Sobha Ltd Q4 2024 Earnings Call Transcript

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

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Hi. So my first question is on the launches. So you did some launches in Q4, so GIFT City launch, SOBHA Meadows launch. And I think that followed up with launching Gurgaon Karma Lakelands. So if you can help us, how has been the response to these launches? That's my first question.

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : What was the total -- I mean, between the three projects, Meadows, GIFT City, and the Delhi Karma Lakelands, so how much is the total value of write-off inventory leased or INR1,000 crores or if you can help us in 1 million square feet. So that would be helpful. How much of the inventory you have released to the market?

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : So the 20% has been released?

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Okay. And what are the balances for this quarter? So what are the other projects which are looking to launch in Q1? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 17, 2024 / 1:00PM, SOBH.NS - Q4 2024 Sobha Ltd Earnings Call

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Okay. Sir, just one more question on that. So while you are releasing -- I mean, what we have seen in Gurgaon, I think large part of Karma Lakelands will have -- the value of inventory will be high there. So why you have only released 20%? So I just wanted to understand from you, when other developers are launching the entire project, why you're holding back and only releasing 1/5 of the inventory.

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Okay. Just one last question, sir, on this Pune. Now we are seeing the Pune launch. One project has been added in Pune. So also, we see that the Gurgaon overall launch pipeline has increased from almost 5 million to 8 million square feet. So that means we have done some new business development. So if you can help us understand what has been the new business development quarter on quarter, how much area you have added? So that would be helpful.

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : You're saying you're planning to do 9 million square feet of sales -- presales.

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : What is the sales guidance for the full year then? I mean, because you --

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : That's my last question. That's my last question, if you can answer that. So just on the guidance, just on presales this year. So are we in line to cross INR10,000 crores of sales this year?

Question: Pritesh Sheth - Motilal Oswal Securities Limited - Analyst : Yes. Thanks for taking my question. Firstly, I think the launches, you elaborated on launches that you are planning for Q1. But in these 9 million square feet, how would it be split across cities, if you can help on that?

Question: Pritesh Sheth - Motilal Oswal Securities Limited - Analyst : Okay, that's helpful. Secondly, on the land spend, now that we have seen an increase in the land spend in this quarter, what is your estimate on land spend in next year? And what are the projects? And I mean, what are the markets you are targeting in terms of land acquisition?

Question: Pritesh Sheth - Motilal Oswal Securities Limited - Analyst : Roughly INR400 crores of the land spend next year as well?

Question: Pritesh Sheth - Motilal Oswal Securities Limited - Analyst : Okay. One last on margins. So is this INR135 kind of --

Question: Pritesh Sheth - Motilal Oswal Securities Limited - Analyst : Sure. Got it, and one last on margin. So [INR135 billion] of sales yet to be recognized. What kind of margins we should expect from that? When do you see the improvement coming in? Is it from 1Q onwards or a little later in the year?

Question: Pritesh Sheth - Motilal Oswal Securities Limited - Analyst : Sure, that's helpful. Thank you. All the best. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 17, 2024 / 1:00PM, SOBH.NS - Q4 2024 Sobha Ltd Earnings Call

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : Yes. I wanted to ask about the overall rights issue. But before that, I wanted to applaud you that finally, the shareholders have got rewarded. But still, we would like the final P&L to come in. And of course, we are waiting for the margins to catch up. So thank you for the overall efforts and the direction that the company has taken under you, Jagadish. Yes. So on the rights issue, if you can -- why is it taking time? I understand that probably in the coming few weeks, you will do it. But is it that the cash flow of the promoters are tied up to a certain timeline and that is the reason for it or some other internal planning leads to the delay?

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : Okay. And one broad question because you used the word, saying that the land purchase is after the rights issue will be much more or significantly higher than the INR400-crore otherwise planned out of your existing cash flows. On the broader sense of things, how will we prepare that we are probably mid of the cycle already? We are definitely not at the low now. The land prices have readjusted across the country, and in fact, at many places and cities, much more than -- I mean, the jumps have been very significant. With such a large city now coming in, and let's say, if we think about INR2,000 crores of land purchase in the next two years out of the new cash flows, how do we shield for the future problems, which came similar to the past ones after 2008, 2009? I mean, are there enough such opportunities that are easily monetizable, or this will be like long-dated land purchase plans again where we will not be able to monetize them for another 5 or 10 years?

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : So if I can squeeze in one small one, in terms of the presales, I mean -- though you don't guide, you have indicated something like, let's say, INR8,000 crores, INR8,500 crores. But maybe the kind of growth a lot of our peer sets are now facing and how they are -- it's like animal spirits are coming out, where there are not even five players touching INR5,000 crores, INR7,000 crores, INR8,000 crores before a couple of years. And now, there are more than five players touching about INR20,000 crores of presales. Should we not ramp up much faster than probably what you are conservatively guiding? Or we are still not ready with the launches in the near extent? Why can't we go to INR12,000, INR13,000 crores now?

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : Thank you and best of luck.

Question: Kunal Lakhan - CLSA Limited - Analyst : Hi, good evening. Thanks for taking my question. I just wanted to understand how much of presales of INR66 million in this year are from, say, projects on existing land bank versus newer land that we acquired?

