The real estate market is still struggling to come out of a downturn even though some companies are making good money in some pockets. Sobha Developers has clocked mixed but stable Q4 earnings. The company also plans buy back of shares at a price 8-10 per cent higher than market price as part of efforts to reward shareholders. Speaking to Bloomberg TV India, Sobha Developers Vice-Chairman and Managing Director JC Sharma says the company has been able to post good revenues even though net profit was lower due to one-off provision for taxes and CSR. The company believes that the real estate market in Kerala, Delhi NCR, Chennai and Pune should start doing better in times to come, he said.
What key factors drove the quarter?
The key highlights has been that on a top-line basis it has been a better quarter as compared with the preceding quarter as well as last year’s same quarter. As far as margins are concerned, at EBITDA level as well as the profit after tax (PAT) level, it is better than the last quarter but lower than preceding quarter last year. We believe that prima facie this year had higher number of sales, higher quantum of revenue recollection and good cash flow, which ensured that we were able to meet all our costs and reduce our debt. As far as the PAT is concerned, it is lower due to one-time provision of the extra ₹20 crore in a year for tax purpose only. There is one more item last year: we were allowed about ₹13.6 crore of CSR-related costs to be charged to reserves and surplus account. This year we have to book it in our P&L account. But for these things, the margins would also have been better this quarter.
Talking about realisations, how has the markets in Bengaluru panned out this time around?
We are getting about 75-80 per cent of total sales from Bengaluru. We believe that the real estate market in Kerala, Delhi NCR, Chennai and Pune should start doing better in times to come. But in the current environment, when the markets still remain difficult for most of the real estate companies in almost all the cities, Bengaluru continues to perform relatively better though there is also some stress. Bengaluru will continue to contribute significant amount of new sales and revenue recognition. But this year the NCR market should perform credibly well and significantly better with new launches. And the same logic applies to the Kochi market as well.
What about the new launches and the revenue recognition from the older projects that have been launched in the previous quarter?
From the new launches you cannot immediately get revenue recognition because it requires certain pre-conditions to be met. You should be able to sell 25 per cent, incur 25 per cent of construction cost and you should be able to collect 10 per cent of booking money from the customers. So in case of new launches, it will not immediately get linked to the revenue recognition.
Can you tell us about the buyback plan that has been approved? What has been the quantum and timeline for the issue?
This year, we intend to buy 2.32 per cent of the total equity through tender. The price the Board has decided is ₹330, which is roughly 8-10 per cent higher than the current market price. We believe that the company has enough reserve and surplus. This year the company generated also ₹103 crore of net profit and ₹517 crore of EBITDA for the year as a whole. With the book value of ₹250 with a good land bank and with 17 million square feet of inventory, the company wishes to give back shareholders the price, which is higher than the current price.
Credit The Hindu Business Line