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Phoenix Mills Ltd.

BSE: 503100 Sector: Infrastructure
NSE: PHOENIXLTD ISIN Code: INE211B01039
BSE LIVE 15:40 | 20 Nov 512.10 -6.05
(-1.17%)
OPEN

510.10

HIGH

515.30

LOW

505.00

NSE 15:48 | 20 Nov 513.20 -3.40
(-0.66%)
OPEN

519.00

HIGH

519.00

LOW

505.05

OPEN 510.10
PREVIOUS CLOSE 518.15
VOLUME 1356
52-Week high 597.95
52-Week low 309.95
P/E 45.64
Mkt Cap.(Rs cr) 7,840
Buy Price 0.00
Buy Qty 0.00
Sell Price 512.10
Sell Qty 75.00
OPEN 510.10
CLOSE 518.15
VOLUME 1356
52-Week high 597.95
52-Week low 309.95
P/E 45.64
Mkt Cap.(Rs cr) 7,840
Buy Price 0.00
Buy Qty 0.00
Sell Price 512.10
Sell Qty 75.00

Phoenix Mills Ltd. (PHOENIXLTD) - Chairman Speech

Company chairman speech

Today India stands at an inflection point from where the retail consumption pie in thecountry is set to grow by almost twice the GDP growth rate for the next decade and ourCompany is best equipped to tap this huge opportunity.

Dear Shareholders

On behalf of our Board of Directors it is my great pleasure to share with you ourFY2017 Annual Report. While navigating through a challenging business environment ourmanagement delivered commendable results during the year.

India Economic Growth

India's Gross Domestic Product (GDP) growth grew by 7.1% during FY2017. Growth waslargely driven by Government spending and an improving agricultural economy. India remainsthe fastest growing major economy placing us in a sweet spot within the global economiclandscape.

With respect to consumer spending the joint report released by FICCI andPricewaterhouseCoopers expects consumer spending to grow to US$ 3.6 trillion by 2020.India's retail sector alone is expected to touch US$ 1 trillion growing at a CAGR of 12%.The Government's initiatives for relaxing FDI regulations in certain retail segments areproviding further impetus for consumption growth. With increasing household incomesconsumer attitude towards discretionary spending is gradually shifting and consumers areincreasingly vying for quality and premium products.

India today stands at an inflection point from where the retail consumption pie in thecountry is set to grow at almost twice the GDP growth rate for the next decade and ourcompany is best equipped to tap this huge opportunity.

India's growing economy rising disposable incomes and growing aspirations are feedingthe engine called "urban consumption". Its retail infrastructure has come a longway and our Company is a responsible peer within it. Our malls are becoming more than justshopping destinations. They are now fully integrated recreational centers in which thewhole community feels a sense of belonging - a place where they all come to share andcreate happy memories.

Our Financial Performance

Our performance and prospects for future growth are deeply rooted in a proven strategyfocussed on creating long-term shareholder value. We delivered a strong set of results forFY2017. Our performance is the outcome of continuous operational improvements and oursteadfast consistency in our strategies for profitable growth innovation and efficiency.In FY2017 we reported excellent secular escalation on all fronts - in terms of retailconsumption rental income and earnings. Our standalone income from operations at Rs 3759million grew by 6% over the previous financial year while our standalone EBITDA rose fromRs 2391 million in FY2016 to Rs 2538 million in FY2017 up 6% year-on-year.

At a consolidated level our Income from Operations grew from Rs 17795 million inFY2016 to Rs 18246 million. Profit After Tax at Rs 1679 million was up 29%. Our RetailIncome from Operations and EBITDA have grown at a 6-year CAGR of 43% and 35%respectively. Over the years your Company has recorded superior year-on-year performanceand managed to bring down the effective cost of debt from 12.3% in FY2014 to

10.16% on a blended basis by FY2017. We continue to re-finance our borrowings atattractive rates to further bring down the cost of debt. I am pleased to inform ourshareholders that the Board has recommended a final dividend of Rs 2.40 per equity share(120%) for the financial year 2016-17.

Propellant for Future Growth

In a landmark development in April 2017 our company joined hands with Canada PensionPlan Investment Board (CPPIB) to develop own and operate retail led mixed-usedevelopments across India. In CPPIB we have found a like-minded partner who shares ourvision of creating and managing world-class retail assets. Island Star Mall DevelopersPrivate Limited (ISMDPL) our 100% subsidiary that houses Phoenix MarketCity Bengalurubecame the new investment platform in which CPPIB will be investing over Rs 16 billion inmultiple tranches for up to 49% stake in ISMDPL.

