1. At a Glance

Sobha Ltd just pulled off a 123% PAT jump in Q1 FY26—yes, the same company with margins flatter than Dosa batter. Net debt is now negative, sales hit ₹2,079 Cr, and revenue at ₹901 Cr. But is the luxury real estate darling just building castles… or castles in the air?

2. Introduction with Hook

Imagine running a 5-star restaurant where you also grow your own wheat, bake your own bread, and wait tables. That’s Sobha. They build homes and manufacture the interiors. It’s like Ambani personally wiring up your flat.

Q1 FY26 saw:

• 123% YoY jump in PAT
• ₹2,079 Cr gross sales
  But here’s the kicker: the stock still trades at a PE of 169. Yes, that’s not a typo. Welcome to real estate where valuation logic goes to retire.

3. Business Model (WTF Do They Even Do?)

Sobha is into two things:
1. Real Estate (81% of revenue) – Selling premium homes that make your EMI cry.
2. Contractual/Manufacturing (19%) – EPC work + producing fancy glass, interiors, concrete—because why not build everything in-house?

So basically, they’re a real estate company and their own vendor. That’s like opening a restaurant and also owning the farm, poultry, spice garden, delivery app… and yelling at the waiter.

4. Financials Overview

Let’s unpack the numbers like a builder unrolling blueprints:

Commentary:
“Operating profit lower than your building society’s maintenance fund.”
Margins have evaporated faster than RERA deadlines.

5. Valuation

Let’s bring out the big guns:

• PE Method: 169x trailing earnings.
  → Fair Value Range = ₹900–₹1,100 (being generous)
• EV/EBITDA Method: EBITDA last 12M = ₹294 Cr
  → EV/EBITDA of 20x = ₹5,880 Cr EV
  → Implied Price = ₹1,080–₹1,200

Verdict: If you think paying 169x for low ROE is smart, we’ve got a bridge to sell you.

6. What’s Cooking – News, Triggers, Drama

• Rights Issue of ₹1,999 Cr – Fully compliant. ICRA nodded like a proud tuition teacher.
• Net Debt turned negative – They’ve stopped borrowing from tomorrow to pay for yesterday.
• PAT jump of 123% – But half of it is “Other Income.” You decide if that’s genius or jugglery.
• Stock down 13% YoY – Either the market is blind, or it’s wearing reading glasses.

7. Balance Sheet

Key Comment:
“Debt: Not Titanic-level, but the iceberg is gone and they’re cruising debt-free.”
Fixed Assets are inching up, but borrowings are shrinking—like your salary post rent.

8. Cash Flow – Sab Number Game Hai

Analysis:
“Cash flow looks like a freelancer’s WhatsApp: lots of ‘on it boss,’ but no payments.”

9. Ratios – Sexy or Stressy?

Commentary:
“ROCE is as exciting as cold pizza. D/E is low, so no panic. But valuation is drunk.”

10. P&L Breakdown – Show Me the Money

Observation:
“PAT grew 93% this year. Great. But after falling 50% last year, it’s just back to the base camp.”

11. Peer Comparison

Comment:
“Looks like the most overdressed guest at a party of fit billionaires.”

12. Miscellaneous – Shareholding, Promoters

Trend:

• FIIs running like it’s 2008
• DIIs doubling down like desi uncles at a buffet

Rights Issue Note: ₹1,999 Cr used as promised. Monitoring agencies nodding in approval.

13. EduInvesting Verdict™

Sobha is cleaning its balance sheet faster than your mom wipes kitchen counters before guests arrive. But profits are anaemic, ROE is sleepy, and the PE is hallucinating.

Final POV:
“A beautiful apartment… with a leaky pipeline called valuation.”
Track it, don’t chase it. Margin of safety > marble flooring.

Written by EduInvesting Team | 25 July 2025
Tags: Sobha Ltd, Real Estate, Q1 FY26, Rights Issue, EduInvesting Premium, Luxury Housing