Sobha Limited: Building on Record Sales and Strategic Expansion in H1 FY26

Sobha Limited, a prominent name in Indian real estate, has delivered a robust performance in the first half of fiscal year 2026 (H1 FY26), marked by record sales and strong operational cashflows. The company's disciplined growth strategy, underpinned by its unique backward integrated model, has enabled it to navigate market dynamics effectively. In H1 FY26, Sobha reported a total income of INR 2,370.7 crore, with Real Estate Operations contributing the lion's share at INR 1,888.7 crore. Despite a slight dip in reported margins due to one-off provisions, the company's underlying operational strength and strategic initiatives point towards sustained future growth.

The real estate segment was the primary growth driver, contributing nearly 80% of the total revenue. This was supported by an impressive H1 sales value of INR 3,981 crore, a significant 30% increase year-on-year. Bangalore and the National Capital Region (NCR) were key contributors, accounting for 48% and 38% of overall sales, respectively. The company successfully sold 2.84 million square feet across its operational markets, with an average price realization of INR 14,028 per square foot. The contractual and manufacturing segment also played a vital role, adding INR 370.9 crore to the revenue, showcasing the benefits of Sobha's integrated business model. This model allows for in-house concept-to-completion delivery, ensuring quality control and cost efficiency, which is particularly advantageous in a stable inflationary environment.

Sobha's strategic focus extends beyond current sales to building a robust future pipeline. The company spent INR 632 crore on land-related activities in H1 FY26, nearly doubling the investment from the previous year, to strengthen its developable land bank. This proactive approach ensures a continuous supply of projects for future launches. Management has guided for launching 8-9 million square feet across 7-8 projects in FY26, including key launches like Sobha Magnus in South Bangalore and three projects totaling approximately 3.5 million square feet in the NCR. The company is also making a strategic entry into the Mumbai market, with the first phase of launch planned for H2 FY26, aiming to tap into the region's significant luxury housing demand.

Despite the strong operational performance, reported margins for H1 FY26 were impacted. EBITDA stood at INR 230.6 crore (9.7% margin) and PAT at INR 86.1 crore (3.6% margin). This was primarily due to a one-off provision of INR 27 crore for BBMP ground rent and other minor transactions. Management, however, expressed confidence that project-level gross margins, currently over 20%, are expected to increase towards 30% starting from the next financial year as higher-margin, self-owned projects like Neopolis come to completion. The company's balance sheet remains strong, having achieved a net-debt negative position in FY25 and maintaining a net cash position of INR 751 crore at the end of Q2 FY26, underscoring its financial prudence and ability to fund future growth.

Sobha's H1 FY26 performance reflects a company that is not only capitalizing on current market demand but also strategically investing for long-term sustainable growth. The focus on expanding its project portfolio, strengthening its land bank, and maintaining financial discipline positions Sobha to continue its trajectory as a leading real estate developer. The management's commitment to timely project completions and leveraging its integrated model reinforces confidence in its ability to deliver on future guidance and enhance shareholder value.