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Sobha Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Sobha reported a strong 76% YoY revenue growth in Q3 FY25, driven by real estate sales, though margins were impacted by one-time losses in the contractual segment. The company achieved ₹1,388 crores in real estate sales for the quarter and ₹4,440 crores for 9M FY25. Management highlighted a robust launch pipeline and significant revenue visibility from already sold units, while also addressing a revised, more conservative presales target for FY25 and plans for debt reduction using rights issue proceeds.

Highlights

Total real estate sales value for Q3 FY25 stood at ₹1,388 crores.
Total real estate sales value for 9 months FY25 reached ₹4,440 crores.
Q3 FY25 total revenue rose by 76% year-on-year to ₹1,256 crores.
9 months FY25 EBITDA was ₹294 crores with a margin of 10.2%.
9 months FY25 PAT improved by 28% year-on-year to ₹53.8 crores.
Unsold inventory as of December 31, 2024, was 8.92 million square feet, totaling a sales value of about ₹14,000 crores.
The company has a strong residential pipeline of 21 million square feet and a commercial pipeline of 1.19 million square feet.
Net debt for Q3 FY25 was ₹456 crores, with a net debt to equity ratio of 0.13.

Key financials

3 periods

Headline

Total Revenue
₹1,256 Cr
YoY +76%

Q3 FY25

PAT
₹21.7 Cr
Net Debt
₹456 Cr
Net Debt to Equity
0.13
Real Estate Sales Value
₹1,388 Cr

9M FY25

PAT
₹53.8 Cr
YoY +28%
EBITDA
₹294 Cr
EBITDA Margin
10.2%
Real Estate Sales Value
₹4,440 Cr
Operational Cash Inflow
₹4,399 Cr
YoY +2%

What they filed

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

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	934	1,224	1,241	852	1,408 +51%	943 −23%	1,988 +60%	1,278 +50%
Expenses	856	1,157	1,147	828	1,312	905	1,836	1,201
EBITDA	77	67	94	24	96 +25%	39 −42%	152 +62%	78 +225%
Margin	8%	5%	8%	3%	7%	4%	8%	6%
Other income	32	33	30	49	62	40	42	52
Interest	49	47	45	31	32	30	44	32
Depreciation	23	23	23	24	26	28	28	28
Profit before tax	36	29	56	19	99 +175%	21 −28%	122 +118%	69 +263%
Tax rate	28%	26%	27%	27%	27%	25%	25%	26%
Net profit	26	22	41	14	73 +181%	15 −32%	92 +124%	51 +264%
EPS	2.44	2.03	3.82	1.27	6.78	1.44	8.59	4.76

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 Revenue (9M FY25)

₹2,798 Cr Total

Real Estate ₹2,319 Cr 82.9%
Contracts & Manufacturing ₹479 Cr 17.1%

Guidance & targets

Volume

FY25 Launch Pipeline Volume · FY25 · Medium confidence about 9 million square feet

that can take the yearly launches to about 9 million square feet.

— Jagadish Nangineni
Launch Pipeline (Residential) Volume · next four to six quarters · High confidence 21 million square feet

We have a very strong residential pipeline of 21 million square feet across 19 projects in 10 cities

— Jagadish Nangineni
Launch Pipeline (Commercial) Volume · next four to six quarters · High confidence 1.19 million square feet

and a commercial pipeline of about 1.19 million square feet or four projects across our operational cities.

— Jagadish Nangineni
New Land Tied Up (Potential GDV) Volume · from new land tied up · Medium confidence ₹6,000 crores

roughly if you look at from a new land that we have tied up, that would be roughly about 5 million to 5.5 million square feet where we can develop new and probably at a value of, even if you take about 12,000, it's about ₹6,000 crores what we can achieve in sales from that.

— Jagadish Nangineni

Revenue

Revenue yet to be recognized Revenue · next 3, 3.5 to 4 years · High confidence ₹15,000 crores

the real estate revenue yet to be recognized from already sold units stands at about ₹15,000 crores. This revenue has profit before tax margin of about 28% at the project level.

— Jagadish Nangineni
Contracts & Manufacturing Yearly Revenue Revenue · yearly basis · Medium confidence ₹450-500 crores

and we might stabilize at a cumulative revenue of about 450 crores to ₹500 crores on a yearly basis with gross margins of over net 15%.

— Jagadish Nangineni

Profitability

PBT Margin (Project Level) Profitability · over the period of revenue recognition · High confidence 28%

This revenue has profit before tax margin of about 28% at the project level.

— Jagadish Nangineni
PBT Level Margin (Corporate overhead + interest + depreciation removed) Profitability · steady state going forward · Medium confidence 15-18%

So Kunal, if corporate overhead plus interest plus depreciation, will be removed, so with the PBT level, we should be within range of 15% to 18% steady state going forward.

— Yogesh Bansal

Debt

Debt Reduction from Rights Issue Debt · from proceeds of the rights issue · High confidence ₹900 crores

From the proceeds of the rights issue, we are planning to reduce debt of close to ₹900 crores.

— Jagadish Nangineni
Comfortable Absolute Debt Amount Debt · near to medium term · Medium confidence ₹1,200 crores to ₹1,500 crores

What we currently in the near, or, let's say, medium term, what we are comfortable is between ₹1,200 crores to ₹1,500 crores.

— Jagadish Nangineni

Capex

Land Acquisition & General Corporate Purposes from Rights Issue Capex · balance from rights issue · High confidence ₹1,100 crores

And the balance ₹1,100 crores for the land acquisition and general corporate purposes?

