Realty firm Sobha Ltd is set to launch its rights issue with the aim of raising up to Rs 20 billion. – The proceeds from the rights issue will be utilized for debt reduction, land acquisition, machinery purchase, and covering construction costs for various projects. – The rights issue will close on July 4, 2021.
Terms and Details of the Rights Issue – On June 12, the company’s Board approved the terms of the rights issue. – Sobha Ltd plans to issue 1,21,07,981 equity shares on a partly-paid basis at a price of Rs 1,651 per share, which includes a premium of Rs 1,641 per share. – The authorized rights entitlement ratio is set at 6 rights equity shares for every 47 fully paid-up equity shares held by eligible shareholders as of the record date.
Allocation of Funds – Out of the total proceeds, Rs 9.05 billion will be allocated for loan repayment and prepayment. – Rs 2.12 billion will fund project-related expenses for ongoing and upcoming projects. – The purchase of equipment and machinery will be supported with an allocation of Rs 2.1 billion. – Land acquisition costs will amount to Rs 6.58 billion, as stated in the letter of offer.
Strategic Growth Plans – Chairman Emeritus PNC Menon revealed the company’s plans to increase its equity capital four times to Rs 100 billion over the next five years, supported by the rights issue. – Sobha Ltd aims to aggressively expand its operations, including entering the luxury housing market in Mumbai, with a goal of achieving annual sales bookings of Rs 300 billion in the next 4-5 years. – The current equity capital of the company stands at Rs 25 billion, which is expected to increase to Rs 45 billion post the rights issue. – Promoters, holding a 52 percent stake in the company, will participate in the rights issue.
Future Outlook – Sobha Ltd, a leading player in South India’s real estate sector, is also expanding its presence in the Delhi-NCR market. – The company displayed a 28 percent growth in sales bookings during the last fiscal year, reaching Rs 6,644.1 crore. – Sobha Ltd is exploring various land acquisition options, including outright purchases, joint development, and redevelopment of existing housing societies, as it prepares to enter the Mumbai market. – Chairman Emeritus PNC Menon believes that the potential for higher returns in Mumbai justifies the costs involved. – The company’s disciplined financial management and strategic growth initiatives position it for substantial expansion in the upcoming years. Sobha Ltd, known for its strong position in South India’s real estate sector, is all set to raise funds through a rights issue. The realty firm is aiming to raise up to Rs 20 billion through the issue, which will primarily be used for reducing debt, purchasing land, acquiring machinery, and covering construction costs for ongoing and upcoming projects. The issue, which will issue 1,21,07,981 equity shares on a partly-paid basis with a price of Rs 1,651 per share, commenced on June 12 and will close on July 4, 2021. Allocation of Funds: Of the total proceeds, Sobha Ltd has outlined its plans for fund allocation. Approximately Rs 9.05 billion will be allocated towards loan repayments, while Rs 2.12 billion will be used for project-related expenses. Another Rs 2.1 billion has been earmarked for equipment and machinery purchases. Additionally, the company plans to utilize Rs 6.58 billion for acquiring land parcels as mentioned in the letter of offer. Impact on Equity Capital and Growth Plans: Earlier in May, Chairman Emeritus PNC Menon shared the company’s strategic growth plans, stating their intention to increase the equity capital by fourfold to Rs 100 billion over the next five years, supported by the rights issue. Sobha Ltd aims to aggressively expand its operations, including entering the luxurious housing market in Mumbai. With these plans in place, the company aims to achieve an annual sales booking of Rs 300 billion in the next 4-5 years. The current equity capital of the company stands at Rs 25 billion, but it is expected to attain Rs 45 billion post-rights issue. Thus, this move represents a significant step towards the company’s ambitious future outlook. Future Outlook: Founded by PNC Menon in 1995, Sobha Ltd is a notable player in South India’s real estate domain. The firm has always displayed disciplined financial management and is constantly exploring growth opportunities. The Delhi-NCR market is already a part of Sobha Ltd’s portfolio. The recently announced plans to enter the Mumbai market only corroborates the company’s sustained efforts to explore new horizons. Sobha Ltd plans to showcase something unique in the Indian market, specifically in Mumbai, where the potential for higher returns justifies the costs involved. In conclusion, Sobha Ltd’s launch of the rights issue reflects its commitment to reducing debt and strategically utilizing funds. With a clear plan in place for allocation of funds, the company aims to chart its path towards significant growth and market expansion.
