Sobha Group Targets INR 10,000 Crore Equity Capital and 5-Fold Sales Growth in Next Five Years

Sobha Group has Aggressive Expansion Plans in India

Bengaluru: Sobha, the Indian arm of the Dubai-based Sobha Group, aims to significantly boost its equity capital to ₹10,000 crore over the next five years. This ambitious plan is set to fuel the company's growth and expansion into new markets. The initial step involves a ₹2,000 crore rights issue within this financial year, as stated by its founder PNC Menon. Following this rights issue, Sobha's equity base will increase to ₹4,500 crore.

Strategic Financial Management - Balancing Equity and Debt

Menon emphasized the importance of equity in the cyclical real estate industry, noting the company's disciplined approach to debt management. He explained that Sobha maintains a policy of not allowing debt to exceed 45% without a corresponding 50% equity. The primary focus will remain on residential projects, which will constitute around 85-90% of Sobha’s portfolio.

Board Approvals and Growth Targets

Earlier this year, Sobha's board approved the ₹2,000 crore rights issue to bolster the company’s equity and support its growth plans. The company is targeting a more than five-fold increase in sales to ₹30,000 crore over the next four years, driven by new project launches and entry into the Mumbai market.

Expanding Portfolio

Sobha plans to develop at least 50 million square feet of projects over the next four years across major cities, including Mumbai, Bengaluru, Pune, Chennai, Kerala, Hyderabad, and Ahmedabad. The company aims to have ₹15,000 crore worth of land under its management for these developments.

Mumbai Market Entry

Menon highlighted Mumbai as a key market for Sobha, with plans to target a small percentage of high-end buyers. The potential revenue from Mumbai alone is projected to be around ₹10,000 crore. The company has identified its first residential project on a 300,000 square feet plot in Mumbai, targeting the super-rich segment, to be launched by mid-next year. Sobha is open to slum rehabilitation, redevelopment, joint ventures, and outright projects in Mumbai.

Navigating Mumbai real estate Challenges

Ravi Menon, chairman of Sobha, noted that the firm has finalized one residential project deal in Mumbai and is hoping to secure several more in the next quarter. He acknowledged the unique challenges of the Mumbai market compared to other cities and mentioned ongoing evaluations of costs and market conditions.

Replicating the Dubai Model & Maintaining Quality Standards

Sobha plans to replicate its successful Dubai model in Mumbai, focusing on product and pricing. PNC Menon stated that buyers will not be allowed to make changes to their apartments to maintain property quality. This policy ensures that the delivered product meets Sobha's high standards.

Diversifying Market Focus & De-Risking the Portfolio

The company is also keen to de-risk its portfolio by increasing its focus on other key markets, including the National Capital Region (NCR), Hyderabad, and Pune, alongside its expansion in Mumbai.