Realty firm Sobha looking to up equity capital to Rs 10,000 cr in 5 yrs

Realty firm Sobha Ltd is looking to increase its equity capital by four times to Rs 10,000 crore over the next five years to support future expansion plans and is set to launch a rights issue this fiscal year to raise around Rs 2,000 crore.

Bengaluru-based Sobha Ltd is part of Sobha Group that was founded by PNC Menon in 1995. The Group has real estate business in Dubai under an entity named Sobha Realty. The Group is planning to enter the US property market as well.

Sobha Ltd's board has approved the company's proposal to launch rights issue for an amount not exceeding Rs 2,000 crore.

"We want to increase the equity of the company. So the purpose of bringing the rights issue is to provide money into the company so that we can fund the growth," Sobha Ltd Chairman Ravi Menon said in an interaction with reporters in Dubai recently.

Post rights issue to eligible equity shareholders of the company, the equity capital base would increase to Rs 4,500 crore from Rs 2,500 crore currently.

Promoters having a 52 per cent stake in the company would participate in the rights issue.

Sobha Ltd's long-term target is to increase equity capital to Rs 10,000 crore over the next five years.

"So over a period of time, within the next four, five years, we should be Rs 10,000 crore equity. And we are reasonably disciplined on the debt," said 76-year-old PNC Menon, who is Chairman Emeritus of Sobha Ltd and Chairman of Sobha Realty.

Ravi further added, "...as the development happens, you start generating profits and that gets going back into the equity."

Sobha Ltd has chalked out an aggressive expansion plan and will soon enter the Mumbai luxury housing market, as it seeks to achieve more than a four-fold jump in annual sale bookings to Rs 30,000 crore in the next 4-5 years.

The company, which got listed on the Indian stock exchanges in 2006 and is one of the leading players in South India, is looking at all options to acquire land parcels in the Mumbai region, including outright purchases, joint development with land owners and redevelopment of existing housing societies.

"Our India business Sobha Ltd will enter the Mumbai market. I have a dream, we have to show something which India has not seen. We are going to follow the same methodology that we do here. When you do that, it becomes expensive. The cost will go up. The only place in India which can pay is Mumbai," said PNC Menon.

Elaborating further, Ravi Menon said the company expects to break ground in Mumbai by middle of the next calendar year.

"Hopefully we can replicate the Dubai model, using Mumbai as a city which has a market and can absorb that sort of price," Ravi added.

Sobha Ltd has set a high growth target of sales bookings in the coming years. The company had posted a 28 per cent growth in sales bookings during the last financial year to Rs 6,644.1 crore from Rs 5,197.8 crore in the 2022-23 fiscal.

Asked about the near-term goals, PNC Menon said, "We are targeting at Rs 30,000 crore worth of annual sales bookings in the next 4-5 years."

Ravi said Mumbai would be a major contributor to this growth target. The company plans to launch projects close to 8 million square feet this fiscal.

In Dubai, Sobha Realty has developed a large resort-style luxury township named 'Sobha Hartland' with complete backward integration to ensure quality. Another township and a few more projects are being constructed here.

Sobha Realty clocked Rs 35,000 crore worth of sales in 2023 calendar year.