Sobha Ltd Q3 2021 Earnings Call Hosted by ICICI Securities Ltd Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Parikshit Kandpal - HDFC Securities - Analyst : Congratulations around the decent performance during the quarter. My first question was on the sales. We have largely been doing sustainable sales about 1 million square feet every quarter, while in this quarter some of our peers have done INR1,000 crores of the sales or INR2,000 crores of these sales. Just wanted a sense that next two quarters you are ramping up your launches significantly. So do you see market is there, the demand is there which can give a significant boost to your overall presales?

Question: Parikshit Kandpal - HDFC Securities - Analyst : This 10 million which you spoke about, is it like an entirety is going or it will be phased [wise] this quarter (multiple speakers)?

Question: Parikshit Kandpal - HDFC Securities - Analyst : When you launch a project going by history -- historically how the launch is affecting, so on an average say within launch -- a couple of months of the timeframe. So, how much typically you would sell say if you launch 1 million square feet, so how much do you sell from that going by your historical track record or numbers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 15, 2021 / 10:30AM, SOBH.NS - Q3 2021 Sobha Ltd Earnings Call Hosted by ICICI Securities Ltd

Question: Parikshit Kandpal - HDFC Securities - Analyst : Numbers like 30%-40% you will be selling when you launch, or I understand (multiple speakers)?

Question: Abhinav Sinha - Jefferies LLC - Analyst : Good to see the sales numbers and the confidence there. So, when did we hear that correctly that pricing has started improving? And if you can give us some idea on what is the pricing increase you are taking or are looking to take there?

Question: Abhinav Sinha - Jefferies LLC - Analyst :

Question: Abhinav Sinha - Jefferies LLC - Analyst : Okay. Okay, that's interesting. Along with pricing, we have heard about a lot of these material cost increases particularly that the steel is high and there are some issues in cement in the South. So, any impact of that? Have you sort of readjusted your project cost in the P&L to take into account that or anything like it?

Question: Abhinav Sinha - Jefferies LLC - Analyst : Finally, on the net debt front, we saw a good decline this quarter. But what is your guidance there? Is this a good base to look at or how should we

Question: Kunal Lakhan - CLSA - Analyst : Just on the demand side, I've been seeing some pickup and demand even in plotted development site in Bangalore. In that context side how are we looking at our Hoskote land parcel? Would we contemplate doing plotted developments over there or any of our other land parcels?

Question: Kunal Lakhan - CLSA - Analyst : So, when can we expect Hoskote to be launched technically?

Question: Kunal Lakhan - CLSA - Analyst : Sure. And you had guided for EBITDA margins of 20% sustainable going ahead. What are the drivers for this -- like because considering the cost inflation is going on and our overheads are reasonably high. So, how do you think we'll be able to restrict it to 20% and not (inaudible)?

Question: Kunal Lakhan - CLSA - Analyst : And lastly, Sharma ji, Kochi has been clocking about INR100 crores of sales for a couple of quarters. Do you think this is -- and this is again I think the Marina One project, but do you think this is sustainable going ahead also considering the ticket size of that product?

Question: Kunal Lakhan - CLSA - Analyst : Congratulations on the good quarter and all the best, sir.

Question: Sameer Baisiwala - Morgan Stanley - Analyst : Question one is what is your marginal cost from borrowing? And how much do you think you can refinance over the next maybe three or four quarters?

Question: Sameer Baisiwala - Morgan Stanley - Analyst : Okay. So, you think that your weighted average cost can bottom out at around 9%?

Question: Sameer Baisiwala - Morgan Stanley - Analyst : Okay, perfect. And sir, second question is, sir, how much -- you cited a few demand drivers in presentation and in your comments. But how much is the low mortgage rate creating this demand?

Question: Sameer Baisiwala - Morgan Stanley - Analyst : This is very helpful, sir, thanks. And just one final one, just a clarification. You mentioned three numbers for new launches. I just want to make sure, so 3 million square feet for this quarter, 2.8 and then 3.7 by second quarter next year?

Question: Sameer Baisiwala - Morgan Stanley - Analyst : Okay, and this is the overall number, not what is only available for marketing?

Question: Girish Choudhary - Spark Capital - Analyst : Firstly on the cash flow, if I look at the construction expenses for the real estate segment and slide number 7, your overall construction expense is around 44% for the nine months. So, even if you look at the third quarter run rate, it is INR290 crores versus INR400 crores quarterly run rate seen in the past. So, generally asking, any reason for a very slow ramp-up in the construction activity? And we are also seeing substantial inflation in raw material costs. So, just would like to know your thoughts on this.

