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Edited Transcript of SOBHA.NSE earnings conference call or presentation 20-May-19 10:30am GMT

Q4 2019 Sobha Ltd Earnings Call

Bangalore, Karnataka Jun 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Sobha Ltd earnings conference call or presentation Monday, May 20, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jagdish Chandra Sharma

Sobha Limited - Vice Chairman & MD

* Subhash Mohan Bhatt

Sobha Limited - Head of Finance

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Conference Call Participants

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* Abhinav Sinha

CLSA Limited, Research Division - Research Analyst

* Abhishek Anand

JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research

* Abhishek Bhandari

Macquarie Research - Analyst

* Dhaval Somaiya

PhillipCapital (India) Pvt. Ltd., Research Division - Research Associate

* Dhruvesh Anil Sanghvi

Prospero Tree Financial Services LLP - Founder & Research Analyst

* Nimit M. Gala

Edelweiss Securities Ltd., Research Division - Research Analyst

* Prem Khurana

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Rahul Thakkar

* Sameer Baisiwala

Morgan Stanley, Research Division - Executive Director

* Sandeep Mathew

SBICAP Securities Ltd., Research Division - Analyst

* Swagato Sourya Ghosh

Franklin Templeton Asset Management (India) Private Limited, Research Division

* Vinit Manek

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Sobha Limited Q4 FY '19 Earnings Conference Call hosted by SBICAP Securities Private Ltd. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Sandeep Mathew from SBICAP Securities. Thank you, and over to you.

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Sandeep Mathew, SBICAP Securities Ltd., Research Division - Analyst [2]

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A very good evening, everyone. We're very happy to have with us today, the management of Sobha Limited, represented by Mr. J.C. Sharma, Vice Chairman and Managing Director; Mr. Subhash Bhat, Chief Financial Officer; Mr. Ramesh Babu, VP Finance; Mr. Vighneshwar Bhat, Company Secretary and Compliance Officer; Mr. Tejus Singh, Investor Relations and Finance.

I now request Mr. J.C. Sharma for to give us an overview on the results. Thank you.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [3]

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Good morning, friends. We are pleased to connect with you today postdeclaration of our audited financial results for the fourth quarter and financial year 2018-'19 ended 31st March, '19 through this con call hosted by SBICAP Securities. Thank you, Sandeep, for hosting this.

We had already shared the details of our operational updates of the company in the first week of April 2019. We have also uploaded our investors' presentation on these financial results adopted by the Board, and the same can be downloaded from our website as well.

With the implementation of various structural and regulatory reforms in the last few years in the real estate sector, the sector is expected to do well. And the operational and financial results of various listed players is an indication of the same.

However, the liquidity crisis still persists and NBFC/banks are going slow on lending to majority of real estate players and hence the sector is not able to tap its full potential the way it is anticipated. There is a slow, but definite consolidation happening in the real estate sector, and listed players like that of ours and others are definitely expected to benefit from this consolidation.

On the macroeconomic side, the policy initiatives taken by the government, like push for affordable housing, interim budget announcements, GST rate cuts, continuation with PMAY, RBI Repo cut, et cetera, are pushing the demand in the sector, and we believe that this demand can only keep growing in the coming quarters. We also believe that postelection and new government coming in, the outlook for the real estate sector definitely will become better and better.

Now I hand over to our CFO, Subhash Bhatt, to talk about the performance of our company and the outlook in this context.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [4]

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Thanks Sharmaji. Good evening, friends. For Sobha the financial year 2019 has been its best year, so far. We have achieved the highest ever new sales of INR 31.25 billion, and with the income coming in at INR 35.16 billion. The sales volumes of 4.03 million square feet and the total cash flow inflow of INR 32.36 billion has been the best ever. The contractual and the manufacturing cash flow came in at INR 10.58 billion, and the EBITDA was clocked at INR 7.46 billion. The PBT at INR 4.48 billion and the PAT coming in at INR 2.96 billion.

We also completed this year 5.41 million square feet of sellable area, and we have completed 3,516 units in the residential space, which shows our delivery capability.

As on 31st of March, 2019, we have delivered overall 103.88 million square feet of developable area, which is one of the highest in the real estate industry. We continue to invest in completing the existing projects on time, launching new projects and also planning for the forthcoming projects.

As of 31st of March, 2019, we have an unsold completed inventory of only 0.27 million

square feet, valued at INR 1.17 billion, which is probably the lowest in the industry, and reflects our strong capability to sell the project before completion. Out of the 0.27 million square feet, 0.12 million square feet is attributed to plotted development projects that we have.

We have achieved sales of 51% on the area, which is released for sale in the ongoing projects. Overall, we have a unsold ongoing inventory in the projects of 17.21 million square feet, which we consider adequate in the current market scenario, and the committed deliverables more visible from the sold units stand at INR 41.22 billion as of 31st of March 2019, which gives good cash inflow visibility over the next 3, 4 years.

Additionally, we have cash inflow visibility of INR 25.88 billion from the contractual and the manufacturing verticals, while the components -- while it complements the overall cash visibility for the company.

For FY '19-'20, we expect our operational performance to be better than FY '18-'19. Bangalore will continue to grow consistently, and will remain our top contributor in the presales value, along with meaningful contributions coming in from other regions.

From last 2, 3 years, there has not been much price increase done by the company in ongoing projects, but as we see the supply side being impacted in sectors due to very few launches by good developers and the demand remaining intact, we expect sales, selling prices to start going north in the coming quarters.

Our unique business model of offering quality products to the customer, offers very strong platform for us to grow faster than the industry. The other significant benefit of this model has been to grow our contracting and the manufacturing business, the performance of this vertical for the year as well as the quarter has been quite satisfactory and in line with our expectation.

