Sobha Ltd Q4 FY25 Earnings Analysis

- Sobha Limited aims to reach or exceed last year's presales of ₹4,440 crores for FY ’25, with hopes to improve with new launches in Bangalore and other cities. - Launches this year have cumulatively reached 4.66 million sq. ft. over six projects; expected to increase to about 9 million sq. ft. with upcoming launches. - For FY ’26, the company targets ₹8,000 to ₹10,000 crores in sales, with expectations to cross ₹10,000 crores through consistent quarterly launches of ₹3,000 to ₹4,000 crores GDV. - The company sees strong demand in key cities like Bangalore and NCR; ticket size sweet spots vary by location but generally support healthy sales velocity. - Growth is supported by an active land bank and successful ongoing project sales; the focus is on balancing own land and joint development projects with about 80% share in forthcoming projects. - Operational cash inflows and collections remain strong, supporting sustained growth and disciplined capital deployment.

- Sobha Limited expects margin improvement from Q4 FY25 and better margins from next financial year, driven by completion of real estate projects and easing contractual losses. - Project-level profit before tax (PBT) margin is estimated at about 28%, with overall margins improving as revenues from ongoing/forthcoming projects (~₹15,000 crores) are recognized over 3-4 years. - Contract and manufacturing segment may stabilize at ₹450-500 crores annual revenue with over 15% gross margins. - Net debt target in the medium term is around ₹1,200-1,500 crores, with effective capital deployment capacity for growth. - Sales value run rate is targeted to increase to ₹8,000-10,000 crores, supported by new project launches. - Operating cash flow remains strong, with ₹1,000 crores revenue recognition quarterly anticipated. - Overall steady state PBT margin including corporate overheads expected to be 15-18%. - Earnings growth linked to improved sales velocity, especially in premium ticket-size projects.

- In 9 months FY ’25, Sobha Limited incurred capex of ₹1,241 million, a 46.54% increase from the previous year, supporting increased area under construction and new project launches. - Significant net land outflow of ₹6.33 billion was spent, more than double last year's period, reflecting commitment to deploying growth capital. - New land acquisitions include 5 to 5.5 million square feet with a projected GDV of ₹6,000 crores at an average price of ₹12,000 per sq ft, spread across Greater Noida, Mumbai, Chennai, Bangalore, and Pune. - Rights issue proceeds are being used partly to reduce debt (~₹900 crores) and partly to fund growth capital for land acquisitions and business development. - Projects in the pipeline involve capex to complete ongoing projects and new launches, including the first phase of a plotted development in Hosur (38 acres) and early-stage Mumbai project approvals. - Planned calibrated capital deployment with focus on optimally timed investments for growth while managing debt.

- Sobha Limited conducted a rights issue recently; the proceeds are being used partly to reduce debt (~₹900 crores) and partly for growth capital including land acquisition and business development. - The company is comfortable maintaining net debt in the range of ₹1,200 to ₹1,500 crores in the medium term. - There is no mention of any immediate or new fundraising plans through debt or equity apart from the ongoing rights issue utilization. - The company aims to take a calibrated approach to capital deployment, leveraging strong cash flows from existing projects and selectively growing in certain cities. - Unsubscribed portion of the rights issue is being reopened from February 18 to March 1, 2025, but this is a continuation of the current raise, not a new fundraising.

- Sobha Limited's contracts and manufacturing segment revenue for the quarter was about ₹160 crores. - Expected to stabilize at a cumulative revenue of about ₹450-500 crores annually, with gross margins over net 15%. - The company is reducing emphasis on civil contracts and some glazing contracts, having descoped some projects this quarter. - Remaining order book in contractual projects is now far lower. - The real estate revenue yet to be recognized from already sold units stands at about ₹15,000 crores with a project-level PBT margin of about 28%.