Expansion lays bricks for Phoenix upgrade: Revamps, launches boost outlook

Shares of India’s largest retail-led mixed-use developer Phoenix Mills slipped on Wednesday after a sharp rally in the previous session. The stock had risen more than 5 per cent on Tuesday to hit an intraday high of ₹1,597.3, following an upgrade from domestic brokerage Motilal Oswal. 

On Wednesday, however, the stock gave up some of those gains and closed 3.02 per cent lower at ₹1,518, even as the benchmark BSE Sensex settled 0.51 per cent higher at 80,567.71. 

Motilal Oswal upgraded Phoenix Mills to a ‘buy’ rating and raised its target price to ₹2,044 from ₹1,673 earlier, implying a potential upside of 35 per cent. 

Between 2014–15 and 2024–25 (FY25), Phoenix Mills delivered an 11 per cent compound annual growth rate (CAGR) in retail consumption, driven by around 7 per cent like-for-like growth in existing malls and the successful launch of new properties in Lucknow, Indore, Ahmedabad, Pune, and Bengaluru. Retail rental income grew at a 12 per cent CAGR over the same period, closely mirroring consumption trends. 

Analysts expect this momentum to persist, mainly from the ramp-up of recently launched malls. As of the first quarter (Q1) of 2025–26 (FY26), trading occupancy stood at 89 per cent, slightly lower than 91 per cent in March 2025. The dip was due to ongoing revamps and tenant churn in some mature assets. 

In Bengaluru, about 10 per cent of leasable space is under fit-outs or being reconfigured — from hypermarkets to high-performing fashion anchors. A similar repositioning is underway in Pune, replacing outdated tenants with more relevant options.

 

Despite these short-term transitions, management remains confident of strong growth from 2026–27 (FY27) onwards, once the revamps are complete. Newly operational malls such as Phoenix Palassio (Lucknow), Phoenix Citadel (Indore), Mall of Millennium (Pune), and Palladium Ahmedabad have already achieved an average trading occupancy of 94 per cent within six to eight quarters of launch. The company expects to replicate this success in upcoming properties in Gujarat and Kolkata.

 

Expansion continues with Phoenix Palladium adding 0.35 million square feet (msf) by FY26–27.

 

Recent land acquisitions in Coimbatore (22.1 acres) and Mohali will help the company more than double its portfolio by 2029–30. Phoenix Mills is expected to post a 21 per cent CAGR in retail rental income over FY25–27E, reaching ₹2,800 crore by FY27E, with total income projected to touch ₹3,900 crore, according to Motilal Oswal.

 

As part of its ‘mall of the future’ strategy, Phoenix Mills delivered its first major office asset — Fountainhead (0.8 msf) in Pune — in the fourth quarter of 2021–22 (Q4FY22), marking its entry into offices. The portfolio has since expanded to 2 msf. Despite initial scepticism about office demand, Fountainhead’s occupancy has risen to 65 per cent, suggesting strong potential for co-located office spaces within retail complexes.

 

The office portfolio is expanding across cities, with developments at malls in Bengaluru (1.2 msf), Chennai (0.4 msf), and Palladium Mumbai (1.1 msf). Newly launched malls in Pune and Bengaluru will each add another 1.2 msf of office space. The office portfolio is projected to grow nearly fourfold to 7.1 msf by FY27, with rental income expected to treble to ₹600 crore, implying a 71 per cent CAGR over FY25–27.

 

Phoenix Mills’ hospitality business is also gaining traction. Its flagship, The St Regis, has posted strong operational gains, supported by robust demand. In Q1FY26, the hotel recorded an average room rate of ₹16,425, a 13 per cent year-on-year increase, along with an improved earnings before interest, tax, depreciation, and amortisation margin of 47 per cent.

 

Expansion is underway in hospitality as well. A 400-key Grand Hyatt is being developed at Phoenix Marketcity (PMC) Bengaluru, with an estimated capital expenditure of ₹1,000 crore and completion targeted for FY27 through 2027-28. Phase-III of PMC Bengaluru will include another 300-key hotel, construction for which is about to begin. Phoenix Citadel is also planning a 300-key hotel.

 

The company’s 2023–24 acquisition of an 11-acre parcel in Thane is also expected to house a premium hotel. Collectively, these projects will expand Phoenix Mills’ hospitality portfolio to more than 1,800 keys, up from 588 currently.

 

Meanwhile, the company continues to implement initiatives to boost consumption at its mature malls, even as new properties ramp up. These efforts, along with higher occupancy, are expected to support steady consumption growth.

 

The recent acquisition of the remaining 49 per cent stake in Island Star Mall Developers further strengthens Phoenix Mills’ retail portfolio. The deal is expected to be earnings-accretive from the first year, with additional upside as rental income stabilises and 2.71 msf of floor space index is developed. Staggered payments will also help the company maintain a conservative net debt-to-equity ratio below 0.4x over the next two years.