Diversification drive: Sobha promoters expand horizons to hotels, investments and the US market

The Menon family promoters of real estate giant, Sobha, known for its expansive ventures in both domestic and Middle East (primarily Dubai) markets, are charting a new course towards diversification which will see it establish hotels, an investment arm and enter the US market.

PNC Menon, Chairman emeritus of Sobha, recently unveiled the group’s multifaceted expansion strategy in an interaction with businessline.

Menon articulated the ambitious vision, stating, “We are embarking on a journey into the hospitality sector, with plans to construct a portfolio of at least eight hotels, each with an investment of around $80 million which comes to around $700 million.”

It plans to establish these properties across locations including Kochi, Ahmedabad, a couple in Dubai, and the remaining scattered across Europe. “After we complete eight projects, I will stop investing my money and instead only be a manager. We will not put our money into physical assets.”

Realty business

With respect to its real estate business, Sobha Group’s current business in Dubai alone stands at a staggering ₹38,000 crore, according to Menon, while it garners around $400 million per annum, in revenue from its listed Indian operations.

• Also read: Sobha reports Q4 PAT of ₹47.1 cr

Discussing the potential within these markets, Menon said, “Dubai is poised to reach a maximum of $5 billion, and India’s ceiling is between $1 billion and 1.5 billion. In order to onboard our next phase of growth, we have decided to enter the US market in a big way.”

The US market, Menon said, will offer the company a $10-billion growth opportunity, over the next decade.

Although it has yet to secure a parcel of land, it has already setup a team for its US operations and Sobha’s Menon says the Group has set a target of reaching $10 billion in revenue within a decade from the American market alone. Given the size of the operations, the company is preparing to establish a formidable presence, led by three CEOs, and has identified Texas as its initial market.

• Also read: Sobha shareholders vote against resolution for increased remuneration to Ravi Menon

Simultaneously, the Group has also established its investment arm, Sobha Investments, with a substantial commitment of $2 billion in investments over two years. Menon emphasised, “For this vertical, our focus will shift away from real estate, channeling the $2 billion exclusively into sectors beyond real estate,” but refused to elaborate further on the investment strategy.

In discussing the company’s expansive blueprint, he said, “the diversification strategy, spanning expansion into hotels and hospitality segment, market diversification, and strategic investments, serves as a buffer against the cyclical nature of the real estate industry.”

Once the process is complete, Sobha will operate across four distinct business verticals: real estate, hotels, allied businesses and strategic investments, ‘forging a path toward a more dynamic and resilient future’, Menon added.