Question: Girish Choudhary - Spark Capital - Analyst : Perfect, perfect. And similarly again on the cash flows, if I look at the land payments nine months versus INR20 crores only and versus INR230 crores last year. And generally we have seen INR250 crores to INR300 crores spent annually. So, anything which is expected to come in the very near to medium-term? Any deals or any pending payment is there?

Question: Girish Choudhary - Spark Capital - Analyst : lastly, in terms of the upcoming launch pipelines, specifically in Bangalore market you have six projects and a salable area of close to 7 million square feet. If you can just highlight two or three key projects or sizable projects which we need to know and on the timelines (inaudible)?

Question: Chandrasekhar Sridhar - Fidelity International - Analyst : Just wanted to know, Sharma Ji, just the Panathur land parcel which you have, how far are you -- how far you from developing that? That's the first question. Second is just the corporate overhead there now substantially lower at INR35 crores , INR37 crores per annum versus INR50 crores, INR55 crores and that sort of helped, obviously, you from a cash flow perspective. But how sustainable are these low corporate overheads? And thirdly, as of the end of last year, your letters of credit payable were about INR178 crores and you had non-interest-bearing trade payables of INR956 crores. Can you just give those numbers, what they are maybe right now? And are there any acceptances which are there sitting in the payables?

Question: Chandrasekhar Sridhar - Fidelity International - Analyst : What will the average land cost in this be?

Question: Chandrasekhar Sridhar - Fidelity International - Analyst : what is the trade payable right now.

Question: Chandrasekhar Sridhar - Fidelity International - Analyst :

Question: Parvez Akhtar Qazi - Edelweiss - Analyst : Congratulations for a great set of numbers. Sir, you gave some details about the upcoming projects in Bangalore. Would it be possible to get the status of the projects outside of Bangalore, especially as far as the RERA registration is concerned? And how confident we are about meeting this launch guideline of about 10 million square feet over the next three quarters? And the second question is on the -- what would be your expectation level let's say one year down the line once we have launched all these projects?

Question: Parvez Akhtar Qazi - Edelweiss - Analyst : Where do we see our debt level one, 1.5 years down the line once we have launched all these projects? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 15, 2021 / 10:30AM, SOBH.NS - Q3 2021 Sobha Ltd Earnings Call Hosted by ICICI Securities Ltd

Question: Vivek Kumar - Bestpals Research & Advisory - Analyst : My question is about Sobha's presale has been around 3 million to 4 million for the past 10 years. And there are other companies in the same sector which were smaller than us which have scaled up significantly. And given our backward integration model and our [customer] brand. So, when will we get to the next level of sustainable presales? Like we are sustainably doing 3 million or 4 million even with the launches. So, when will we go to 6 million, 7 million or 8 million given our business model? And my second question is, because of the backward integration model, are we facing problem in scaling up in in new cities? So, these two questions, Sharma.

Question: Himanshu Upadhyay - PGIM India - Analyst : My first question is some of the markets like Gurgaon and Pune, they have been there for around eight to nine years now. But the yearly sales are still 2.5 lakh square feet which we did in FY11 and FY13 type of years when we were there or in the initial year of launch. Which will be the markets you think can be your next 1 million square feet? And why after being for so long in those markets it has been difficult to scale those markets? And related to this only, what requires to be a market leader in our market, even after nearly 9, 10 years we are nowhere around in those large markets? And what will be the role for those markets for us? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 15, 2021 / 10:30AM, SOBH.NS - Q3 2021 Sobha Ltd Earnings Call Hosted by ICICI Securities Ltd

Question: Himanshu Upadhyay - PGIM India - Analyst : One thing in these three markets of Gurgaon, Chennai and Pune where we don't have new inventory, or let's say number of new projects, what is the thought on business development now? Because once we want the other markets to be 50%, but we do not have much on hand in these three markets which you can take us to be a scalable market the way that. And why not JD, JVs or -- which are the things -- other things which many people say we have not been able to get during the last nine months, which have been really tough for real estate. So, can you throw some light on what you are doing on these three cities and how are you looking ahead on these (multiple speakers)?

Question: Himanshu Upadhyay - PGIM India - Analyst : So, we are aggressively looking at these cities also? Just we need more clarity to (multiple speakers)?

Question: Himanshu Upadhyay - PGIM India - Analyst : One last question. In the Q1 you had stated that some projects or some inventory where people are paid partially only, and the rest was we have taken back as inventory or we have canceled those. What is the status on those debt inventories? Have we got -- sold off the complete inventory which we had taken (multiple speakers)?