Sobha Ltd

NSE:SOBHA

Earnings Call Analysis

Sobha Limited Reports Record Sales and Launch Plans for FY '25

Sobha Limited achieved a record sales value of INR 6,644 crores in FY '24, a 28% increase, with 66% of sales from Bangalore. The company plans to launch 9 million square feet of new projects in FY '25, a 30% increase from last year. Operational cash flow reached an all-time high of INR 5,797 crores, reducing the net debt-to-equity ratio to 0.5 from 0.66. Projected revenue from future launches is estimated at INR 6,541 crores. EBITDA margin stood at 12.4%, with an expected improvement as sales from new projects grow. The company targets sales of INR 8,500 crores for the upcoming year.

Record Performance and Future Prospects

Sobha Limited has reported a remarkable financial year 2024, marked by its highest operational cash flow of INR 5,797 crores. This stellar performance is attributed largely to increased sales and timely construction milestones, leading to robust billing and collections. Significantly, over INR 5,034 crores of this cash flow originated from its real estate operations, pointing to a solid foundation for ongoing growth. Moreover, Sobha's debt management strategy has been successful, with net debt reduced by INR 377.5 crores throughout the year, lowering the net debt-to-equity ratio from 0.66 to a comfortable 0.5【4:1†source】【4:3†source】.

Sales Insights

In FY '24, Sobha achieved a sales value of INR 6,644 crores, reflecting a 28% increase from the previous year, marking it the best year for sales performance. Roughly 66% of sales hail from Bangalore, with INR 2 crore plus ticket sizes accounting for 58% of sales during Q4 alone. Sobha's pipeline looks robust, with 9 million square feet planned for launch in FY '25, potentially contributing INR 6,541 crores to marginal net cash flow【4:1†source】【4:12†source】.

Project Launches and Inventory Management

Sobha has been active in launching new projects, introducing a total of 7 projects in FY '24, contributing to a total potential launch inventory of 16.85 million square feet. For the current financial year, the company anticipates that 60% of this will originate from Bangalore, while also expanding into Gurgaon, Chennai, and Kerala. This expansion stems from a commitment to maintaining healthy inventory visibility, currently at 24.4 million square feet, thereby enabling future revenue recognition【4:2†source】【4:5†source】.

Financial Indicators and Profitability Goals

Looking at profitability, Sobha's total income for the year stands at INR 3,218 crores, accompanied by an EBITDA margin of approximately 12.4%. However, there are optimistic projections for higher margins in the coming quarters as existing projects mature. Management indicated a goal for EBITDA margins to reach approximately 30% as construction and sales accelerate, reflecting the company's proactive approach to enhancing profitability while managing operational costs【4:12†source】【4:4†source】.

Guidances and Strategic Outlook

Management outlined a target presale goal of at least INR 8,500 crores for FY '25, with an ambitious vision to cross INR 10,000 crores if market conditions and inventory sales remain favorable. Given the anticipation of substantial launches and a positive demand environment—notably in metro areas like Bangalore and Gurgaon—the company is poised for continued growth in line with the optimism pervading the Indian real estate market【4:1†source】【4:6†source】.

Consideration of Market Conditions and Risks

Despite a healthy outlook, management remains mindful of the current real estate cycle's dynamics and the risks of land price volatility, ensuring prudent investments post-rights issue discussions. The intent is to solidify financial health, avoiding hasty land acquisitions which could lead to challenges akin to those observed during economic downturns【4:11†source】【4:18†source】.

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Sobha Limited Q4 FY '24 Results Conference Call hosted by ICICI Securities.

[Operator Instructions]

Please note that this conference is being recorded. I now hand the conference over to Mr. Adhidev Chattopadhyay from ICICI Securities. Thank you, and over to you, sir.

[Adhidev Chattopadhyay, analyst]

Good evening, everyone. On behalf of ICICI Securities, I'd like to welcome everyone to the Sobha Limited call today. From the management, we have with us Mr. Jagadish Nangineni, the Managing Director; and Mr. Yogesh Bansal, the Chief Financial Officer.

I'd now like to hand over the call to the management for their opening remarks. Over to you, thank you.

