Mumbai based real estate firm Godrej Properties Ltd., on February 4, informed that its board has decided to reject the earlier announcement that it will acquire around 10 per cent stake in DB Realty with an investment of Rs 400 crore in DB Realty.
The board has taken this decision after the feedback received from the stakeholders and minority investors. The company has said in its statement issued in this regard that taking into account the long discussions and the feedback received from the stakeholders and minority investors, the board of the company has decided that Godrej Properties will no longer take any further steps on the possible investment in DB Realty. Will pick up However, the company will continue to explore possibilities of jointly working on different projects with DB Realty on a case to case basis.
Godrej Properties had announced that it would invest Rs 400 crore to acquire 10 per cent stake in DB Realty. Apart from this, a joint venture will be formed for the slum redevelopment project in Mumbai. The market may not have liked this plan of the company, due to which the stock is seeing a huge decline for 2 days.
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The decline in the shares of Godrej Properties was seen expanding the day after yesterday, on February 4, ie. The stock had declined further by 10 per cent yesterday.
Godrej Properties had said in a conversation with the analyst that with this partnership, the company is likely to get big opportunities in the redevelopment business in Mumbai. Under this joint venture agreement, DB Realty will look after the business development and prepare the project side for approval. At the same time, Godrej will do the work of development, sales and marketing of Properties. But now Godrej Properties has decided to withdraw from this plan due to negative response from the market.
Experts say that the deal was being considered a complicated capital allocation decision. Because there are various risks associated with slum rehabilitation schemes.
The brokerage firm CLSA says that the slum rehabilitation project projects get stuck in the trap of rules and regulations, hence this agreement is not liked by the market. CLSA has given sell advice on the stock.
Similarly, brokerage firm Jefferies says that the company’s bet on DB Realty and slum rehabilitation project is not good for the stock in the near term. Though Jefferies has maintained its buy call on the stock, it has cut its price target by 27 per cent.
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