Sobha (NSE:SOBHA) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Sobha Limited q one f y twenty seven earnings conference call hosted by ICSI Securities. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal and update by pressing star, then 0 on your touch tone phone. Please note that this conference is being recorded. I would now like to hand over the call to mister from ICICI Securities. Thank you, and over to you, sir. Yeah. Good evening, everyone. Thank you for joining us on the SOBHA Limited q one FY twenty seven results call today. As always, from the management we have with us, mister Jagdish Nagineni, the managing director, and mister Yogesh Bansal, the chief financial I'd now like to hand over the call to the management for their opening remarks. Over to you. Thank you.

0:59 Thank you, Ajith. Good evening, everyone, and thank you for joining us on this Q1 FY 'twenty seven earnings call. I thank all the investors, analysts and stakeholders for taking time to be with us today. Our operational update was earlier shared in the month, and a detailed investor presentation is available on our website. Today, I'll briefly cover the key business and operational highlights for the quarter. And our CFO, CEO, Gish Kansal, will walk you through the financial performance in greater detail. I'm pleased to share that Q1 FY 'twenty seven has been a landmark quarter for Sobha in terms of sales. We achieved our highest ever quarterly real estate sales, recording sales value of INR 3,666 crores, representing a 76% increase year on year. We sold 2,340,000 square feet across fourteen thirty two homes with an average realization of $15,655 per square feet, reflecting the strength of our product portfolio and brand.

2:09 Bangalore once again emerged as our strongest market, contributing 57% of the quarterly sales of about INR 2,067 crores, driven by good response to our launches of Sobha One World and Sacred Grove, a plotted development. The NCR region also delivered its highest ever quarterly sales with a sale value of about $13.84 crores, mainly driven by successful launch of SOBHA Crescent in Gurgaon, reaffirming our strategy of expanding in high growth micro markets. Together, these launches significantly contribute to our record quarterly performance. In Sobha One World, out of the overall 3,484 homes across 47.4 acres, we released 3,400,000 square feet. And out of the release, we could sell about 40% at the launch.

3:08 In Sobha Crescent, we sold about 60% in Q1 FY 'twenty seven. During the quarter, we launched three new projects across Bangalore and Gurgaon with a combined sale area saleable area of 6,890,000 square feet and a potential sale value of about 10,000 crores. These launches further strengthen our development pipeline and provide strong visibility for future growth. Execution continued to remain our core strength. During the quarter, we completed six seventy seven homes, covering 1,080,000 square feet across multiple Consistent project delivery remains central to our business model and enables faster revenue recognition while reinforcing customer confidence in the Sobha brand.

3:57 We plan to complete 6,000,000 to 6,500,000 square feet for FY 'twenty seven as against last year's completion of about 5,400,000 square feet, which can be about 20% higher. Our development portfolio continues to provide strong long term growth visibility. We currently have a forthcoming launch pipeline of about 20,770,000 square feet across 17 projects. Of this, we are confident of launching nine projects, aggregating approximately 8,200,000 square feet during the remaining period of FY 'twenty seven. So the planned launches comprise four projects in Bangalore, about 3,000,000 square feet two projects in NCR, about 2,000,000 square feet one project in Hyderabad, which is about 1,700,000 square feet and two projects in Kerala at about 1,500,000 square feet.

4:51 This pipeline provides us with confidence in sustaining the growth momentum over the medium term. As of end of Q1 FY 'twenty seven, we also have 14,940,000 square feet of unsold inventory. Both put together the forthcoming launch pipeline and our current unsold inventory, we have a strong visibility of inventory to be sold in the coming quarters and the years. We envisage our net debt to be at about zero level for this year. Another important strength of our business continues to be our balance sheet. We ended the quarter with a net cash position of about INR 69 crores while maintaining a low leverage low borrowing cost of about 7.62%.

5:40 Our operational cash inflow remained quite healthy at 19.24 crores despite higher investments in land acquisition and project expansion. This financial strength gives us flexibility to continue investing in future growth while maintaining a prudent capital allocation strategy. On the financial performance front, we reported a total income of INR $13.30 crores, representing a growth of nearly 48% year on year. The remaining P and L details will be covered by our CFO. Our future earnings visibility continues to be very strong. As on end of this quarter, the company has 20,553 of revenue yet to be recognized from the sales that have already been done.

