In This Article:
Release Date: February 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Sobha Ltd (BOM:532784) reported a significant increase in total real estate sales value, with Bangalore contributing 72.1% of the total sales.
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The company launched a new project, Ayana in Bangalore, adding 1.13 million square feet to its salable area.
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Sobha Ltd has a strong residential pipeline of 21 million square feet across 19 projects and 10 cities.
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The company plans to expand its operations to Greater Noida, Kour, and Mumbai, increasing its presence to 15 cities.
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The real estate revenue yet to be recognized from already sold units stands at about 15,000 crores, with a profit before tax margin of about 28% at the project level.
Negative Points
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The company faced delays in launching some projects, impacting its ability to meet pre-sales targets.
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Reported margins for the quarter were lower than expected due to one-time losses in contractual projects.
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There was a slower pace of sales in projects with higher ticket sizes, affecting overall sales velocity.
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Interest costs have not decreased significantly despite an increase in cash balances.
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The company has faced challenges in maintaining sales velocity in certain regions, particularly in projects with larger ticket sizes.
Q & A Highlights
Q: Given the pre-sales target of 8,500 crores, is it still reasonable to expect meeting this guidance by March, considering the current run rate and pending launches? A: (Managing Director) We did about 4,444 crores in the first 9 months, and while our guidance was higher, delays in certain projects have impacted this. We aim to reach last year's sales value, and if additional projects launch as planned, we might exceed that.
Q: Why are the reported margins lower this quarter despite better revenue recognition, and when can we expect a turnaround? A: (CFO) The lower margins are due to one-time losses from contractual projects and increased costs in some real estate projects. We expect margins to improve as these issues are resolved and as we recognize more revenue from real estate projects.
Q: Can you explain the impact of higher realization per square foot on project margins and sales velocity? A: (Managing Director) The increase in realization is due to market price rises and changes in inventory mix. While higher ticket sizes have slowed sales in some projects, new launches and inventory adjustments should improve sales velocity.