GODREJ: THE GROUP THAT OWNS INDIA??

 

It is said that the Government of India owns at least 13505 Sq Kms of area. This land mainly includes the plants and machinery of PSUs, their headquarters, factories and many more. Some prominent examples include the land owned by the public sector chemical company, RCF (Rashtriya Chemical Fertilizers), whose value is 2X their market capitalization, the Defense PSU, Mazagon Dock shipbuilders, who own the Mazagon dock port, or the iconic SBI headquarters. All these investments sound great but, wait until I narrate to you the story of the man smiling above. He is none other than Mr. Adi Godrej, the son of Mr. Pirojshah Godrej and the chairman of one of the wisest, richest and the most profitable business groups in India, The Godrej group of Industries.

Mr. Pirojshah Godrej started the business in 1897, when Mr. Ardeshir Godrej, co-founder of the Godrej group and brother to Mr. Pirojshah Godrej, read about rising citywide crimes and hence started selling locks. And the world knows today from where to buy great locks to protect your valuables. By just reading about how he converted this mishap into an opportunity, it justifies the amount of wealth the group has. 

At the beginning, I quoted that the government of India is the largest landowner in India. This might not be true. Can a group that built its business fortune and reputation by selling locks be the largest or the 2nd largest landowner in India? Get ready because the numbers can play with your brain. 

The first example is of a land owned by the Godrej brothers in Vikhroli. Mr. Pirojshah was a man who had a lot of interest in agricultural and commercial land. Back in 1938, when WW2 was going on, he approached the Britishers and cracked a deal to buy the Vikhroli land. He initially brought 3000 acres. Later, he bought 400 more acres. He paid roughly Rs 30 lakh for the 3400 acres of land. Now, the present. 

Out of nowhere, in 2021, news flashes saying that the decades-old group is thinking of redesigning their ownership in the business. It was at that time that someone talked about this Vikhroli property. Today, out of 3400 acres, 1800 acres of land is covered in mangroves. They call it the Godrej Mangroves. 

 When the brothers thought of dividing the wealth, they also talked about the division of this land. The land where commercialization can take place stands at 1000 acres. Now here is where the magic happens. In the suburbs of Mumbai, the cost of owning land exceeds Rs 40 Cr/sq ft. No, I am not joking. That's Rs 40 Cr/ sq ft. When the commercialization is completed, the expected revenue which this land can generate is over Rs 4,50,000 Cr. That's right. Rs 4,50,000 Cr from just one piece of land. This value is 2X the combined market capitalization of 4 listed Godrej companies, which is Rs 1,53,159 Cr. 

Coming to the Mangroves, hypothetically, if we assume that the group chops down say 400 acres of that 1800 acres, and plans to building a port, the expected revenues will cross the stratosphere. You see why the brothers are fighting. Let me give you another example which would definitely make you go loco. 

Everyone knows the Bandra Krula complex or BKC, as we all call it. The BKC stands on a land bank of 914 acres. Guess who owns it?  Yup, it's the Godrej group. The minimum rent per sq ft in the BKC starts in lakhs and ends in hundreds of crores. Recently, a Japanese company, The Sumitomo corporation, purchased 3 acres of land in the BKC for Rs 2067 Cr. The price they paid on a per acre basis exceeds Rs 689 Cr. Now that's value investing at its best. The combined value of the BKC itself exceeds Rs 1,38,000 Cr, whereas the market capitalization of the Godrej properties, the company that owns the BKC, stands at R 36,000 Cr. (* As of 16-12-2022) 

I don't know whether the Godrej group owns India or so, but I can at least guarantee that, if we combine the value of all the land owned by the group, it may exceed the GDP of a state in India. But the group hasn't disclosed much of their holdings. Hence, it becomes difficult to calculate the intrinsic value of their properties. The average buying also remains undisclosed. 

Real estate investing in India isn't a new topic. Since the 1900's, this activity has seen a tremendous growth which still continues. More than 50% of the wealth of the middle class or upper middle-class Indians is in real estate. But the sad part is, everyone wants to be the next Hiranandani, but they don't have what it takes to become one. Real estate investing isn't as easy as it sounds. It isn't liquid either. Everyone knows the interference of the mafia and the corrupt politicians, and how their involvement leads to price rigging. 

The wealthiest Indians own so much land, when combined, the value would make their other investments look inferior. The rich have been investing in real estate for a long time. They know that companies and markets are all temporary, as in, today's blue chip might not be tomorrow's blue chip. But the land is here to stay. The way we think and the way they think about real estate investing, is what differentiates them from making irrational investments and hence, I believe, the money they own is justifiable. A very famous real estate investor, Mr. Louis Glickman once said that the best investment on earth is "the Earth'.