Sobha Developers to meet target of Rs 2,000cr sales in FY13

In the last financial year there was a judicious price increase of about 12 percent. In an interview to CNBC-TV18, JC Sharma, Vice Chairman & MD of Sobha Developers informed that they hope to do more than Rs 2000 crore of new sales in the current financial year.

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He further added that currently they are operating from seven cities and by the end of the next financial year they will have presence in 10 cities across India.

Below is the edited transcript of his interview to CNBC-TV18

Q: Can you take us through the quarter that was, how did you do in terms of realizations and how do you see the current quarter doing?

A: In the last calendar year in particular and the last quarter in general, we believed that the interest costs will come down, the economy will start growing. We did not expect a slowdown in the IT sector. Instead the input and the labour cost had gone up and the availability of labour was also quite challenging. However, we did believe that structurally the demand had remained intact. The NRI interest in the Indian real estate has been growing significantly. The market from where we were operating there was a scope to ensure that we improve the volume. We also maintain the margins by judiciously passing the input increase cost.

When we looked back at the last financial year and the calendar year we have been able to achieve this through a judicious price increase of about 12 percent, also ensuring that we have a double digit growth in volumes. So, what you are seeing today is the benefit of that judicial increase. There we hope to do more than Rs 2000 crore of new sales in the current financial year.

Q: Quarter on quarter (QoQ) your sales have remained flat. It is not as if your volume has done very well it is your realisations that have done well. So, is there still some demand resistance at higher levels?

A: You have a point and that is why we are cautious in giving our guidance. We had given a guidance of about 14 percent increase in the volumes and 20 percent plus increase in the prices. We are cautious of these facts. However, at the same time when we look at our customers profile we find all 50 percent of the people do not take any loan.

The availability of loan to our customers has remained better than ever before. The benefit of the interest cost is getting started. It is passed onto where the leaders do the transactions now between 10 percent and 10.5 percent. Some of the banks are even going upto 30 years of loan. So, we are capitalizing on that aspect. It is to ensure that in this quarter also the volume growth momentum is maintained. We hope to achieve the volume growth, where we should be doing 3.75 million square feet in this quarter as well.

Q: I was just going to ask you because you have already finished around 70-72 of your FY13 target in terms of total sales volumes, what would you finish the entire year by with?

A: We are confident that from a value point of view it should be more than 20 billion. On a volume point of view we should be just about 3.75 million square feet.

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Q: What currently does your debt figure stand at this point in time?  How do you expect it to pan out in the remaining part of the fiscal? What sort of debt to equity levels will you be comfortable with?

A: W would like to peg our debt equity at 0.6. We are well within that level. We are having better cash flows. We are using those better cash flows to see that our volume growth and the new vertical of the commercial space, develops a significant strength over a period of time. So, rest assured our cash flows are far better than what they used to be in the preceding financial year. Those cash flows are being used quite judiciously to ensure that keeping the debt equity at 0.6, we keep growing at faster pace than this industry is growing.

Q: Your share from Bangalore has come down to 65 percent from 69 percent. Can you take us through your forays in NCR, Chennai and Mysore? There as well are you able to go with this kind of increase in realisations?

A: Yes, it was again a very conscious strategy to go out of Bangalore. If you look at it from the value point of view, Bangalore gives us 60 percent of our revenues versus close to 70 percent what it used to give only a year back. Going forward we do believe that in a couple of years time Bangalore will only be contributing about 50 percent. The balance 50 percent would be coming from the newer cities. Our experience in NCR and in Chennai started paying off. We should be adding three more cities in this coming financial year. So, currently we are operating from seven cities, by the end of the next financial year we will have a presence in 10 cities in India.

Q: Can you just give us an update on whether you will be looking for any private equity deals also in terms of any specific projects, in order to ease funding? Can you give us an update on your Gurgaon project?

A: As far as funding is concerned it is a conscious call. There is no pressure. We can leverage ourselves comfortably. We can borrow much more and can service it comfortably. This has been a well thought out decision. We thought that on fair terms if we can get some private equity who understands the real estate as well. Also who has been there in this business for a longer period to capitalize on this financial strength to grow faster. This we hope to continue in the coming year as well.