[Jagadish Nangineni, executive]

Good evening, everyone. Thank you, Adhidev and team, for your introduction and organizing this call. Sobha team and I are happy to interact with you post the financial results of quarter 4 of the financial year FY '23, '24. In this call, we will very briefly touch upon our last quarter and 12-month performance and provide an outlook for the next year.

Firstly, on real estate sales, FY '24 was the best year for us on all fronts. Sale value of INR 6,644 crores, an increase of about 28%, area of 6.08 million square feet and an average highest average price realization of 10,922. In Q4, after 10 quarters of higher sales than previous quarters, we took a breather and we landed at about INR 1,500 crores of sales with 1.34 million square feet area.

Overall, for the year, about 66% of the sales are from Bangalore. 58% of this quarter sales have been contributed by INR 2 crore plus ticket size. Secondly, on the project launches, we launched a total of 7 projects in the last year with 7.03 million square feet, all of them in Q3 and Q4. In the last quarter alone, we launched 4 projects, Sobha Cristal Meadows, Sobha [indiscernible] City, Sobha Rig in Trivandrum and Sobha Atlantis Phase 2 in [indiscernible]. Last year, our contracting and manufacturing have also been steady at INR 683 crores with a small degrowth in some of the support stats. At the end of this quarter, we have a potential new launches of 16.85 million square feet and an existing inventory of 7.55 million square feet, making a robust inventory visibility of 24.4 million square feet. Of the remaining unlaunched inventory of 16.85 million, we plan to launch about 9 million square feet in FY '25 and the remaining subsequently. That would be an increase of about 30% from the previous year of 7 million square feet launches. In addition to this, we are working rapidly to bring the remaining land bank also into the project stages, which we estimate to have a potential of between 25 million to 30 million square feet. We will keep adding to the future launches as the work progresses in those in this year and the next. Positive cash flow generation has been our focus and it continued last year as well.

Details of the cash flow and other financials will be taken up by our CFO. I request Mr. Yogesh Bansal to take you through the same before we open for questions.

[Yogesh Bansal, executive]

Good evening, everyone, and thank you for joining us today. I would like to share our financial performance of FY '24. we achieved the highest operational cash flow of INR 5,797 crores. In this, about INR 5,034 crores were contributed by other real estate business, making it the highest ever collection here in Sobha's operating industry. This was possible due to increased sales and also making more construction-linked milestone across our ongoing projects, leading to higher billing and collections. This enabled us to increase our spend across business and control to help us help our growing scale and expedite reception activity in the projects.

We have generated highest ever net operating cash flow of INR 1,089 crores. Higher inflows has also helped us reduce our dependence on short-term financial improvement thereby there is reduction in our interest cost in line with our commitment to balance growth and financial display, we have spent a net amount of INR 383 crores towards land and new opportunities. Q4 '24 was the 14th consecutive quarter of debt reduction, we reduced our debt -- net debt by INR 81 crores in the quarter and INR 377.5 crores in the entire year. Our net debt-to-equity now at a comfortable level of 0.5 compared to 0.66, which was on March 31, 2023. This achievement are a clear reflection of our commitment to maintaining financial display balancing a sustainable growth at the same time. Looking at it from our residential real estate business, we have an estimated marginal cash flow of INR 14,934 crores to be realized. Of this, INR 8,393 crores is expected to be contributed from our ongoing projects. Additionally, we have had a robust pipeline of 16.85 million square feet expected to be launched over the coming 6 quarters. These forthcoming projects are expected to generate INR 6,541 crores of marginal net cash flow.

Our proven approach to capital management, coupled with cash flow visibility puts us on solid financial foundation to see new growth opportunity in future. On the P&L side, during the financial year, our total income is INR 3,218 crores with an EBITDA margin of 12.4%. Out of this above INR 9,953 crores were contributed from property development. This year revenue largely compared to resales made 4 years back in the quarter ended March 31st, 2024, our income was INR 791 crores of it whereas INR 91 crore from our residential business. We have balanced revenue of INR 13,515 crores from the whole residential unit, which will be recognized in the next 3 to 4 years, we expect the margin to be improved significantly from this whenever we recognized balance revenue for our Q4 '24, we recorded a PAT of INR 7 crore and for the year PAT is INR 49 crores. I would like to thank you all once again for your participation. And now we can open the floor to question-and-answer session.

