Phoenix Mills up 6% on Rs 1,100 cr QIP; Govt of Singapore picks 4.3% stake

Phoenix Mills said it intends to use the net proceeds towards funding growth opportunities including investing in existing and proposed business ventures, acquisitions, & debt service obligation

Shares of real estate developer The Phoenix Mills jumped nearly 6 per cent to Rs 737.15 per share on the BSE on Monday after the company raised Rs 1,100 crore via its Qualified Institutional Placement (QIP).

The company said, it has raised about Rs 1,100 crore through QIP of 1.81 crore equity shares at Rs 605 each. Phoenix Mills allotted 74.38 lakh shares (or 40.91 per cent of the total shares offered in the issue) to Government of Singapore, 12.39 lakh shares (or 6.82 per cent of the total shares offered in the issue) to ICICI Prudential Mutual Fund, 12.39 lakh shares (or 6.82 per cent of the total shares offered in the issue) to SBI Mutual Fund and 9.39 lakh shares (or 5.17 per cent of the total shares offered in the issue) to Aditya Birla Sun Life Mutual Fund. READ HERE

Consequently, the Government of Singapore holds 4.3 per cent stake in the company, MFs cumulatively hold 12.61 per cent stake, Schroder International Selection Fund Emerging Asia hold 2.84 per cent stake, as per shareholding pattern data released on Saturday, August 22.

Pursuant to the QIP allotment, the paid-up equity share capital of the company stands increased to Rs 34.32 crore consisting of 17.16 crore equity shares.

The company's fund-raising programme via qualified instituional placement (QIP) closed on Friday, August 21. "The Board, at its meeting held on August 21, determined and approved the issue price of Rs 605 per Equity Share (including a premium of Rs 603 per Equity Share) which is at a discount of Rs 6.31 per Equity Share i.e. 1.03 per cent to the floor price of Rs 611.31 per Equity Share for the Equity Shares to be allotted to the eligible qualified institutional buyers in the issue," it said in an exchange filing.

In the draft placement document, Phoenix Mills said it intends to use the net proceeds towards funding growth opportunities including investing in existing and proposed business ventures, proposed acquisitions, debt service obligations including but not limited to servicing debt interest obligations, capital expenditure and working capital requirements, operations, and general corporate purposes and for such other purposes as may be permitted by applicable laws.

For the June quarter of FY21, the company had posted a net loss of Rs 52 crore, as against net profit of Rs 153.71 crore reported in Q1FY20. Its revenue from operations stood at Rs 134,7 crore, down from Rs 615.04 crore in the year-ago quarter.

"Due to the Covid19 led crisis, real estate segments such as retail, residential and hospitality faced near-term challenges. However, the commercial segment has shown resilience. Further, the latest directive by the Government of Maharashtra to commence mall operations from the first week of Aug’20 bodes well for Phoenix Mills (PHNX). PHNX still remains one of the best proxy plays on India’s consumption story in the medium-to-long term," said Motilal Oswal Financial Services in a result update report. It has 'Buy' call on the stock with a target price of Rs 746. 

ICICI Securities, too, believes PML remains a quasi play on India’s consumption story, notwithstanding a steep impact on retail & hospitality portfolio in FY21, given the quality of assets, healthy balance sheet & strategic expansion plans.

"With only five to six major retail mall developers currently in India, and given PML’s USP of operating large format properties efficiently, it is likely to emerge as a superior player in the medium to long term. Recommencement of key malls of Mumbai and Pune are likely to provide some relief in cash flows,' it said in a post-result report. The brokerage has 'buy' rating on the stock with a target price of Rs 725 per share.

According to analysts at HDFC Institutional Equities, Covid-19 outbreak has hit the retail malls sector hard, both globally and locally. 

"While, in the near term, this has led to asset values correcting 35-40 per cent with concerns on survival of the modern-day consumption format, we believe we are a vaccine away from normalcy, and it will be a hard road over the next 12-15 months. For well- capitalized organized players, it is a blessing in disguise to be able to (1) build inorganic assets at high cap rates (2) optimize/relook capital allocation, and (3) further gain market share through consolidation," they said in a sector report dated August 21.

They have initiated coverage on Phoenix Mills with a target price of Rs 828 per share. "We believe, with strong balance sheet and marquee assets position, PML is well-poised to ride the cyclical recovery (at present, restrictions on mall’s operations and Covid-led fears have curtailed the underlying demand). PML is a derivate on richly valued underlying consumption real estate play with a vast scope for expansion. In the long run, it holds the potential for significant cash flow distribution and growth. Near-term headwinds remain, but current prices provide ‘quality at reasonable price," it said in its rationale.

At 11:22 am, the stock was trading 4.2 per cent higher at Rs 727 apiece on the BSE, as against 0.45 per cent gain in the S&P BSE Sensex.