Promising Growth Ahead

With its mall and hotel verticals putting up a strong show, residential segment boosting revenue, and office rentals set to scale up in FY25, Phoenix Mills has promising times ahead.

Phoenix Mills’ strong growth is aided by the opening of new malls. Further, due to higher contribution by the residential segment, the company’s FY 24 revenue jumped 51 percent YoY to INR 39.7 billion and its Adj PAT (Profit After Tax) stood at INR 11 billion, up 37 percent YoY.The sound financial health of the company  can also be gauged from Operating Cash Flow (OCF- Post Interest) rising by 27 percent to INR 17.8 billion and net debt declining by INR 1 billion to INR 15.6 billion.

According to a  latest report by Motilal Financials, new malls have been driving  strong consumption and rental growth.  Consumption across company’s mall portfolio was up 23   percent  YoY in FY 24 to INR 113.4 billion .        FY24 retail rental income grew 27 percent YoY (in line with consumption growth) to INR16.6b as new malls contributed 18 percent to the overall revenue. Leased occupancy stood at 97 percent in March 2024. With the company expecting to reach trading occupancy of over 95 percent by the end of FY 25, up from 88 percent in March 24, there will be 30 percent upsurge in retail rental income in FY 25. However, with no new malls expected to be commissioned over the next two years, rental CAGR is likely to subside to 15 percent over FY25-27.

Hospitalty segment  has also been a driving factor with total income growing 11 percent YoY to  INR 1.6 billion and EBITDA was up 15 percent YoY to INR 0.75 billion in 4QFY24 as both  Marriott Agra and  St. Regis reported  strong occupancy and around 10-11 percent growth in ARR (Average Room Rent). The company has also shown healthy  performance by commercial segmment , with total income rising by over 22 percent to INR 480 million and EBITDA rising 14 percent to INR 300 million . As Phoenix Mills is likely to deliver 1.6 msf of office assets across Bengaluru, Pune and Chennai over the next 6-9 months, office rental income  is expected to register a CAGR of 39 percent to reach INR 4.7 billion over FY 24-27.On the retail front, the company is well on track to deliver mall space of  1msf  each year.

Going forward, there will be key upcoming assets. In Thane, in next 3 months, the company will be finalizing the development mix of a large mixed-use project with some retail and hotel components while residential development is also being explored. In the next 6-8 months, Phoenix Mills is aiming for a launch of a residential development in Kolkata. In Bangalore, the company has acquired 6.6 acres of land for INR 2.3 billion , with an opportunity to add at least 1.3-1.4 msf , thereby enhancing the quality of the existing asset.

Phoenix Mills  continues to deliver strong operational and financial performance, driven by the commencement of new malls. As the trading occupancy ramps up further,  the growth momentum is expected to continue. However, in the absence of the completion of any major new mall, the  growth is likely  to taper down in FY26-27.