TO THE SHAREHOLDERS
It gives me immense pleasure to present to you the Annual Report forFY2020. This was mostly a year of anticipated progress for The Phoenix Mills Limited (PML)as we continued to be on track to meet most of our set goals but for the pause imposed onall of us by the COVID-19 pandemic in the last month of the financial year. Despite thissudden disruption FY2020 was largely a great year for your Company.
Through an exciting journey of innovation capital raising and thesuccessful build-up of a formidable portfolio of prized assets over the last many yearswe have today emerged as the undisputed leader in Indian Mall space. Our purpose andvision are based on our ardent allegiance to India's strong consumption story and it isthis undeterred focus that has brought your Company to such great heights of success. Our
relatively young and iconic retail assets have matured into landmarkdestinations in the key gateway cities of India. Supported by profitable complementaryprojects commercial and hospitality assets strategic prime residential developments; wehave developed our own unique and successful approach to sustained value creation. Overthe last seven years of our operations we have recorded 15% compounded growth inconsumption and 14% of compounded growth in rentals. These numbers are indicative of anoutlier performance by any comparison.
The COVID-19 pandemic and our response
Under the cloud of the COVID-19 pandemic we realise that as aresponsible company our destinations need to be havens of trust and safety. Our peopleretailers and consumers must feel secure in our environments so that they can go aboutliving their lives as normally as possible. Therefore our prime objective is to ensurethat the wellbeing of all our
stakeholders is maintained under the highest hygiene standards; themost appropriate social distancing discipline; and the most ruggedised processes andtraining to monitor and maintain their administration.
While I write this I trace back to the global financial crisis of2008 which was a severe financial tragedy for the world. It had shaken businessesindustries and economies alike. During this period almost every mall project that wasbeing developed in the country was either shelved or repurposed for other uses. Howeverat PML we stayed on the track of our long-term vision and continued to construct ourassets with conviction.
From 2010 onwards our destinations were ready for operations and atthe same time the consumption trend in India had spurred along with strong demand fromretailers for world class mall spaces within the top cities of the country. As a result ofour undeterred faith in our strategies we emerged as the most preferred and sought-afterchoice for both consumers and retailers.
OUR PURPOSE AND VISION ARE BASED ON OUR ARDENT ALLEGIANCE TO INDIA'SSTRONG CONSUMPTION STORY AND IT IS THIS UNDETERRED FOCUS THAT HAS BROUGHTYOUR COMPANY TOSUCH GREAT HEIGHTS OF SUCCESS.
Our assets had quickly evolved into the most popular urban hubs with astrong gravity for pulling visitors.
As with all the calamities we believe that this too will eventuallyend and life will go back to being usual. When that happens we are confident that ourproperties will record the strongest rebound within the Indian retail landscape. We haveprepared ourselves to embrace the new normal. In the best interests of our stakeholdersour focus has been squarely directed towards making safety of all our stakeholders apriority. In doing so we aim to instil and maintain the confidence in people visiting ourmalls.
Our Operational Performance and the Pandemic Effect
I am writing this at a time when the world is fighting a battle withthe unprecedented pandemic COVID-19.
In March 2020 the contagion developed rapidly into a global crisisforcing the Government of India to impose a lockdown of all the economic activities in thecountry.
The outbreak of this challenging pandemic occurred at a time when allour business segments were witnessing a sustained period of robust growth. Prior to thelockdown we were recording strong growth across our retail portfolio until the end ofFebruary 2020.
Across our malls we have witnessed a deceleration in the consumptionlevels resulting in a 40%-60% decline in March due to the subsequent nationwide lockdown.However from the 8th of June 2020 we resumed operations at three of ourmalls- Phoenix Marketcity Bangalore Phoenix United Lucknow and Phoenix United Bareilly.High Street Phoenix & Palladium Phoenix Marketcity Mumbai & Phoenix MarketCityPune opened on 5th Aug 2020. Also on 1st of September 2020 Phoenix Marketcity& Palladium
Chennai became operational. With the re-opening of our retaildestinations we have ensured complete precautions by adopting the highest standards ofsafety and hygiene across all our assets. With a short- medium term decline inconsumption we have also realised that our retail partners too are in the midst of amassive disruption and based on the need of the hour we have extended discounts on fixedrentals and allowed deferrals for the rent payable during the period of shutdown of mallsgiving them all a chance to get through this phase with minimal pain as possible.
Today PML is recognised as India's leading mall operator withunmatched expertise and management capabilities. I am confident that as the lockdown easesin the coming days the visibility of our retail business will improve. We anticipate thatthe pandemic will have a short to medium-term impact and we remain confident on thelong-term prospects of our business model. While our operation have been momentarilydisrupted we are confident that we will successfully revert to our long-term organicgrowth trend in both consumption and rental rates. In cities where we have resumed malloperations we are already witnessing the resumption of consumption nearing pre-COVIDlevels. As we return to new definitions of post-COVID normalcy we expect our malls tocontinue to play their fundamental role as much needed and scarce social hubs withincity-centres.
