAT, it has grown at phenomenal pace over the past so many years and in fact, the management has clearly indicated very bullish outlook and very good growth rates for the coming 3-4 years though they are not given the guidance. I feel that Godrej Consumer should be growing at 18-20% over the next 2-3 years.
As far as the Godrej Property business is concerned, which this company Godrej Industries owns 70%, I think this is going to be one of the biggest businesses of the Godrej Group in the next 10 years.
The property Business is doing quite well including the Ahmadabad project and now in Bombay they have initiated a project called ‘The Trees’ on 35 acres of land which actually belongs to Godrej & Boyce but has been leased to Godrej Industries. Out of these 35 acres they are going to develop around 2.8 million square feet of project and out of these 2.8 million square feet which they are planning to develop 7.5 lakh square feet, which is going to be leased. It’s going to be a commercial complex called Godrej One. This project is likely to get completed in about 24-36 months.
So, almost Rs 2.5 will be added to Godrej Industries earnings in 2013-2014, which is actually a sharp jump. This is only about 7.5 lakh square feet. The rest 2 million square feet, a hospitality project is coming up. There is a super market which is coming up. This is all maybe leased out or maybe the management has not yet decided and there is about 7.5 lakh residential complex also which is going to come up.
So I think if this 7.5 lakh square feet is going to add to the 2.5 earnings to the Godrej Industries the rest 2 million could actually add over Rs 4-5 kind of earnings. So, 2013-2014 is the year to watch Godrej Industries where suddenly there will be a sharp jump in the profits of Godrej Properties and obviously Godrej Industries.
This project is going to be developed by Tele Clerk who is one of the world’s known architects. So it is going to be premium project and construction cost is likely to be 3000 per square feet in residential rates in that particular area should be around Rs 10-1200. So the profit margin is going to be very high. This is going to be a mind boggling project of Godrej.
Also Godrej & Boyce has properties across the country in Punjab, Hyderabad, Thane and the huge land owned in Vikhroli. Godrej & Boyce owns 60% of Godrej Industries and the mandate to develop this property will certainty go to Godrej Properties and in turn benefit Godrej Industries. In short, Godrej Properties does not need to look out for business for the next 10-15 years. That is the kind of business that it will have on sign from good companies.
Now coming to Godrej Agrovet in which Godrej Industries owns 75%. Last year on Rs 300 crore jump in turnover the profits went up by 34 crore. So that is very significant and the management yesterday, the MD, Mr. Balram Jadhav very clearly mentioned that Agrovet is going to grow at a very good pace. So I think all the businesses are doing very well and I think we have worked out actually. I think in 2014-2015 probably Godrej can report about Rs 23 kind of earnings and I think a company like this deserves a 20 PE Multiple.
(reference godrej ind website, monecontrol.com)