[Operator]

[Operator Instructions]

The first question is from the line of Parikshit Kandpal from HDFC Securities.

[Parikshit Kandpal, analyst]

So my first question is on the launches. So you did some launches in Q4, so GIFT City launch, Sobha Meadows launch. And I think that followed up with launching Gurgaon [indiscernible] land. So if you can help us how has been the response to these launches? That's my first question.

[Jagadish Nangineni, executive]

Yes, we did these launches and the response has been quite good and it will be. The sales of this response will be reflecting in the Q1 because the launch of the GIFT City and Crystal Meadows has been towards the end of the previous quarter, Q4. So majority of the sales will flow and the response has been quite good according to our expectations.

[Parikshit Kandpal, analyst]

What was the total, I mean, between the 3 projects, Meadows, GIFT City and [indiscernible]. So how much is the total value of work-off inventory leased or like INR 1,000 crores or if you can help us a in million square feet so that would be helpful. How much of the inventory you have released to the market?

[Jagadish Nangineni, executive]

So the total inventory for this would be about about 7,500-odd or so, and we have released about 20% of it for the month.

[Parikshit Kandpal, analyst]

So the 20% has been released?

[Jagadish Nangineni, executive]

Yes.

[Parikshit Kandpal, analyst]

Okay. And what are the balance for this quarter? So what are the other projects which are looking to launch in Q1.

[Jagadish Nangineni, executive]

In Q1, like you said, we have already launched this arena, which is the Karma Lake lands project. And we have 1 house -- sorry, plotted development in Chennai. And we have 1 more project slated to be done in Gurgaon. Apart from that, we have 1 more product development in Coimbatore. These are the ones which we think that we can do in this quarter.

[Parikshit Kandpal, analyst]

Okay. Sir, just one more question on that. So while you are using -- I mean, when we have seen in Gurgaon, I think large part of Karma Lake land will have -- the value inventory will be high there. So why you have only released 20%? Just wanted to understand from you when other developers are launching the entire project, why you're holding back and only releasing 1/5 of the inventory.

[Jagadish Nangineni, executive]

Well, it's -- we have several towers there. So we are doing tower-wise launches, Parikshit. And we believe that it's one of the most unique projects in an entire country, which is a golf course project. And we think that there is a good value to be realized. And they -- and since there is current -- what we have launched is just the overall launch is about 1.9 million square feet. So of which we believe that over a period of time, as we launch, sell and to develop, it would be more prudent than launching all and probably selling everything and having a majority of the cash flows coming in, but there is significant time for us to actually do the construction. So we would like to pace the sales also in line with the construction activity.

[Parikshit Kandpal, analyst]

Okay. Just one last question, sir, on this Pune now, we are seeing the Pune launch 1 project has been added in Pune. So also, we see that the Gurgaon overall launch pipeline has increased from almost 5 million to 8 million square feet. So that we have done some new business come in. So if you can help us understand what has been the new business development quarter-on-quarter. How much area you have added so that would be helpful.

[Jagadish Nangineni, executive]

Yes. So in Pune, we have added 1 project, which we think that the overall potential for the project is about 5 million square feet at least. However, in that, first, we are doing it in phases, and the first 1 million square feet is what we have put it in the pipeline and which we plan to launch it next FY '25, if it comes through. If it comes through it adds to our overall what I have guided as 9 million square feet, we can do probably more than that.

[Parikshit Kandpal, analyst]

You're planning to do 9 million square feet of sales -- presales.

[Jagadish Nangineni, executive]

Of launches, yes. And Gurgaon, also we have added 2 more projects in sector 99 and sector 63. Both these projects also will come up for launches in the next 12 months or so.

[Parikshit Kandpal, analyst]

What is the sales guidance for the full year then? I mean, because.

[Operator]

Sir, may we request that...

[Parikshit Kandpal, analyst]

That's my last question. That's my last question, if you can answer that. So just on the guidance with presales. Are we in line to cross INR 10,000 crores of sales this year?

