Oberoi Realty: Softer offtake leaves investors with little room for optimism
Shares of Oberoi Realty Ltd are on a shaky ground, plummeting 13% in the past two trading sessions. The fact that sales momentum did not sustain in its marquee project Three Sixty West located at Worli in Mumbai and other projects has weighed heavily on sentiment.
Oberoi sold only two units in Three Sixty West in the December quarter (Q3FY25), compared to a run rate of six units in the previous two quarters. Sales in Eternia, Enigma (both located in Mulund), Sky City (Borivali), and Forestville (Kolshet Road, Thane) were also muted.
Oberoi took significant (5-15%) price hikes in its key projects of Sky City, Elysian, Eternia/Enigma during the quarter, which may take time to get absorbed.
Softer offtakes cloud Oberoi’s FY25 pre-sales trajectory, resetting expectations lower. “For 360 West, we now expect an inventory of 38 units to be rundown over the next three-four years versus around two years previously,” said Nomura Global Markets Research report dated 21 January. Nomura has cut its FY25 pre-sales target to ₹5,800 crore from ₹6,800 crore previously.
Bothered by similar issues, Antique Stock Broking is penciling in Oberoi’s FY25 pre-sales at ₹6,000 crore from ₹6,500 crore earlier. Both broking firms have reduced the stock’s target price.
Pre-sales of ₹1,920 crore in Q3FY25 rose sequentially and year-on-year, but missed analysts’ estimates. The jump was mainly led by large bookings at the newly launched Jardin project at Oberoi Garden City, Pokhran Road in Thane, which contributed 70% to the quarter’s pre-sales. Here, Oberoi launched two towers (phase 1) out of five in October.
“Oberoi had announced clocking gross bookings of ₹1,350 crore within the first three days of the launch. However, for Q3FY25, the Pokhran project managed to clock ₹1,330 crore of net bookings, implying cancellations,” said IIFL Securities. A higher contribution from the low-priced Jardin project meant that overall realizations dipped sequentially and year-on-year. The planned launches of new towers in Sky City, Elysian and new locations such as Gurgaon are likely from first half of FY26 given the available unsold inventory.
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On the bright side, all commercial office assets – Commerz I, Commerz II and the recently commissioned Commerz III, saw better occupancy sequentially in Q3FY25. Robust leasing momentum can help these assets achieve full occupancy by FY25-end.
Further, Oberoi continues to scout for new business development opportunities, which is seen as a key trigger for the stock. Oberoi entered into a development agreement for around 81.05 acres parcel in Alibaug in Q3FY25. It was appointed as a developer for a slum rehabilitation project at Bandra Reclamation in Mumbai. It has also completed the acquisition of Nirmal Lifestyle in Mulund through the NCLT last quarter.
According to Nomura, a key event to look out for is the Supreme Court hearing in early February for joint venture rights with Sahara Group for the 106 acre Versova land parcel.
Currently, Oberoi Realty and Valor Estate are competing for the deal. The gross development value of the 106-acre land parcel with around 12msf potential could be worth over ₹40,000 crore, which is bigger than Oberoi Garden City Thane (at around ₹30,000 crore, added the Nomura report.
Also Read: Realty companies’ Q3 to be mixed, followed by an action-packed Q4
Meanwhile, the recent NCD fundraise and robust collections have aided Oberoi’s debt position, with the net debt/equity ratio now at 0.01x. It has also enhanced Oberoi’s ability to pursue new business opportunities. The Oberoi Realty stock has gained 19% so far in FY25, outperforming the Nifty Realty index’s negative returns. However, a steep upside from hereon depends on a revival in the pre-sales trend.
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