Sobha Developers may miss revenue guidance for FY14 as sales volume dip almost 18% in Q3

Bangalore-based real estate firm Sobha Developers has recorded a decline of 17.7 per cent in sales volume for the quarter ended December 31, 2013 over the year-ago period which shrunk the revenue in the corresponding despite a rise in average realisation.

The firm sold 0.74 million sq ft of new space, compared with 0.90 million sq ft of new space in the same quarter in the previous fiscal, it informed the stock exchanges.

This was partly cushioned by a 14.8 per cent rise in average price realisation per sq ft to Rs 6,786 during the December quarter. But sales value of the realty firm dropped 5.83 per cent to Rs 502 crore in the quarter from Rs 533 crore in the year-ago period.

For the first nine months of the financial year, the company saw sales volume decline to 2.66 million sq ft of space against 2.68 million sq ft in the year-ago period.

The firm attributed the decline in sales to weak sentiments in the Delhi NCR market but said it remains upbeat on key south Indian markets despite a lower sales volume during the quarter.

Sobha Developers is primarily focused on residential and contractual projects and has projects in seven cities, including Bangalore, Gurgaon, Chennai, Pune, Coimbatore, Thrissur and Mysore. Last quarter, it saw sales decline in five of these, including its biggest market Bangalore, with only a marginal increase in Pune. It counted a jump in sales in Mysore and added fresh sales in a new city Kozhikode.

Earlier, Sobha Developers had given a guidance of new sales area of 4.2 million sq ft valued at Rs 2,600 crore for the current financial year. It clocked sales worth Rs 1,737 crore in the first there quarters aided by higher price realisation but cautioned that it may miss the guidance for the year.

“While the company is able to maintain better sales realisations and generate consistent operational cash flows, it remains cautious about achieving its guidance set for the current fiscal,” Sobha Developers said.

During financial year 2012-13, the firm had sold 3.75 million sq ft area worth Rs 2,214.5 crore.

HDFC Securities in a note to its clients said that it sees sales volume of Sobha Developers to recover in the fourth quarter with the new launches in the pipeline, but expects the realty firm to fall short of achieving sales guidance of 4.2 million sq ft. It said the firm will launch two large projects in its home market besides other launches in Coimbatore, Gurgaon and Kozhikode which may allow it to sell around 1 million sq ft in the fourth quarter.

Sobha Developers had previously attracted Singapore’s sovereign wealth fund Temasek to pick a stake by buying shares of the promoters. Temasek is estimated to have put in around Rs 100 crore to buy a little over 4 per cent stake in Sobha Developers but has been cutting its stake since mid-2012. It is believed to have pulled out the money it invested originally and its remaining stake is worth around Rs 50 crore which could give it around 50 per cent return on its four-year-old investment.

(Edited by Joby Puthuparampil Johnson)

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