— Jagadish Nangineni

Pre-sales

FY25 Presales Target Pre-sales · FY25 · Medium confidence at least what we have done last financial year

Previously ₹8,500 crores → at least what we have done last financial year

we are currently aiming at reaching at least what we have done last financial year in terms of presales.

— Jagadish Nangineni

Cost

Fixed Cost Increase Cost · for ₹8,000-10,000 crores sales · High confidence not significant

we don't think that we are, we would be incurring significant increase in the fixed cost. It would be largely the inflationary, because majority are currently, we are already structured towards aiming at a sale value of about close to ₹8,000 crores to ₹10,000 crores. So I we don't envisage significant increases in the fixed cost.

— Jagadish Nangineni

Risks & concerns

Slower sales pace in high-ticket size projects
medium

Management noted 'some slower pace of sales in some of our projects where the ticket size is large'.

Management acknowledged
One-time losses in contractual business impacting margins
medium

Additional expenses and losses from descoped civil and glazing contracts impacted Q3 margins, stated as a 'onetime scenario'.

Management acknowledged
Project approval delays impacting launch timelines
medium

Delays in project approvals, specifically for Townpark, contributed to the revised presales guidance.

Management acknowledged

Q&A highlights

3 direct

FY25 Presales Guidance Revision Direct

Puneet, it's true that the first 9 months, we did about 4,440 crores, and our guidance is about, was much higher. But because of the delay even in the Townpark... we are currently aiming at reaching at least what we have done last financial year in terms of presales.

Management acknowledged a downward revision of the annual presales target for FY25, indicating challenges in meeting the initial guidance due to project delays and slower sales in some high-ticket projects.

Asked by Puneet from HSBC

Q3 Margin Decline Direct

we have actively descoped a couple of projects of our contractual projects... And both these contracts, we had to recognize some of the losses towards the end of, as the end of the project has been completed last quarter, in the last period. And that as a onetime items have reduced the margins.

Management explained the reason for lower Q3 margins, attributing it to one-time losses from descoped contractual projects and higher costs in some real estate JV projects, suggesting it's not a recurring issue.

Asked by Puneet from HSBC

Launch vs. Sales Discrepancy Direct

Opening of new phases is not an issue for us. It is the reason why we are opening in phases is only based on how we're pacing out our sales. Because we have obtained RERA for all the entire project, so we can choose to launch the phases much faster.

Management clarified their strategy of phased project launches based on sales velocity, explaining that while large projects are announced, inventory is released incrementally, which can affect immediate presales figures but is a controlled approach.

Asked by Parikshit Kandpal from HDFC Securities

2 min read 6 chapters

Detailed narrative

Q3 FY25 Operational Performance and Sales Highlights

Sobha reported a total real estate sales value of ₹1,388 crores in Q3 FY25, with Bangalore contributing 72.1%. For the first nine months of FY25, total real estate sales reached ₹4,440 crores. The company launched one new project, Sobha Ayana in Bangalore, with a salable area of 1.13 million square feet during Q3. Overall launch area for 9M FY25 stands at 4.66 million square feet across six projects in four cities.

Financial Performance and Margin Impact

Q3 FY25 total revenue increased by 76% year-on-year to ₹1,256 crores. For 9M FY25, total revenue was ₹2,892 crores, with real estate contributing 80.2%. EBITDA for 9M FY25 stood at ₹294 crores, with a margin of 10.2%. PAT for 9M FY25 improved by 28% to ₹53.8 crores, while Q3 FY25 PAT was ₹21.7 crores. Management noted that Q3 margins were impacted by one-time losses from descoped contractual projects and higher costs in some real estate JV projects, which they expect to be a 'onetime scenario'.

Launch Pipeline and Future Growth Strategy

Sobha has a robust residential pipeline of 21 million square feet across 19 projects in 10 cities and a commercial pipeline of 1.19 million square feet across four projects, all planned for launch in the next four to six quarters. The company aims to launch approximately 9 million square feet in FY25, with RERA approvals already secured for 3.67 million square feet in projects like Sobha Townpark, Madison Heights, and Hampton. New markets like Greater Noida, Hosur, and Mumbai are targeted for expansion in the next financial year, increasing presence to 15 cities.

Debt Management and Capital Allocation

Net debt for Q3 FY25 was ₹456 crores, with a net debt to equity ratio of 0.13. The company received ₹806 crores from its rights issue in January. Management plans to use approximately ₹900 crores from the rights issue proceeds for debt reduction, with the balance ₹1,100 crores allocated for land acquisition and general corporate purposes. The comfortable absolute debt level for the near to medium term is targeted between ₹1,200 crores and ₹1,500 crores.

Inventory and Revenue Recognition Visibility

As of December 31, 2024, unsold inventory stood at 8.92 million square feet, representing a sales value of about ₹14,000 crores. Additionally, revenue yet to be recognized from already sold units is approximately ₹15,000 crores, which is expected to be recognized over the next 3 to 4 years, translating to roughly ₹1,000 crores per quarter. This unrecognized revenue carries a project-level PBT margin of about 28%.

Geographic Diversification and Sales Velocity

Sobha is present in over 10 cities, with Bangalore contributing 72.1% to Q3 FY25 sales. Management noted strong demand in Bangalore and NCR, but acknowledged slower sales in some projects with higher ticket sizes. The average realization per square foot has increased from ₹7,500 five to six years ago to nearly ₹14,000 currently, driven by both general market price increases and a shift in inventory mix across locations like NCR, Gurgaon, Kerala, and Hyderabad.

This is an AI-generated summary of a publicly available earnings call transcript.

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