Demand Revival To Aid Phoenix Mills’ Growth



When the Omicron variant of covid-19 struck in January, operations of mall developer The Phoenix Mills Ltd were impacted. Things have started to look up since then, with restrictions easing across key cities.

Retail consumption in March stood at 142% and 116% of the same month in 2021 and 2019, respectively, according to the company’s latest presentation. Since the nationwide lockdown hurt malls in March 2020, data for 2019 has been used for comparison. During the fourth quarter (Q4FY22), retail consumption was 1,657 crore, representing 115% and 102% of the measure in Q4FY21 and Q4FY19, respectively. This shows consumption has surpassed pre-covid levels. On a like-to-like basis though, Q4FY22 consumption stood at 91% of Q4FY19, analysts from ICICI Securities said in a report on 6 April. Here, the analysts have excluded numbers of Lucknow’s Phoenix Palassio, which commenced operations in FY21.

Catching up

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Catching up

However, March was better with like-to-like consumption at 105% of 2019 level, ICICI Securities said. Footfall has been higher in March with food & beverage (F&B) outlets becoming fully operational. Consequently, retail collections at 480 crore in Q4FY22 have surpassed the previous peak of 440 crore in Q3FY22.

Lease rentals are poised to recover further, with Phoenix Mills opening various malls. Its Indore and Ahmedabad malls are set to open in FY23. Malls in Wakad, Pune, and Hebbal, Bengaluru, are to open in FY24. Analysts at Antique Stock Broking Ltd note that pre-leasing activity remains strong at these malls with strong rental trends. Analysts at ICICI Securities Ltd expect the company’s rental income to see a 14% compound annual growth rate over FY20-25.

Also, with leisure and corporate travel making a comeback, its hospitality segment has also seen increased occupancy levels in Q4FY22. In March 2022, St Regis, Mumbai’s occupancy hit 90% versus 70-80% in Q3FY22.

On the flip side, potential fresh covid waves and accompanying mobility restrictions are a key risk. That apart, high inflation can wreak havoc on demand and purchasing power. This could impact footfalls at malls and F&B outlets, weighing on the recovery in rentals. In the last one year, shares of Phoenix Mills rallied 44%, just ahead of the Nifty Realty index’s 42% returns. “Timely commencement of malls and trends in mall lease rentals are crucial for the stock to see a meaningful upside from here on,” said an analyst seeking anonymity.

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