Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sobha Ltd (BOM:532784, Financial) launched four new projects in Q1 FY25, totaling 3.04 million square feet, enhancing their project portfolio.
- The company achieved its second-highest ever sales value in Q1 FY25, with a total sales of INR 1,874 crores, marking a year-on-year growth of 28% and a quarter-on-quarter growth of 24.6%.
- Sobha Ltd (BOM:532784) raised INR 2,000 crores through a successful rights issue, which will support future growth and expansion.
- The company has a strong residential launch pipeline of 17.9 million square feet across 16 projects in seven cities, providing a robust outlook for the next six to eight quarters.
- Sobha Ltd (BOM:532784) achieved the highest ever quarterly inflows and collections, amounting to INR 1,546 crores, indicating strong financial performance and cash flow management.
Negative Points
- The company has 9.24 million square feet of unsold inventory, which may impact future sales velocity, especially for high-ticket size units.
- Revenue recognition was affected by delays in obtaining policies, which may cause a lag in revenue recognition for the remainder of the financial year.
- The EBITDA margin for Q1 FY25 was relatively low at 12.7%, partly due to increased sales and marketing expenses.
- The company is de-emphasizing civil contract projects to focus on real estate, which may impact revenue from contract projects.
- There are concerns about the high cost of land acquisition in new markets like Mumbai and Noida, which could affect the company's financial returns and project viability.
Q & A Highlights
Q: Given the high-ticket phased launches, how should one think about bookings?
A: We expect to target sales of at least INR 8,500 crores this year, considering both current inventory and proposed launches. While high-ticket units may see moderate sales, the diverse inventory across locations should help achieve our targets. (Jagadish Nangineni, Managing Director)
Q: Can you elaborate on the revenue recognition delays and their impact?
A: Revenue recognition was delayed in Q1 due to elections affecting government processes. We expect improvements from Q2 onwards, with significant revenue recognition in the third and fourth quarters. (Jagadish Nangineni, Managing Director)
Q: Why has the inventory reported gone up significantly?
A: The increase is due to converting land opportunities into projects, particularly in joint developments, which affects both sides of the balance sheet. (Jagadish Nangineni, Managing Director)
Q: What is driving the bump in realizations in GIFT City and Hyderabad?
A: GIFT City has seen steady increases in realization due to significant demand and recent land auctions. The new project launched at INR 12,000 per square foot is seeing good traction. (Jagadish Nangineni, Managing Director)
Q: What is the strategy for venturing into new geographies like Mumbai and Noida?
A: We are taking baby steps in these cities and will provide more clarity in future calls. The intent is to expand and grow, but timelines are still being determined. (Jagadish Nangineni, Managing Director)
Q: What is the target for land-related CapEx and new project additions?
A: We do not have a clear yearly target for adding GDV. We have enough in the pipeline and will allocate capital based on financial returns and market opportunities. (Jagadish Nangineni, Managing Director)
Q: What are the expected EBITDA margins for FY25 and FY26?
A: We expect project-level EBITDA margins to be more than 30% as we recognize revenues from recent sales. Margins should improve steadily from the next financial year. (Jagadish Nangineni, Managing Director)
Q: How will the rights issue funds be utilized?
A: The rights issue will help secure new opportunities in new markets and strengthen existing operations. The promoter's share has increased by 4.5%. (Yogesh Bansal, Chief Financial Officer)
Q: What is the status of the Greater Noida land auction?
A: We won a 3.44-acre land parcel, allowing us to develop about 0.65 to 0.7 million square feet. This is a good opportunity to experiment in a new market. (Jagadish Nangineni, Managing Director)
Q: What is the plan for the remaining inventory in Bangalore?
A: We have about 13.5 million square feet in Bangalore and plan to launch over 11 million square feet in the next one or two quarters. (Jagadish Nangineni, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
