4 reasons why Motilal Oswal upgraded Phoenix Mills to 'Buy'; target raised

On the bourses, Phoenix Mills share has gained nearly 3 per cent over the past month, although it remains 4.5 per cent lower on a year-to-date (YTD) basis.

Motilal Oswal upgrades Phoenix Mills: Real estate firm Phoenix Mills shares were buzzing in trade on Tuesday, September 2, 2025, with the scrip rising up to 4 per cent to an intraday high of ₹1,577.80 per share.

 

At 9:21 AM, Phoenix Mills’ share was trading 2.99 per cent higher at ₹1,562.40 per share. In comparison, BSE Sensex was trading 0.20 per cent higher at 80,528.12 levels.

 

The uptick in real estate firm stock came after domestic brokerage Motilal Oswal upgraded the stock to a ‘Buy’ rating. Alongside the rating upgrade, the brokerage has raised its target price to ₹2,044 from the earlier ₹1,673, implying a potential upside of 35 per cent from current levels.

 

 

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Given this, here are the top four reasons why Motilal Oswal turned bullish on Phoenix Mills:

New malls to drive sustained growth

 

Between FY15 and FY25, Phoenix Mills achieved an 11 per cent compound annual growth rate (CAGR) in retail consumption, fueled by approximately 7 per cent like-for-like growth in its existing malls and the successful launch of new malls in Lucknow, Indore, Ahmedabad, Pune, and Bengaluru. Correspondingly, retail rental income rose at a 12 per cent CAGR, closely mirroring consumption trends.

 

Looking ahead, this positive momentum is expected to persist, primarily driven by the ramp-up of newly launched malls. As of Q1FY26, trading occupancy stood at 89 per cent, slightly lower than 91 per cent in March 2025. This dip is attributed to ongoing revamps and tenant churn in some mature assets. In Bengaluru, about 10 per cent of the leasable space is undergoing fit-outs or is being reconfigured – from hypermarkets to high-performing fashion anchors. A similar repositioning is underway in Pune, replacing outdated tenants with more relevant and modern options.

 

Despite these short-term transitions, management remains optimistic, expecting robust growth to resume from FY27 onward, post-revamp. The newly operational malls – Phoenix Palassio (Lucknow), Phoenix Citadel (Indore), Mall of Millennium, and Palladium Ahmedabad – achieved an impressive average trading occupancy of 94 per cent within just 6-8 quarters of launch. The company is confident of replicating this success in its upcoming properties in Gujarat and Kolkata.

 

Further expansion is also on the cards, with Phoenix Palladium adding 0.35msf by FY26-27. Recent acquisitions of 22.1 acres in Coimbatore and Chandigarh Mohali will help the company more than double its portfolio by FY30. As a result, 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.  ALSO READ | Why did Nuvama downgrade BFSI, upgrade IT & Reliance Ind?

Office segment set for 3x expansion

 

Following the rollout of its ‘mall of the future’ strategy, Phoenix Mills delivered its first major office asset – Fountainhead (0.8msf) in Pune – in Q4FY22. This marked the beginning of its office space journey, which has since expanded to 2msf. Despite earlier scepticism about office demand, Fountainhead’s occupancy has steadily risen to 65 per cent, signaling strong potential for office spaces co-located within retail assets.

 

The company continues to diversify and grow its office footprint across major cities. Notable developments include office components at its malls in Bengaluru (1.2msf), Chennai (0.4msf), and Palladium Mumbai (1.1msf). Newly launched malls in Pune and Bengaluru will each contribute an additional 1.2msf of office space.

 

This strategic focus is expected to pay off, with the office portfolio projected to grow nearly fourfold to 7.1msf by FY27, through phased execution. Rental income from the office segment is anticipated to triple, reaching ₹600 crore by FY27, implying a robust 71 per cent CAGR over FY25-27. These figures reflect the company’s strong confidence in the long-term viability of office spaces within its integrated developments.

Hotels riding the tailwinds of demand

 

Phoenix Mills’ hospitality business is also seeing strong momentum. Its flagship property, the St. Regis has recorded major operational improvements, aided by favourable demand trends. In Q1FY26, the hotel posted an average room rate (ARR) of ~₹16,425, a 13 per cent Y-o-Y increase, along with an improved Ebitda margin of ~47 per cent.

 

Expansion is ongoing in the hospitality segment as well. A new 400-key Grand Hyatt hotel is under development at MarketCity Bengaluru, with an estimated capex of ₹1,000 crore and a targeted completion timeline of FY27-28. Additionally, Phase 3 of PMC Bengaluru will include another 300-key hotel, construction for which is about to begin. 

 

Meanwhile, Phoenix Citadel is also set to host a 300-key hotel currently in the planning phase.

 

The company’s recent acquisition of an 11-acre parcel in Thane (FY24) is expected to include another premium hotel. Altogether, these developments will significantly expand PHNX’s hospitality portfolio to over ~1,800 keys, tripling from the current 588 operational keys.  ALSO READ | Motilal Oswal suggests 2 hotel stocks as hospitality sector boom continues

Valuation and outlook

 

As its newer malls continue to ramp up successfully, Phoenix Mills is also implementing targeted initiatives to boost consumption in its mature properties. These efforts, coupled with higher trading occupancy, will help the company maintain steady consumption traction.

 

The recent acquisition of the remaining 49 per cent stake in Island Star Mall Developers (ISMDPL) further strengthens the company’s portfolio of high-quality retail assets. This transaction is expected to be earnings-accretive from the very first year, with major upside as rental income stabilises and the additional 2.71msf of FSI is developed over the medium term. Staggered payment terms will help maintain a conservative net debt-to-equity ratio of below 0.4x over the next two years.