Phoenix Mills has risen from the pandemic lull

The company’s latest business update said that consumption at its malls from April to November this year stood at ₹6,070.5 crore. Phoenix remains on track to achieve FY23 consumption target of ₹9,000 crore. This is excluding the new mall in Indore and the upcoming mall in Ahmedabad.

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Overall, year-to-date FY23 consumption was 127% of YTD FY20 (pre-covid), according to the company’s presentation. However, on a like-to-like basis, excluding the contribution from the Phoenix Palassio mall, which opened in July 2020, YTD FY23 consumption stood at 115% of the same period in 2019 (pre-covid levels). In November, the momentum slowed compared to October.

For perspective, on a like-to-like basis, last month’s retail consumption stood at 113% of November 2019. In October, consumption was 118% of 2019 levels. In other words, consumption on a compound annual growth rate basis from 2019 levels stood at 4% for November, which isn’t striking. October consumption was aided by the festive season. “The post-Diwali month, i.e., November is a seasonally weaker month, with consumption again picking up in December,” said the company.

Meanwhile, Phoenix’s other businesses, such as its hospitality portfolio, are also seeing a solid revival in demand, reflected in the healthy occupancy levels and revenue per available room. St. Regis, Mumbai clocked the highest ever revenue per available room of ₹14,884 in November and occupancy at 84%.

Investors are visibly thrilled about the rebound in consumption, what with the sharp appreciation of 31% in the Phoenix stock in FY23 so far, while the Nifty 500 index has risen by nearly 7%. “Consolidation in the realty space and Phoenix’s leadership in retail realty and unique understanding of the Indian consumer’s psyche coupled with the structural story of urban consumption growth has enabled it to weather the covid-19 storm,” said analysts from Nuvama Research in a report on 6 December.

The stock is now about 11% below its 52-week high of ₹1,624 seen last month.

“Entry in new cities and operationalization of under-construction/planned assets are some of the stock triggers that we expect to play out over the next few years,” added the Nuvama report. On 1 December, the company opened the Phoenix Citadel mall in Indore. The Ahmedabad mall is scheduled to open in January. With malls in Pune and Bengaluru expected to open in FY24, ICICI Securities expect a 17% rental income CAGR over FY20-25E. The broking firm expects ₹1,371.8 crore of rental income in FY23. In the half-year ending September, rental income stood at nearly Rs636 crore. Further, the expected land deal closures in Surat, Jaipur and Chandigarh would also keep investor sentiments upbeat.

Overall, the group’s liquidity position, excluding overdrafts, at roughly ₹2,300 crore as of September end is encouraging. The strong upward trajectory in consumption, improving hotel occupancy and sale of ready housing units would boost cash flows going forward. According to IIFL Securities, Phoenix is reviving the residential portfolio while also entering into warehousing/data centres.

Any success here could be a trigger for the stock. For now, the stock’s sharp outperformance suggests investors are capturing the lofty expectations adequately. The performance of new malls remains crucial, and a shortfall on this front would be a dampener.