Godrej Group Hikes Stake In Sobha To About 10%

Godrej Group increased its stake in Sobha Ltd. as the diversified Indian conglomerate looks to gain market share.

Anamudi Real Estates LLP, wholly owned by the Godrej family, held 9.99% stake in the Bengaluru-based real estate developer as of June compared with 1.08% as of March, according to an exchange filing. The promoters’ stake rose 12 basis points during the period.

India’s real estate demand hasn’t recovered since November 2016 overnight cash ban and a stricter housing law protecting buyers against fraud. A slowing economy and a liquidity stress aggravated the slump, stalling projects. And then a virus-driven lockdown dealt a fresh blow.

Sobha said since construction activities were impacted due to the pandemic, there would be an adverse impact in billings. It will impact revenue recognition as there will be some delay in handing over of the apartments, it said in a media statement. The company follows the IND-AS 115 accounting standard where revenue recognition happens on handing over of the apartment. Its new sales fell 38% year-on-year in the quarter ended June.

Still, the Bengaluru-based developer is optimistic.

With more and more companies opting for work from home, inherent demand for better quality homes, low interest rates and other benefits extended by the government, the demand is likely to sustain in the coming quarters and organised players are expected to perform better, Sobha said in the statement. The level of enquiries from customers is now almost back to pre-Covid levels.

According to Abhinav Sinha, research analyst at Jefferies, Bengaluru had relatively low Covid incidence among major metros and started opening up early, which helped Sobha. Some help also came from certain NRI-driven markets such as Kochi and Thrissur for the company, he said in a note. The ability to market real estate online and gain customer trust on project delivery during tough times, Sinha said, is a key differentiating factor that would help to accelerate market share gains for Sobha, Godrej Properties and Prestige Projects.

Pirojsha Godrej, executive chairman at Godrej Properties Ltd., said in the annual report that the progress in market share gains has been encouraging, and combined with a sustained momentum in new project additions, puts the company on track to consistently deliver return of equity in excess of 20%.

Shares of Godrej Properties have gained 35% in the last three months, while Sobha rose 26%. That compares with a 15% advance in the Nifty Realty Index during the period, according to Bloomberg data.