Sobha Ltd
NSE:SOBHA
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
985.7
2 122.99
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Sobha Ltd
Earnings Call Analysis
Q2-2025 Analysis
Sobha Ltd
In the first half of FY 2025, Sobha Limited achieved total real estate sales of INR 3,052 crores, with Bangalore contributing 40% and the rest of India 60%. Notably, in Q2 FY 2025 alone, sales reached INR 1,179 crores. Kerala distinguished itself with its best-ever quarterly performance, selling 0.3 million square feet amounting to INR 338 crores. A significant factor in this growth is the average price realization, which saw an impressive 32% year-over-year increase, driven by projects in Gurgaon.
Sobha launched one project, Sobha Insignia, in Q2 FY 2025, with an area of 0.49 million square feet. For the first half of the fiscal year, total launches reached 3.53 million square feet across five projects. Looking ahead, Sobha plans to launch an additional 5.5 million square feet in the second half of FY 2025, aiming for total yearly launches to hit about 9 million square feet. Furthermore, for FY 2026, Sobha has targeted a significant launch of about 10 million square feet.
During Q2 FY 2025, Sobha raised INR 19.99 billion through a rights issue, which was oversubscribed by 1.39x. So far, the company received 50% of the funds, allocated for repaying borrowings, project-related expenses, and land acquisitions. As a result of these efforts, Sobha's net debt has decreased by INR 9.08 billion, positioning the net debt at INR 2.80 billion, with a low net debt-to-equity ratio of 0.08. Cash flow from operations also reflects a healthy increase, achieving INR 29.21 billion for H1 FY 2025.
The Contracts & Manufacturing segment generated INR 317 crores in revenue during the first half but has faced pressure due to cost escalations and resource mobilization issues. These challenges are expected to continue, affecting profit margins in the coming quarters.
For FY 2025, Sobha maintains a revenue guidance of INR 8,500 crores, contingent on the timing of upcoming launches. The management remains optimistic that upcoming projects will cater to a mix of products and ticket sizes, enhancing sales velocity. Therefore, the company anticipates achieving its sales targets within the projected time frame.
Looking towards the medium term, Sobha aims to elevate its overall EBITDA margins to beyond 20%. The real estate segment's margins are expected to be even higher, between 22% to 25%. The focus will remain on optimizing project configurations and managing costs effectively within the Contracts & Manufacturing segment as well.
As of the end of September 2024, Sobha has a robust land bank totaling 1,878 acres, projecting the capability to develop approximately 26 million square feet. The company plans ongoing developments and potential expansions in new markets, including Greater Noida and Mumbai, where various opportunities for land acquisition are being evaluated.
Despite certain market challenges and fluctuations in luxury real estate demand, Sobha's performance, strategic plans, and robust financial positioning suggest a positive trajectory. With a strong sales pipeline, a disciplined approach to debt management, and an unwavering focus on profitability, Sobha Limited is well-positioned for sustained growth in the coming years.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Sobha Limited Q2 FY '25 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Adhidev Chattopadhyay from ICICI Securities Limited. Thank you, and over to you, sir.
Yes. Good evening, everyone. Thank you for joining us on the call today. From the management of Sobha Limited, as always, we have with us Mr. Jagadish Nangineni, the Managing Director; and Mr. Yogesh Bansal, the Chief Financial Officer. And I'd now like to hand over the call to the management for their opening remarks. Over to you, sir. Thank you.
Thank you, Adhidev. Good evening, everyone, and thank you for taking part in this Q2 FY '25 earnings call. Our team at Sobha [Audio Gap] to interact with you today. You can access the results and the quarterly presentation on our website, sobha.com.
In today's call, we'll briefly speak about our performance in Q2 and H1, and our perspective for the remainder of the year and beyond. Firstly, on the sales. In the first half of the year, our sales -- total real estate sales stands at about INR 3,052 crores where Bangalore has contributed to about 40%, and the rest of India at about 60%. And lion's share of that is by NCR, which is about 30%, Kerala about 19% and the remaining from the rest of the locations.
