Sobha Ltd Q3 2025 Earnings Call Transcript

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

Question: Puneet Gulati - HSBC - Analyst : My first question is during the year, you guided for presales target of INR8,500 crores. Given the run rate and the fact that you're still to launch Townpark, is there a reasonable expectation that you would still be able to meet this guidance by March?

Question: Puneet Gulati - HSBC - Analyst : Got it. My second question is on the margins front, right? I mean the reported margins in this quarter as well is even lower than the previous quarter despite better recognition of revenue. Why is that happening? And when do we see a turnaround?

Question: Puneet Gulati - HSBC - Analyst : Okay. So just 28% of PBT you said on those revenues?

Question: Puneet Gulati - HSBC - Analyst : At project level. And how -- is it possible to quantify how big were the losses on the contractual business because on a Q3 over Q2 basis, I see a INR290 crores revenue growth, but no change in EBITDA. So is it as big as INR280 crores, INR290 crores of losses on contractual business?

Question: Puneet Gulati - HSBC - Analyst : Okay. That's helpful. And lastly, on the interest costs, despite a INR1,000 crores addition to the cash balances, the interest cost on cash flow side hasn't gone down. How should one think about that?

Question: Himanshu Upadhyay - BugleRock Capital - Analyst : My first question was, if you look at the realization per square feet for stock to sell has increased from INR7,500, what used to be there two years back, to nearly INR14,000 per square feet, the realization. If the velocity remains slow for such projects, how much does it impact the project level IRR? And can margins be under pressure because of general inflation, which is there in the country and in most expenses? And secondly, what can we do to increase our velocity for such projects?

Question: Himanshu Upadhyay - BugleRock Capital - Analyst : And secondly, I think historically, we have stated that the premium projects generally tend to have a higher sales near the completion. But if the project or construction phase is faster, let's say, in 2.5 to 3 years, do you think the sales velocity will also tend to increase for premium projects because if people are able to see the fully constructed project much earlier sales also?

Question: Himanshu Upadhyay - BugleRock Capital - Analyst : So my just question was, if premium projects, the construction happens faster, will it also help in faster sales side for those projects? Does it also happen in that way?

Question: Kunal Lakhan - CLSA - Analyst : I am just trying to reconcile the margin guidance that you have given on the INR15,000 crores of unrecognized revenue. When I look at your margins in your P&L, like if you look at your nine months PBT margin is about less than 3%. I understand there is corporate overheads and also if I were to ask you that this 28% PBT margin at project level, if you were to apportion, say, corporate overheads over there, what will be the realistic PBT margin considering -- eventually, you have to look at the business at the consolidated level, right, what kind of margins and cash flows the company makes on a consolidated basis, not just project level. So I'm just trying to understand if you apportion the corporate cost to your project level margins, what will be the realistic PBT margin there? 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 07, 2025 / 11:00AM, SOBH.NS - Q3 2025 Sobha Ltd Earnings Call

Question: Kunal Lakhan - CLSA - Analyst : Okay. I mean depreciation isn't very significant anyway. So basically, your interest and corporate overheads, if you remove, it will be roughly about 15% to 18% you are saying?

Question: Parikshit Kandpal - HDFC Securities - Analyst : My first question is, so you said you're launching 9 million square feet this year. So I want to understand out of the total sales of the nine months, how much was out of this 9 million was opened for sale? And how much is the contribution of new launches to the overall sales for nine months?

Question: Parikshit Kandpal - HDFC Securities - Analyst : Jagadish, my question was out of 4.6 million, that is the total size of the project, how much was opened for sale? And what is the area which is still to be opened? 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 07, 2025 / 11:00AM, SOBH.NS - Q3 2025 Sobha Ltd Earnings Call

Question: Parikshit Kandpal - HDFC Securities - Analyst : And on the Townpark, I think the total size of the Townpark is 3.7 million sellable. So how much are you planning to open there?

Question: Parikshit Kandpal - HDFC Securities - Analyst : Jagadish, the issue is that you are launching, the number which you are giving is very high, but actual launch is only a third or maybe 30%, 40% of that. And -- so when we look at presales, so we are building it with thinking that you're launching the entire project and market basis that assumptions, making assumptions on presales, but the actual launched or opened area is much lower, and that is getting reflected in much lower sales in presales. So --

Question: Parikshit Kandpal - HDFC Securities - Analyst : Okay. And just the last question. So now we had this year guided for INR8,500 crores. If we would have achieved that, then next year, if we had guided 15%, 20% growth on that, we should have crossed INR10,000 crores of sales. So when I look at FY26, so how will you base the growth there? I mean, will INR8,500 crores will be the relevant number so we look to cross INR10,000 crores? And to do that, what kind of launch pipeline on GDV leases would be there on a quarterly basis? Are we targeting INR3,000 crores to INR4,000 crores of launches every quarter from next year so that we can deliver on that number?

