Sobha Limited — Q1 FY26 earnings call

Call held 26 Jul 2025

Management summary

Sobha reported its highest-ever real estate sales in Q1 FY26, crossing INR2,000 crores, driven by successful new launches like Sobha Aurum. Despite strong operational performance and cash flow generation, reported margins were low due to delays in obtaining OCs for 5 Bangalore projects, which would have added over INR650 crores in revenue and INR150 crores in PBT. Management expressed confidence in margin improvement in subsequent quarters and outlined a robust launch pipeline for the coming year.

Highlights

  • Highest ever real estate sales of INR2,078.8 crores in Q1 FY26.

  • Total collections grew 15% YoY to INR1,778 crores, with real estate collections at INR1,599 crores.

  • Net operational cash flow was INR395 crores, resulting in net cash flow of INR56.8 crores after land and capex payments.

  • Q1 FY26 total income was INR901 crores, with EBITDA of INR73 crores (8.1% margin) and PAT of INR13.6 crores (1.5% margin).

  • Project-level EBITDA margin target of 33% for new projects.

  • Launch pipeline of another 8 million square feet expected in the next 9 months, with a potential sales value of INR10,000-12,000 crores.

  • Total balance revenue to be recognized from already sold units stands at INR17,245 crores as of June 30, 2025.

  • Delivery target of 4 million to 4.5 million square feet for the balance 9 months of FY26.

Concerns

  • Project approval delays (specifically OCs for Bangalore projects)

Key financials

  1. Real Estate Sales Value ₹2,078.8 Cr
  2. Total Collections ₹1,778 Cr +15%YoY
  3. Net Operational Cash Flow ₹395 Cr
  4. Gross Debt ₹1,019 Cr
  5. Cash Balance ₹1,706 Cr
  6. Total Income ₹901 Cr
  7. EBITDA ₹73 Cr
  8. EBITDA Margin 8.1%
  9. PAT ₹13.6 Cr
  10. PAT Margin 1.5%
  11. Sales Volume 1.44 million sq ft
  12. Average Realization ₹14,395/sq ft
  13. Delivery Volume 1.07 million sq ft

What they filed

Q1 FY27: revenue up 50.0%, net profit up 264.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue934 1,224 1,241 852 1,408 +51%943 −23%1,988 +60%1,278 +50%
EBITDA77 67 94 24 96 +25%39 −42%152 +62%78 +225%
Net profit26 22 41 14 73 +181%15 −32%92 +124%51 +264%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Income
₹852 Cr Total
  • Real Estate ₹690 Cr 81.0%
  • Contracts and Manufacturing ₹162 Cr 19.0%

Guidance & targets

Pre-sales

  • Pre-sales Growth Pre-sales · FY26 · High confidence 30% increase
    We had guided for 30% increase over last financial year, Duaji, and with an expectation that we would go towards a INR10,000 crores sale in the subsequent year.

    — Jagadish Nangineni, Managing Director

  • Pre-sales Value Pre-sales · subsequent year (FY27) · Medium confidence INR10,000 crores

    — Jagadish Nangineni, Managing Director

Launches

  • Launch Pipeline Area Launches · next 9 months · High confidence 8 million square feet
    So we are hoping that we'll do another 8 million square feet in the next 9 months.

    — Jagadish Nangineni, Managing Director

  • Launch Pipeline Value Launches · next 9 months · Medium confidence INR10,000-12,000 crores
    Well, the total value of the projects at an average of at least INR12,000 crores should be about close to INR10,000 crores.

    — Jagadish Nangineni, Managing Director

Sales Mix

  • Sales from New Launches Sales Mix · this year (FY26) · High confidence 50%
    But overall, we expect that we should be doing roughly about 50% of our sales from new launches in this year and 50% from the earlier inventory that we had.

    — Jagadish Nangineni, Managing Director

Delivery

  • Delivery Volume Delivery · balance 9 months (FY26) · High confidence 4 million to 4.5 million square feet
    we are on track to complete about 4 million to 4.5 million square feet for the balance 9 months.

    — Jagadish Nangineni, Managing Director

Profitability

  • Project-level EBITDA Margin Profitability · new projects · High confidence 33%
    we have at the project level, the EBITDA margin is at 33%.

    — Jagadish Nangineni, Managing Director

Cash Flow

  • Future Cash Inflow (Completed/Ongoing) Cash Flow · next 4 to 5 years · High confidence INR24,752 crores
    From all our completed and ongoing projects, we expect total of INR24,752 crores of future cash inflow.

    — Yogesh Bansal, Chief Financial Officer

  • Additional Marginal Cash Flow (Forthcoming Projects) Cash Flow · next 5 to 6 years · High confidence INR7,000 crores
    Additionally, we shall generate another INR7,000 crores of marginal cash flow in next 5 to 6 years from forthcoming project of 18.38 million square feet, which will be launched in the next 6 to 8 quarters.

    — Yogesh Bansal, Chief Financial Officer

Revenue Recognition

  • Quarterly Revenue Recognition (from sold units) Revenue Recognition · next 4 years (quarterly) · High confidence INR1,000-1,100 crores
    So if you have, if we have to recognize in the next 4 years, these revenues, it would be roughly about INR1,000 crores to INR1,100 crores.