And in Q2 FY '25, we achieved an overall sales of INR 1,179 crores. And in this, Kerala has witnessed best ever quarterly sales of 0.3 million square feet, which is sales value of INR 338 crores, recording their best quarterly performance and half yearly performance. The average price realization has improved by 32% over the last year, and 40% compared to first half of the last year due to the contribution from projects in Gurgaon and also price increases across the projects.
In Q2 FY '25, we have launched one project, Sobha Insignia in Bangalore with an area of 0.49 million square feet. This launch takes the overall H1 '25 launch area to 3.53 million square feet over 5 projects. We have a very strong pipeline of 19.29 million square feet of residential projects over 18 projects and 8 cities, and a commercial pipeline of 1.19 million square feet over 4 projects spread across all our cities and -- which can be done in the next 6 to 8 quarters.
In the second half year, we expect to launch an additional 5.5 million square feet, taking the yearly launches to about 9 million square feet across 4 projects in Bangalore. Of the 19.29 million square feet, in FY '26 also, we target to launch about 10 million square feet.
We are building a strong pipeline of our future endeavors from our existing land bank and [Audio Gap] transactions in our current operating cities and 5 potential nonoperating cities. The revenue yet to be recognized from the sales that have been done till date stands at about INR 14,500 crores and the blended margin for these unrecognized revenue is over 33%, which would be recognized in the next 4 to 5 years.
In our Contracts & Manufacturing segment, in first half, we had a revenue of about INR 317 crores. Margin in the contractual and manufacturing projects -- contractual projects and contract-based manufacturing projects continue to be under stress with the resource mobilization issue and cost escalation issue, and hence, we expect this pressure to continue to reflect in our P&L for the next couple of quarters.
With this, I hand over to our CFO, Yogesh Bansal, to take you through the financial numbers for this quarter and the half. Over to you, Yogesh.
Good evening, everyone, and thank you for joining us today. I am pleased to share our financial performance for first half and second quarter of financial year 2024-'25 ending September 30, 2024.
I will start with our rights issue. During the quarter, we have raised INR 19.99 billion through rights issue, and it was oversubscribed by 1.39x, and we have received 50% of the fund as application money. And these funds are earmarked for the repayment of certain borrowings, project-related expenses, equipment purchases and strategic land acquisitions. Now -- thanks to all of you for participating in rights issue.
So now coming to quarter performance. Starting with cash flow. Cash flow for H1 FY 2025, we achieved a robust total operational cash inflow of INR 29.21 billion, reflecting 4% increase from the same period last year. The Real Estate segment led this growth with collection increasing by 8.6% to INR 26.14 billion. Contracts & Manufacturing business contributed INR 3.07 billion.
The consistent higher inflows caused an increase in project-related CapEx. During the H1 2025, we have incurred INR 848 million, which is 54.18% more as compared to same period last year. For the quarter, it reached INR 441 million, double of Q2 FY '24, enabling us to progress on key projects. Additionally, we have incurred INR 3.27 billion in land outflow for H1 compared to INR 1.12 billion in H1 FY '24, aligned with our growth and expansion plans.
As of September 30, 2024, the projected marginal cash flow from ongoing and forthcoming residential projects stand at INR 161.22 billion, indicating a strong visibility of cash flow. Unsold inventory across launched ongoing projects has a sale value of INR 125.44 billion.
Due to rights issue proceeds, this quarter, our net debt reduced by INR 9.08 billion, and as on September 30, it was down to INR 2.80 billion. Our net debt to equity ratio was 0.08. Average interest rate has remained steady in recent quarters, holding at 9.4%.
On the P&L side, for H1 FY 2025, total revenue stood at INR 16.35 billion with the Real Estate contributing INR 12.56 billion and Contractual & Manufacturing segment generating INR 3.17 billion. EBITDA for H1 was INR 1.94 billion with an EBITDA margin of 11.9%. PAT for the half year has improved by 19% over H1 FY 2024.
