Godrej Properties Q2 Profit Falls 62% to Rs 154 Crore Even as Collections Hit Rs 5,318 Crore

Godrej Properties reported a steep fall in quarterly earnings on Friday, and the stock market did not wait for the fine print. The developer's consolidated net profit for the July-September quarter dropped 62% to about Rs 154 crore, from Rs 405 crore a year earlier, and its shares slid as much as roughly 6% to around Rs 1,468 in afternoon trade.

The headline drop came despite much higher revenue. Revenue from operations rose to about Rs 1,935 crore from roughly Rs 740 crore a year ago, and total income climbed to about Rs 2,572 crore. The problem sat lower down the income statement.

Where the profit went

Expenses rose much faster than revenue. Operating costs for the quarter came to roughly Rs 2,477 crore, and the company's adjusted Ebitda shrank to about Rs 268 crore from Rs 630 crore a year earlier. That took the adjusted Ebitda margin down to about 10.4% from 33.7%. Profit before tax fell even harder, to about Rs 98 crore from Rs 566 crore.

Two other factors weighed on the comparison. Interest and other income, which had padded earnings in the year-ago quarter, fell by nearly half to about Rs 637 crore. The results also include accounting adjustments from the merger of a wholly owned subsidiary, Embellish Houses, and from reclassifying Godrej Skyview LLP from a subsidiary to a joint venture, which makes a clean year-on-year comparison harder.

Real estate earnings are also lumpy by nature. Developers book revenue as projects reach completion milestones, so the projects that happen to be recognised in a given quarter, and the margins on them, can swing reported profit sharply. A large slice of this quarter's income came from a single Pune project at Mahalunge.

The cash story is better

Investors who look past accounting profit will find a more encouraging set of numbers. Customer collections rose 31% from a year earlier to about Rs 5,318 crore, and net operating cash flow improved to around Rs 1,584 crore, up about a third.

Sales slowed slightly. Bookings came in at about Rs 8,008 crore across 3,658 homes, down 6% from a year earlier, which management attributed to some launches slipping into the October-December quarter. Bookings for the first half still rose 7% to roughly Rs 16,659 crore, which the company described as its best first half on record. Nearly two-thirds of the quarter's sales came from projects already in the market rather than fresh launches, a sign that demand for existing inventory is holding up.

What investors will watch

The company has set an ambitious second half. It is guiding for bookings of Rs 22,500 crore to Rs 25,000 crore, supported by about Rs 32,000 crore of planned launches, and expects roughly Rs 15,000 crore of collections and about Rs 7,000 crore of operating cash flow in October-March. If that happens, management says the company will turn free cash flow positive in the second half.

That target matters because borrowing has gone up. Net debt rose to about Rs 7,908 crore at the end of September from Rs 6,414 crore in March, lifting net debt to equity to 0.41 from 0.33. Construction spending is rising too, as the company pushes to deliver projects already sold.

The stock was already down about a quarter this year before Friday's fall. For the shares to recover, investors will likely want proof that the launch pipeline arrives on schedule and that cash flow, not just bookings, starts bringing debt down. Buyers weighing a home loan as developers push new launches can use our EMI calculator to check what a given loan size means for monthly outgo.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.