In this backdrop, let me summarize the company's performance for the fourth quarter and the financial year ended 31st March, 2019. The financial highlights for Q4 FY '19 are: total income at INR 14.22 billion, achieved during the quarter, is the highest ever quarterly income achieved by the company, which is 76% quarter-on-quarter growth. The real estate revenue at INR 10.17 billion, which is up by 102% quarter-on-quarter, with Sobha City -- Sobha Indraprastha, Sobha Dream Acres, and Sobha City Bangalore with Sobha Heritage and Sobha Silicon Oasis projects being the revenue -- the main revenue contributors. The contracts and the manufacturing revenues came in at INR 3.81 billion, which is, again, the highest ever in the history of the company, which is 34% quarter-on-quarter growth.

The EBITDA at INR 2.67 billion is the highest ever in the history of the company, same is also up 49% on a quarter-on-quarter basis and the margins was clocked at 19%. EBITDA margin is slightly down due to the fact that we had to recognize INR 1 billion as revenue and proportionate cost for reverse discounting of the customer's advances as required by the Ind AS 115 requirement. We will continue to enjoy same margins on the projects as before.

PBT at INR 1.76 billion is the highest ever in the history of the company. The same is up 60% quarter-on-quarter basis, and the margin clocked at 12%. The PAT was INR 1.13 billion, which is, again, the highest ever. And this is 63% quarter-on-quarter growth with the margin coming in at 8%. The debt/equity as on 31st of March 2019 stood at 1.09 as compared to 1.13 as of end of December 2018. The cost of borrowing today stands at 9.72%.

Coming to the full year highlights, the total income at INR 35.16 billion is the highest ever yearly income achieved by the company. The real estate revenue came in at INR 22.65 billion, which is, again, the highest ever, with the contracts and manufacturing revenues coming at INR 11.77 billion, which is, again, the highest ever. These are -- these numbers of 50% year-on-year growth, with the EBITDA at -- coming in at INR 7.47 billion, which is, again, the highest ever and the margins for the full year stood at 21%. The PBT was clocked at INR 4.48 billion, again, highest ever, with a margin at 13%, and the PAT at INR 2.96 million, again, highest ever number for the company with the margin at 8%.

Coming to the cash flow. Cash inflow at INR 9.23 billion was up 13% quarter-on-quarter for Q4 FY '18-'19, with the real estate contributing INR 5.77 billion, which was higher by 3% quarter-on-quarter, and the contract and the manufacturing inflow coming at INR 3.46 billion, which is the highest ever contract and manufacturing verticals cash inflow by this company.

The net operating cash inflows was INR 244 million, after meeting the financial expenses. This is the 15th consecutive quarter where the company has generated net operating cash flow after meeting financial outflows.

For the full year highlights on the cash flow. The total cash inflow was at INR 32.36 billion, which is again the highest ever cash inflow achieved by the company, and saw 8% growth year-on-year, with the real estate contributing INR 21.78 billion, and again, which was the highest ever real estate cash inflow achieved by the company on a yearly basis. And the growth year-on-year was 4%. The contract and manufacturing vertical also came -- clocked the highest ever inflow at INR 10.58 billion, which was a 16% year-on-year growth. The net operating cash inflow of -- was INR 1.47 billion, after meeting all the financial expenses.

The operating highlights for FY '18-'19, as communicated in the first week of April 2019, we sold 1.13 million square feet during the quarter -- fourth quarter, with a total sales value of INR 9.205 billion, with the Sobha's share in face value coming in at INR 7.115 billion. We've achieved average price realization of INR 8,152 per square feet, and we have witnessed growth of 6% in the total average price realization as compared to the last quarter.

During the quarter, we have entered GIFT City in Gujarat with the launch of Sobha Dream Heritage, an affordable housing project with a saleable area of 0.52 million square feet. And we also launched Sobha Royal Pavilion, a luxury -- a super luxury project with a saleable area of 2.23 million square feet in Bangalore; and Sobha Palacia, a super luxury project in Chennai, with a saleable area of 0.6 million square feet.

In total, during the Q4, we have launched 3.35 million square feet, and the company is planning to launch 4.19 million square feet of new projects in Chennai, Bangalore, Coimbatore, Thrissur and Pune region during the next 3 to 4 quarters, which would drive our further sales growth in retail.

The contracts and the manufacturing segment has delivered a very strong financial performance as well as operating performance and will continue to grow at a steady pace. The contract revenues grew by 84% year-on-year basis and the segment has shown a CAGR of 24% from FY '16. The Sobha Glazing, Sobha Interiors, and Sobha Concrete products have also shown a CAGR of 12%, 16% and 18%, respectively, from the period FY '16.

Currently the ongoing contract projects aggregate to 8.59 million square feet, which are under various stages of construction. The order book stood at INR 25.88 billion, which gives us good visibility in the coming quarters as well.

All these segments are contributing significantly to both the top line and the bottom line.

Thank you, and now we can start the Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Abhishek Bhandari from Macquarie Industries (sic) [Macquarie Research]

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Abhishek Bhandari, Macquarie Research - Analyst [2]

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Sir, I had few questions. Before that, congrats on ending FY '19 on record presales. Sir, my first question is on Slide #34, where we have mentioned, we have witnessed a good growth in INR 1 crore, INR 2 crores product category. Now this seems to be little different from what of the -- most of your peers are talking about. So if you could help us understand what's driving higher sales in this price bucket between INR 1 crores to INR 2 crores?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [3]

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See, we have always believed and maintained that there is a market for all sorts of projects. If you really look at [seven] -- except the Mumbai market, whether it is Gurgaon market, whether it is Bangalore market, whether it's even Hyderabad market or Chennai market, generally speaking, people do prefer 2 bedroom and above square feet, how do you define, 1,000 square feet-plus apartments and generally, in our case, it used to be about 1,500 to 1,600 square feet as an average-sized apartment. Our recent launch, Sobha Royal Pavilion in Sarjapur Road, it helped us in selling under this category, where there seems to be a significant demand, which complemented the other projects, The Dream Acres what we have in the same South East axis of Bangalore.