In Q2 FY '25, our total revenue rose by 25% year-on-year to INR 9.65 billion. Real estate segment contributed INR 7.81 billion, representing 80.9% of total revenue. Revenue yet to be recognized from sales completed as of 30th September 2024 stands at INR 144.77 billion. This will be recognized over the period upon handover of the units.
With this, we can now open the call for questions. Once again, thank you for -- all for your participation.
[Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities Limited.
My first question is on the presales for the first half. So I just wanted to understand what went wrong. I mean, we had good launches. We had launches in GIFT City, we had launches in Gurgaon, we had the Crystal Meadows launch and these were like sizable launches in excess of close I think -- if I add up the total value, it would be close to about INR 8,000, INR 9,000 crores, but the contribution coming in from these launches has been disappointing.
So what are you doing -- so what went wrong? And how are you correcting it? And I understand these are high-value launches, but in the second half in order to meet your guidance of INR 8,500 crores, so what steps has been taken? And what is the launch pipeline in the second half?
Parikshit, as you rightly pointed out, we have improved upon our launch timeline, and we have been consistently been launching the projects across locations in the last year or so. And that has created a big pipeline -- I mean, big inventory for us, which is available for sale for all our teams.
Now when we launched these projects across mainly Bangalore and Gurgaon, while the inventory got created, the 67% of our inventory right now is over INR 4 crores. And typically, the larger ticket size sales have -- we have seen is the pace of sales is over the period of the project. And hence, it is an expected thing that it is -- we would be able to do the sales of these projects over the course of the project.
And second is, in general. for Sobha being a premium player, it is unlike several of our other competitors, the pace of sales has always been during the course of the project, which is essentially what people call as sustenance sales is the way we also have been doing all our sales over the last more than a decade. So that phenomenon continues.
And hence, there is nothing as such has gone wrong is what the perception is. However, there are one or two projects where we think that it can -- we could relook at the project configuration, which we are actively looking, but otherwise, rest of the inventory is in place. That's one.
Second is -- for the remaining period of the -- for the remaining 5 months, 6 months that we have in FY -- this financial year, the project that we are launching, they have products, which are across the ticket sizes and which are typically are bread-and-butter business, which is 1-bedroom, 2-bedroom, 3-bedroom, 4-bedroom apartments.
So those, once they come in, I think the SKU, which currently we have towards larger ticket size would go back to the as usual split and that should significantly improve our sales -- pace of sales. So these two, I think, with these, we should be in a good stead going forward, Parikshit.
So on the guidance part, we'll continue to maintain INR 8,500 crores for the year?
So on the guidance, which is INR 8,500 crores, it entirely depends on our timing of the launches that we are expecting in the next 5 months. And we are really hopeful that things would gear up and we'll be able to still do it. But I mean the clearer picture will emerge in the next few months as we launch these projects.
Okay. So we've been hearing off late that there has been issue in approvals in Bangalore and other peers of yours have also alluded to that, and there has been issues and delays. So in light of that, how are we placed? So what is the launch pipeline in this quarter have we applied for -- for which we have already applied RERA? So what is the visibility for November and December in terms of launches?
We expect one project to be launched in November for which we have already received RERA. And another one -- which is about 1.1 million square feet. And the other projects that we are expecting, those also are in advanced stages. So we are hoping that we will be able to launch them very soon.
The delay or the perception that there is a delay in the approval in Bangalore or any other location, these issues keep coming up every time. There will be some issue or the other that comes up, whether it is an election, whether it is a change in regulation, whether it is a change in government appointments.
So these are, I think, routine matters, but we are expecting that things would significantly improve over the period, but somehow, that's not the case yet. So we are in regular business of obtaining approvals and the timelines and the risks associated with it. So probably we'll have to live with it.
But having said that, we are trying our best to quicken the whole approval process as much as possible by optimizing internally. External is something that is entirely sometimes not in our control. And that those things are factored in when we are giving timelines to you in terms of launches as well.
Jagadish, what are the launches? I mean, 5.5 million is the balance for the H2. So this quarter, you said 1.1 million one launch where you have got RERA approval. So what is the other launch in this quarter?
