Sobha soars 11% on fund raising plan; stock has zoomed 226% in one year

The board is scheduled to meet on Monday, November 8, 2021 to consider and approve the proposal of issue of unlisted secured redeemable non-convertible debentures on a private placement basis

Shares of Sobha soared 11 per cent to Rs 962.50 on the BSE in Wednesday’s intra-day trade amid heavy volumes after the real estate developer announced fund raising plan through issue of unlisted secured redeemable non-convertible debentures on a private placement basis. In past four trading sessions, the stock has rallied 27 per cent from Rs 759 on October 28, 2021.

At 02:17 pm; the stock was trading 10 per cent higher at Rs 950, as compared to 0.35 per cent decline in the S&P BSE Sensex. The trading volumes at the counter jumped over seven-fold today. A combined 4.3 million shares had changed hands on the NSE and BSE. In past one year, the market price of Sobha zoomed 226 per cent, against 48 per cent rally in the Sensex.

A meeting of the board of directors of the company is scheduled on Monday, November 8, 2021 to consider financial results of the company for the quarter and half year ended September 30, 2021. The board will also consider and approve the proposal of issue of unlisted secured redeemable non-convertible debentures on a private placement basis, Sobha said in exchange filing.

For July-September quarter (Q2FY22), Sobha achieved best ever sales volume of 1.35 million sq ft valued at Rs 1,030.2 crore. The company had reported total sales value of Rs 682.90 crore in Q1FY22 and Rs 689.90 crore in Q2FY21.

The structural changes in real estate sector has created never before opportunities for the established, financially strong and multi-location-based developers to capitalise on the gradual but stable pickup in housing demand, Sobha said in its Q2FY22 operational update.

The consensus of most of the experts in this sector remain that the work from home, low interest rates, increased affordability, significant pickup in the prospects of IT sector and increase in salaries etc. and focus of banking sector to support home buyers augur well for the sustainability in the demand, the company said.

“Steady reduction in unsold inventory and demand revival are lifting the housing market out of the down cycle. Prices are nosing up. This along with potential market share gains places organized developers in a sweet spot,” it added.

Analyst at ICICI Securities believe that the company’s Q2FY22 sales performance is commendable considering the second Covid wave impact across India, and expect sales momentum to sustain heading into H2FY22E as well on the back of new launches.

Listed developers including Sobha have lined up a number of launches across Tier I cities. Low mortgage rates, stable property prices and robust hiring outlook for IT/ITeS and financial services, especially in South India and continued Work-from-Home is expected to support residential housing demand in FY23-24E as well.

With developers keeping pricing discipline with price hikes of 4-5 per cent on a like-to-like basis in new phases of ongoing projects, we expect single digit price hikes annually to protect EBITDA margins of South based developers which range between 20-25 per cent, the brokerage firm said post company’s Q2 business update.