Going forward also, my belief remains best for Sobha, both up to INR 1 crore, and up to INR 2 crores, both these market will keep growing at a healthy pace. And [the best] demand will come from these 2 segments only. You will also see that somewhere in the presentation that 21 to 30-year-old guys, 30 to 40, 40 to 50 and 50 to 60, kind of age profile, so the guys who are in the 21 to 30, generally, they go for 1,000 square feet and below sort of an apartment, above that, they will go for a 2-bedroom-plus kind of an apartment. And this kind of a trend is expected to continue.

In Gurgaon also, because of the density law, whatever we are selling, it falls under that category, that also helps. The new launch in Chennai also will fall under that category.

So some of the launches in the last quarter has helped this category to grow a little bit faster, but going forward, both these categories are expected to do better, without hurting each other's segments.

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Abhishek Bhandari, Macquarie Research - Analyst [4]

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That's right, sir. So again, sir, I was going through your website, I could see some advertisements like in Lake Garden, you have 25% payment, each over the next 4 years. In Palm Court, you have INR 25,000 pay now, pay rest when you move in, generally the Banashankari project. So are these some new schemes that we have launched very recently or these have been there for some time now?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [5]

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Abhishek, these schemes have always been there, okay? And these -- if you see there is always conditions apply below. So in case somebody comes and seeks a discount, we will say, okay, we will give you a better payment term, okay, but not the discount. So these are basically the NAV of these sales comes out at the same level, our discounting policy with the sales team is based on the NAV that we get from the customer for a particular [sale].

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Abhishek Bhandari, Macquarie Research - Analyst [6]

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Right, sir. And sir, my last question is on the cash flow generation. So if I look at the cash flows what you're generating from your real estate collections, the growth rate seems to be lagging the presale growth rate even if you look FY '18 or FY '19, the sales growth rate seems to be higher compared to the collection growth rate. So is my reading right or do you think the collections are progressing in the way you have anticipated when you're selling to customers?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [7]

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This is exactly in the way we have anticipated. The reason why this lag is being felt is because, if you see, most of our new launches have happened over last 1.5 year to 2 years, and normally, your collections during the first phase is not as good right now, because you have to wait for these agreements to be signed, you cannot collect more than INR 10,000 from the customer until the agreement is signed, with RERA being in place, this is the natural lag that we had anticipated and budgeted. And it will pick up over next 1.5 years.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [8]

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I will just -- complement to that. we have delivered or completed highest numbers of units and square footage in the last financial year. Normally we are collecting significant amount of money at the time of structure completion that is what the norms this sector has. So the buildings which got completed and been delivered, you spent more but collected less. And where you had launched the projects, the collection will happen the way the RERA coming in at a pace which will be relatively slower.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [9]

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Until the agreement is signed, but once the agreement is signed we can go at a normal pace. So that's why we are confident this collection pace will improve over next 1.5 years.

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Abhishek Bhandari, Macquarie Research - Analyst [10]

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Sir, my last question is on the pending money what we have from Bangalore Metro, any progress out over there, for the land what we have given...

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [11]

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No, no, not yet. That is somewhere got stuck with some legal disputes, not of our land, along with that some 2 to 3 other guys are there, not yet settled. But the adjacent land we are going to develop, some another 5 acres in the Bannerghatta Road as a residential project.

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Operator [12]

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The next question is from the line of Swagato Ghosh from Franklin Templeton.

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Swagato Sourya Ghosh, Franklin Templeton Asset Management (India) Private Limited, Research Division [13]

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Sir, if I'm looking at the launch pipeline slide that you give every quarter, this number, I would expect a company of your size should be like staying at the same level, like if you're launching, some of it goes out, but new projects are added. But that has not happened in the last 2, 3 quarters. So is it like conservatism on our part or is there any, like, again, delay in approvals. What is like keeping us from adding more projects to this number, the visible pipeline number?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [14]

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It's a good point, Swagato. Basically, more than this is there at the drawing stage, but looking at the approval process nowadays, up to the RERA point of view, it takes 3 to 4 quarters to get all the approvals in place. So we have created a pipeline, which is as large or even more than what we have communicated. And going forward, from next quarter onwards, we will be seeing the details of those projects also. Say for example, you are working in Hosur, you are working in Bangalore, you are working in Chennai, therefore that's where a lot of work is happening, but it is not getting captured.

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Swagato Sourya Ghosh, Franklin Templeton Asset Management (India) Private Limited, Research Division [15]

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Okay. Fair enough, sir. And Gurgaon, I just want to understand how you are looking at that market. We don't have, like, in the pipeline 3, 4 quarters any project launches in Gurgaon. But like, I guess, you'd be looking at inorganic deals also. So what is your like outlook on that market. If you can think you can like gain large market share, like Godrej has done in the recent past. So I just wanted to know your thoughts on that market?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [16]

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A couple of projects, we have already started working on the design part, 1 in Delhi, 1 in Gurgaon, right? We are talking also on couple of other opportunities, which may take little bit more time. Our belief is that after Bangalore, the maximum growth has to happen from the NCR market and Gurgaon in particular. Lots of visibility will be there as far as the Gurgaon growth is concerned, because that market had started showing clear improvement, both at the Metro level and from the Dwarka Expressway point of view also. The Dwarka Expressway is functional and the linkage to Delhi also is progressing quite satisfactorily. And I get the sense that with the kind of scenario in which most of the other developers are, it is a good opportunity to become aggressive. And we look at Gurgaon, honestly from a big growth driver perspective.