[Jagadish Nangineni, executive]

Parikshit, that would be a great aim for us. Right now, in a very high base last couple of years, we have achieved about 30% plus increase in sales. If we continue on the path of at least 20% plus, we should be at least doing INR 8,500 crores. And if we can achieve anything more than that based on the new launches that we are seeing and based on how the release of inventory, if it continues to do well, then definitely, we should be aiming towards it. On a base case, I think we should be able to do INR 8,500 at least.

[Operator]

Our next question is from the line of Pritesh Sheth from Motilal Oswal.

[Pritesh Sheth, analyst]

Firstly, I think launches, you elaborated on launches that you are planning for Q1. But in this 9 million square feet, how would it be split across cities, if you can help on that.

[Jagadish Nangineni, executive]

Yes. Pritesh, there is -- largely about 60% would be from -- in Bangalore, these launches and about 2.8 million to 3 million square feet will be from Gurgaon and rest of it will be from Chennai and Kerala.

[Pritesh Sheth, analyst]

Secondly, on the land spend, now that we have seen an increase in the land spend in this quarter, what is your estimate on land spend in next year? And what are the projects? And I mean what are the markets you are targeting in terms of land acquisition.

[Jagadish Nangineni, executive]

In the long term, our focus is going to be in the large markets, which is our large markets, Bangalore, currently there, we have represent Bangalore, NCR, Pune, and Hyderabad. These are the 4 cities. In addition to that, of course, we have Kerala market, which has been doing well, and we have small projects in Chennai and in all these markets, we would like to continue to increase our scope of operations. And the current -- what we have done this financial year, similar spend is what we indicate to do next year also with the kind of cash flow that we would be generating. And I think that would suffice for taking care of the next couple of years of requirement, considering where we are in terms of pipeline of both existing inventory and the new launches.

[Pritesh Sheth, analyst]

Roughly INR 400 crores of land spend next year as well?

[Jagadish Nangineni, executive]

Yes.

[Pritesh Sheth, analyst]

Okay. Perhaps on margins. INR 135 kind of...

[Jagadish Nangineni, executive]

Just to add there, Pritesh, I mean this is the current plan. And we -- like you know, we have started the process of rights issue last quarter. And if that comes through, which we are working upon it in the last 2 to 3 months, and we would like to take it forward as quickly in the coming weeks. Once that comes in and the capital that could be available for us through the rights issue, though, that we will -- and what purpose we'll be using it and the additional cash flow that will be available for us. The actual spend on the land will significantly change from us. This INR 400 crores, what I was meaning is from the cash flows that we generate from an operational level.

[Pritesh Sheth, analyst]

Sure. Got it. And one last on margin. So [ INR 135 billion ] of sales yet to be recognized, what kind of margins we should expect from that? When do you see the improvement coming in? Is it from 1Q onwards or a little later in the year?

[Jagadish Nangineni, executive]

Yes. Yes, Yogesh, you like to...

[Yogesh Bansal, executive]

Yes. So Pritesh, currently, if you see, we are incurring data marketing on presale of last year, we incurred INR 6,644 crores, which is higher by 28%. And correspondingly, we incurred corporate overhead. That's why our EBITDA margin was low. Going forward, we are targeting with sales with higher EBITDA margin close to 30% plus we are speeding up our delivery both combination once it will start, okay fine, we'll see higher EBITDA margins.

[Operator]

The next question is from the line of Dhruvesh Sanghvi from Prospero Tree.

[Dhruvesh Sanghvi, analyst]

Yes. I wanted to ask about the overall rights issue. But before that, I wanted to applaud you that finally, the shareholders have got rewarded, but still, we would like the final P&L to come in. And of course, we are waiting for the margins to catch up. So thank you for the overall efforts and the direction that the company has taken under you, Jagadish.

Yes. So on the rights issue, if you can -- like why is it taking time? I understand that probably in the coming few weeks, you will do it. But is it that the cash flow of the promoters are tied up to a certain timeline and that is the reason for it or some other internal planning leads to the delay?

