Sobha Ltd (SOBHA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (ICICI Securities Limited): Ladies and gentlemen, good day, and welcome to the Sobha Limited Q2 FY27 earnings conference call, hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Adidev Chattopadhyay from ICICI Securities Limited. Thank you, and over to you, sir.
Adidev Chattopadhyay (ICICI Securities Limited): Hello, good evening everyone, and I'd like to welcome everyone on the Sobha Limited call today. From the management, as always, we have with us Mr. Jagadish Nangineni, the Managing Director, and Mr. Yogesh Bansal, the Chief Financial Officer. I'd now like to hand over the call to the management for their opening remarks and comments. Over to you. Thank you.
Jagadish Nangineni (Sobha Ltd): Thank you, Adidev. Good evening everyone, and thank you for joining today's call for Q2 and H1 '27 earnings. I extend a warm welcome to all our investors, analysts and stakeholders. I'll briefly highlight our business performance and key developments before I hand over it to our CFO, Yogesh Bansal. H1 '27 was the strongest half-year in Sobha's history with sales value of 5,862 crores, a strong 47.2% year-on-year growth. We sold 3.76 million square feet across 2,260 units with sales volume growing at 32.4%. Sobha's share of sales value also reached a record of 4,874 crores. In Q2 FY27, this is our second-highest quarterly sales of 2,206 crores with a growth of 16% year-on-year with 1.42 million square feet across 828 units. Average price realization improved to 15,522 per square feet in Q2 from 13,648 representing 13.7% growth. For H1, realization increased to 15,604 per square feet compared to 14,028 last year, reflecting our strong product positioning and favorable sales mix. From a city mark-- city performance point of view, Bangalore remained our largest market contributing 3,385 crores, or about 58% of first half of sales, and NCR of about 1,974 crores, which is again 30-- about 34%, Kerala at 357 crores, which is about 6% and remaining cities at 2.5%. Following significant launches in Q1 and Q2, Q2 witnessed healthy sustenance sales, particularly from our launched project in Q1, SOBHA One World and SOBHA Neopolis in Bangalore, and SOBHA Crescent and Aranya in Gurgaon. This demonstrates sustained customer demand beyond the initial launch phase. Overall, we are on track for our guidance and hope
Jagadish Nangineni (Sobha Ltd): exceed in terms of sales for the entire financial year. Coming to new launches, during this quarter, we launched two projects, which is SOBHA Boulevard, which is a plotted development project in Mysore and SOBHA Belleview, a- a high rise and apartment project about 4.3 acres, 298 homes of about 0.83 million square feet in Calicut. Overall, for the ha- for the first half, we launched five projects across Bangalore, Gurgaon, and Calicut aggregating to 7.91 million square feet, with an estimated sales potential of close to 11,200 crores. Our forthcoming launch pipeline remains robust at 20.42 million square feet across 18 projects. We are quite confident of launching at least nine projects exceeding 11 million square feet during the reminder of FY '27. As of September 30, 2026, our unsold inventory stood at approximately 15 million square feet, providing a healthy growth visibility. On execution front, we completed 720 homes covering 1.4 mil- 49 million square feet across nine wings and blocks in Q2. H1 completion stood at 1391 homes covering 2.56 million square feet across 17 wings. Our balance sheet Coming to cash flows and financials briefly, our balance sheet continues to be our key strength. We maintain a net cash position of about 322 crores, with a competitive borrowing cost of 7.75% and remaining fo- focused on sustaining a zero net debt position throughout FY '27. We achieved our highest-ever cash inflows for the for both for the quarter and half year. Q2 collections reached more than 2,000 crores to the at 2,084, and our net operational cash flow was 422 crores. This financial strength supports our future investments while maintaining prudent capital allocation. As of end of this quarter, we had 22,040 crores of revenue yet to be recognized from units already sold. We expect while the quarter level margins appear lower, we continue As we continue to recognize lower-margin projects and as we recognize future projects, which we are on course for completion and handovers, we are quite confident that our margins will significantly improve and we should be able to deliver at least 50% of PAT over 50% growth of PAT over last financial year by the end of this financial year. During Q2, our contracts manufacturing and retail businesses generated about 225 crores, an increase of 31% quarter-on-quarter, and the external order book stood at 540 crores. Our commercial rental portfolio contributed 24 crores in income during the quarter. We expect these businesses to maintain steady performance and with the scope for marginal growth. Also, this in this quarter, as part of our plan to deepen our expertise in terms of execution, we have acquired a small business of fire and safety from Sobha Projects and Trade Limited, SPTL, and this would enable us to execute fire protection services across all our projects as they scale towards their larger volume delivery. With this remarks, I would conclude my opening remarks and then, I will hand over the the forum to our CFO, Mr. Yogesh Bansal, for his remarks on the financial performance.
