Sobha Limited – Is It a Good Real Estate Company?

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This article has been written by Mayank Zadap for Finmedium Research Desk.

Table of Content

  1. Company Overview
  2. Product and service portfolio
  3. Chairman’s message
  4. Industry overview
  5. The Covid effect
  6. Emerging trends
  7. Risks
  8. Financial analysis

Sobha Limited – Company Overview

Sobha Limited Logo

Sobha Limited is a Bangalore – based real estate company founded in 1995.

It undertakes projects of real estate development as well as manufacturing of interior, concrete products, glazing, and metal works.

The company has also undertaken and executed projects for some corporate houses like Wipro, HCL, Dell, Bosch, etc.

Today, SOBHA has a presence in the residential segment in 10 cities and its overall footprint extends to 27 cities in 14 states across India.

It is the only company in India to have a full-fledged backward integrated model of operations.

Product and Service Portfolio of Sobha Limited

  • Real Estate:

Sobha Ltd undertakes real estate development projects like residential villa, row houses, and luxury apartments and commercial properties.

  • Contractual:

This is a fairly new arm of the company which undertakes contractual services to the corporate entities in matter design, architecture, civil, mechanical.

  • Manufacturing:
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Sobha has 3 manufacturing divisions- Glazing and metal works, interior and concrete products and interior. Sobha uses its backward integration models in this units which makes it a self-reliant company.

Chairman’s Message

Mr Ravi PNC Menon the chairman of sobha ltd marked the 25years of operation in India.

They have completed 5.6 million of  5.86 million square feet of developable area during the financial year.

The chairman also mentions that they will be centralizing the marketing team in India with investment in technological interventions to scale in customer acquisitions and putting down on non- productive expenses.

Last year, the company also organized its first home expo, Click2buy.

Also watch: Mr. Ravi Menon at Sobha Click to buy home expo

Industry Overview

The financial year 2019-20 was a difficult year for the Indian real estate due to challenging regulatory and macro-economic environment, this was compounded by covid-19

Even though the real estate sector is expected to reach US$ 1 trillion by 2030

It is said that by 2025, it will contribute 13% of total countries GDP.

The Covid Effect

The sentiments on the real estate industry in India have been majorly affected by due to covid-19.

The industries day to day operation had come to a halt in the first 3 months of the lockdown.

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With the GDP in negative figures the real estate industry also took a major hit as we saw construction come to a sudden halt, no manpower to continue labour work, and delays in payments.

But six months in lockdown we can see a rise in demand in tier II and III cities. People seem to be taking advantage of the drop in prices and making their investments in real estate across many different metropolitan cities.

Emerging Trends

“Make In India                                                                                            

This year the Make in India campaign saw huge support from the Indian government as well as the people of India.

With several large Chinese corporate out of the way, India had the grounds for commercial and manufacturing infrastructure development.

Sobha’s manufacturing arm stands to benefits from this trend in the market as it offers the raw material and other services that help in the development of commercial infrastructure.                                                                       

“Attractive Prices

With the GDP plunging in negative numbers and the country facing an economic recession the real estate also saw a high dip in prices and an increase in the unsold inventory

This caused the prices of real estate to fall significantly which seem to have attracted the people.

Since this, there has been an increase in demand in the affordable homes segment i.e. homes priced up to 50 lakhs.

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Risks Associated with Sobha Limited

Sobha Limited - Risks

Financial Analysis of Sobha Limited

Sobha Limited - Financial Analysis
  • Sobha Limited sales saw an increase of 9% YoY
  • Income: the total income saw an increase of 8% YoY and 25% in FY18-19
  • A decrease in the expenditure of 4% can be seen as an effect of lockdown and shutting down all operations.
  • EBITA saw a growth of 62% from FY19-20 as compared to 33% in FY18
  • EPS: The earnings per share is 29.70
  • A decline in reserves of the company can be observed from FY18 till last financial year
  • Companies borrowings also consolidated YoY, but the companies cost of borrowing seems High

Shareholding Pattern

Sobha Limited - Shareholding Pattern

Ratio Analysis

Sobha Limited - Ratio Analysis
  • The company has a low return on equity of 10.54% for the last 3 years
  • Promoter holding has decreased over last 3 years by 4%

This article has been written by Mayank Zadap for Finmedium Research Desk.

Read more research reports on Indian companies here.

Cover Image: Business Standard

References:

Annual Report of Sobha Limited: https://www.sobha.com/investor-relations/#downloads

Official Website: https://www.sobha.com/

www.ibef.org

www.99acres.com

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