J C Sharma Md Of Sobha Developers Says: People Getting New Jobs Will Need New Homes

In Bangalore residential market are there signs of a slowdown or price moderation

?

Theres no stagnation of price in residential property of Bangalore as the economy is doing well. Information technology sector, due to muted guidance the expectation has looked depressed, but they have seen healthy growth. As Bangalore continues to absorb the highest amount of leasing commercial property in Indian and the position continues to hold for the past 10-12 years. Today people are getting new jobs in IT/ other sectors as well and they also need new residential property in Bangalore for over a period of times. As stagnation cannot happen in Bangalore in isolation as this market should sustain the growth rates it has achieved over the past couple of years.

Whats the reason behind the robust performance in FY2012?

Real Estate developers in Bangalore have seen headwinds and didnt see expected volumes in FY 2011-12. At Sobha, 2009 onwards the reducing debt and launching of new residential property in Bangalore has been their strategy. They didn't invest in any additional land bank, not even for new diversification and ensured the new launches were at attractive prices.

What are your expectations for FY13 as you have achieved 18% growth in sales volumes for FY12?

As they have continued launching more projects in multiple cities which approach of launching a good volume of projects and keeping prices reasonable in the markets as they operate in gives us the confidence that they should be doing better number than what they achieved in FY12.

Will this share come down?Little over 70%of your sales came from Bangalore.

Bangalore have seen good growth on launch in other cities which would mean the proportion would come down. They did about 2.4 million sq ft in FY12 , out of overall sales of 3.3 mn sq ft which is about 72% in Bangalore. Bangalore to overall volumes has peaked its share. Having scope for more growth in other cities without compromising on growth in Bangalore.

Whats the size of your land bank and your debt to equity ratio targets?

Their land bank is about 2,500 acres across country with about a third in Bangalore. They continues to generate free cash flow every quarter and would look at reducing their debt to equity ratio from 0.6 to 0.5 in current fiscal (2012-13)

In addition:-

Strong quarter, steady year:

Buoyed by new launches residential property in Bangalore the company last week reported volume growth of 31% year-on-year 0.86 mn sq ft for the March quarter. The pre-sale or bookings f Rs. 1,700 crore in 2011-12 were 50% higher compared to 2010-11 and 20% higher than its own guidance of Rs. 1,500 crore. While 2011-12 estimates looked muted as it was largely due to a high 2010-11 base which included income from sale of land. Even so the same is expected to be robust in 2012-13, led by new residential property launches. The company is also expected to generate free cash flow of Rs 100-130 crore in year 2012-13 and the high operating cash flows make it standout in the realty market of Bangalore.

Analysts Mr. Ambit Capital says, the run rate of operating cash flows in 2011-12 was twice the interest cost outflow making Sobha one of the two listed developers generating net cash surplus from ongoing operations without relying on alternative strategies like land sales or low-margin products like affordable housing.

by: lokeshmanu24

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