    — Jagadish Nangineni, Managing Director

Tax

  • Income Tax Payment Tax · this year · High confidence INR200 crores
    So that will, on an average, we are expecting that INR200 crores will pay income tax, including TDS this year.

    — Yogesh Bansal, Chief Financial Officer

Risks & concerns

  • Project approval delays (specifically OCs for Bangalore projects)

    high

    Delay in obtaining OCs for 5 Bangalore projects led to non-recognition of >INR650 crores revenue and >INR150 crores PBT in Q1 FY26.

    Management acknowledged

  • P&L pressure from higher sales and marketing expenses

    medium

    With higher sales value, sales and marketing expenses increase, which, under completion-based revenue recognition, can appear detrimental to P&L in the short term for the current financial year.

    Management acknowledged

Q&A highlights

3 direct
Impact of delayed Occupancy Certificates (OCs) on Q1 margins and PBT Direct
If we had included those, we could recognize additional close over INR650 crores with regard to these projects. And probably the net that we could have recognized, net in the sense, PBT would be over INR150 crores.

Directly addresses the primary reason for low reported margins and quantifies the potential improvement, providing clarity on the underlying operational performance.

Asked by Puneet from HSBC

Strategy for expanding the pipeline in Noida/Greater Noida Direct
We are exploring all opportunities. Particularly Noida, Greater Noida, majority of the lands are with the government and/or someone has taken the land to the government. So that is one avenue of which do have private lands as well. So we are surely looking at other opportunities also.

Reveals the company's approach to land acquisition in key growth markets, balancing government auctions with private opportunities, and indicates a proactive stance on pipeline expansion.

Asked by Pritesh Sheth from Axis Capital

Deployment of significant cash balance, including RERA funds, and rationale for recent land purchases Direct
Majority of them are in RERA accounts, which are, which would get available for deployment as and when we progress on the projects... Some of the cash outflow that we are seeing is not necessarily in the new land that we are acquiring. But part of it is being, majority of that part is being deployed for the earlier land procurements and to consolidate those lands or whatever deals that we have done in the past.

Clarifies the nature of the cash balance (RERA funds) and explains that recent land-related expenditures are largely for consolidating existing land bank rather than aggressive new acquisitions, addressing concerns about debt-funded growth.

Asked by Puneet from HSBC

2 min read 5 chapters

Detailed narrative

Record Sales and Robust Launch Pipeline in Q1 FY26

Sobha achieved its highest-ever real estate sales of INR2,078.8 crores in Q1 FY26, driven by strong demand for new projects like Sobha Aurum in Greater Noida. The company also reported total collections of INR1,778 crores, a 15% increase year-on-year, with real estate contributing INR1,599 crores. Management guided for a 30% increase in pre-sales for FY26, aiming towards INR10,000 crores in the subsequent year, supported by a pipeline of another 8 million square feet to be launched in the next 9 months with a potential sales value of INR10,000-12,000 crores.

Q1 Margin Impacted by Delayed OCs; Expect Improvement

Despite strong operational performance, Q1 FY26 reported EBITDA was INR73 crores (8.1% margin) and PAT was INR13.6 crores (1.5% margin). This was primarily due to delays in obtaining Occupancy Certificates (OCs) for 5 Bangalore projects, which prevented the recognition of over INR650 crores in revenue and INR150 crores in PBT. Management expressed confidence in significant margin improvement in subsequent quarters as these completed projects are recognized, reiterating a project-level EBITDA margin target of 33% for new projects.

Healthy Cash Flow Generation and Debt Management

Sobha generated a net operational cash flow of INR395 crores in Q1 FY26, leading to a net cash flow of INR56.8 crores after finance, land, and capex-related payments. The company ended the quarter with gross debt of INR1,019 crores and a cash balance of INR1,706 crores, with INR1,300 crores held in RERA accounts. Management highlighted a strong financial footing with robust future cash flow visibility, including INR24,752 crores from ongoing projects and an additional INR7,000 crores from forthcoming projects.

Strategic Market Focus and Expansion

Sobha's priority markets for business development remain Bangalore and NCR, with a long-term focus on Mumbai. The company is also exploring opportunistic land investments in Kerala, Hyderabad, Chennai, and Pune. In Mumbai, Sobha has launched a smaller project (Phase 1 of a >300,000 sq ft development) as a learning experience, with plans to pursue larger opportunities as understanding of the market deepens. The demand environment across all operational markets, including Gurgaon and Kerala, remains stable.

Operational Deliveries and Unrecognized Revenue Backlog

In Q1 FY26, Sobha completed the delivery of 1.07 million square feet, comprising 594 homes, and is on track to deliver 4 million to 4.5 million square feet for the full financial year. The company holds a substantial backlog of INR17,245 crores in total balance revenue to be recognized from already sold units as of June 30, 2025. This unrecognized revenue is expected to translate into approximately INR1,000-1,100 crores quarterly over the next four years, providing strong revenue visibility.

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