Phoenix Mills seems to be firing on all cylinders; investors rejoice

Phoenix Mills seems to be firing on all cylinders. Besides 30 per cent jump in its net profit at Rs 91.85 crore in Q3FY20, the company is doing well on several business metrics.

While it had a muted H1FY20 performance with consumption growth of just 3 per cent across its malls, last quar­ter it saw consumption growth of 10 per cent (year-on year) YoY and rental income growth of 8 per cent. Investors are also cheering the performance of the company. On February 25, the stock of Phoenix Mills hit an all-time high of Rs 980. The stock has jumped 29 per cent since the beginning of the current financial year.

Its crown jewels — High Street Phoenix and Palladium — clocked an average trading density of Rs 3,620 per sq ft per month last quarter and both properties are among the highest trading density among retail properties in the country. Trading density means sales turnover achieved on rentable square feet of a mall or store.

Its newer properties are also fast catching up with High Street Phoenix. For instance, Phoenix Marketcity in Bengaluru posted trading density of Rs 2,085 per sq ft per month, thus becoming the first Marketcity to cross the density of Rs 2,000 per sq ft per month, company’s Managing Director Shishir Shrivastava said in the Q3 earnings call with analysts.

The company has also done a turnaround of sorts for some of its key assets, which were laggards earlier.

Rise of the Phoenix

Net profit jumps 30 per cent at Rs 91.85 crore in Q3FY20

Consumption growth touches 10 per cent YoY and rental income growth at 8 per cent in Q3.

Its stock jumped 29 per cent since the beginning of the current FY

High Street Phoenix and Palladium are among the highest trading density among retail properties in the country

Phoenix Marketcity Bengaluru posted trading density of Rs 2,085 per sq ft per month

Trading density at Phoenix Marketcity at Kurla in Mumbai grew 50 per cent in the past three years

Trading density at Phoenix Mark­et­city at Kurla in Mumbai grew 50 per cent in the past three years from Rs 942 per sq ft per month in FY17 to Rs 1,415 per sq ft per month in Q3FY20.

Shrivastava told Business Standard that the company had done many things at Kurla mall from upgrading the common area spaces to investing into art and festive decors at a scale not seen before in other malls in the country. It has created one of the largest indoor performance venues, which has played host to the best of Indian and International artists over the past three years, he said. The company claimed that its flagship hotel property St Regis continues to be the market leader in Mumbai and had an occupancy of 84 per cent. It had highest-ever average room rental of Rs 13,857 in Q3, the company said.

Growth plans

Phoenix Mills is looking to double its retail portfolio and increase commercial properties by FY24 and add a million sq ft area in tier-I cities by 2024.

Phoenix has eight operational malls, with a retail area of six million sq ft in six cities. It has 5.8 million sq ft of under-construction and under-planning malls. The 0.9 million sq ft Palassio Lucknow mall is expected to start operations in March and is fully leased. It will begin to contribute to rental income from Q2FY21 onwards. The Indore mall, which is set for an early FY22 opening, is also 60 per cent pre-leased, ICICI Securities said.  

Shrivastava said the company had a staggered launch calendar across Ahmedabad, Pune and Bengaluru, with at least one new mall opening each year up to 2023. “We remain positive on the mall landscape in India as demand for Grade A malls has in­creased in the past few years while supply remains constrained due to high upfront capex,” said a report by Sp­ark Capital. PML’s expertise on ac­quiring, designing and developing land parcels and best in class mall management skills have given an edge to the company over other mall developers,” the report by Spark said.

Phoenix Mills joint venture with Canadian pension fund manager CPPIB has also given it financial muscle to scale up the business, analysts said. CPPIB has put in Rs 1,662 crore for 49 per cent stake in the subsidiary of Phoenix Mills.

According to ICICI Securities, the company’s rental Ebitda to grow from Rs 950 crore in FY19 to Rs 1,330 crore by FY22, driven by renewal of 50-60 per cent space across malls over FY20-22. However, some analysts said the firm could see competition from the likes of Blackstone-backed Nexus Malls, Prestige Estates and VRSA, which are looking to double their portfolio. Nexus has a portfolio of six million sq ft and looking to double retail spaces.

Bengaluru-based Prestige Estates Projects, which has nine operational malls with an area of 4.1 million square feet, is coming up with seven more with an area of 4 million square feet in Bengaluru, Chennai, Kochi, and Kakkanad (in Kerala). The company is planning to have 25 malls with a space of 15 million square feet by 2023.