Yogesh Bansal (Sobha Ltd): Good evening everyone. Let me take you through the key financial highlights of Sobha's performance for the second quarter and first half of FY '27. The first half has been marked by strong operational cash inflows continued investment in project execution and expansion of our development pipeline, while maintaining a healthy balance sheet. We recorded our highest-ever half-yearly operational cash inflow of 4,009 crore, generated positive operational cash flow of 755 crore, and closed September with a net cash position of 322 crore. Coming to cash flows, operational cash inflow for the quarter stood at
Yogesh Bansal (Sobha Ltd): 2,084 crore compared with 2,046 crore in the corresponding quarter last year. Real estate collection contributed 19, 22 crore. Against this operational outflow were 1,642 crore resulting in positive operations cash flow of 442 crore for the qua- quarter. For the first half, operational cash inflow reached 4,009 crore with positive operational cash flow of 755 crore. Construction expenditure continue to be an important area of cash deployment during the quarter. Real estate project related outflow stood at 826 crore, while sales and marketing expenditure was 103 crore. We have made land payment amounted to 617 crore during for Q2 and 987 crore for the first half. In These payments are aligned with our objective of strengthening the development pipe- pipeline, while continuing to fund existing projects. After accounting for land payments, capital expenditure and financing- financing related movement, the overall net cash movement was negative 337 crore for Q2 and negative 486 for H1. Our operation continued to generate positive cash flow while we deployed capital towards existing projects and further growth. Moving to our reported financial performance. Total income for quarter stood at 1,017 crore compared with 1,469 crore in Q2 of the previous year. Real estate revenue contributed 749 crore, while contractual manufacturing and retail operation contributed 225 crore. Quarterly EBITDA stood at 119 crore representing a margin of 11%, while profit after tax was 33 crore. For the first half, total income stood at 2,347 crore. EBITDA was 249 crore and profit PAT was amounting to 84 crore. Our gross debt as on 30th September 2026 stood at 1,505 crore against cash and cash equivalent of 1,827 crore. Our debt to equity ratio stood at negative 0.07, while our average borrowing cost was 7.75%. Maintaining financial discipline remain a key priority. We continue to focus on optimizing borrowing cost, maintaining adequate liquidity and balancing investment in new opportunities with the funding requirement of ongoing projects. Looking ahead, our existing portfolio provide meaningful visibility on future cash flow and revenue. As of 20- as on 30th September, 2026, receivable from sold unit together with sales value of unsold inventories stood at 3- 31,814 crore against estimated remaining project cost of 19,297 crore. This represent projected project level marginal cash flow of 12,517 crore. Including fourth coming project, the projected real estate project level margin of cash flow increased to 19,748 crore. This figure provide visibility on the potential of our existing development portfolio To conclude, our priority remain clear, sus- sustaining operating cash generation, progressing project execution, maintaining balance sheet strength and ensuring disciplined capital allocation. We remain committed to delivering sustainable growth, strengthening financial performance and creating long term value for our shareholders. Thank you. Now we can open We can now take your questions.
Moderator (ICICI Securities Limited): Thank you very much. We will now begin with a question and answer session. Anyone who wishes to ask a question, may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets, while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again to register, please press star and one.
Moderator (ICICI Securities Limited): Your first question comes from the line of Parikshit Kandpal with HDFC Securities. Please go ahead.
Parikshit Kandpal (HDFC Securities): Yeah. Hi. Congratulations on a great pre-sales for the H1. So, our first question is in this quarter, we have seen very strong gross margins, almost 48%, maybe, I think, recent quarter highs. So, is it right to understand now that the legacy low margin projects were behind us? And as the deliveries improve from here on in the coming quarters, and if this level of material, if this level of gross margins maintain, so, we can see a sharp uptick in the EBITDA margins from Q3 onwards?
Jagadish Nangineni (Sobha Ltd): Good evening, Parikshit. The EBITDA margins, as we go forward, like I said, the remaining, the entire revenue to be recognized is close to 22,000 crores. It has got excellent EBITDA margins, and we we believe that we will be able to maintain our cost and be able to deliver those margins as we as we progress forward. So, increasingly, you will definitely see an increased margins, and whether they will it's going to come from Q3, Q4? Yes, they would, and like I mentioned in the opening remarks, as of now, we estimate that from a PAT point of view, this financial year, we will be able to deliver at least 50% of growth over the last financial year. And next from the next financial year, also it's it's going to be even better. So, overall, from a P&L standpoint, we're quite confident, considering what we have done in terms of pre-sales, the sales value that we achieved, and the the pace of development that we are doing, and the and the handovers that the visibility that we have. So, we we believe that it's it's going to be a uptick from from our, from now on. Also in the previous quarters, I had guided that from Q3 onwards this financial year, it should it should start looking better, and we believe we are on we should be on track for that.
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