[Jagadish Nangineni, executive]

Thank you, Dhruvesh. The rights issue, we had started our work on this in February itself. The time lag of what we expected and where we are today, it's more of technical in nature. We wanted to do the entire financials and due diligence based on past financials. But as you know, we had got a new auditor in FY '23 and we wanted to complete 2 financial years with the existing auditors and come up with the financials of that, that made some of the overall diligence part much simpler. And hence, we have waited to come out with the results for this last quarter as well. And hence, now that everything else, this quarter has ended and the financial results are out, we will go on to the best possible extent in terms of speed to move ahead with the rights issue. So it's got nothing to do with the -- any other factors like we mentioned, but more to do with technicality.

[Dhruvesh Sanghvi, analyst]

Okay. And one broad question because you used the word, saying that the land purchase is after the rights issue will be much more or significantly higher than the INR 400 crore otherwise planned out of your existing cash flows.

On the broader sense of things, how will we take care that we are probably mid of the cycle already. We are definitely under the low now. The land prices have readjusted across the country and in fact, at many places and cities much more than -- I mean, the jumps have been very significant with such a large city now coming in and let's say, if we think about INR 2,000 crores of land purchase in the next 2 years out of the new cash flows, how do we shield for the future problems, which came similar to the past ones after 2008, '09, I mean are there enough such opportunities that are easily monetizable or this will be like long-dated land purchase plans again where we will not be able to monetize them for another 5 or 10 years?

[Jagadish Nangineni, executive]

No, it's a very valid question, Dhruvesh. In fact, if you look at our journey in the past few years and where we are today and with the rights issue, what's happening we are probably in the best possible situation in terms of availability and visibility of cash flow. That gives us a lot of leverage in terms of ability to evaluate and seek opportunities which makes sense for us. We are not in the land banking business, and that's not what we would like to do with the availability of the cash flow like you would have seen our marginal cash flow from the existing and the new launches is about INR 15,000 crores. And add to that, we are raising this particular -- the rights also, which advances our plans, but that gives us enough firepower to deploy wherever it can be done, and we are very mindful of the cycle where we are in.

We are mindful of the opportunities that -- where the margin of safety might be low. We are mindful of what the issues that we faced in the past, even in the existing cities and the new locations. So considering that, it is not that we would be in a super hurry to deploy and start launching. That's not the aim here. The aim here is to make the company financially extremely strong. And with this coming in, we would be -- I believe that one of the few players who will be reasonably well balanced in terms of financial structure and hence, the ability for us to create a longer run rate has just begun.

[Dhruvesh Sanghvi, analyst]

So if I can squeeze in one small one. In terms of the presales, I mean though you don't guide, you have indicated something like, let's say, INR 8,000, INR 8,500 crores. But maybe the kind of growth, a lot of our peer sets are now facing and how they are like -- it's like animal spirits are coming out, where there are not even 5 players touching INR 5,000 crores, INR 7,000 crores, INR 8,000 crores before a couple of years. And now there are more than 5 players touching about INR 20,000 crores of presales, should we not ramp up much faster than probably what you are conservatively guiding? Or we are still not ready with the launches in the near extent. Like why can't we go to INR 12,000, INR 13,000 crores now.

[Jagadish Nangineni, executive]

You're absolutely right that the market and the scale of some of the some of the players in the market has been significant, and it is -- reflects the move in the residential real estate. But you have seen our company how we have been operating. One, we have increased the pace of branches, we would continue to increase the pace of launches. There is no doubt about it. We are -- although we have the 16.85 million square feet, we would like to do it as quickly as possible. If we can do better than what we are planning for, nothing like it, not that we are trying to deliberately slow it down. That said, that we are a premium player in the market and the uptake of the inventory that's there, while it's true for most of the other players.

For us, it might be a little bit more balanced in terms of the premium that we charge and the kind of scale of launches that we can do. Based on that, I think we can -- we are -- we would -- the thing that we can do at least is what I have guided as INR 8,500 crores, or what we assume that can be done. But there is absolutely no effort that we are going to leave to make sure that the -- what we launch and what we sell will be as per the market conditions. I do believe that there is an optimistic scenario than what we are planning, but we will take it as we go during the financial year.

[Operator]

The next question is from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, analyst]

Just wanted to understand how much of presales of INR 66 million in this year are from, say, projects on existing land bank versus newer land that we acquired?

[Jagadish Nangineni, executive]

During the last financial year, Kunal?

