Sobha jumps 10% on rights issue plan; stock zooms 48% thus far in Jan

The board of directors of Sobha are scheduled to meed on Monday, January 22, 2024, to consider the proposal of fund raising by way of equity shares through rights issue.

Shares of the real estate developer Sobha moved higher by 10 per cent to Rs 1,455.65 on the BSE in Thursday’s intra-day trade after the company announced fund raising plan via rights issue. In comparison, the S&P BSE Sensex was down 0.34 per cent at 71,265 at 11:54 AM.

Thus far in the month of January, the share price of Sobha has zoomed 48 per cent. While, since November 2023 the stock has more-than-doubled or skyrocketed 104 per cent.

In an exchange filing Sobha on Wednesday after market hours said that a meeting of the board of directors of the company was scheduled for January 22, 2024, to consider, inter alia, the proposal of fund raising by way of equity shares through rights issue.

Meanwhile, Sobha had logged its best-ever quarterly sales in December quarter (Q3FY24) at Rs 1,952 crore. The company launched two new projects during the quarter with a total saleable area of 3.84 million sq. ft. Cash flows for the quarter remained strong and has resulted in further net debt reduction, the company had said in its quarterly business update.

The management said demand for residential real estate, in this positive economic environment has been at a historic high. Heightened economic activity is driving new job creation, more so in the urban areas, leading to significant increase in migrating population mix across the company’s main cities of operations.

A combination of optimism, increased income levels, new job creation, migration and interest rate stability has supported a steady demand scenario, witnessed in the company’s improving sales performance quarter on quarter, it added.

The Reserve Bank of India’s (RBI’s) revision of FY24 GDP growth outlook to 7.0 per cent from 6.5 per cent earlier validates the confidence. Despite high growth, inflation has been contained, enabling RBI to keep the interest rates unchanged since February 2023, which augured well for the real estate sector, the management said. Thus far in the financial year 2023-24, the share price of Sobha has appreciated by 238 per cent.

After underperforming its listed peers on pre-sales growth over FY21-23, the brokerage firm Motilal Oswal Financial Services believes Sobha is set to outperform in terms of growth given its focus on unlocking its vast land reserve and exploring external growth opportunities through its healthy balance sheet.

The outperformance is also expected to be driven by improvements in profitability. Further, visibility in the monetization of some of its large land parcels in Bengaluru will lead to a re-rating in its implied land valuation. The stock, however, is trading above its target price of Rs 1,400 per share.