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Operator [17]

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The next question is from the line of Abhishek Anand from JM Financial.

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Abhishek Anand, JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research [18]

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Congratulations for a very good quarter. My first question, Sharmaji, will be on the GST status of your projects. Have we shifted to 5% or have you applied for the 12% status?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [19]

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See for all the ongoing projects we are going ahead with 12%, [driven] except these 2 affordable housing projects where we are opting for 1%. So basically we will move to 1% in GIFT City, because we had only 5 sales happening in March, and this met the requirement of the affordable housing in the earlier regime, so we had an option of moving to 1%, even though the INR 45 lakh consideration was breached.

So we thought this was a good option to pitch with the customers, and customers are saving almost 7% in the GST and were not losing much. So we took that call and we took the price improvement there and we have moved that project.

The other project that we have moved is Green Gardens in Bangalore. Again, based on the same concept, that it's all affordable under the old regime, under the GST. And in the new regime, we could move it to 1%. And since we had few customers who had signed the agreements, we could manage that move.

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Abhishek Anand, JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research [20]

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Subhash, sir, do we have clarity on the definition of ongoing projects. Is it -- so basically it's 12% applicable for all the phases of Dream Acres or it's only for the phases which have been launched until 31st of March?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [21]

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Okay. Let me answer that question. If you look at the FAQ's which came out, there are 2 FAQ's which came out. The project definition ongoing is very, very simple there. You have to launch the project, you have to incur expenditure at the site, even you need to be RERA registered and you have to have at least 1 collection from 1 customer. So in our cases, okay, we are getting that benefit in most of the phases in Dream Acres, Dream Acres that we have launched already, okay? The last few, 4 or 5 phases for 5 lakh square feet or something, will go into the 5% regime, but that's later when we launch at 1 and 1.5 years down the line.

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Abhishek Anand, JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research [22]

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Sure, sure, sure. That's helpful. Secondly, just trying to understand the residential margin or the margin of company during the quarter. I guess, it was slightly on the lower side. I think EBITDA was in the order of 17%, any particular reason for the low-margin during the quarter?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [23]

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Yes, 2 reasons. One is this INR 100 crores of reverse interest that we had to compute on the advances taken from the customers and that itself impacted the overall EBITDA for the company margin by 1.4%, had we not taken that INR 100 crores, then this INR 100 crores will stop at top line as well as the cost. So it doesn't improve your EBITDA, but it pushes up your top line by INR 100 crores. And this came about because AS 115 equivalent of this in the international accounting standard, is something which was applicable for most of the companies from January 2019, because here financial starts with January 2019. And that is where the clarification started coming in, and one of the clarifications that came out is for companies, for a industry like ours, which gets money up front over a period of 2.5 years to 3 years, and you deliver at the end of that term and the project is completed, you are supposed to do reverse the call -- reverse discounting and account for the implied interest in this particular collection. So that is how it goes up. And I think in the listed phase, we have taken this position, Godrej has taken this position and Oberoi has taken this position.

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Abhishek Anand, JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research [24]

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Okay, Okay. So that was the key, nothing on the margin of...

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [25]

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The operating side -- it was not on the operating side.

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Abhishek Anand, JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research [26]

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Okay, okay, okay. And finally, if you could help us with the status of Hoskote land parcel, at what stage are we at, how close to launch are we for that particular land parcel?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [27]

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This year, we have nothing to share honestly speaking. This year we will be talking about Hosur, then the Hoskote, and other projects. But definitely we are working on that project as well.

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Abhishek Anand, JM Financial Institutional Securities Limited, Research Division - Assistant VP of Equity Research [28]

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Sure, sure. And anything on APMC?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [29]

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AMC, the guys were on the election duty. Our APMC directors are attending to the Madhya Pradesh thing, much have returned now, we will be taking it up now.

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Operator [30]

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The next question is from the line of Abhinav Sinha from CLSA.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [31]

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Congratulations on the good sales numbers that we have seen. So just wanted to sort of look at how you are seeing FY '20 growth here. And are you about to hit INR 1,000 crore quarter anytime soon?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [32]

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See we are aiming for that definitely. You understand that the macro headwind still continues, the customer sentiment's yet to fully improve as you feel the comfort that, yes, the market had started showing clear improvement from the demand uptick point of view. So these things you have to keep in mind.

At the same time, our aggressive stance on new launches, on completions, because we are not carrying the finished stock inventory burden anymore, it continues. And we believe that operationally we are okay. And this is the good time where our [insurgence] has to be confirmed and deepened. Keeping this background into mind we did 4 million square feet in the last financial year operationally, and for that received one of the most important barometers to understand the financial performance subsequently. We still believe that we should be doing better growth than what we achieved in the last financial year operationally.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [33]

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Better growth on volume or value first?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [34]

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On volume. Coming back to the -- what you call, revenue recognition and the profitability part, at least this year we have got clear visibility that we should be doing, again, better than what we have achieved last year, overall, from a yearly basis point a few. Some quarters due to this Accounting Standard 115, it may not reflect the true picture, but to context it, few projects are getting completed this financial year also, lot of projects which were completed, the handover is yet to happen. So the revenue growth visibility, the top line, and the bottom line that way is quite clear.