[Kunal Lakhan, analyst]

Yes.

[Jagadish Nangineni, executive]

Last financial year, all of our launches have been based on the existing land bank, which we have done in the past. No new launches have been done on an acquisition during the year. So 100% of the launches would be in the past, except for small sales that are small sales that would have come from the GIFT City where we incrementally acquire certain -- some lands.

[Kunal Lakhan, analyst]

Sure. So just a follow-up on that is, so I'm just trying to understand what is, say, a pro forma EBITDA margin on these sales, which are simply from the existing land and the reason I'm asking is because if you look at our OCF margins, right, even after excluding, say, contractual and manufacturing business are roughly in the range of, say, 20-odd percent. You would expect a lot more in considering like this is legacy land, which you're launching on. So just trying to get my head around it, if you can help.

[Jagadish Nangineni, executive]

That's it for land that we have -- we are launching on the legacy lines. The EBITDA margin should be far higher, would be 40% plus. And whereas for the others, it would be slightly lower. But if you look at the launches that we have done, just like, let's say, for example, last year in new projecs, which is on our own land. Here the -- it should be anything more than 40% to 45%. But for some of the others, it will be -- in a joint development projects, it might be a little lower. Having said that, in the overall, like Yogesh has mentioned previously, we have this INR 13,500 crores of revenue to be recognized. And in that, it's roughly about -- on an average, it comes to about 30%.

If you -- but if you break it down again and see the sales that we have done in the last couple of years, that will be about 70% of the INR 13,500 crore, and that should be -- we should be about gross margin of more than close to 33% to 34%.

So as we recognize these revenues of the older projects, the remaining portion of the projects that need to be recognized that could -- their contribution increases and hence, the remaining EBITDA margin should improve. So we have another 2 to 4 quarters of the slightly lower margin scenario. And it also depends on the higher revenue recognition that we can do. So increased days of completions is a key thing that we need to -- we are working towards. Once we achieve that pace of completions as well, then we should be in a far better position in terms of P&L.

[Kunal Lakhan, analyst]

Actually, the question was not P&L margins, actually it was on OCF margin, which is based on what -- the sale that you're booking today, the OCF provided by say collections from real estate only, that is at about 20-odd percent. So I'm just trying to get -- this number should be a lot more higher than 20%.

[Jagadish Nangineni, executive]

Operating cash flow margin for the projects that we launched?

[Kunal Lakhan, analyst]

Operating cash flow margin for say FY '24.

[Operator]

I request you to use your handset, so your audio is not very clear.

[Kunal Lakhan, analyst]

Okay. I'm saying that operating cash flow is divided by the cash inflows from real estate. If you exclude the contraction in the manufacturing business, that's around 20%. That's what I was trying to get.

[Jagadish Nangineni, executive]

Okay. On the overall real estate business?

[Kunal Lakhan, analyst]

Correct. Correct.

[Jagadish Nangineni, executive]

Okay. Okay.

[Kunal Lakhan, analyst]

So that is at 20%, which should be technically around 30% subsidy and today these are all legacy projects, and there's no land cost associated with these?

[Jagadish Nangineni, executive]

Kunal, we don't have a ready answer for that. Can we quickly work on this, and we can take it up.

[Operator]

[Operator Instructions]

The next question is from the line of Yash from Stallion Asset.

[Unknown Analyst]

Sir, so my question is that I understand that you would like to launch 9 million square feet in FY '25, right, like in terms of the area?

[Jagadish Nangineni, executive]

That's right.

[Unknown Analyst]

So if I just do this simple math that if I multiply this by average realization of INR 10,000 per square feet, then you get the presales to about INR 9,000 crores, so I'm just trying to understand that are we trying to be a bit more conservative year on our guidance for presales for FY '25? Or maybe I haven't got the math right or if you can just maybe explain that would be very helpful.

[Jagadish Nangineni, executive]

So this new launch is as of FY '25 of 9 million, they -- probably the average price for that might be slightly higher than 10,000. And that's number one. Number two is, this has -- this is the launches that we are planning to do and not necessarily the -- not presales. Presales would, of course, depend on the ability for us to launch these new projects and the pace of sale of the existing inventory of about 7.5 million that we have.

