Shares of Shobha slumped 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 was being conducted by the Income Tax Department at its registered office and other premises of the company.
At 12:12 pm, Sobha was trading at Rs 492.60, down 5.2 per cent on the BSE. It was also quoting near 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 being a responsible company, all the concerned employees/employees of the company are extending their full cooperation to the authorities.
In the past one month, the stock has declined 15 per cent compared to a 2.6 per cent fall in the S&P BSE Sensex. Moreover, it has declined 30 per cent in the last six months as against 1.5 per cent fall in the benchmark index.
For the October-December (Q3FY23) quarter, Sobha’s net profit almost halved, impacted by higher cost of land acquisition. The company’s consolidated net profit declined by nearly 48 per cent to Rs 31.8 crore from Rs 61.4 crore in the year-ago quarter. Meanwhile, total expenses rose 49 per cent to Rs 779 crore over the year-ago quarter.
The group primarily operates from Bengaluru, with around 67 per cent of its total sales coming from the region. It also serves 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 timely receipt of the same is critical for launching new projects within stipulated timelines and for future sale/collection is,” said India Ratings and Research (Ind-Ra).
Significant increase in scale and cash flow diversification while improving liquidity and credit metrics could be positive for the company’s rating. Lower-than-expected demand for new projects, resulting in higher-than-expected concentration of cash flows in selected projects, or cash flow losses, or deviation from stated land acquisition strategy resulting in higher dependence on debt, and/or Ind- Ra said in its recent rating action on Shobha that net debt/net working capital exceeding 0.65x on an ongoing basis would warrant a negative rating action.
