Sobha slips 5%, nears 52-week low on raid by Income-Tax department

Shares of Sobha slipped 5.4 per cent to Rs 491.40 on the BSE in Wednesday's intra-day trade after the real estate company announced that a search by the Income Tax Department was being carried out at the registered office, and other premises of the company.

At 12:12 pm, Sobha was trading 5.2 per cent lower at Rs 492.60 on the BSE. It was also quoting close to its 52-week low of Rs 480.35, touched on June 20, 2022. In comparison, the S&P BSE Sensex was up 0.13 per cent at 58,152.

Sobha, however, said that as a responsible company, all the concerned employees/staff of the company are extending their full cooperation to the officials. READ HERE

In the past one month, the stock has declined 15 per cent, as compared to 2.6 per cent fall in the S&P BSE Sensex. Further, in the past six months, it has tanked 30 per cent, as against 1.5 per cent decline in the benchmark index.

For October- December (Q3FY23) quarter, Sobha's net profit nearly halved, hit by higher land acquisition costs. The company's consolidated net profit fell around 48 per cent to Rs 31.8 crore from Rs 61.4 crore in the year-ago quarter. Total expenses, meanwhile, surged 49 per cent to Rs 779 crore over the previous year quarter.

The group operates majorly out of Bengaluru, with about 67 per cent of its total sales coming from the region. It also operates in nine other cities including Pune, Delhi NCR, and Chennai.

"The Indian real estate industry is highly cyclical with volatile cash flows. The sector is also subject to multiple regulatory approvals, and the timely receipt of the same is critical for launching new projects within the scheduled timelines and for future sales/collections," India Ratings and Research (Ind-Ra) said.

A significant increase in the scale and cash flow diversification while improving the liquidity and credit metrics could be positive for the company's ratings. A lower-than-expected demand for new projects, resulting in higher-than-expected concentration of cash flows in select projects, or a cash flow deficit, or deviation from the stated land acquisition strategy resulting in higher reliance on debt, and/or the net debt/net working capital exceeding 0.65x on a sustained basis, will lead to a negative rating action, Ind-Ra said in its recent rating action of Sobha.