We have Rs 12K cr of unrecognised revenue: Sobha MD

Jagadish Nangineni, MD, Sobha, says “We have been recognising revenue of the projects which we have launched and sold pre-Covid. And this is clearly a pre-Covid pricing and post-Covid costs, which is the effect that we are seeing as we are recognising those projects which we have completed. Going forward, we have about Rs 12,000 crores of unrecognised revenue, which is coming at a much higher margin. And those we will be able to recognise as we complete those projects in subsequent quarters and years.”

A good set of numbers has been reported by the company. Good operating performance is what we are seeing coming in as well. This is the highest ever quarterly sales for the company in the 10th quarter in a row is Q3. What is the performance that we could expect going forward? For FY25 as well as Q4, what is the guidance in terms of pre-sales as well?

Jagadish Nangineni: Yes, glad that we have done so far very well. And like you said, we are in the 10th straight quarter of highest ever quarterly sales. We have huge sectoral tailwinds that have helped us. And particularly in the last couple of years, if you have seen given the current strong demand environment from the customers, whoever has had the supply has been the winner. And hence, going forward as well, we have a very strong pipeline of launches. And those launches should help us achieve better sales growth from what we have seen.

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I would, you know, look more on a yearly basis.

Jagadish Nangineni: For this quarter as well as last year, we have done about Rs 5,200 crore of sales. And this year, on an overall basis, we should be able to achieve at least 20% of growth on that. And for FY25, the plans are still on and if the launches come out really in time, then we should hope to see at least what we have done or if not, there is growth. The plans are still being worked out and we will be able to sort of give the details in the coming months.

I want to know a little bit about your margin performance. It is just over 10%. The industry margins are slightly higher. Do you have a strategy to take them higher going forward? Is there a particular reason why your margins are under pressure right now?

Jagadish Nangineni: Absolutely. We have been recognising revenue of the projects which we have launched and sold pre-Covid. And this is clearly a pre-Covid pricing and post-Covid costs, which is the effect that we are seeing as we are recognising those projects which we have completed. Going forward, we have about Rs 12,000 crores of unrecognised revenue, which is coming at a much higher margin. And those we will be able to recognise as we complete those projects in subsequent quarters and years.

How is your overseas portfolio doing? Has it started contributing very meaningfully to overall numbers or not just? Where would you like to see it go?

Jagadish Nangineni: Well, our Dubai business is from the same promoter, but that is not part of the listed entity in India.

At a time when rest of the real estate players have been reporting a very good growth in terms of the revenue, margin performance, as well as profitability, on a year-on-year basis, your numbers are a bit lower. And as you pointed out, in this kind of market, whoever has the supply is the key winner. Has there been a delay in your supply pipeline?

Jagadish Nangineni: Just to clarify, in real estate, the revenue is recognized as we complete the projects. So, the projects that we are completing are the ones which we launched and sold pre-Covid. And that is the reason why the revenue and particularly the margins are under pressure. The revenue, again, we would start seeing significant uptick in the revenue as we increase our pace of deliveries, which we would increase in the subsequent quarters. And those coming in at a higher margin will also increase the margin percentages as well.

So while you are seeing that a lot of other real estate developers are seeing good uptick in the revenue, probably you are referring to both to the pre-sales, which we also recorded quite significant growth. In fact, last financial year, we did 5200 crores and this financial year, in the first nine months, we have already touched about a similar number. We are looking forward to a good growth this financial year as well.



The only worry I had was because of your unsold inventory jumping up quite materially on a quarter on quarter basis to 5.6 million square feet versus 3.5. Is there a bit of a delay because other players are reporting inventory being sold out in a couple of days of the launch itself, But I am guessing it’s a bit of a timing issue. But if you can comment quickly on that and as well as the debt picture, because given the robust pipeline that you have, is debt expected to go up materially? Should we be prepared for that?


Jagadish Nangineni: On the debt part, we have a very high focus on cash flow management and for the 13th straight quarter, we have generated positive net cash flow and our current net debt to equity has come down to 0.54 because our focus of cash flow management, we would continue to have that focus. And even during the growth phase, we would continue to generate positive cash flow is what we expect to do.

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