The other, we are -- what we are expecting to do is Town Park, and there is one more project in Bangalore, that's in South Bangalore. So both those would also come in the next 1 to -- 1.5 to 3 months.
And what is the -- I mean, million square feet of area, so 5.5 million which you expect to launch, what is the split in Q3 and Q4?
Q3, we should be anywhere between -- one which we already approved, that is 1.1 million. If Town Park, which is over 3.5 million square feet, that comes in this quarter, then that would be about over 3.5 million square feet, and another project is about 0.7 million square feet.
Okay. So if all these approvals come in, so 3 million plus 1.1 million plus 0.7 million, so approximately 4.8 million should be -- we should be able to launch in this quarter?
That's right.
And in Q4?
In Q4, we have another -- one more project, which is about 600,000.
And Pune one -- Pune also will come in Q4?
Sorry, Parikshit, you're not audible.
Pune. Pune project will also come in Q4, the Pune or the Noida, I mean any chance of these two projects coming in, in the fourth quarter?
Pune also, we are working on the approval part. We are expecting to do it by the end of the quarter of Q4, but I'm not completely sure on it because we are yet to reach an advanced stage there.
Okay. Just one last question on the land bank. You have now disclosed the land banks and total 48 million square feet of area and this 1,878 acres of land bank. So when you say that it's under consolidation, monetization, self-use, so how much of this do you think can be, out of 1,878, brought in as an end product, and how much do you think you cannot develop and you will have to sell in the market? And what is the book value of this land?
Yes, we had put up a slide this time in the investor presentation in Page 16, so wherein we have clearly marked out what's the subsequent projects' land as well, which we think that we can develop about 26 million square feet. And beyond that, the remaining land bank that we have, wherever we will be able to consolidate and add to the subsequent projects' land, we will do over a period. And as and when we do that, we would put it up and update the -- in this bucket as well.
Sir, my question was how much of this is developable? I mean, do you think -- there are two portions to it. One is that which you cannot develop. I mean you don't want to develop because they are very, very far away from a development point of view. You will not get that 10,000 minimum realization. So how much of that you will apportion to that? And how much do you think can be brought back to that table which you have shown of 48 million square feet?
In this, majority of the development that we can do from the remaining land bank would be from our Hoskote land, which can -- we can probably add another 100 acres, right? And in addition to that, if any of the other lands come in for even for plotted development, that we are looking at actively.
Because some of the locations that we have these lands, earlier, they were quite in outskirts of the cities. But now some of the locations have improved. And hence, we can look at plotted developments as well, provided we are able to have a contiguous line.
Second, the -- some of the land we are actually going to use, probably close to about 100 acres, for our self use, where we can set up -- increase our capacity of our manufacturing units as well. So that's still in initial stages. So hence, we will -- as and when those events happen, we will keep updating you.
The Hoskote land was about 500 acres or -- because my understanding is, it's close to about 500 acres.
Sorry to interrupt you, sir. I request you to come back for follow-up questions.
[Operator Instructions] The next question is from the line of Parvez Qazi from Nuvama Group.
So I have two questions. First is, and we keep hearing about your potential entry in Mumbai by doing a luxury project. So I wanted to get your views on our diversification beyond the existing cities, especially in, let's say, Mumbai and Noida. That's the first question.
Second is with regards to the future business development. Now after the rights issue, obviously, we have substantial firepower. So while our land-related CapEx has already increased this year, but do we have certain targets in mind as to by when we would like to utilize most of the rights issue proceeds?
Parvez, to answer your second question first. So the rights issue proceeds, once -- we are calling for the remaining money also in December. And once we do that and we have the capital, we have a good visibility in terms of deployment of the capital from the existing opportunity itself because some of the funds would be utilized for the investment in getting the subsequent projects' land into a project level.
And in addition to that, we have -- we are actively working on building up the business development pipeline. And that, I think in the next 2 years, we should be able to deploy a majority of the capital.