6:32 We would see margin expansion as we complete the projects that we have sold from FY 'twenty three. Our backward integrated operating model continues to differentiate Sobha in the market. During the quarter, our other businesses generated revenue of about INR 170 crores, and we have a good order book visibility for those businesses. Our commercial rental has a total income of about INR 23 crores. In the steady state run rate, we expect in this financial year also to be similar to last financial year in terms of revenue for the other businesses. Looking ahead, we remain quite optimistic about the new launch pipeline that we have.

7:18 And we see a good customer demand for our products, and we believe the company is well positioned to sustain this growth momentum and deliver long term value. With that, I would like to hand over the call to our CFO, Mr. Yogesh Kansal, who will take you through the financial performance in greater detail. Good evening, everyone. Q1 FY 'twenty seven quarter reflects improved revenue and profitability, healthy operating cash generation and continued strength in our balance sheet within net cash position. So our total operational cash inflow during the quarter increased by 8.2% year on year basis to $19.24 crore.

8:05 Real estate collections stood at $17.56 crore compared with INR $15.99 crore in Q1 FY 'twenty Collections from contractual and manufacturing businesses stood at INR 168 crore. Total net operational cash flow originated INR $3.12 crore. During the quarter, project related expenditure increased in line with increase in construction activity. We also incurred higher sales and marketing expenditures in line with increased sales and new project launches. The company generated cash flow of $2.90 crore. During the quarter, we invested approximately INR $3.70 crore in land and approximately INR 70 crore in CapEx.

8:54 Third quarter recorded an overall net cash outflow of 149 crore. This net cash outflow was primarily attributable to planned investment in land and future development opportunities. These investments were undertaken while retaining a strong liquidity position and a net cash balance sheet. Coming to P and L front, total income for Q1 FY 'twenty seven stood at thirteen thirty crore an increase of approximately 48% year on year. Real estate revenue increased by approximately 60% to INR $110.07 crore compared with INR $6.90 crore in Q1 FY 'twenty Revenue from the Contractual Manufacturing and Retail business stood at 171 crore compared with INR 162 crore in corresponding quarter of the previous year.

9:53 Profit after tax stood at 50.7 crore compared with INR 13.5 crore in Q1 FY 'twenty six. The improvement in profitability was supported by higher real estate revenue recognition and improved revenue mix and continued financial discipline. During the quarter, our residential real estate contributed revenue of $9.63 crore from a delivery of INR one point two four million square feet comprising eight nineteen homes, reflecting our continued focus on timely project execution and delivery. Our balance sheet continues to be a key source of strength. As on 06/30/2026, our gross debt stood at INR $11.10 crore, while cash and cash equivalents stood at $17.69 crores.

10:50 Our net debt ratio stood at negative 0.14, and our average borrowing cost is 7.62%. Our strong cash position, low leverage and competitive borrowing costs provide us with the flexibility to fund construction, land acquisition and pursue growth opportunity without compromising financial discipline. We have projected receivables from sale and unsold value approximately 31,000 crore. Again, this estimated remaining cost to be incurred is 19,000 crore, resulting in projected margin cash flow 12,000 crores from completed and ongoing projects. Together, these figures provide substantial visibility for future collection and cash generation and give us additional headroom to invest in future growth. On FY 'twenty seven, our financial priorities remain focused on maintaining a strong and liquid balance sheet, improved collection and operating cash generation and declining capital allocation.

11:58 It remains well positioned to support sustainable business growth. Thank you once again for joining us today. With that, we can open the floor for questions. Thank you very much. We will now begin the question answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, The first question is from the line of Girish Chaudhry from. Please go ahead. Yeah. Hi,.

12:45 Congratulations on the strong presales. I mean, firstly, if you if you... Obviously, you've had a strong start to the year. So if you could just give us the pre sales growth or the booking value you're targeting for fiscal twenty twenty seven? And as a follow-up, you mentioned about 8,000,000 square feet of launches for the remaining 9,000,000. So if you could give the GDV and also the time lines and the key projects, which we should look forward to? Thank you, Girish. In the last quarter, I mean, like end of the financial year, so we have guided for at least 30% growth in the presales. That I think we should be able to continue to achieve. And if all the launches happen within time, probably we can do slightly better than that. But as of now, I think we continue to aim for that in terms of presales.

13:41 Now coming to the exact timing of these remaining project launches of about 8,200,000 square feet, like I've told in the opening comments I have given, those most all these about nine projects, we would be able to do it within the next nine months. So those most of them would be I mean, this quarter would be about three projects and remain which are a couple of projects in Kerala and one plotted development in Bangalore and probably a small 400,000 square feet project in Bangalore. But other than that, the remaining projects would be coming in Q3 and Q4.

