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• The company is engaged in real estate constructions and related materials manufacturing.
• It posted declining trends in its bottom lines for the reported periods.
• It has bright prospects ahead, but the degrowth in its profits remains major concern.
• Well-informed/cash surplus investors may park moderate funds for long term.
ABOUT COMPANY:
Sobha Ltd. is one of the few vertically integrated real estate companies in India known for providing residential homes in India (Source: CRISIL Report) as well as manufacturing construction related products. It has continuously endeavored to diversify and expand its offerings, through focus on design, construction quality, building materials and technology.
It completed first project in 1999 located in Bengaluru, Karnataka and has gradually expanded its geographical presence to other cities in India which, amongst others, include Gurugram, Haryana; Chennai, Tamil Nadu; Pune, Maharashtra; and Kochi, Kerala. Further, it has recently expanded presence by launching projects in Hyderabad, Telangana; and Trivandrum, Kerala. In addition to developing real estate projects under the "Sobha" brand, it is also engaged in contractual engineering, procurement and construction capabilities for institutional customers.
As of March 31, 2024, the company has completed construction of 136.25 million square feet of developable area across 27 cities in India including contractual projects and currently have 38.36 million square feet of developable area for its projects which are under various stages of construction (including projects developed under the Sobha brand as well as contractual projects undertaken by it). In the last three Fiscals, it has completed construction of over 7 million square feet every Fiscal across real estate and contractual projects. In addition to its 69 Ongoing Projects, as of March 31, 2024, it had 21 Forthcoming Projects, which comprised 18 residential projects with an estimated Saleable Area of 16.85 million square feet and three commercial projects with an estimated Saleable/Leasable Area of 0.82 million square feet.
The company also manufactures a wide range of products required for construction activities such as concrete blocks, aluminum windows, doors and louvers, glass skylights, canopies and partitions, automatic sliding doors, glass, and railings; wooden products ranging from doors, home furniture, furnishing products and other home accessories. As of March 31, 2024, it had six manufacturing units located in Bengaluru, Karnataka; Alwar, Rajasthan; Kancheepuram, Tamil Nadu; and Sonipat, Haryana which cater to its internal construction material requirements as well as external customers.
As of March 31, 2024, it had 3,814 permanent employees and more than 10,000 contractual workers. Through its focus on maintaining a skilled and diversified workforce, it aims to maintain flexibility and agility to adapt to the future needs of business.
ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 12107981 equity shares of Rs. 10 each at a fixed price of Rs. 1651 per share to mobilize Rs. 1999.03 cr. The RI opens for subscription on June 28, 2024, and will close on July 04, 2024. The company is offering RI in the ratio of 6 for 47 to its eligible stakeholders as of the record date of June 19, 2024. The company is asking for Rs. 825.50 (i.e. 50%) on application and the balance by not more than two calls from time to time as may be decided by the company to complete the process prior to December 2025. Post allotment, RIs will be listed on BSE and NSE. The company is spending Rs. 13.06 cr. for this RI process, and from the net proceeds, it will utilize Rs. 905.00 cr. for repayment/prepayment of certain borrowings, Rs. 212.36 cr. for funding certain ongoing and forthcoming projects related expenses, Rs. 210.03 cr. for purchase of equipment and machinery, and Rs. 658.58 cr. for funding acquisition land parcels and general corporate purposes.
This RI is jointly lead managed by J M Financial Ltd., and BOB Capital Markets Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue.
Post-RI, company's current paid up equity capital of Rs. 94.85 cr. will stand enhanced to Rs. 106.95 cr. Based on the RI pricing the company is looking for a market cap of Rs. 17658.08 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 2645.23 cr. / Rs. 173.19 cr. (FY22), Rs. 3402.43 cr. / Rs. 104.21 cr. (FY23), and Rs. 3217.88 cr. / Rs. 49.11 cr. (FY24).
DIVIDEND POLICY:
The company has declared 30% dividends for the last two fiscals. It has already adopted a prudent dividend policy based on its financial performance and future prospects.
SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532784 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 2155.10 on June 18, 2024, and opened on an ex-right basis at Rs. 2072.80 on June 19, 2024. Since then, it has marked a high/low of Rs. 2094.25 / Rs. 1970.60. The scrip last closed at Rs. 2047.75 as of June 26, 2024. For the last 52 weeks' it has posted a high/low of Rs. 2179.81 / Rs. 510.38. The counter is currently under ASM LT: Stage 1.
The promoters' holding has been constant at 52.28% for the last three quarters ended with March 31, 2024. The counter is well managed above the RI price to lure investors.
Review By Dilip Davda on June 26, 2024
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The Sobha Rights Issues 2024 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Sobha Rights Issues 2024 worth investing. The Sobha Rights Issues 2024 Note sets the Rights Issue expectations in systematic way which tells you if Sobha Rights Issues 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Sobha Rights Issues 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.
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