And to answer your second question, which is diversification into new cities. You would have seen that Greater Noida, we have already one small parcel of land and marks our entry into a new city. That -- once we get a good sense of the entire cycle of the project right from land acquisition to the launch of the project and initial phase of the project, then we would have a much better sense. And hence, actively, we are pursuing opportunity, further opportunity -- we will actively pursue opportunities there as well.
When it comes to other cities like Mumbai, we -- like I've mentioned in my previous calls as well, the Mumbai opportunity is a big one, strategic one for us. We are evaluating multiple opportunities. We have lot of opportunities that we have been evaluating and we will surely start doing transactions there too.
In addition to these two cities, we -- as of now, we are not looking at any other nonoperating cities yet. We already are in 12 cities, and these two will be two more. Third city, as such, if you have to add, that will be Hosur, where we already have a land bank and that we are getting -- we are waiting for some conversion approvals. Once that is done, that will also be added to our portfolio of projects.
Sure. And lastly, when we look at FY '26 launches, did I get the number correct, you were talking about a 10 million square feet potential launches in FY '26?
That's right. That's right, Parvez. The overall, like we have seen that it's about 19 million square feet is what we have as of end of September. We should be able to do at least about another 5.5 million, 6 million remainder and about another about 10 million square feet in the next financial year.
The next question is from the line of Biplab Debbarma from Antique Stockbroking Limited.
So my first question is on the Gurugram project. So we are still seeing Gurugram -- seeing slow absorption. So to compensate for that -- because you have a lot of land parcels in Gurugram. Do you intend to do more launches in Gurugram in, say, in Q4? Because approval is also not an issue, absorption is happening quite fast. And so just wondering whether is there possibility of new launches in Gurugram.
Biplab, we have good inventory, like you mentioned, in Gurugram. In addition to what we have, in order to increase the pace of sale and our own presence in Gurugram, we have two more projects -- three more projects in pipeline. And those would be done not in FY '25, but in Q2, Q3 of FY '26.
Okay. So no new launches in this financial year?
No.
Okay. And sir, just to understand, so in that -- thanks for giving us the table on land bank, so just trying to understand the terminology of this land bank. So basically, you are saying in addition to the forthcoming projects of 19.2 million square feet, you have forthcoming projects' land and subsequent projects' land and there is 1,878 acres of land bank. So these are the additional land.
So this 228 plus 207 plus 1,878. Is that correct, sir? I'm just trying to understand what does this mean. What is the meaning of forthcoming projects' land and subsequent projects' land and 1,878 acres of land under various stages of consolidation? And amongst this land parcel, how much is Hoskote?
So Biplab, this is -- the pipeline that we typically say that we have forthcoming projects, that's the 19.29 plus some commercial space. All of that is about 228 acres like the slide shows. And these are the ones which we are expecting to be launched. And these are the projects where we have already initiated an approval process, design is mostly complete.
And hence, we have taken them as forthcoming projects where we have a clear timeline for launches. And those, we believe that we should be able to do it in the next 6 to 8 quarters. Beyond that, what we also wanted to show was that we have additional about 207 acres, which is about -- which can bring in about 26 million square feet.
Those lands are also with us. And we have to -- we have not yet started the approval process, but there are various -- I mean, there are a couple of other activities that we are doing, which is any conversion activity or it's in the initial design phase activity.
Once those are completed and we start applying for any of these -- applying for approvals, then we would move them into the bucket of forthcoming projects. So it's -- so hence, what we wanted to show is not just the visibility of this about 20 million square feet, but we have clear line of sight for about another 26 million square feet.
And the third one, which we have is the bigger land bank of 1,878 acres. Those -- also -- they are in a different stage where probably we'll have to do in some places consolidation. And those -- or we have clearly marked out saying that they are at monetization.
So those are not yet -- I mean, we are still making progress in terms of getting the right set of land shape to make sure that we can -- we can move into the subsequent projects' land. So the objective of this developable land bank slide is to showcase what's today and -- what's visible today and what's visible tomorrow. And beyond that, we will continue to work.