On the contracting side also, we have got huge order backlog of INR 2,500 crores plus. So on the back of very good performance in the last financial year we should do better. The manufacturing division also continues to do better, the factories are running both shifts, first time, 24/7. So we feel that manufacturing division also should do better. So visibly clear and confident that this year also both operationally and financially we are expected to do better than '19/-- '20 performance -- '18-'19 performance, sorry.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [35]

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Okay. So that's good to know. Sir, just follow-ups here. So one on the sales front. Bangalore, obviously you're expecting to be a bigger market next year but where else can we look at growth from?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [36]

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From all the markets. If you really look at this year, we are definitely going to do significantly better because of almost negligible base in Pune and GIFT City. We're going to do significantly better in Gurgaon market and Chennai market also. And even the Cochin market, which we have done very well, along with Bangalore market, close to 10% market share is coming from the Kerala market. Again, we will do better there.

So the growth rate of non-Bangalore market is expected to be better than the Bangalore market. But at the same time, Bangalore market we are not ceding our dominant position, which is 2.75, which is INR 2,100 crores of new sales. And it is continuing to perform better and better in this market also.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [37]

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Sir, and just on the demand rate, so we've seen some slowdown concerns elsewhere, have you seen any such thing yourselves, April was weaker than previous quarter or anything like that?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [38]

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No, no, no. We believe that this quarter also should be a reasonably good quarter. And the strength is, while we do acknowledge and appreciate that the external environment has not improved, that is why this sales price, I will keep repeating and telling. But until we do not get to that pricing power this challenge will continue, but at the same time, the new launches are getting diminished, the availability of liquidity still remains a huge challenge to most of the developers. And in that environment, we have got that required pace to capitalize and remain aggressive and positive, both.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [39]

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Finally, I think Subhash sir was mentioning earlier, you have seen some instance of price increase, right? So is that there -- is it there only in Bangalore or any incidence in any sort of projects that you can tell us?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [40]

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So, Abhinav, this price increase that I have been mentioning in our discussions with various -- in [tickets] that we hold is basically when we do a new launch. So when we do a new launch, we reprice the price including the new costing and everything. So in the same project, the Phase 1 was launched at X, the Phase 2 will be launched at X plus Y. So that is the price increase that we have been talking about.

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Abhinav Sinha, CLSA Limited, Research Division - Research Analyst [41]

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And is this something which has come through recently or it was always happening?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [42]

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More or less, it has been happening. At the same time somewhere on the discounting front or otherwise also, we have been more accommodative than we used to be before. So net-net, there may be small improvements in the pricing, but still not what you call -- the change has definitely reversed for the better.

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Operator [43]

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The next question is from the line of Sameer Baisiwala from Morgan Stanley.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [44]

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Sir, just following from the previous participant on pricing. What's the outlook for fiscal '20? Do you see a pricing power come back?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [45]

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See, Sameer, we're already at INR 8,000-plus, if you look at per square feet. But going forward, I believe that while in the last quarter, the INR 1 crores to INR 2 crores did exceptionally well. In the coming quarters, there will be relatively more contribution even from the affordable segment also. So net-net, we will be around this INR 8,000 per square feet rate only. I don't foresee significant improvement coming on the pricing front.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [46]

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Okay. And how should we think about the balance sheet, especially leverage for fiscal '20?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [47]

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See, the debt/equity, according to the new norms, where we were in the beginning of this financial, we ended almost at the same level.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [48]

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Slightly better.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [49]

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Slightly better, maybe. So for -- in the new norms, what used to be 0.8 for the last 5 years prior to the last year, the same should continue now with -- under this new system of about 1.1. We are staging growth also and at the same time, we are keeping the debt and liquidity under control as well. So it has to be that kind of a fine balance where debt may not come down, but the debt/equity should remain the same.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [50]

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So which means absolute debt of INR 2,400-plus crores will go up?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [51]

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Yes, Sameerji. May go up.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [52]

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Okay. And when banks evaluate for loans, et cetera, do they look at IGAAP numbers or now they have started looking Ind AS numbers?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [53]

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They now look at the Ind AS numbers only. They look at the current Ind AS numbers, but at the same time, the comfort sectors on the banking system is excellent. All the banks currently who are lending, almost all of them, they would like to lend us. State Bank of India remains the biggest lender, but name any bank who is currently lending to the developers, they have shown interest in lending to us. And, Sameer, most of the time the banks look at the cash flow rather than the accounting part.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [54]

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Okay. Which is seen in both the accounting methods?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [55]

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Yes. It doesn't make any difference.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [56]

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Absolutely right, absolutely right.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [57]

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Okay. Sir, just getting on. You talked about Gurgaon being a very important part of the business going forward. So far, you have been sort of localized in Dwarka Expressway belt. So going forward, which are the other micro markets that interest you? Would it be just this location?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [58]

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We are working on a couple of projects. Number one, we've taken from Indian Hume Pipe in Badarpur, Delhi where design is [frozen] and approval process in some of them have been put in place. Since we have been new to Delhi and Delhi approval process which is, we have been told quite complicated, taking our own time. Then we have worked into one partnership near Manesar 25 acres of group housing, where we have already paid the advance and moving towards another group housing scheme. That also we hope to see that in next 6 months or so, some kind of clarity to emerge.

