NIFTY Realty is the top performer in 2024 with nearly 40% gains so far; Raymond, Sobha and Phoenix Mills deliver strong returns

Across 14 major sectoral indices of NSE, the NIFTY Realty index which tracks the performance of 10 real estate stocks has delivered the stand-out performance in 2024. To date, it has gained 39.9% the highest among the sectoral indices.

In the first half of 2024, the realty index rally was driven by political stability, the government's investment-led growth policies, and optimistic macroeconomic factors. However, sentiment took a hit following the budget announcement to remove indexation benefits and lower the tax rate on capital gains. After protests from the industry, the government introduced an optional regime, allowing investors to choose between indexation with a higher tax rate or no indexation with a lower tax rate. This measure restored confidence in the realty sector, ultimately contributing to its outperformance.

The rally has been led by stocks such as Raymond (68.20%), Sobha (60.39%), and Phoenix Mills (61.77%) return, standing as the top three performing stocks. Apart from these stocks, seven other stocks of NIFTY Realty have shown the following performance in 2024, so far - Prestige (52.80%), Oberoi Realty (50.29%), Godrej Properties (47.51%), Brigade (41.34%), Lodha (38.28%), DLF (22.66%), and Mahindra Lifespace only stock which gave negative return of (-10.84%).

NIFTY Realty, Raymond, Sobha, and Phoenix Mills year-to-date return in 2024.

Raymond Ltd

In H1FY25, Raymond Ltd reported revenue of ₹2,099 crore with a year-on-year (YoY) growth of 104%, of which ₹706.25 crore came from the real estate division. Whereas during the latest quarter, i.e Q2FY25, the Real Estate business reported revenue of ₹571 crore up 135% YoY and EBITDA rose to ₹112 crore compared to ₹47 crore in the same quarter last year.

Additionally, management reported in quarterly results that the company's new launches have received positive responses and it has 100 acres of land in Thane with potential revenue generation of ₹25,000 crore out of which 40 acres are under development. As of September 30, 2024, Raymond had a strong liquidity position with cash and cash equivalent of ₹1,591 crore.

Investors have garnered interest in the Real Estate division of Raymond considering its growth potential and strong financial performance. Its management has already announced intentions to list the real estate division by next year to create value, after the successful listing of the apparel business.

Raymond Realty has a largely redevelopment-led growth trajectory and has signed Joint Development Agreements (JDAs) in areas such as Bandra, Sion, and Mahim, with a combined revenue potential of ₹7,000 crore. With sustained real estate demand in the Mumbai region and a robust pipeline of projects, the strong performance of the company is likely to remain, resulting in significant investor buying.

Sobha Ltd

During H1FY25, Shobha’s real estate business revenue stood at ₹3,052 crore, with average price realisation improved by 32% YoY, due to contributions from Gurgaon projects and general price increase. In Q2FY25, the revenue of Shobha was ₹1,614 crore, with real estate contributing ₹1,205 crore and contractual manufacturing generating ₹409 crore. The EBITDA for H1FY25 was ₹194 crore, reflecting an EBITDA margin of 11.9%; PAT improved by 19% YoY.

Shobha has a land bank of over 1,878 acres, and management of focusing on consolidating land for potential development; Management has also maintained sales guidance of ₹8,500 crore for FY25 and after successful capital raising through the right issue of ₹2,000 crore for expansion and strengthening of operations in existing and new markets. The investors are confident about future growth prospects, supported by strong sales performance.

The Phoenix Mills Ltd

For H1FY25, retailer sales totalled around ₹6,506 crore, up 25% YoY, driven by strong performances at Phoenix Palassio and Phoenix Market City Mumbai, as well as the ramp-up of newly launched malls. Gross retail collections for H1FY25, meanwhile, stood at about ₹1,610 crore, up 29 % YoY. As of September 2024, the weighted average trading occupancy across major malls was 92%, with a weighted average leased occupancy of 96%. The increase in occupancy in the newly launched Phoenix Mall of Asia and Phoenix Mall of the Millennium reflected strong operational performance in Q2FY25.

The company is leading the capex for H1FY25 of around ₹1,380 crore, through internal accruals and 3 million square feet of retail space under development with the expectation of completion by 2027. Along with this improvement in existing mall performance through management and customer service in recent quarters has made investors optimistic of the stock.

Conclusion

The realty sector has performed best across sectors in 2024, due to policy support from the government, positive macroeconomic environment and stock-specific performance. Realty stocks like Raymond, Sobha and Phoenix Mills led the rally, driven by strong financial performance, expansions, and investor confidence in the sector’s growth potential.