This provides excellent clarity. Just trying to understand, this 1,878 acres, this is under your control. Yes, you may monetize it, you may use it self use for some manufacturing or you may acquire a few more land parcel to consolidate this 1,878 acres, but it is under your control, right?
That is right.
Okay, okay. And my final question is on the Contract & Manufacturing. You mentioned about the poor margin. What kind of margin we have made in first half of FY '25? And going forward, what should be the expected margin in this segment, sir?
Only in the Contract & Manufacturing?
Yes, Contract & Manufacture, not Real Estate. Basically non-Real Estate part, what is the margin that you have been -- you have done in the first half of FY '25? And what would be the new normal in terms of EBITDA margin?
For the entire Contract & Manufacturing in the first half, we would have done an EBITDA margin of about 6%.
And this would be the new normal, sir? Or do you see improvement to 10% or 11%, 12% going forward? Or there's uncertainty like kind of thing?
I'll let Yogesh take this question. Yogesh?
Biplab, this year, you will see similar margin. But next year, you will start improving our margin...
So in contracts -- just to give a small color to that. The Contracts & Manufacturing, it comprises of various sub-manufacturing activities, which is we have glazing and metal works, interiors, concrete products in manufacturing. And in contract, we have civil, electrical and plumbing. The main reduction in our margins has been in civil and in our glazings, which are contract-based.
And once -- but the other, which are electrical, plumbing and even interiors and concrete products, they are performing much better. And I think once the emphasis on the civil contracts and once we complete some of the older projects in glazing and metal works, it should -- we should start seeing significant improvement in the margin, and that's what Yogesh is also alluding to.
The next question is from the line of [ Akshay ] from Investec Capital.
Am I audible?
Yes, now it's better, Akshay.
I have two questions. So the first question is related to like most of our launches -- recently launched inventory is [Technical Difficulty]. So how do you intend to sustain the sales momentum, like amidst the potential -- like potential market fluctuation like in the Bangalore or the Gurugram market going ahead? That is my first question.
And second question is like you already answered related to the margin and all. So what will be your overall guidance on -- overall EBITDA margin going ahead for like FY '25, '26? I know that you already are focusing on the contractual margin, Contractual & Manufacturing margin towards [Technical Difficulty]? Any guidance on the overall EBITDA margin for going ahead like for '25 to '26? Yes, that's my second question.
So Akshay, to your first question. The demand side from -- in those and Gurugram seems to be very steady, and we see as such no issues till now if you consider the leading indicators. So the only thing that we need to be more cognizant of is the product configuration that we have and the mix of the configuration that we have.
So -- and in a kind of pyramid demand -- sorry, pyramid demand structure, where there will be -- the size of the higher ticket size is smaller and as we go down, the size of the market increases. And I think there is a big market for residential real estate considering the economic growth and the migration that has taken place in the last few years.
And one of -- even if you look at the commercial offtake in the recent -- in this year, apparently, it's going to be one of the highest. And that gives a lot of confidence in terms of the job creation that's happening in the country and which is largely in the metros. And biggest beneficiaries of this is our cities like Bangalore and Gurugram.
Given that macro view and from a supply side, what we are seeing from the ability to launch a project and deliver the project is also -- the supply is also very consistent with the kind of demand that we are seeing. And hence, we see -- it can be a very stable environment in both these locations.
Coming to your second question related to the guidance on the margins, I mean our goal for our EBITDA margins going for -- in the medium to long term, which is probably I can -- we will not be able to clearly guide you for the next year or -- next half or next year. But over a period of time, we would -- our aim is to take our EBITDA margins to over 20%.
It seems like our current participant got disconnected. We'll take our next question from the line of Ankit Gupta from Bamboo Capital.
So my question was on the overall demand on the luxury real estate side. Are we seeing some slowdown there over the past few months?
Sorry, can you please repeat the question?
Sure, I'll do that. So my question was on the overall market for the luxury real estate. Are we seeing some signs of slowdown over the past few months in the sales for, let's say, houses above INR 3 crores, INR 4 crores for us as well as in the overall industry?