ISMDPL will develop own and operate retail-led mixed- use assets across the key citiesin India. Leveraging our operational excellence growth pipeline and financial strengthwe are now building greater scale strength and market position in more cities. We expectto gain immensely from CPPIB's experience of owning and managing Grade A retail assetsacross the globe.

Our Leadership Position

Retail real estate in India has come a long way over the past two decades. Our mallshave become urban consumption destinations offering a holistic and premium experience.They provide consumers a variety of Indian and international brands a plethora of food& beverage options and multiple entertainment avenues. With 8 retail destinations in 6cities spread across an area of close to 6.0 million square feet The Phoenix MillsLimited is a clear leader amongst lifestyle retail consumption destinations. DuringFY2017 we reported an aggregate consumption of Rs 58 billion which has grown by a CAGRof 22% between FY2013 to FY2017.

Retail - Preferred Destination for Brands and Consumers

We take active interest in constantly maintaining our malls as modern and safe spacesthrough regular renovation and refitting. We take a keen interest in the well-being of allthe brands at our malls by promoting them through various promotional initiatives andbrand-centric events. We work tirelessly to propagate consumption flow through our brandpartners occupying our malls. To be current with the times and to keep our consumersinterested we routinely introduce more contemporary global brands and categories to enterIndia and set up shop. We are able to offer a multi-city entry strategy to established andemerging international brands by offering them scarce premium spaces in the key gatewaycities of India.

I am pleased to inform you that consumption trading density and rental income at ourmalls has been growing steadily year on year. Consolidated consumption at the malls camein at Rs 58 billion for the year up 7% yoy while rental income was Rs 7.7 billion up 9%year-on-year.

We are particularly excited about the progress at Phoenix MarketCity Mumbai. Havingcommenced operations in 2011 the mall initially witnessed a slow start. However thanksto the relentless efforts of our management leasing and marketing teams the asset iscurrently out-performing all our other malls in terms of year-on-year growth. DuringFY2017 Phoenix MarketCity Mumbai reported a 17% increase in consumption and a 18% risein its trading density making it the fastest growing amongst our MarketCity malls. We areyet to see the full potential of this location and we are confident that over the nextfew years this property will see continuous all-round improvements in consumption andrentals.

Residential Projects - Strengthening Free Cash Flows

PML is in advanced stages of developing and delivering premium residential projects inBengaluru and Chennai. One Bangalore West at Bengaluru city is the Group's flagshipresidential project. It has been established as "the best gated community inBengaluru" with world-class facilities. Kessaku is also one-of-its-kind developmentoffering customers the convenience of a 'gated communityRs and luxurious single-levelhomes. During FY2017 we completed construction of Tower 1 to 5 at One Bangalore West andreceived Occupation Certificates (OCs) for the towers. The balance area as and when soldwill keep generating substantial free cashflows for our company.

Hospitality - Improving Occupancy and ARR

We own and operate two hotels namely The St.

Regis Mumbai and Courtyard by Marriott in Agra.

The vertical contributed 17% to our total revenues in FY2017. During the year thenumber of available rooms increased to 395 rooms from 335 rooms. Despite higher inventorythe property maintained an average annual occupancy of 72% with the Average Room Rate(ARR) of this property growing by 14% YoY. The Hotel reported a growth of 16% in revenue(Rs 2520 million) and EBITDA (Rs 907 million). The Agra property reported a revenue of Rs323 million with its occupancy improving to 57% during FY2017 from 45% in the previousyear.

Finally I would like to briefly touch upon our Food & Beverages vertical. As apart of our initiatives to increase the area dedicated for entertainment and leisureacross all our malls we have actively launched appealing and innovative dining concepts.At the end of the year under review our F&B portfolio comprised of 7 F&B brandconcepts spread across 13 stores at our malls. Gradually we plan to extend these newproven concepts across all our existing and upcoming retail assets.

Commercial Projects - Rising Annuity income

Our commercial portfolio amounts to 1.42 million square feet in Pune and Mumbai. Ofthis we have already sold about 0.45 million square feet. Of the remaining area availablefor leasing we leased out

0.54 million square feet during the year. Art Guild House spread across 0.76 millionsquare feet is the Company's largest commercial project. It is a premium propertyoffering opulent interiors with exquisite art installations. It showcases structural artinfused within the infrastructure and dynamic art amidst opulent business environments.

I feel privileged and proud of our management leadership team and employees who keepgiving their best every single day to take Brand Phoenix higher.

On behalf of the management and the Board of Directors we wish to thank all our staffshareholders business partners and associates for their continued commitment and support.We look forward to an exciting FY2018 as we commence our journey to consolidate our marketposition.

Sincerely

ASHOKKUMAR RUIA

CHAIRMAN & MANAGING DIRECTOR