We bought the best house when the whole street was for sale.

Quality on sale is exactly what our discipline is built for.

Our approach is simple to state and hard to practise. We wait for a genuinely good business to fall out of favour with the crowd, we check that the quality is real and the balance sheet can survive the wait, and then we size up while others are looking away. Oberoi Realty in early 2025 was that setup in almost textbook form.

The growing business is real, not a story. Oberoi has compounded profit after tax at more than 20% a year over the past decade and earns operating margins in the mid fifties, which is close to double what most listed developers manage. It builds on land it owns outright rather than through joint development agreements, which is why its margins hold when the cycle turns. Revenue reached Rs 6,009 crore in FY26 and the first quarter of FY27 has already grown 27% over the prior year, so the engine is accelerating rather than fading.

The price we paid was fair for the quality, and the street was cheap. When we built the position the stock changed hands near and below Rs 1,600, having fallen from above Rs 2,000. Oberoi has rarely traded at a distressed multiple because its quality is widely acknowledged, so we were not buying a broken business at a broken price. We were buying an excellent business at a reasonable price precisely because the entire sector was being marked down together, and the reasonable price on a great franchise is the trade our philosophy is designed to take.

The street the market hated gave us our entry. Through FY25 and into FY26 foreign institutional investors cut their holding in Oberoi from about 19.4% to 15.1%, part of a broad retreat from Indian property rather than anything specific to the company. Pre sales looked soft for a couple of quarters, which the market read as weakening demand when it was in fact launches slipping later into the calendar. While outsiders were selling the sector, the promoter did the opposite of worry: the family holding stayed pinned at 67.7% with zero pledge, and the company kept buying land and building. When informed insiders hold firm and the crowd leaves, we pay attention.

This is mispriced size, not smallness. Oberoi is classified as a mid cap, yet it is the highest quality residential developer in Mumbai, the most supply constrained property market in the country, and it now owns a rent yielding portfolio of malls, offices and hotels that few peers can match. The market cap of about Rs 66,000 crore understates the strategic weight of the land and annuity assets underneath it. We own the leader, not a minnow, and we own it at a discount to the sector it leads.

Does it still qualify?

Owning a name is not a reason to keep owning it. Every position has to keep clearing the same five tests we applied before we bought a single share. Oberoi passes four cleanly and one with an honest caveat, and the single caveat is about our entry price today rather than the business.

The caveat on the fifth line is not about the record, which is exemplary. It is that at today's price the margin of safety has narrowed, which is why our stance is to hold what we own and add on weakness rather than chase the stock here.

Two engines under one roof.

Oberoi runs two very different businesses that share a balance sheet. One is cyclical and lumpy, the other is steady and compounding, and the quiet shift in the mix toward the second is the most under appreciated part of the story.

The development engine is the cyclical half. Oberoi buys large contiguous parcels in Mumbai's best micro markets, master plans them into integrated garden city communities and phases the build over ten to fifteen years, capturing price appreciation on later phases as the location matures. Flagship projects at Goregaon, Borivali, Thane, Mulund and ultra luxury Worli sit alongside a widening pipeline that now reaches beyond Mumbai for the first time. This half throws off cash and record margins, but its revenue arrives in steps as towers cross accounting thresholds, which is why the quarterly numbers swing.

The annuity engine is the compounding half. Six investment properties, the Oberoi and Sky City malls, the Commerz office towers and the Westin hotel, together produced roughly Rs 1,190 crore of rent in FY26 at office and mall margins above 90%. This stream is contractual, escalates every year and grows as new space fills, and it gives an otherwise lumpy property company an earnings floor that most developers simply do not have. As the newer assets stabilise and the Ritz Carlton and Marriott hotels open, the rent line should keep stepping up for years.

Ten years, one table.

The record we want the reader to see is one of a business that has grown revenue more than fivefold, lifted profit more than sixfold and pushed returns into the mid teens, all while carrying essentially no net debt.

EBITDA here is stated on an operating basis, before the treasury income the large cash pile also earns, so the underlying margin is if anything understated. Returns are on year end equity.

The leg the market is not fully paying for.

Most of the value in the price today rests on the visible development business. What we think the market discounts too heavily is the compounding it cannot yet see clearly: a rent stream inflecting higher and a Mumbai land bank that quietly grows in value.

The rent line is the nearer term of the two. It has roughly doubled in three years and, as Sky City Mall fills from about 69% toward full occupancy, Commerz III ramps to stabilised rent, and the Ritz Carlton at Worli and Marriott at Borivali open, management has pointed to visibility of Rs 2,000 to 2,300 crore of annual rent from the assets it already holds. At the cap rates such assets command, that stream alone underpins a very large share of today's market value, and it does so with contractual, escalating, high margin cash flow. This is the part of Oberoi that behaves less like a developer and more like a compounding landlord, and it is why the whole company deserves a lower discount rate than a pure builder.

The land bank is the longer term of the two, and the more valuable. Redevelopment opportunities at Aram Nagar, Pedder Road, Malabar Hill and Adarsh Nagar, the strata commercial project at Bandra East, and the newly opened chapter in the National Capital Region together carry gross development value that sits largely outside our base case. These are options rather than certainties, and they will take years to convert, but they are options on Mumbai's scarcest land held by a debt free owner who has never needed to sell them cheaply. Over a five to ten year horizon this is where the genuine surprise to the upside lies, and it is the reason our stance is to hold rather than to trim into strength.

Fair value, honestly drawn.

We value Oberoi by separating the two engines, putting a project level value on the development cash flows and a cap rate value on the stabilised rent, then layering the land options on top. The build gives a range rather than a single number, because the pipeline outcomes genuinely span a wide band.

The picture the range paints is consistent whichever way we come at it. Our own bottom up build gives a bear case near Rs 1,090, a base case near Rs 1,481 and a bull case near Rs 1,909, with the swing between them driven almost entirely by how well the new launches, above all the Gurugram debut, are priced and absorbed. The twenty six analysts who cover the stock average a target of Rs 1,909, which is exactly our bull case. An external net asset value read puts fair value between roughly Rs 1,650 and Rs 1,790. Every one of these independent methods clusters below or around the current Rs 1,810, which tells us the same thing in three languages: the stock is fair to full today, not cheap.

The best returns, at the lowest price.

Set against the other large listed developers, the oddity of Oberoi's valuation becomes plain. It earns the highest returns and the fattest margins in the group, yet it trades on the lowest multiple of earnings and of operating profit. That is the whole thesis in a single table.

What can hurt us, sized.

We hold this position with our eyes open. The point of owning quality is not that nothing can go wrong, it is that the balance sheet lets us survive when it does. Here is what we watch, in order of how much it could cost.

"We bought Oberoi because the market was selling a great franchise along with a bad sector, and our job was to tell the two apart. We paid a fair price for exceptional quality when foreign money was leaving and the family that runs it was not. The stock has since done its part, and it is no longer cheap. So we do the harder thing than buying, which is to keep holding a debt free compounder whose rent engine and Mumbai land bank should be worth a great deal more in five years than the market will pay for them today."