Shares of Puravankara Limited, a prominent residential real estate developer, were locked in a 5 per cent lower circuit at ₹401.40 following the release of its Q2FY25 earnings report. Despite impressive growth in revenue, the company reported a continuing net loss, causing investor concerns and impacting its share market investment appeal.
Puravankara recorded a net loss of ₹17 crore in the September quarter, a larger loss compared to ₹11 crore in the same period last year. The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) saw a notable improvement, increasing by 31.76 per cent year-on-year to ₹112 crore from ₹85 crore. However, the EBITDA margin declined slightly, down by 47 basis points to 22.62 per cent in Q2FY25, compared to 23.09 per cent in Q2FY24.
Strong revenue growth in Q2 and H1FY25
Puravankara’s revenue for Q2FY25 stood at ₹495 crore, reflecting a robust 34.5 per cent increase from ₹368 crore in the previous year. This growth highlights the company’s ability to capture market demand, even amid challenges in the real estate sector. Over the first half of the fiscal year (H1FY25), revenue from projects reached ₹1,195 crore, a significant 67 per cent increase from ₹717 crore in H1FY24, with customer collections rising by 27 per cent to ₹1,999 crore, indicating enhanced operational efficiency.
In H1FY25, Puravankara achieved a sales volume of 2.84 million square feet (msft) and sales valued at ₹2,459 crores. While revenue growth has been impressive, the company’s bottom line remains affected, with a net loss of ₹5 crore recorded for H1FY25. This mixed financial performance has raised questions about the stability of share market investment in the real estate sector, especially as Puravankara continues to focus on expansion.
Expansion plans and investments in land acquisition
Puravankara’s growth strategy includes substantial investments in land acquisition. The company has invested approximately ₹945 crore in land, with a projected Gross Development Value (GDV) of ₹9,700 crore from 5.8 msft of newly acquired properties. This land acquisition indicates Puravankara’s commitment to growth, positioning itself to take advantage of long-term demand in the real estate market. For investors considering share market investment, these acquisitions reflect Puravankara’s strategy to expand its project portfolio and maximise future revenue potential.
As of September 30, 2024, Puravankara reported balance collections of ₹4,520 crore from sold units, encompassing both completed and ongoing projects. The company estimates a total surplus of ₹7,490 crore from these projects, indicating potential cash flow benefits that could support future growth and debt reduction efforts.
Debt levels and financial ratios
Puravankara’s expansion efforts have also impacted its debt levels. The company’s net debt as of Q2FY25 stood at ₹2,430 crore, with a net debt-to-equity ratio of 1.29, reflecting the company’s leveraged growth strategy. The weighted average cost of debt was reported at 11.62 per cent. While the debt-to-equity ratio is within manageable limits, it is worth noting for those evaluating share market investment in real estate stocks, as higher debt costs may impact future profitability.
Puravankara share price history and market performance
Despite the recent dip, Puravankara’s stock has shown remarkable growth over the past year. The company’s share price has surged by 114 per cent year to date and a striking 172 per cent over the last year, outperforming the BSE Sensex, which rose 9.8 per cent year to date and 22.3 per cent over the same period. With a market capitalisation of ₹9,519.19 crore, Puravankara shares are trading at a price-to-earnings (P/E) ratio of 616.21 times, with earnings per share (EPS) of ₹0.69. While this high P/E ratio may deter some conservative investors, it reflects market confidence in the company’s growth prospects and expansion strategy.
Evaluating share market investment in Puravankara
Puravankara’s recent earnings highlight the complexity of investing in real estate stocks. While the company has shown impressive revenue growth and robust market performance, the ongoing net loss and high debt levels pose challenges. For those considering share market investment, Puravankara offers potential for long-term gains, driven by its ambitious expansion plans and strong market positioning. However, investors should carefully assess the company’s financials and market dynamics, as Puravankara’s performance remains susceptible to fluctuations in the real estate sector and macroeconomic conditions.
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