[Unknown Analyst]

Right, right. So you're saying that out of this 9 million, maybe like 70% or 80% would only be converted to presales, if I understand right, like broadly.

[Jagadish Nangineni, executive]

Yes. I mean, 9 million plus what we have already is about 7.5 million, so that's 16.5 million. So on this 9 million will come over a period of -- during the financial year. So on an average, probably convert about 50% of it.

[Operator]

The next question is from the line of Kai Parvez Qazi from Nuvama Group.

[Parvez Qazi, analyst]

My first question is, I mean, in the various markets that you operate, where do you believe the demand environment currency is [indiscernible]. And the second question in FY '24, what would have been, let's say, price increase in the various geographies that [indiscernible].

[Jagadish Nangineni, executive]

The audio is not very clear if you can just kindly repeat the last couple of sentences that you have.

[Parvez Qazi, analyst]

So the second question was on like-to-like price increase in FY '24 across areas.

[Jagadish Nangineni, executive]

Okay. The increase in for FY '25 versus the full -- versus FY '24 because we are launching several projects in Gurgaon and also some of the projects that we launched in -- the current inventory, which we launched in Bangalore also is slightly higher. I think there would be -- we should see an increase of at least about 15% to 20% in the average price. And coming to the launches itself, like I said, part of the launches of about 50% of the launches -- sorry, 60% of the launches would be in Bangalore and remain in gur and Chennai and Kerala.

[Parvez Qazi, analyst]

Sure. And actually, my question was about the demand environment in the various markets that you operate, where do you see the demand environment currently leases.

[Jagadish Nangineni, executive]

The -- right now, on a steady-state basis, we are operating in Bangalore and [indiscernible] GIFT City and in Kerala. Each market is slightly different. The Bangalore market has been very steady, and we continue to see very good demand for projects across ticket sizes. But in Gurgaon, but clearly, there is an elevated demand for residential projects. And in Kerala it has been very steady in terms of the demand mainly driven by the NRI clients.

In GIFT City also, as the progress of the GIFT City itself is making -- seeing good traction. The demand for residential real estate data also seems to be very good. So in fact, we -- considering that we have -- last year, we have sold out the entire remaining inventory that we had in GIFT City. So all these seem to be very high. And apart from these, there are other 2 locations, which we would like to be a clean player that is in Hyderabad and in Pune. Hyderabad has -- continues to see a very good demand environment, similarly in Pune. However, we would like to see some more new investments there, then only we can have a real number out there for you in terms of demand for our products.

[Operator]

The next question is from the line of Parikshit Kandpal from HDFC Securities.

[Parikshit Kandpal, analyst]

Yes, sir. The first question is on we are ramping up our [indiscernible]. We are totally backward integrated. So just wanted to understand, are you open as we are expanding to your geography, so when you look at engaging external third-party contractors to do construction for you. So if you can give some color on capacity building there given that -- and also, if you can give some color on how your parent has been doing in Dubai because their scale is INR 40,000 crores, they also do -- I mean, do they hire external construction companies and whether in India also, you are open to higher contractors.

[Jagadish Nangineni, executive]

Good question, Parikshit. Our uniqueness of the operations lies on the backward indication model. And that is something that we will hold on to. You brought up a good point wherein the scale, how would we scale up the construction activities also. But as you know, in the past several years, we have been doing a lot of contractual work for Infosys and several other clients. And as we have been scaling up this -- the real estate vertical, we have brought -- and there has been a descaling of the operations in the -- in those verticals.

We have a lot of talent and capability in those who we have moved to the real estate vertical and hence we have been able to manage the capacity that's coming in now. Having said that, there is no doubt that we should -- we have to continue to build on this capacity that we have already built in, that's an ongoing exercise.

But for the time being, for the volume that we have sold and volume where we have achieved right until now, we are comfortable and understanding the requirements of the future, we are ramping up our -- the group maintain and also some of the capacity building on our manufacturing verticals as well.

[Parikshit Kandpal, analyst]

Even in Dubai, the parent is like doing it like backorder, they outsource the entire construction.

[Jagadish Nangineni, executive]

I believe Dubai also follows the same model.

