In an interview to CNBC-TV18, JC Sharma, vice chairman and managing director, Sobha Developers shares his views on the company's recent performance and explains why the company may not be able to meet its sales value target.
Below is the transcript of JC Sharma’s interview with Reema Tendulkar and Nigel D’souza on CNBC-TV18.
Reema: Let me start with Chennai because that contributes nearly 10 percent to your overall revenues. It is your second largest market after Bangalore and we have seen the devastating impact, the floods have caused over the last two weeks. Have things slowed down? Will there be an impact on the company’s performance because of in Q3, that is in this quarter and perhaps even in Q4, because of what has happened in Chennai?
A: Chennai from a volume perspective, it has been contributing 10 percent of our total volumes and it had shown the sign of picking up in the first two quarters and in the first two months also, it has done reasonably well. But, unfortunately, with the rains of this month and the floods also, have impacted the realty market as a whole.
The customers right now, they are deferring their purchases, so yes, this particular month, as far as the real estate is concerned in Chennai market, it is likely to be impacted adversely. But, on balance, we are confident that for the whole year, that includes the fourth quarter’s performance as well, Chennai should be doing better than what we achieved in the last financial year. And we also believe that this flood somehow will give some kind of an idea to the would be buyers, where to buy the products which are relatively safe.
Nigel: Could you tell us about your Sobha Dream Acres project? It is going to come in for revenue recognition in the second half this year. Could you tell us how much, when exactly will it come in the books, Q3, Q4?
A: This product was launched in the month of February in this calendar year and it continues to perform well. We believe that with the way things are shaping up, touch and go, we should be able to recognise the revenue of the Dream Acres for this quarter for some of the blocks. And then going forward, continuously we will see the improvement in our revenue recognitions thanks to these Dream Acres, quarter-on-quarter (QoQ).
The company is doing exceedingly well on this front and this is where it will be forecasting in other cities as well as in Bangalore and other locations going forward, we have got a great product, the product has been accepted by the market. The momentum continues and hopefully, when the market improves, Dream Acres along with the other products will start giving the signals to the market per se that yes, now, the volumes are better, realisations also are not getting affected, margins are also okay, and the growth will be back.
Reema: In the prior quarter, you told us that you were looking to launch a group housing project in NCR Gurgaon in Q3. I think November was the expected date of the launch. Have you launched it? Is phase-I currently open? What would be the size or has it been deferred?
A: There was one small technical issue. We have got the permission with some small technical compliance which should be over anytime this month. But, yes, the project is being talked about. We have done the Bhoomi Puja there and the other preliminary activities have started. We hope that in this quarter, a significant contribution as far as from Delhi market is concerned, it will come via this NCR Gurgaon project. And whatever losses we have had in Chennai, it will be more than compensated.
Reema: Already launched or not yet?
A: Not exactly launched, we are not accepting the payments now, but it is being marketed to the targeted customers.
Nigel: Your FY16 guidance is intact? Last year, you had missed your guidance. This time around, are you maintaining your guidance?
A: One of the reasons for the stock not performing is primarily that we believed that with the launch of Dream Acres, we should be able to do four million sq ft. But, as the market has stand out, there has been no improvement from the other markets and Bangalore market, if you take out the Dream Acres kind of thing, got impacted as well. This has resulted in to our not being able to achieve the expected numbers in the first half. The second half will definitely be better according to us. The per se, the worst is behind us. The realisation per sq ft is improving. The overall volumes also should be showing improvement from this quarter onwards. And touch and go, we still believe that the number of products what we have, we may reach to our guidance of this four million sq ft as far as the volumes are concerned.
As far as the value is concerned, we believe that we may not be able to achieve the target in this financial target.
Reema: So, what are you likely to achieve then, because in the first half, you have done Rs 1,000 crore, so could you end the year with Rs 2,000 crore for the full year?
A: We have already done Rs 1,000 crore, already we have done. So, definitely, we will be doing more than Rs 2,000 crore if the second half performance is better. How much it all depends on the market. Already we have given one guidance. Would not like to now guess anything beyond that.
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