Godrej Properties: Q4 Skew in Collections and Strong Market Performance in Mumbai and Bengaluru

Godrej Properties Ltd. is experiencing a slight anomaly in the current financial year 2025-26 (Apr-Mar) as its project deliveries and collections are skewed towards the fourth quarter (Jan-Mar). The company, which had guided for customer collections of INR 210 billion in FY26, has achieved only INR 170.5 billion, or just 37%, in the first half.

This seems a bit low, but the company has seen good construction progress during the September quarter, as evident from the rapid increase in construction spend. The management is confident that it will meet its FY26 guidance on customer collections.

In the first half of FY26, Godrej Properties achieved 47% of its launch-value guidance of INR 400 billion for the year and 48% of its booking-value guidance of INR 325 billion. Additionally, the company has achieved only 30% of the guidance for deliveries of 10 million square feet in the first half of the current financial year. The management expects deliveries to increase in the March quarter, with a significant number of occupation certificates (OCs) scheduled for January, February, and March.

The company faced external challenges in project execution, which have partly delayed some projects and affected profitability. The adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) margin contracted sequentially to 33.7% in the September quarter from 58.1% in the trailing quarter. This included interest costs added to the cost of sales.

External challenges included the National Green Tribunal (NGT) rules in the Delhi-National Capital Region (NCR), which effectively delay construction for three months each year. Apart from regulatory rules, some projects have been delayed. Despite these challenges, the company delivered 18.4 million square feet in FY25 and expects FY26 deliveries to exceed its guidance of 10 million square feet.

On inventory levels, the management explained that the jump in inventories in its consolidated balance sheet from the end of FY25 to the end of the September quarter was due to the company acquiring the stakes of the partner in some of its joint venture projects. This resulted in a substantial on-year increase in inventory gains in the profit and loss account in the September quarter to INR 32.1 billion from INR 12.0 billion in the year-ago quarter.

Regarding land acquisition costs, the management noted that it is a mixed bag. While there are instances where land prices are quite high, the company remains confident in generating the expected returns and margins from acquired land parcels. For example, recent land auctions of 10-11-acre parcels in both Hyderabad and Navi Mumbai saw high auction values, but this is not too concerning at the moment.

In terms of real estate markets, the management stated that the Gurugram market looks far healthier than it was 12 months ago, when it was becoming speculative and risky. Noida and Greater Noida are strong real estate markets. However, the Pune real estate market has not taken off, despite Godrej Properties being the number one player there. Price-wise, the Pune real estate market has been flattish. In contrast, the Mumbai and Bengaluru real estate markets are performing strongly.

The company reported a 21% on-year rise in consolidated net profit to INR 4.1 billion, surpassing the Street's estimate of INR 3.2 billion. Revenue from operations, however, fell by over 32% year on year to INR 7.4 billion, below the INR 11.3 billion analysts expected for the reporting quarter. On Thursday, the company's shares closed 4.3% lower at INR 2,193.70 on the National Stock Exchange, despite the strong financial performance.