I mean, luxury housing demand is a function of, again, several factors, which is micro market based, ticket size, product type and also the overall macroeconomic environment. But I think given the complex mix of it, it cannot be just given in the same brush for products over a certain ticket size.
For example, in Gurugram, even ticket size of INR 5 crores is considered a good ticket size where the sales velocity can be good. And whereas in Bangalore, any ticket size below INR 3 crores can be a very good ticket size where the sales velocity can be good.
So considering both these, I think there is a steadiness in the market and probably what we can anticipate is it's not that it's going to be how we have seen the increase in the sales volumes in the last couple of years. Probably we are reaching a steady state instead of continuous increase in terms of demand.
Because I was coming to this point referring to some indications of slowdown in sales of luxury items like cars as well over the past few months. So that was the point I was making, like are we also -- have we also seen some, let's say, reduction in demand or the growth that which was there over the past few quarters has seen a bit of a reduction.
Right. So a direct correlation from cars to houses, we are yet to establish but we will be able to sort of get the indicators and also actual how it's going to play out in the next few months. Once we have that clear, then we would be able to respond to that changing market conditions, too.
The next question is from the line of Aayush Saboo from Choice Equity Broking Private Limited.
Can you please guidance on the net debt figure that you expect to realize in the next 1 year?
Sorry, Aayush, you are referring to net debt?
Yes, net debt.
Okay. So what's the question, sorry?
Could you just guide over the -- what kind of range you see the net debt sitting at the next 1 to 2 years?
So from a debt perspective, Aayush, what we -- the way we are thinking is, I mean our gross debt is currently it's about INR 1,500 crores, right? And largely, we are comfortable having a gross debt of about this number.
And going forward, we -- our objective is to utilize the proceeds of the rights issue and cash flow that we generate from the operations, both of those towards equity -- sorry, towards -- to use that as growth capital. And given that objective, there would be fluctuations in the net debt in the next few quarters because we would get -- receive the rights issue tranches -- this next tranche.
And there would be definitely a reduction in the whole net debt. In fact, it will become negative. And once that -- but post that, as we utilize it for the -- towards land, then again, the net debt would increase. But at a gross debt level, we would probably continue -- in the long term, we might see at an absolute level of about INR 1,500 crores or so.
Pardon, INR 1,600 crores, right? That is the gross that you're guiding?
Yes, gross debt is INR 1,500 crores, yes.
Aayush, I hope this answers your question.
Yes.
[Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities Limited.
Yes, sir. So you touched upon that you'll be calling the rights second tranche in December, next month, right?
Yes. That's right, Parikshit.
But sir, if the current price is almost INR 100 lower than the rights price, so you think that -- last time the promoters came and filled up for the unsubscribed portion. So they will continue to do the same thing, right, as per the rights offer document?
Sorry, Parikshit, we could not hear the question properly. Can you please repeat that?
I was saying that as per the offer document, the unsubscribed portion of the rights will be taken up by the promoter. And since the current market price is lower than the rights price, do you think that we will continue with the same direction, right? If there's some unsubscribed portion, the promoters will fill in?
Parikshit, already promoter has subscribed unsubscribed portion. I think now we are calling only the right money first call. Okay, when we are going -- if there is -- we have to see what is the [Technical Difficulty].
No, no. So my question was that if the current price is lower, the market -- other investors can buy from the market. So if in case they don't subscribe to the rights issue, will their portion of the rights renunciation will be taken up by the promoters, that was I was asking.
See, the rights, ones who have subscribed to the rights, right, you -- the ones who have already subscribed, they need to pay up. In case of any nonpayment, I mean, the first tranche would be forfeited. And if those are available and we will have reinstituted, the promoter would be willing to take up those.
Okay. That is what I wanted to ask. Second question was, sir, on the land again, I could not get the answer last time. So out of this 1,800 acres-odd, which you have shown, so how much is the total Hoskote land and how much is the Hosur land in this?
The Hoskote land will be another -- close to 300 acres, and -- the entire land. And Hosur is about 150 acres or so.