Our commercial asset portfolio which was least impacted due to thepandemic continues to remain an important pillar for our growth aspirations. From theearliest moments possible we implemented prompt measures to safeguard our occupiers ofour various commercial properties. We expanded security and housekeeping services tomaintain the highest health and safety standards. We observed excellent traction in thegross rental collections during the fiscal and despite the current inertia we continue to
IN AUGUST 2020 WE SUCCESSFULLY RAISED ' 11 BILLION THROUGH A QUALIFIEDINSTITUTIONAL PLACEMENT ISSUE WHICH WAS RECEIVED VERY WELL BY INVESTORS DESPITE THEADVERSITIES SURROUNDING RETAIL AND HOSPITALITY SECTOR
witness steady leasing interest for our new spaces. Our two towers atthe Fountainhead Pune in particular which are fast nearing their completion arereceiving strong traction in leasing interest. Beyond this we have the potential ofdeveloping around 4.2 msft of additional area through the 'densification' strategy of ourexisting assets giving us substantial headroom for growing our commercial space GLA overthe foreseeable future. With land costs already paid for and absorbed we expect to bewell placed in terms of incremental returns and competitive positioning.
Our flagship hotel The St. Regis Mumbai continued to be a preferredchoice for visitors due to its blend of unparalleled Indian luxury extraordinaryexperiences contemporary ambience and service standards. While it enjoys anuninterrupted acceptance by affluent tourists from across the world it has also played acrucial role in elevating the luxury hospitality landscape of Mumbai. On the performancefront The St. Regis was enjoying an occupancy level of >85% in January and February2020 just before air travel restrictions were imposed in early March. Not surprisinglythe subsequent and prolonged lockdown started impacting our hospitality operationsadversely. Nevertheless we continue to run The St. Regis Mumbai with a limited capacityas authorised by the state government guidelines. On the other hand the Courtyard byMarriott in Agra was opened again on 8th Aug 2020.
Strong performance adding to our resilience
FY2020 was a year of stable and consistent growth trend for PML acrossits business in spite of the COVID-19 environment. For the year under review all ourmalls continued to show improvement in the key parameters year on year. In terms of ourfinancial performance the retail consumption was at ? 69309 million for FY2020 whichwas up by 1%.
The aggregate retail rental income was up 3% YoY at ? 10200 million.The retail EBITDA was up by 3% YoY at ? 9774 million for the fiscal. The commercialincome was at ? 290 million up 19% YoY in FY2020. The income from hospitality and otherswere at ? 3486 million showing a decrease of 3% for full-year FY2020.
The consolidated revenues from operations were ? 19411 million whichis marginally down by 2% YoY.
Despite a challenging business environment we continue to maintain aresilient and robust balance sheet. Our consolidated debt stood at ? 45732 million as of31st March 2020. Our current position with cash and cash-equivalents providesus with sufficient liquidity to comfortably service our debt obligations as well as meetour planned capex requirements.
This places us advantageously in the current scenario and provides uswith sufficient cushion to pursue
with our set targets uninterruptedly. We witnessed a decline in ourcost of borrowing which is down to 9.19% as compared to 9.38% in the previous financialyear. We expect the borrowing cost to undergo a further decline in the coming quarters asthe banks start passing on the rate cut benefit to the customers. We have availedmoratorium offered by our banking partners as per the RBI guidelines for six months acrossall our SPVs. We have also carried out various cost rationalisation efforts across ourbusiness verticals to ensure that we can bounce back strongly once the businessenvironment normalises. In fact in Q1 FY2021 despite most of our properties being shutdown due to lock-down our cash inflow was ? 950 million and cash outflow was ? 750million. We further expect our net cash position to improve in the coming quarters as ourmalls become operational.
Strengthening our balance-sheet with QIP
In August 2020 PML successfully raised around ? 11 billion through aQualified Institutional Placement (QIP) issue. Despite the adversities surrounding theretail and hospitality sectors investor confidence in our Company's prospects wasreaffirmed by the success of the QIP issue which saw strong interest from marquee domesticand foreign investors. This was amongst the fastest ever QIP transactions as the entireprocess from launch to transaction closure was completed in a very short time of 25days. The subscription was widely applied and allotted to different institutionscomprising of Sovereign Wealth Funds
Long term FIIs (Foreign institutional Investors) Indian MF &Insurance Companies and hedge funds. This transaction attracted both existing shareholdersand high quality new investors. Furthermore all the investor roadshows for this QIP issuewas done via audio-video conferences across different geographies in order to ensure thatwe are abiding by the health and safety guidelines issued by the Government Authorities.
The proceeds from QIP issue will act as a safety net in the short term.However once our business operations normalise with an improvement in our cash flows andthe macroeconomic scenario in the post-COVID world we expect this safety net to transforminto a war chest for potential acquisitions.
In a nutshell PML is comfortably placed with adequate liquidity levelsto navigate through this crisis period.
At PML we have nurtured and fostered millions of loyal customers whomake our malls their first choice of places to keep spending time in. Today the PML brandhas become synonymous to being a trusted and
empathetic partner to all its stakeholders - employees occupiers andconsumers alike. In the long run we are confident that the consumption will be back ontrack as people will continue to rely on our malls as a safe and regulated way to shopdine entertain and socialise.
Going forward we are confident that our mindful business strategiesprudent financial management coupled with our balance sheet strength will provide us withsignificant elbowroom to explore new opportunities and emerge as one of the valuablecompanies in the country.
In closing I would like to take this moment to thank all our staffshareholders business partners and associates for their unceasing support and commitmentto your Company.
Thank you for being a part of our on-going success story.