14:28 Got it. Got it. That's useful. And secondly, what we noticed also collections were relatively modest considering the presales. So what is primarily a timing issue because a large part of sales came towards the end of quarter? And should we expect material improvement from this quarter onwards? Yes, that's right. What you mentioned was right. One is the collections from new sales have come towards the end of the quarter. And hence, there is a I mean, there is more collection that would be coming from these new sales, but part of the collections only have come in this Q1.

15:15 Second is typically our milestone billing collections this time were relatively lower because some of the milestones we could not achieve due to labor shortage in mainly in April and May. And hence, the billing corresponding billing could not happen. And hence, there is a small shortfall there also. Otherwise, in general, things seem to be good in terms of overall cash flow visibility. Okay. So we are on target to do the INR 2,000 crore writing, which was guided in the past for the year? INR 2,000 crore of operating cash flow? Yes, yes. Yes. I mean, that is on an average for the next few years, if you take an aggregate level of what is the marginal cash flow. But we should as we grow, we should be able to do we should be able to touch that number.

16:16 Yes. If I may, on your land payments, we have seen around $3.70 crores during the quarter, higher than the normal run rate. So if you could explain, I mean, for fiscal twenty twenty seven and 2028, what are the commitments? And then from a business development point of view, what are you seeing? Yes. I mean, this quarter, in addition to our current, I mean, normal commitments of the existing lands, we have invested in a couple of new lands. One small land, we have bought in Mumbai, and we have invested in a new opportunity in Greater Noida. So put together, these are the two new ones. Otherwise, the rest are towards commitments of the future forthcoming projects that we have already declared.

17:14 Got it. Got it. Thank you and all the very best. Thank you, Girish. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to three per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Puneet Gulati from HSBC. Please go ahead. Yeah. Thank you so much. My first question is one, with respect to your disclosures on the forthcoming project, where you talk about potential sales value of $295,000,000,000 And versus that, the margin that you talk about in slide 15 is 68,300,000,000.

18:04 This is a lot lower than what you had in the previous presentation at at close to 86,000,000,000 of margin and a smaller sellable value for forthcoming project. What is the change here? You're right, Puneet. So the main difference for the new forthcoming majority I mean, the mix of the projects, a greater mix is towards joint development. And hence, that's the incremental marginal cash flow would have you would have seen reduction. Second is earlier in this marginal cash flow for forthcoming projects, we had Hoskote Hoskote as one of the main projects, which had which was our own land and hence, the marginal cash flow was much higher.

18:58 Okay. So the GDV that you stated is basically including the landowner share? Yes. This is a gross value of the all the projects of the entire project. Okay. That's fine. And secondly, while you talked about potential two acquisitions this quarter, one in Mumbai and one sorry, the other one I missed out. In Greater Noida. And have you paid for both of them? Yes. Okay. So how should one think about full year allocation of capital towards land? What is the run rate one should assume? We have done last year's I mean, we would from a land payments point of view, we would be roughly similar to land for last year. And going forward, there would be an incremental from a I mean, last year, we did about INR $11.60 crores.

19:57 And this year, we already did about INR $3.70 crores. And we have identified a couple of opportunities where I think we can invest in Bangalore and in NCR. So if we are able to complete those transactions, then we might look at closer towards INR 1,500 crores to INR 1,600 crores this year. Okay. That's helpful. And lastly, in your nine project launches, does that also include the balance phase of One World or is that separate? No, that doesn't include balance phases. Like I said, we have taken the entire project of Sobha One World the new project process in Q1.

20:52 Thank you. The next question is from the line of Parikshit Kampal from HDFC Securities. Please go ahead. Yeah. Hi, Jagdish. Congratulations on a great quarter on free sales. So my first question is, I mean, the way we were forecasting this quarter, the first half was a washout because of geopolitical issue. So just wanted to understand what led to the strong demand coming back towards the second half of the quarter to both in Gurgaon and Bangalore. And also wanted some color on Moida, how the Rivauna has done after there were some delays you said the sales could have got pushed out. So just your sense on the demand, what has surprised just surprised us positively? And where do you think the real estate cycle currently is? Thank you, Barikshit.

21:38 So like you have seen in Q1 or let's say, Q1 of this calendar year, right, we had been preparing for these launches for some time. And hence, the time advantage that we had got in terms of preparation is what I believe is what led to a stronger performance in this quarter. So for any new launches, like you know, it's not only dependent on the timing of the launch, but also the extent of preparation for that. So for in that aspect, we were much better prepared, and hence, there is a stronger response is what we can see in Q1. Otherwise, the overall demand scenario seems to be quite stable from what we have seen in terms of the launches and also what we are witnessing post the launches also. It's been quite steady.