Couple of more land parcels here. You pay some small advances like we are working on them. Hopefully, some visibility will come. So our strength is that looking at -- right now with NCR market, there is good scope for Sobha to improve its market share as we move forward.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [59]

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And sir, the Golf Course Extension Road and further down, I mean, those are the areas that -- would you be going there?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [60]

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We would be going there. But right now, near Sohna Road, one project we paid some advance. Another one is near that -- just before the Manesar. And another one is near the Sector-81. These are the areas we're currently -- we're looking at as an opportunity.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [61]

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Sir, all of these would be JD and JV route?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [62]

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Somewhere. Yes, yes, yes, but in view of the current GST requirement, the structure what we're operating is a bit better than what's normally conventionally getting used to be. Our interest remains forecasted.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [63]

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Sir, if you total up all of these partnerships, how many million square feet does it work out to? 3 million, 4 million square feet?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [64]

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Easily, easily.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [65]

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But Sameer, it will take time to launch, therefore, it is not in the future 5 plan. Check your slides now.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [66]

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Next quarter, 1 project at least will be reprojected.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [67]

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Reprojected.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [68]

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Okay. Great. And you were thinking of launching new Phase 2, Phase 3, especially for row house and villas for your...

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [69]

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Yes. That also is being finalized at the same place. You are right, you are right. That Phase 3 and Phase 2. And for a new phase also, we have tied up -- that detail also will come.

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Sameer Baisiwala, Morgan Stanley, Research Division - Executive Director [70]

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As well as the group housing?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [71]

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As well as the group housing. You are right. You are right.

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Operator [72]

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The next question is from the line of Vinit Manek from Karma Capital.

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Vinit Manek, [73]

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So just continuing with the previous -- one of the previous questions that we have seen a large increase in the sales between the INR 1 crore and INR 2 crore ticket sales and as you indicated that we, going, forward would see launches into similar range. So we might not look forward to participate in the dual segments or the affordable kind of segments, which has been growing largely good for the market?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [74]

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No, no, no. We never said like this. We said that while some of the new projects what we are planning also and what we have recently launched also, they fall under that category. But these markets between INR 1 crore to INR 2 crore still continues to remain positive and robust. And this does not touch the other market, that's the point I'm trying to highlight.

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Vinit Manek, [75]

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Okay. So for us, large part of the sales would be coming out from these categories and...

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [76]

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Will continue too -- it will continue too, without any problem.

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Vinit Manek, [77]

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Yes, yes. And one bookkeeping question for us that out of the total INR 552 crores of receivables from the ongoing and the completed, can you help me out with the breakup of how much is from the completed sold projects and it is from the ongoing projects, if you can?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [78]

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You're talking from the projected cash flow?

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Vinit Manek, [79]

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Yes, yes. On the Slide #30 -- 23.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [80]

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So your question was, of the INR 552 crores...

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Vinit Manek, [81]

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Yes. How much pertains to the totally completed and how much from the ongoing, which we have...

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [82]

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That is -- the INR 552 crores is all from the completed projects only.

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Vinit Manek, [83]

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Okay, okay. So it is not from the ongoing projects that we are selling right now?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [84]

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Yes. We have completed. And the ongoing is the next column, it is INR 35.7 crores.

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Vinit Manek, [85]

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Okay, okay, okay. So INR 500 crores is only from the completed. And how do you foresee these numbers going forward at these levels, or a significant reduction going forward?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [86]

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So they will basically. We will have movement from ongoing into completed? Right? So it's a flow. These have been at this level.

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Operator [87]

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The next question is from the line of Nimit Gala from Edelweiss.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [88]

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Congratulations on a very good quarter and a year. So in the previous quarter, you already launched around [3.7 million] square feet and currently, from the new projects, you have around 4 million square feet or something right now. So the deals being mentioned that is only for 2 to 4 quarters, right? Isn't it too much or do you expect more clarity on that in the second half?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [89]

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You will still see more clarity in the second quarter. These are the ones where we have clear visibility, and we know we'll launch it during the next 4 quarters. Rest of it will be in the various stages where we are not sure that we have approval before end of March 2020. And we'll keep updating that in our quarterly results.

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Nimit M. Gala, Edelweiss Securities Ltd., Research Division - Research Analyst [90]

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Sure, that's helpful. And do we have any internal sales target for the year, in terms of volume or tariff?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [91]

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No. If it is internal, it should be known internal only.

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Operator [92]

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The next question is from the line of Prem Khurana from Anand Rathi.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [93]

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Congratulations on a very good set of numbers. So on Slide 39, we give a breakup in terms of buyers' profile and if it's sold to IT, people working with IT companies or non-IT. What I observe is that the non-IT number seems to be coming down gradually, I mean, it used to be more than 35% some time back and gradually, it's come down to 27-odd percent. So what would explain them? Essentially it is -- is it because -- is it a structural change or is it because, I mean, the product that is launched over the 1 or 1.5 years where most we did for IT? And second on the same slide. Are 21 to 30 age group, which used to be more than 20% is down to 14%. So if you could explain these 2, please.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [94]

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So this is an average only for the quarter. Around 50% still IT sector that continues to buy. Last -- I think for the last 4, 5 quarters we have seen IT go down slightly. Slightly, not much. But it seems to be back now.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [95]

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Okay. No, because non-IT if I were to give you the number, then in 1Q FY '18 used to be almost 36-odd-percent and that 36%...

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [96]

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Yes, IT would have been equally lower.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [97]

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IT (inaudible) eventually. Yes. But there has been a shift from non-IT to IT. Is it because we launch projects in areas where I mean it is more IT?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [98]

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No, it's...

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [99]

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Okay. Sure. And of the age group, sir? Is it a structural change? Because 21 to 30 has come down to 14%, does it adjust this for...