Question: Kunal Lakhan - CLSA Limited - Analyst : Yes.

Question: Kunal Lakhan - CLSA Limited - Analyst : Sure. So just a follow-up on that is, so I'm just trying to understand what is, say, a pro forma EBITDA margin on these sales, which are simply from the existing land. And the reason I'm asking is because if you look at our OCF margins, right, even after excluding, say, contractual and manufacturing business are roughly in the range of, say, 20-odd percent. You would expect a lot more, considering that this is legacy land, which you're launching on. So just trying to get my head around it, if you can help.

Question: Kunal Lakhan - CLSA Limited - Analyst : Actually, the question was not on P&L margins. Actually, it was on OCF margin, which is based on what your -- the sales that you're booking today, the OCF divided by -- into collections from real estate only, that is at about 20-odd percent. So I'm just trying to get -- this number should be a lot more higher than 20%.

Question: Kunal Lakhan - CLSA Limited - Analyst : Operating cash flow margin for FY24. (Multiple speakers) Okay. I'm saying that operating cash flow is divided by the cash inflows from real estate, if you exclude the contraction in the manufacturing business, that's around 20%. That's what I was trying to get.

Question: Kunal Lakhan - CLSA Limited - Analyst : Correct.

Question: Kunal Lakhan - CLSA Limited - Analyst : So that is at 20%, which should be technically around 30% subsidy. And today, these are all legacy projects, and there's no land cost associated with these?

Question: Kunal Lakhan - CLSA Limited - Analyst : No worries. Yes, sure. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 17, 2024 / 1:00PM, SOBH.NS - Q4 2024 Sobha Ltd Earnings Call

Question: Parvez Qazi - Nuvama Wealth Management Limited - Analyst : Good evening, and thanks for taking my questions. My first question is, I mean, in the various markets that you operate, where do you believe the demand environment currency is the strongest? And the second question, in FY24, what would have been, let's say, price increase in the various geographies that you [operate in]?

Question: Parvez Qazi - Nuvama Wealth Management Limited - Analyst :

Question: Parvez Qazi - Nuvama Wealth Management Limited - Analyst : Sure. And actually, my question was about the demand environment. In the various markets that you operate, where do you see the demand environment currently leasing from it?

Question: Parvez Qazi - Nuvama Wealth Management Limited - Analyst : Sure, sir. Thanks, and all the best. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 17, 2024 / 1:00PM, SOBH.NS - Q4 2024 Sobha Ltd Earnings Call

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Yes, sir. The first question is on we are ramping up our launches when we are a totally backward integrated. So I just wanted to understand, are you open as we are expanding to your geography when you look at engaging external third-party contractors to do construction for you? So if you can give some color on capacity building there given that -- and also, if you can give some color on how your parent has been doing in Dubai because their scale is INR40,000 crores. They also do -- I mean, do they hire external construction companies, and whether in India also, you are open to hire external contractors?

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Even in Dubai, the parent is like doing it backward. They outsource the entire construction.

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Okay. My second question is on business development. So you did touch upon it last year. You acquired 5 million in Pune. So I assume that it should be about close to about INR5,000 crores of gross development value. And Gurgaon, I think 2 million. The increase in the launches, that should be about INR3,000. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 17, 2024 / 1:00PM, SOBH.NS - Q4 2024 Sobha Ltd Earnings Call So is it right that you've added INR8,000 crores of new business development last year? And if you can also help us understand whether in Bangalore and other geographies, how much you would have added in terms of gross development value. And what is your target for FY25?

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Okay. Just lastly, in Mumbai, sir, any plans there? I mean, you're now reviving the Pune piece, getting into Hyderabad, seeing some traction there. So any plans for Mumbai? How are the engagements here? So how are you seeing Mumbai panning out for you?

Question: Parikshit Kandpal - HDFC Securities Limited - Analyst : Okay, sir. Thank you, sir.

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : In terms of price rise, I think somewhere, someone asked that if you can compare Bangalore's like-to-like price rise over the last one year, what would it be? I mean, of course, it's very difficult. That it is project to project. But is it fair to say that Bangalore would have risen for you by 5% to 10% or more in the price rise? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 17, 2024 / 1:00PM, SOBH.NS - Q4 2024 Sobha Ltd Earnings Call

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : Over 12%, okay. And what would be your outlook on that aspect, be it -- again, same Bangalore like-for-like for the next finite period of, let's say, one to two years. Or now we are -- it looks that we are now saturating on the upper side for now.

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : And one question was on Karma. I believe it's a JV. I mean, there's a partner involved, and the land was purchased or the type of the land -- that happened much back into the history during pre-COVID. So how does the dynamic work? Because the pricing in that area has dramatically shot up. So do we get a chunkier pile of the incremental that would have happened in that area from the time of the lock until date? Or is it a complete pass-through where -- I mean, it's not much favorable to us.

Question: Dhruvesh Sanghvi - Prospero Tree Financial Services LLP - Analyst : Okay, sir, DM project. Thank you. Thanks a lot.