An office building in Bengaluru. (Photographer: Dhiraj Singh/Bloomberg)

Sobha Sees Short-Term Growth Disruption On RERA Implementation

Sobha Ltd. sees a short-term disruption in business growth, as states start implementing the Real Estate (Regulation and Development) Act, 2016 (RERA) says, Vice-Chairman and Managing Director JC Sharma said.

“Markets will be a bit tentative due to transition in RERA,” Sharma told BloombergQuint in a post-earnings call on Wednesday.

The south-based real-estate developer reported a 70 percent jump in its net profit for the fourth quarter of financial year 2016-17 on Tuesday, its highest increase in the last 16 quarters led by overall growth in business.

Primarily, growth in topline, improvement in EBITDA margins, better collections and higher sales realisations led to this growth.
JC Sharma, Vice Chairman & Managing Director, Sobha

Sobha also saw its revenue grow six percent to Rs 589 crore.

Though the management refrained from giving any sales volume and value guidance for financial year 2017-18, Sharma said compliance cost is expected to go up in the current financial year, due to implementation of RERA, which came into effect on May 1.

We can not give any financial year 2017-18 guidance due to implementation of RERA. The compliance cost will definitely increase, which will be added to total cost.
JC Sharma, Vice Chairman & Managing Director, Sobha 

The company will also defer new project launches earlier slotted in the first quarter of FY18, to be followed only in the subsequent quarters.

The average realisation per square feet for the March quarter stood at Rs 6,980, higher than the average realisation of Rs 6,200 for FY17, on the back of realisations from high-value projects. However going forward, the company expects realisation to improve when compared to last financial year.

Sobha’s stock rose as much 9.4 percent on Wednesday and 76 percent year-to-date. Of the 18 analysts tracking the company, only one has a ‘sell’ rating while two recommend a ‘hold’, according to Bloomberg.

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