InvestorQ : Why has debt of Godrej Properties gone up so sharply and does it add to the risk of the stock?
vidhya Laxmi made post

Why has debt of Godrej Properties gone up so sharply and does it add to the risk of the stock?

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sarah Leo answered.
2 weeks ago
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The latest results of Godrej Properties for the Sep-20 quarter showed pressures on the top lien and the bottom line. After all, real estate has been one of the worst affected sectors in the pandemic and the consumer demand is yet to pick up in the midst of uncertainty.

If you compare the debt of Godrej Properties on a yoy basis, the company has seen a sharp spike in its debt levels. According to data put out for the Sep-20 quarter, the Godrej Property’s net debt, i.e. net of cash and cash equivalents, has gone up by 56% to Rs.2733 crore on a yoy basis.

Why did the debt actually go up? This spurt was actually necessitated due to tight conditions in the realty market and limited demand for new homes. Most realty companies were forced to increase their debt substantially to keep the turnstiles ticking.

The outcome of this move is that the net debt / equity ratio of Godrej Properties has increased to 0.57X while their cost of funds stands at a relatively higher 7.55%. Analysts are concerned that, this could substantially impact the financial risk of the company.

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