[Parikshit Kandpal, analyst]

Okay. My second question is on business development. So you did touch upon it last year, you acquired 5 million in Pune. So I assume that it should be about close to about INR 5,000 crores a gross development value. And Gurgaon I think 2 million, the increase in the launches that should be about 3,000. So is it right that you've added INR 8,000 crores of new business development last year. And if you can also help us understand whether in Bangalore and other geographies, how much you would have added in terms of gross development value. And what is your target for FY '25?

[Jagadish Nangineni, executive]

We can assume that prediction based on the basic math that you just did, but on a -- as a company and as an ongoing basis, we keep doing new deals, and we did not start any practice of adding the specific deals and showcasing how much we are adding every quarter or a year. But roughly, what you have mentioned that's right and you will keep seeing that in the newer pipeline of launches as we go quarter-on-quarter.

For FY '25, also, if we spend -- if our land spends are going to continue in a similar fashion with what we did, we should add every year at least anywhere between INR 8,000 to INR 10,000 gross value projects, which essentially replenishes the current ongoing case of sales.

[Parikshit Kandpal, analyst]

Okay. Just lastly, Mumbai, so any plans there? I mean you're now reviving the Pune piece, getting into Hyderabad, so some traction there. So any plans for Mumbai, how are the engagements here how are you seeing Mumbai panning out for you?

[Jagadish Nangineni, executive]

We have started understanding Mumbai the market at a very high level, and we are looking at some of the -- or at least the local dynamics of the market is very different from many of the other cities. So there is a little bit of research and a little bit of understanding going on in the company while we are doing that in parallel, we are also evaluating some opportunities as and when they come to a certification level, we'll definitely share.

[Operator]

The next question is from the line of Dhruvesh Sanghvi from Prospero Tree.

[Dhruvesh Sanghvi, analyst]

In terms of brand rise, I think somewhere, someone asked that if you can compare Bangalore, like-to-like price rise over the last 1 year, what would it be? I mean, of course, it's very difficult that it is project to project, but is it fair to say that Bangalore would have risen for you by 5% to 10% or more in the price rise?

[Jagadish Nangineni, executive]

No, there are certain projects, Dhruvesh, where we can see a comparison of the projects there, there has been inventory sales in the same project or during the whole course of the year. If you compare only in those projects because it's tough to compare -- one project to another project. If we do that, then for us, it's definitely been over 12%.

[Dhruvesh Sanghvi, analyst]

Over 12%. Okay. And what would be your outlook on that aspect be again, same Bangalore like-for-like for the next finite period of, let's say, 1 to 2 years or now we are -- it looks that we are now saturating on the upper side.

[Jagadish Nangineni, executive]

It looks that the price increases in the last 2.5 to 3 years has been pretty good. And at least we do not plan to -- we don't have plans where the outlook is far higher than what it is.

Inflationary is what we would expect. But it again depends on the project to project. Some of the projects, once they get successful, then we do see price increases.

[Dhruvesh Sanghvi, analyst]

And one question was on Karma. I believe it's a JV, I mean there's a partner involved and the land was purchased or the type of the land that happened much back into the history during pre-COVID. So how does the dynamic work? Because the pricing in that area has dramatically should start up. So do we get a chunkier of the incremental that would have happened in that area from the time of the lock in till date? Or is it a complete pass-through where -- I mean, it's not much favorable to us.

[Jagadish Nangineni, executive]

Specific to Karma project, Dhruvesh, that is a DM project. So the overall dynamic, there has been an increase in the pricing where there is an increase in the cost, so in a DM project, it is what we -- our margins are largely stable irrespective of the market.

[Operator]

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Jagadish Nangineni, executive]

Thank you. Financial year '24 has been an exceptional year for Sobha. It has -- it underscores our team's focus and commitment to growth and Sobha's strong brand value in the consumer mind and deep stakeholder trust. In this year, not only we delivered good operational performance, but we made significant progress to strengthen our foundation for future growth. We are now very well positioned financially and operationally to capture the growth opportunities that India presents in this upbeat economic environment. I hope in this call, we have answered some of your questions satisfactorily. In case of any further questions, please do reach out to us. Thank you. Have a good weekend.

[Operator]

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.