Both of these -- so out of 1,800, INR 450 crores, so these are developable, right? I mean, these can -- a finished product can be done by you on these two land parcels over the next say 7, 8 years?
On the Hoskote land, yes, they can be developable over a longer term. There again, they are in various batches. And those large batches, as we consolidate, we will be able to give it to development.
In Hosur, the land -- some of the land that -- I mean, this 150 acres of the land that we are alluding to, those we -- based on -- I mean, again, they are in multiple locations in Hosur itself. And currently, given the locations, we do not think that they can be developed as plotted development. Those we will need to -- if they -- if the location develops, we will be able to convert it. Otherwise, we will monetize it.
Okay. And just this 1,878 acres. So if Yogesh can tell what will be the book value of this land, sir, this 1,878 acres?
That would -- we do not have the number exactly, but we will circle back and provide you that number.
The next follow-up question is from the line of Biplab Debbarma from Antique Stockbroking Limited.
So sir, you have made foray in Greater Noida and most probably in MMR, Mumbai region too, you will be entering soon. So I'm just trying to understand what would be your strategy. Like how do you want to play in this new markets, especially MMR, because MMR is a bit difficult market and -- just trying to understand how you want to play.
Like which market -- micro market you would target? Or what kind of redevelopment, land purchase, JDA, what kind of you are targeting? And then premium, luxury, what segment you are targeting? So -- because you have -- would have something in mind, you might -- I'm certain you have done a lot of research before making foray into MMR and Greater Noida. So just trying to understand your strategy.
Yes, you are right that MMR -- when you say MMR, there are multiple micro -- or let's say, large markets within MMR itself, South Bombay, Suburb Bombay, Thane, Navi Mumbai and several others. So -- and each market has its own availability of land, it's own dynamics in terms of the market itself, so -- and including approvals, so -- and bylaws. So hence, we have been indeed studying the opportunities that we are looking at.
And one of the things that we have seen is that the upfront investment in terms of approvals and in terms of whether it is TDR or premiums or FSI charges, is significantly higher than any of the other markets that we have -- been operating in. So based on that, we would take a route of where the upfront capital is not as high as in some of the other markets.
So hence, the current plan is to study the opportunities and spread ourselves in multiple locations so that we can have a presence over multiple geographies within MMR. So once we have clarity on that -- on specific opportunities, we will be able to disclose those to you, Biplab.
But it's a little preliminary for us in terms of clearly spelling out the kind of strategy that we have because the -- it is an ongoing process, and it will take a little bit of time before which we can close a few opportunities, and we start working towards that.
And on Greater Noida, it is a fairly -- the land is largely -- the supplier is the government or people who have taken it from the government allotment. So -- I mean since this is a very straightforward in terms of the supply, we will look for new opportunities based on how we are progressing in the first project.
Once we get some comfort there, we would definitely like to expand because that's -- it's an interesting geography, Noida and Greater Noida, and we believe that there is a good opportunity there for us, considering that we have done well in Gurugram, and we have good presence in Gurugram, the brand recognition and the understanding of the -- and probably the requirement of quality product is very high there.
Okay. Great. Sir, I have two more clarifications I needed. You mentioned EBITDA margin long term and medium term overall EBITDA margin to be 20% plus. Is it for the entire company? Or it is just for the real estate embedded EBITDA that you mentioned, 20%?
Biplab, this is for the entire company.
Okay. And real estate would be -- what would be real estate segment EBITDA margin that you believe would be achievable in the medium to long term?
Real estate would also be slightly higher than -- I mean, it would be closer to -- above 22% -- it might be between 22% to 25%. But even the contracts and manufacturing can be in a much better margin once we choose the right set of contractual projects or we choose to deemphasize on some of the kind of contracts that we are currently undertaking like civil in nature.
Ladies and gentlemen, we'll take this as a last question. I would now like to hand the conference over to the management for closing comments.
Thank you. I express my sincere gratitude to all the participants in the call today. I hope we fielded all your questions. And if there are any further questions, please reach out to us through our Investor Relations. And thank you, and have a wonderful evening.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.