22:36 So we believe that it is a reasonably good demand scenario. What I would like to we would like to see is how the supply is going to come up. Specific to your question related to Rivauna, Rivauna has also been quite steady. Positive on a gross So steady in terms of monthly the sales and the quarterly sales. Okay. My second question is on the INR 1,500 crores in total. I mean, you said if the deals could get close, INR 1,500 crores case at one land may happen this year.

23:22 So just wanted to break up of how much will be Bangalore and how much is the contribution from NCR and MMR on this? And whether is it right to assume that out of the INR 1,500 crores roughly INR 15,000 crores worth of GDV, 10,000 to 13,000 crores of GDV addition will happen? Yes. I mean, from a remaining capital allocation, part of that is towards our current commitments of further INR 20,770,000 square feet, that's roughly about another INR 400 crores. And our past commitments, those are also, that's about another INR 200 crores. So those I mean, those are about INR 600 crores because already we have done about INR $3.70 crores. So remaining is about INR 600 crores. So that INR 600 odd, we will we should look at the current opportunities that we are pursuing.

24:17 It's still a little I mean, a little early to disclose that, but it's at a good valuation, and hence, we should be able to typically in any new land buy, we see that the value of the land is between about 15% of the total sale value. So that it would be in the similar range. So this will be largely in NCI, the INR 600 crores, 700 crores incremental beyond the existing in the past commitments, which you said. So out of the INR 600 crores, where how will be the geographical breakup of this? It's part of it is majority is in Bangalore, and the remaining is split between largely between NCR and little bit portion to Mumbai.

25:06 Okay. And just the third question on this post quarter. So how much was the contribution from the Sugar One World out of the total INR thousand of sales? So how much was the contribution? Because the numbers look little lower, the numbers have been high. So what's the next thing over you're going to book in q q two out of this? Just wanted the total cumulative sales on this, how much has been with the nineteen q one? About... You have seen about 45% of the overall sale is from One World sale, and the remaining is from both... Like, Bangalore and NCR have contributed close to 87%. Sorry. I didn't hear you. How much? Bangalore and NCR together have contributed about 87%.

25:54 Out of the total 3,600, 45% comes from your Sobha One World. Yes. Is there any pending fees to be recognized? Because this number then looks slightly on the lower side compared to what you have released. It's about 1,600. So was there... I mean, were you able to book the entire sales or there's a pass over which will happen in Q2 from this that you could not realize in the Q1 numbers? Yes. So like I mentioned, we have released about 3,400,000 square feet of the total. And within that, we have done about 40% of the sales. So that's about INR 100 odd. So INR 2 crores, 300 crores could be a spillover, which may happen in the Q2 quarter. Hello?

26:44 Yes, Parishit. So there were some spillover into Q2, that means. Yes. That is a characteristic of any new launch or ongoing operation. So there would be naturally be some lower some being put in the previous time period. The next question is from the line of Viplav Devadema from MK Global. Congratulations on the great start to FY 'twenty seven. The first question is on the Mumbai and Gaternoida business development you did in this quarter.

27:32 Could you give us some details like are these outright projects and how much you paid for these projects? What would be their GDP And they are expected to be launched? The Mumbai project is about 1.3 acres, and it's we bought the land for about 180. And the Greater Noida is Greater Noida project is a joint development for which we have paid certain dues for the authority and for the landowners. So both so each one, both put together, the GDV for this would be about 2,700 to 3,000.

28:22 And they will be launched in this financial year? The Greater Noida one, we are envisaging to launch this financial year. Mumbai one, we would endeavor to do it. But considering the approvals, uncertainty of a clear time line from there is a lot of work to be done there. And hence, although our endeavor is to launch it this financial year, so currently, I have not included that in the projection that I have given in terms of 8,200,000 square feet for this remaining nine months. And second question is on the margin. I mean, quarter, you mentioned that margin will see revival from the second half of this financial year.

29:13 Margin continues to continues to be low, sir. Do you maintain that margin will see uptick in second half of this financial year? And what kind of margin do you think we'll see in the second half of financial year as reported margin? Right. Vikram, you're right. I mean, we I still expect the margins to be significantly better from the in the second half. Mean sequentially, it should start looking better. Q2 might be similar or depending on the number of completions that we can do, Q2 might be similar. But Q3 and Q4 sequentially should become better as we complete some of our high margin projects and start handing over. So our expectation is that by Q4, as we currently, we are at about 9.7% EBITDA.

