Sobha Ltd , a prominent real estate developer, has announced significant expansion plans and reported robust financial performance, signaling confidence in the real estate market despite holding substantial unsold inventory.

Inventory and Expansion Plans

Sobha Ltd currently holds unsold inventories valued at Rs 13,000 crore, spread across 10 million square feet in existing projects. However, the company is not slowing down its growth trajectory. Over the next 4-6 quarters, Sobha plans to launch 15 new projects covering an impressive 16.7 million square feet. These projects will span nine cities, including key markets such as Bengaluru, Mumbai, Delhi-NCR, Pune, and Chennai.

The company estimates that these new projects have a revenue potential of Rs 22,000 crore, underlining the scale of its expansion strategy.

Financial Performance and Targets

Sobha Ltd has reported strong financial results and set ambitious targets for the future:

The company achieved record sales bookings of Rs 3,981.40 crore in the first half of the fiscal year, representing a 30% year-over-year increase. The second quarter was particularly strong, with sales bookings of Rs 1,902.60 crore, a substantial 61% increase compared to the same period last year.

Sobha's net profit for the quarter nearly tripled to Rs 72.52 crore, while total income rose to Rs 1,469.30 crore from Rs 965.29 crore in the corresponding quarter of the previous year.

Future Outlook

Looking ahead, Sobha Ltd has set an ambitious target of Rs 8,500 crore in pre-sales for the fiscal year 2025-26. This goal represents over 30% growth from current levels, indicating the company's optimistic outlook on the real estate market.

The company also reported Rs 18,000 crore in unrecognized revenue from completed sales, which suggests a strong pipeline for future income recognition.

Sobha's aggressive expansion plans, coupled with its strong financial performance, reflect a positive sentiment in the real estate sector. However, the substantial unsold inventory also highlights the challenges faced by developers in the current market. As the company moves forward with its growth strategy, balancing new project launches with inventory management will be crucial for sustained success.

Sobha Limited , a leading real estate developer, has reported strong quarterly results for Q2, marked by record collections and robust sales growth. However, the company continues to face margin pressures as it recognizes revenue from older projects.

Record Collections and Strong Sales

Sobha achieved a milestone this quarter with record collections of INR 2,046.00 crores, crossing the INR 2,000.00 crores mark for the first time. The company's real estate sales value for the first half reached INR 3,981.00 crores, representing a 30% year-over-year increase. This growth was supported by the sale of 1,576 homes across 2.84 million square feet.

Financial Performance

Despite strong sales, Sobha's EBITDA margins remained under pressure:

The company maintained a net cash position of INR 751.00 crores and generated a net operational cash flow of INR 909.00 crores for the half-year period.

Project Pipeline and Future Outlook

Sobha plans to launch 8-9 million square feet across 7-8 projects in the second half. The upcoming Sobha Magnus project in South Bangalore is set to be launched in the current week.

Management expects significant margin improvement from the next financial year as higher-margin projects reach completion. The company has an unrecognized revenue of INR 18,000.00 crores from sold units, providing strong future cash flow visibility.

Challenges and Provisions

Sobha took a provision of INR 27.00 crores for ground rent demands from Bangalore authorities, impacting the quarter's profitability. The company also faced delays in project approvals due to the restructuring of the Bangalore municipal corporation into the Greater Bangalore Authority.

Market Expansion

Sobha is actively pursuing business development opportunities in growth markets, including Mumbai and NCR, while continuing its consolidation efforts in Bangalore. The company is set to launch its first project in Mumbai in the second half, marking its entry into this key market.

Management Commentary

Jagadish Nangineni, Managing Director of Sobha Limited, commented on the results: "We delivered a strong and stable performance in Q2 this year, building on momentum already created in the previous quarter in terms of real estate sales with highly integrated sales and marketing efforts. It also reflects the steady demand on the luxury real estate in a growth economy with improving macroeconomic parameters and timely government interventions."

As Sobha Limited navigates through margin pressures and expands into new markets, the company remains focused on timely project completions and maintaining its quality standards across all price segments. The management's optimism about future margin improvements and the strong pipeline of projects suggest a positive outlook for the company in the coming quarters.