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [100]

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Definite a structural change.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [101]

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Okay. So eventually you mean to imply that, I mean, these people are not sure of the growth parameter, which is why they're holding back and 31 to 40 are more established, which is where they're able to buy more from us?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [102]

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No. I think this is more in the affordable segment. That also gets picked up.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [103]

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Sure. And one on our Gujarat launch. So I mean, last quarter you couldn't do much, clearly because it was launched during -- towards the end of the quarter or rather at the end of the month. How is it responding subsequent to the quarter? Is it moving as per our expectation?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [104]

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Yes. Yes, it is moving as per our expectation. And we already started working on the next stage. We believe that in the GIFT City, we've got a good role to play, as far as residential place is concerned, to complement the kind of growth now that GIFT City on the commercial side is experiencing and going through.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [105]

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Sure. And, Subhashji, just one question, the INR 100-odd crores that you talked about on the reverse discounting that you've done. The idea of adjustment for the full year that you would have taken in this quarter, not for this quarter only?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [106]

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The quarterly impact is only INR 40 crores.

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Operator [107]

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The next question is from the line of Dhaval Somaiya from PhillipCapital.

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Dhaval Somaiya, PhillipCapital (India) Pvt. Ltd., Research Division - Research Associate [108]

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A good set of numbers, first. I just wanted to know that the revenue from glazing and material works division has come down in FY '19 [from] 2018. So any particular reason to that?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [109]

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Yes. Let me explain. It's a temporary blip. They have got an order book of more than INR 300 crores. And this year, among that all the manufacturing units from a top line, frankly, this is even not the fastest growing division. They've got good order book and they are doing well.

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Dhaval Somaiya, PhillipCapital (India) Pvt. Ltd., Research Division - Research Associate [110]

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Okay. So, sir, what will be the total order book that we can expect in the next, say, 18 to 20 months?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [111]

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We already have INR 2,500 crores-plus of the order book as far as the constructing division is concerned. And we would like to maintain and sustain at such levels. We are okay. We did INR 1,200 crores. This should grow at a good pace. And small orders from the existing clients keep coming and getting added. The visibility from all the existing clients, it continues to remain relatively better for their existing projects as well as for the new projects.

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Operator [112]

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The next question is from the line of Rahul Thakkar from Angel Broking.

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Rahul Thakkar, [113]

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My first question is, we do annual sales of close to 4 million square feet. And so I want to know what proportion of land bank or what proportion of these projects are built on historical land bank and what proportion are built on the newer recently acquired land bank?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [114]

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That tracking, that this quarter will be difficult. But if you want to know how much of the land bank is currently being processed for launch for next...

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Rahul Thakkar, [115]

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If you could give some highlights?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [116]

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I will give you the visibility going forward, rather than...

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Rahul Thakkar, [117]

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Yes, yes, that would be also helpful.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [118]

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Yes. So it will be -- so 49 acres is what is forthcoming launch which will give us a launch of almost 4.2 million square feet. Okay. So that is what is currently being worked on, okay? In addition to that we have worked about another -- about 32 acres which is in design stage. Roughly the JD share is coming to about 20%, 30% is come to us, our own banking.

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Rahul Thakkar, [119]

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Okay. Okay. And also, if you would like to share, how much of our legacy land bank is being used in this project? Because we also have a lot of legacy vintage land bank. Correct?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [120]

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Mostly it is all the legacy land bank only. If you really look at the -- in Bangalore, whatever projects we are launching or we are working on, they are mostly on the legacy land bank.

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Rahul Thakkar, [121]

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So these are not recently acquired land bank. So the churn will be higher going forward because of our legacy land bank will be processed?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [122]

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The legacy land bank takes their own time to develop, but whereas the new opportunity then we're going for, immediately we start working on the launch. So that's a typical crucial difference?

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Rahul Thakkar, [123]

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Secondly, I want to know the revenue recognition on the joint development projects. So are these recorded on a gross basis inclusive of the share of the joint developer or are these recorded on a net basis?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [124]

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No. No. No. We have submitted on the net basis after AS 115 came into play.

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Rahul Thakkar, [125]

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After AS [back in], we are doing it on a net basis?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [126]

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Yes.

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Operator [127]

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The next question is from the line of Swagato Ghosh from Franklin Templeton.

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Swagato Sourya Ghosh, Franklin Templeton Asset Management (India) Private Limited, Research Division [128]

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One very quick clarification. From 3Q to 4Q, the jump in the real estate revenues that was because of which project? Sorry, if I have missed it.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [129]

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No harm. Primarily, Dream Acres, maximum number of apartments are handed over in case of Dream Acres followed by Indraprastha.

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [130]

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Yes. This quarter, we started delivering on Silicon Oasis also.

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Swagato Sourya Ghosh, Franklin Templeton Asset Management (India) Private Limited, Research Division [131]

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Okay. So that has also contributed. And sir, one other question going back to the first question on the call about how the cash flows are lagging the sales. So going by what you said about like we are now heavy on new projects. So can we expect that cash flow rate to catch up in maybe another 1.5, 2 years or will it take longer because we'll still have...

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [132]

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This should catch up. It should catch up. See, earlier projects we had front-ended cash flow collection and then very few launches happening during the last 2.5 years. And then you had RERA coming in where you cannot collect anything unless you've signed the agreement, only up to 10% you can collect. So that lag should get caught up in the next 1.5 years.

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Swagato Sourya Ghosh, Franklin Templeton Asset Management (India) Private Limited, Research Division [133]

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Right. But sir, what I'm asking is, we will still be launching year-on-year projects, where still we'll be incurring costs, which will be not supported by cash flows coming in. So on a company level, in 1.5, 2 years, is it a good time to see that on an overall basis the cash flow is kind of coming in ahead of like what you're standing on?

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Subhash Mohan Bhatt, Sobha Limited - Head of Finance [134]

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Yes, yes.