30:09 So as we leave the end of Q4, maybe hopefully, we should be able to do closer towards 17% to 20%. Okay. That's great. And my third question is on the remainder of the year, you said 8,200,000 square feet launches. That translated to how much of GDB? At the current average of INR 15,000, it should be about INR 12,000 crores. Okay. Okay. Thanks, Jagdeep, and all the best. Thank you. Good luck. The next question is from the line of Fenil Brahmbha from Choice Institutional Equities.

30:58 Congratulations for the good set of number. I have two questions for you. First is for on this approved NCDs of INR 1,000 crores. So when we are planning to issue this NCDs in the next quarter? Or there is any time line? So if you can throw some light on that, that would be helpful. Yes. We envisage the usage coming in the next couple of quarters. So we will do it in tranches as and when we identify the acquisition opportunity or, let's say, firm up the acquisition opportunity, we would go ahead with the funding of NCLD. So it's not a need not be a one shot, but as and when it's required. But at least I would think that we will take it into at least two tranches.

31:58 Okay. All right. And I just want to understand the project completion for FY twenty twenty seven, twenty eight. So which projects are at the finishing stage or we are planning to deliver in next three quarters or next remaining FY 2027? And if possible, you can give some highlights for FY 2028 projects as well. So for FY 'twenty seven, like I mentioned, we would endeavor to complete about 6,000,000 to 6,500,000 square feet versus what we have done about 5,400,000 square feet last year. So I mean, there is a list of projects that we would complete as per the time line of the completion.

32:44 We can provide you the list completely, if that's okay. Okay. Okay. Yeah. That's all from my side. All the best for the next quarter. Thank you. Thank you, Finlay. Thank you. The next question is from the line of Pratesh Sheth from Axis Capital. Please go ahead. Yeah. Hi. Thanks for the opportunity, and congrats on on a great start to the year. Just drilling some more on on launches again. So second phase of Sobha Crescent is planned for next year or this year? Good evening, Pritesh. Thank you. Crescent Phase two will happen during this financial year, most likely towards the end of Q3 or beginning of Q4.

33:38 Okay. Okay. So 2,000,000 square feet in NCR, which you said is basically second phase of Crescent and the Noida project, Greater Noida project. Yes. Yes. And and Bangalore will have the Crystal Meadows now converted into those apartment projects also included in currently? That's right. Okay. Okay. Perfect. And just in Mumbai, I can't see, you know, the new latest addition in our forthcoming or subsequent pipeline or rather there is one acre of Mumbai, but I thought that's the second part of Parail project. So is this included in the current pipeline? Or since we are not sure of the time line, we don't we are not included in the forthcoming and subsequent land right now?

34:31 Right. So the one that you are seeing in the forthcoming pipeline is the second phase of the current project, which is Inizio. And the one that we have just acquired, that we have not yet included, basically, line once it gets formed up, we would include it subsequently. Sure. Got it. Got it. And one last second on launches. I think last time, we had a six lakh square feet of commercial project in Gurgaon that I don't see currently in the pipeline. Has the plans being shelved for that commercial project now? Or has anything changed there? Good observation, Pritesh.

35:17 That particular project is still the endeavor to launch and develop it. We have, in fact, the entire TDR for it and we can develop the entire project. But currently, we are looking at an option evaluating an option of launching it, but not actually selling it, but retaining for our rental income. So that we are in an evaluation phase. And once that is and hence, we have removed it. So if we decide to do part of the development as a sales model, we'll bring it back. Sure. Perfect. That's pretty helpful. That's it from my side and all the best. Thank you. Thank you, Satish.

36:08 Thank you. The next question is from the line of Sobhaam Salwadia from Tickle Investments. Sir, my question is regarding labor law. Sir, in Karnataka, recently in May month, there was a hike of 60% in minimum wages. So have you evaluated any impact on cost? Good evening, Sobhaam. Yes, there has been, and we are still under the evaluation phase. But largely, our technician course that we have, that is above the minimum page. However, it would have a little bit of impact on our overall cost.

36:54 That is yet to be assessed. But I think we are considering with it should be we should be able to absorb it within the budget that we have allocated for the projects. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. Thank you, everyone, for participating in today's call. I hope we have answered most of the questions that you have you had. In case of any further queries or more details, you can please reach out to us and wish you the very best. Thank you, and have a good evening.

37:42 On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.