Question: Biplab Debbarma - Antique Stock Broking Limited - Analyst : So my first question is on the MMR project that you plan to launch in FY26. What -- can you give us some insight on the project like in terms of GDP, what is the size of the project? What kind of project it is JDA, SRA or outlet purchase? And where is the location?

Question: Biplab Debbarma - Antique Stock Broking Limited - Analyst : Okay. My second question is what would we attribute the slippage in guidance to? Should we say that because of slow sales velocity in the Gurugram project or there is a moderation in demand or it's because of approval challenges? I mean, if we have to pinpoint the reasons for the slippages?

Question: Parvez Qazi - Nuvama Group - Analyst : So of the INR633-odd crores of land expenses that we have undertaken this year, would bulk of it relate to the Greater Noida and the Mumbai project? Or -- I mean there are other cities also where we have acquired land.

Question: Parvez Qazi - Nuvama Group - Analyst : Sir, if I got the number correctly, you said the GDV of the land that we have tied up is about INR12,000-odd crores. So if that number is correct, what is the pending land payment for this INR12,000 crores GDV project?

Question: Parvez Qazi - Nuvama Group - Analyst : Sure. The second question is with regards to geographical diversification. We are already present in 10-plus cities. So on the ground, are you seeing differences in terms of sales velocity across the cities where you are present? And if yes -- and which cities are relatively doing better than -- and which are the laggers?

Question: Pritesh Sheth - Axis Capital Ltd. - Analyst : First question is on Gurugram, where we have seen the impact since last couple of quarters. Any course correction we have done there to improve the sales velocity and how is the traction now? And we have three more projects planned in Gurugram over the next four to six weeks, I mean, residential projects. What kind of ticket sizes that we are targeting in those three projects, considering that we have already -- I mean, you have already mentioned that anything between INR5 crores, INR6 crores is doing good. So will that be our product offering in upcoming three projects? That's my first question. 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 07, 2025 / 11:00AM, SOBH.NS - Q3 2025 Sobha Ltd Earnings Call

Question: Pritesh Sheth - Axis Capital Ltd. - Analyst : Got it. Got it. And just a bit of clarification on what you mentioned in the last question. So with this INR630-odd crores of spending in land, you have acquired 5 million, 5.5 million square feet of new projects and GDV is INR12,000 or INR6,000. I couldn't hear that correctly.

Question: Pritesh Sheth - Axis Capital Ltd. - Analyst : INR6,000 crores of GDV? Okay. Got it.

Question: Puneet Gulati - HSBC - Analyst : If you can also elaborate on where are you going to spend the rights issue money? Is there any plan there? And how much should we expect you to spend over the next one year?

Question: Puneet Gulati - HSBC - Analyst : (inaudible) How much reduction of debt and how much for land? 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 07, 2025 / 11:00AM, SOBH.NS - Q3 2025 Sobha Ltd Earnings Call

Question: Puneet Gulati - HSBC - Analyst : And the balance INR1,100 crores for the land acquisition and general corporate purposes?

Question: Puneet Gulati - HSBC - Analyst : So what is the internal target for debt to equity now?

Question: Puneet Gulati - HSBC - Analyst : Okay. Absolute amount of debt?

Question: Manoj Dua - Geometric Securities & Advisory Pvt. Ltd. - Analyst : Sir, as we go forward to INR8,000 crores, INR10,000 crores sale, general cost -- corporate cost, how much we can think of increasing per year as a percentage?

Question: Manoj Dua - Geometric Securities & Advisory Pvt. Ltd. - Analyst : Okay. That would be a great lever for the margin --

Question: Manoj Dua - Geometric Securities & Advisory Pvt. Ltd. - Analyst : Okay. So this would be a very great lever for the margin increase as well as the premium projects, which would be also coming for revenue recognization. Is it my understanding right?

Question: Rahul Jain - Elara Capital - Analyst : So I just wanted to understand, given that Sobha as a brand has a significant presence internationally, what percentage of the presales would be coming from NRI demand? Like it would be specifically higher for certain geographies? Or how should we look at it?

Question: Rahul Jain - Elara Capital - Analyst : Got it, sir. And sir, on the Mumbai land piece, can you just share the locations where exactly it is in Mumbai?

Question: Himanshu Upadhyay - BugleRock Capital - Analyst : My question was, in the upcoming projects, okay, our share is around 79%, okay? And currently, we are having around 90%. Is there an opportunity to increase our share in the forthcoming projects and -- because just these projects will be much nearer in launches. So any thoughts or opportunity for you to allocate capital and increase share in these projects?