Phoenix Mills rises after signing agreement with GIC affiliate

Phoenix Mills jumped 6.57% to Rs 734.85 after company, along with its subsidiaries, signed a non-binding term-sheet with an affiliate of GIC to create a strategic, retail-led mixed-use platform.

The leading mall developer, Phoenix Mills, and its subsidiaries, Offbeat Developers (ODPL), Graceworks Realty and Leisure (GRLPL) and Vamona Developers (VDPL), have jointly signed a non-binding term-sheet with an affiliate of GIC, for formation and development of a strategic retail-led mixed use platform. The proposed transaction is subject to execution of definitive agreements by the parties and fulfilment of conditions.

GIC will invest in the Phoenix Mills subsidiaries by way of a combination of primary infusion and secondary purchase of equity shares. Subject to mutually agreed terms and conditions between the parties, GIC will initially acquire an equity stake of 26%. The parties to the transaction may mutually agree for GIC to further increase its stake up to 35% within a 12 month period.

Phoenix Mills will contribute its retail assets -- Phoenix Marketcity Mumbai and Phoenix Marketcity Pune; and its commercial assets -- Art Guild House, Phoenix Paragon Plaza and Centrium in Mumbai as a part of the platform. Together these assets, which are held by the Phoenix Mills subsidiaries, constitute a retail gross leasable area of approximately 2.33 million square feet (msf) and office gross leasable area of approximately 1.03 msf, aggregating to GLA of 3.36 msf with FY20 net operating income of approximately Rs 370 crore.

Phoenix Mills' asset contributions are indicatively valued at an approximate enterprise value of Rs 5600 crore - Rs 5700 crore, subject to due diligence and adjustments, if any.

The proceeds from the proposed transaction are intended to be utilized as growth capital for further expansion and acquisition of greenfield, brownfield, operational/distressed mall opportunities.

Parties may consider various options to monetize this platform, including by way of a REIT, over a three to five-year period from the closing of the proposed transaction.

The Phoenix Mills group is the largest player in the Indian retail mall segment, and has a portfolio of of eight retail mall assets across major cities in the country. It also has an office portfolio of in Mumbai and Pune, two operational hotels (one in Mumbai and another in Agra), and residential real estate in Bengaluru and Chennai.

On a consolidated basis, the company posted a net loss of Rs 39.98 crore in Q2 September 2020 as against a net profit of Rs 64.26 crore reported in Q2 September 2019. Net sales declined 48% year on year to Rs 214.9 crore in Q2 September 2020.

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