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Swagato Sourya Ghosh, Franklin Templeton Asset Management (India) Private Limited, Research Division [135]

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Okay.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [136]

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What Subhash is trying to communicate that first of all, that lag effect of -- these are coming without agreement, not many coming. At the same time, so many projects getting completed, where you have not collected the money. So except maybe just small 5% old registration money sort of a situation was existing. Now whatever sales are happening and the agreements are being executed, the payment starts happening. And then on structure again, the payment is ahead of the construction cost. So the positive sides will get started. Then where we have to collect the money from the existing customers on completed apartments also, new sales, that money also will start flowing in. So net-net, we will get into that kind of a positive virtual cycle maybe next couple of quarters [itself].

Hello. Hello?

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Operator [137]

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His line is connected, sir.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [138]

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Okay. Okay. We can go to the next question.

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Operator [139]

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The next question is from the line of Dhruvesh Sanghvi from Prospero Tree.

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Dhruvesh Anil Sanghvi, Prospero Tree Financial Services LLP - Founder & Research Analyst [140]

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Sir, just a couple of questions. One is on the contracts side, I think last or last to last quarter you had said about some positive surprise coming on the products business as well. Any updates that you would like to share on the doors or the mattresses?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [141]

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Thank you for remembering the same. The company essentially had registered one brand name called Metercube. We have got 3,000 square feet of retail space, which is let out in our corporate office only, just to have a test marketing done among just our employees. We are getting into a 25,000 square feet of commercial space at St. Mark's Road, which will be our first retail flagship store with almost 3,000 items. And we believe that yes, we will start on a very smaller note. But on a confident note, where from B2B to B2C this will be a natural progression. Primarily banking on our design capabilities, primarily banking on our manufacturing capabilities where the interior division and the mattresses division will play such a critical role. And hopefully, in the next 5 to 6 years' time, you will see this business also picking up a significantly bigger pace in our overall floor.

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Dhruvesh Anil Sanghvi, Prospero Tree Financial Services LLP - Founder & Research Analyst [142]

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Sir, one more question. I think we are at around INR 1,200 crores to INR 1,300 crores of contracts and the order book that you have given of some INR 2,500 crores - INR 2,600 crores. Are we aggressively trying to get more orders? Or we'd be very choosy on margins and only then. Because I think margins have increased in this year substantially on that contract solutions business.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [143]

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It is like this, we still do not have a full-fledged marketing department in our contract division. But we will continue to get inquiries, and we do respond. My sense is that we should be in a position to keep improving this business, at least for the next couple of years. That kind of a visibility.

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Dhruvesh Anil Sanghvi, Prospero Tree Financial Services LLP - Founder & Research Analyst [144]

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Okay, okay. So this should be considered as a base then?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [145]

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Yes. This can be considered as a base easily.

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Dhruvesh Anil Sanghvi, Prospero Tree Financial Services LLP - Founder & Research Analyst [146]

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Sir, in the annual report of last year, we mentioned something like growing 2.5x in 5 years as an ambition. Can you highlight basic assumptions on what are you building these upon? Is it related to market growing or even without?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [147]

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It's a good question, if the market grows, you get the tailwind and it is easier for you to realize your goals, but even if it is not happening which -- as we have been seeing for last couple of years, we believe still the market size in '18-'19 or in '17-'18 what is not as big as what it was in '11-'12, '12-'13 sort of a scenario.

So despite that also, we did the aggressive launches and focusing on the non-Bangalore market, focusing on this affordable segment, not aggressive on price increase while working on multiple segment plans, all such things what you have just talked about, it's working towards achieving best goals. And also we believe that looking at the current state of affairs of the real estate developers as well as of the liquidity part and looking at that -- the macro environment has definitely become better, with the government policy initiatives, supporting the housing demand. We believe that we are well on course in achieving that objective.

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Dhruvesh Anil Sanghvi, Prospero Tree Financial Services LLP - Founder & Research Analyst [148]

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Sir, last one question. We have around -- I mean, 6 years back, we had total 2,600 acres as our land bank. Slowly, slowly it has fallen to 2,400 acres. I understand that we've been more picky and trying to convert a lot of our existing parcels into this. If you can throw some light in terms of how much of this INR 2,500 crores debt, which is mostly construction-link today, but the origination of this debt was because of land purchases back 8, 10 years. Is there some kind of a metric that you can share that, okay INR 1,000 crores of this amount is actually locked because of our land purchases in the past?

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [149]

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See basically speaking, the reason the company has gone public, the primary objective of the company was to buy [biggest] land parcels as we had articulated -- or communicated in our prospectus. Primarily, it was funded through equity only. But right now looking at the -- where the money is, the money employed is disproportionately higher on the land than what it should be. We are working aggressively on our Chennai parcels, on our Hoskote parcels, on our Hosur parcels, on our Kozhikode parcels to see that some kind of monetization, some kind of a development happens.

So next few years, definitely, we'll be reasonably providing more clarity in unlocking the value of these land parcels. And hopefully, once the headquarter project gets launched, things will look significantly better, these are the kind of investments we have made in our land bank.

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Operator [150]

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As there are no further questions, I would now like to hand the conference over to the management for closing comments.

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Jagdish Chandra Sharma, Sobha Limited - Vice Chairman & MD [151]

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So, friends, thank you very much for attending this conference. We reiterate and believe that we'll continue to keep doing better and better in the years to come. Both our real estate vertical as well as the contracting vertical should perform better in this financial year. Operationally, we should sell more, and our cash flows also should become better. And we hope that going forward, the [margins] should also start reflecting better than what we have achieved so far. Thank you.

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Operator [152]

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Thank you. Ladies and gentlemen, on behalf of SBICAP Securities that concludes this conference. Thank you for joining us, and you may now disconnect your lines.