Porinju Veliyath & Dolly Khanna Forum

Sobha Ltd (SDL) delivered a sharp sequential recovery in Q4FY25 with presales of INR 18.4bn (+24.4% QoQ, +18.1% YoY) c.50% from its new launches, supported by robust traction in Bengaluru (INR 14.1bn; ~77% of sales), alongside improved performance in Gurgaon, Hyderabad, Tamil Nadu, and Kerala. SDL’s average realization for FY25 stood at INR 13,412/sf (+22.8% YoY), aided by a rising share of own land projects (~79% of FY25 sales). While Sobha missed its FY25 pre-sales guidance, this was primarily due to approval delays and slower-than-expected sales conversion in high ticket size products in Gurugram/Bengaluru. Steady traction was seen across other launches with ~45-50% sales velocity within 90days of launch. FY26 will be a year of major transition with (1) new geography addition in Noida, Pune and MMR (combined GDV of INR 40bn launches during FY26); (2) smaller single phases multiple launches with GDV of up to INR 15bn each; (3) improving approval scenario; and (4) robust net cash of INR 7bn to be topped up with INR 15bn+ annual CFO. Depletion of loss-making contractual order book and improving premium projects in revenue mix will result in significant profitability improvement. We expect presales momentum to sustain in the INR 90–100bn range for FY26, with upside possible if launch timelines and approval cycles further improve. SDL has laid out plans to expand in the MMR and Noida market from FY26, ramp up its presence in Pune and Gurugram, and consolidate in Bengaluru. Valuation comfort, robust FCF generation, and likely deleveraging are key near-term triggers for further rerating. Given the robust launch pipeline, strong balance sheet, and stable cash flows, we maintain BUY on SDL with a TP of INR 2,459/sh.