by Suhani Adilabadkar

For an Indian big city resident, Phoenix Mills properties are hard to miss. In the early 2000s, Phoenix Mills  introduced India’s first hypermarket concept by launching Big Bazaar’s first store, along with Food Bazaar at the High Street Phoenix (HSP), Mumbai. Over the past two decades, the company's shift to retail and real estate enabled it to evolve - from a defunct textile manufacturing firm that was once at the centre of Mumbai’s textile strikes, into a massive conglomerate. With a robust asset pipeline and strong rental income, the stock price has been gaining momentum. 

Quick Notes:

• Phoenix Mills is an active owner, developer, and manager of prime retail-led assets in key cities of India.

• Phoenix Mills intends to double its retail portfolio from the current 5.96 mfs to 11.71 mfs by FY24.

• Commercial revenues for the first half of FY20 was Rs. 514 mn, up 66% YoY and 64% YoY growth in Q2FY20.

• PAT stood at Rs. 74.7 crore rising 12% YoY against Rs. 66.6 crore corresponding September quarter FY20. 

Owner and developer of retail assets in urban India 

Phoenix Mills is an active owner, developer, and manager of prime retail-led assets in key cities of India. Over the past ten years, the company created large-scale, retail-led mixed-use destinations, as well as various multiple projects across the country. The company has prime retail, commercial, residential and hospitality properties in Mumbai, Bangalore, Chennai, Pune, Lucknow and Bareilly and assets under development in Ahmedabad and Indore. It has an operational retail portfolio of approximately 6 mn sq ft of retail space spread across 8 malls in 6 gateway cities of India. 

September quarter FY20 was a steady one despite storms

Phoenix Mills gave a steady performance despite economic headwinds. Consolidated revenue from operations stood at Rs. 415 crore in Q2FY20 up 3% YoY and at Rs. 1030 crore for H1FY20 growing 26% YoY. Operating profit for the quarter stood at Rs. 211 crore against Rs. 198 crore in Q2FY19 growing 6% YoY.

Operating margin came out at 50.8% for Q2FY20 expanding 181 bps YoY against 48.9% corresponding quarter the previous year. Net Profit or PAT for Q2FY20 stood at Rs. 74.7 crore rising 12% YoY against Rs. 66.6 crore corresponding September quarter FY19. Mr. Pradumna Kanodia, Director-Finance of Phoenix Mills said, “Excluding the contributions from the residential business, our PAT from our core annuity income generating business of retail, hospitality and commercial offices, was at Rs. 1,516 mn for the first half of FY20, which is up 27% YoY”. 

Retail rental income on the rise

India is the world’s fifth-largest global destination driven by rising incomes, an expanding middle class and flourishing digital connectivity. In the next 2-3 years, traditional retail is expected to have a major share of about 75%, organised retail share nearly 18-20% and e-commerce roughly 5-7% of the total retail market. Phoenix Mills, a leading player in organized retail has a robust real estate development portfolio comprising retail, commercial, residential and hospitality across all major Indian cities such as Mumbai, Pune, Bengaluru, Chennai, Lucknow, Bareilly and Agra. 

Phoenix Mills has 8 operational malls of approximately 6 mn sq ft in 6 cities. Over the past five years, consumption at Phoenix malls has grown at a CAGR of 11%. In the current quarter, retail-led rental income grew 7% YoY at Rs. 302 crore driven by the strong operational performance of Phoenix MarketCity Bangalore, Phoenix MarketCity Pune & Phoenix MarketCity Mumbai.

Phoenix Mills operates commercial centres in Mumbai and Pune with a leasable area of about 1.86 mn sq. ft. which falls under the commercial segment.In this respect, Mr. Shishir Shrivastava, Joint MD, Phoenix Mills said, “Our commercial segment which is an important pillar for our growth aspirations, continues to do well, led by Art Guild House, Mumbai and Fountainhead Tower-I in Viman Nagar, Pune. Commercial revenues for the first half of FY20 was Rs. 514 mn, up 66% YoY”. 

For the quarter, commercial income grew 64% YoY whereas hospitality revenue declined 7% YoY. Phoenix hospitality assets includes St. Regis, Mumbai and Courtyard Marriott, Agra, marquee hotel properties providing strong operating cash flows are in the pipeline. On the whole, this diversified annuity revenue streams of retail, commercial and hospitality ensures robust long term cash flow visibility. The residential portfolio comprises of premium, upscale and large-scale residential developments, with 3.72 mn sq. ft. total saleable area. Residential revenue stream declined 54% YoY in Q2 FY20. 

Though revenues grew at a slower pace in the September quarter, the management contends there are no slowdown worries. Mr. Shrivastava, Joint MD, The Phoenix Mills clarified, “Firstly, Q2 this year has also seen a bit of an extended monsoon. So our weekend sales typically have gotten a little impacted in that way. I would not attribute this to any major economic slowdown reflecting here into our consumption story”. He further added that categories such as entertainment, fashion, footwear, accessories were up 13-14%, books, toys, gifts grew between 9% to 10%, cosmetics 9% and jewelry & watches jumped 4%. But there were segments exhibiting slower or flattish growth such as food and beverages, electronics and home accessories. 

The scrip is up 20% over the past six months.  Strong long-term plans of Phoenix Mills is cheering investors and led to share price surging - the potential lies in its robust pipeline of both retail and commercial assets. Retail portfolio is being augmented by Lucknow Phoenix Palassio (GLA of 0.9 msf) currently under-development with rental income flowing from FY21.

Under-construction retail development was acquired in Indore through an auction process to be constructed as Phoenix MarketCity (GLA of 1.0 mn sq. ft.), Indore, next in line, Phoenix MarketCity (1.20 mn sq. ft), the next in Bengaluru in Hebbal and acquisition of 5.2 acres of prime land in Thaltej, Ahmedabad, Palladium Ahmedabad to be operational from FY22. There is 0.5 mn sq.ft. of office portfolio under development at Fountainhead Tower II and Tower III in Pune. The company is also adding commercial offices at its flagship property, High Street Phoenix (1.1 mn sq ft), Mumbai, Phoenix MarketCity (1 mn sq ft), Bangalore and Phoenix MarketCity (0.42 mn sq ft), Chennai. 

Post FY2023, the company plans to add 1 msf of retail assets to its portfolio each year as it sees strong growth prospects in Tier I markets such as Kolkata, Delhi,  Gurgaon, Hyderabad and Chandigarh. Phoenix Mills intends to double its retail portfolio from the current 5.96 mfs to 11.71 mfs and quadruple commercial portfolio to 5.28 msf from the present level of 1.38 msf by FY24. According to the company, the best is yet to come.