Analysis Godrej Industries

I have been analysing and buying godrej industries.You can download the number analysis here.The company is a kind of holding company for multiple business that godrej operates. The businesses include from agro retailing to soaps, hair dyes to food and beverage,home insecticides to industrial surfactants.

The rationale for investing is the furure market for Affordable Housing.This business is going to have great economics in downturn -construction costs have come down, steel, cement prices are down, plan costs and mortgage rates are down and people have disposable income.Government is also planning for some policy action - this will act as tailwind. Management seems to have woken up and is doing a buy back worth 100 crore.


Good Businesses
Godrej Properties (GPL) GIL holds 80.3 % in GPL.
The most attractive piece of this conglomerate is Godrej properties. GPL has been focusing on its developing residential townships and commercial in tier 1&2 cities like Mumbai, Pune,Kolkata , Hyderabad ,Chandigarh,Chennai and Kochi. In any development, it does not allow land price to exceed 30 per cent of the selling price of the developed property (the average is only about 10 per cent). This protects the company from fluctuations in land prices.

Management is increasing capital allocation and focus to GPL and hopes to be one of the prime player in this fast growing space. Godrej Properties' land reserves currently stands at 78.87 million square feet as of May 15, 2008, it has completed a total of 19 projects consisting 13 residential and six commercial projects, aggregating to approximately 3.62 million square feet of area.

A company called Godrej & Boyce also owns about 3000 acres of prime land in Mumbai, they will lease the land to GIL and GPL will develop it. This land bank can be conservatively valued at 40,000 to 50,000 crore (@ Rs 3500 per sq feet). GPL will have rights to develop this land ,this will give steady revenues and margin of safety to GIL stock since it owns more that 80% of GPL.

GPL is also going to come with an IPO, considering the land under development the issue expected to value the company at about 3000 to 4000 crore.

Godrej agrovet
GIL holds 75.2 % in Agrovet
Agrovet is into Animal Feed,Integrated Poultry and Retail business. These are high ROCE business with a huge potential. Current turnover is about 1500 crore.Agrovet also has 100 acres in bangalore which can be roughtly valued at 100 to 150 crore.

Godrej hershey
GIL holds 43% in Godrej hershey
This business too will have great market as india is becoming a younger country and confectionery is at a nascent stage.Godrej has a jv with hershey to manufacture and distribute confectionery, snacks and beverages across India.Company acquired a 100% stake in Nutrine Confectionery Company Private Limited, the largest player in the Indian confectionery market. The acquisition gives an ownership of the Nutrine brand. Current turnover is about 400 crore.

Godrej Saralee
GIL holds 20% in Godrej Saralee
Is into home insectiside, hair care and aerosols business - "Good Night", "HIT" , "Brylcreem" and "Ambipur" are leading brands.Current turnover is about 800 crore and its high ROCE business.

Godrej Consumer
GIL holds 21.6% in Godrej Consumer.FMCG business has brands like "Cinthol","Fairglow" and "Ezee".Soaps depends on veg oils and competes with HUL they seems to be screwing up.


Bad businesses and Negatives
The oil and chemical business is not good it eats up capital and is basically a commodity business. The structure of the company is complex and leads to unallocation expenses which impact value.It becomes difficult to value the company because the change in stake across so previous results are not easily comparable. Such multiple business companies always trade at a discount to fair value