PHOENIXLTD - The Phoenix Mills Ltd. Share Price

Management provided an optimistic outlook for The Phoenix Mills Limited, highlighting strong growth across various segments. For Q3 FY26, consolidated revenue reached Rs.1,121 crores, a 15% year-on-year increase, while EBITDA grew by 19% to Rs.656 crores. Retail performance was notable, with a 25% growth in consumption during the festive quarter amounting to Rs.4,992 crores, and a rental income increase of 13% to Rs.573 crores. The company's retail sales for the first nine months of FY26 reached Rs.12,327 crores, indicating an encouraging growth trajectory as it approaches the total consumption level of the previous fiscal year despite no new mall additions.

Key forward-looking points include:

1. Office Leasing: The company has achieved approximately 1.2 million square feet of gross leasing year-to-date, constituting nearly 25% of its office portfolio, with expectations for further growth as discussions progress.
2. Sustainability Initiatives: Renewable energy now accounts for 30% of retail energy requirements, up from 20% last year, signaling the company's commitment to sustainable practices.
3. Future Growth Estimates: Management anticipates double-digit growth in the retail sector for FY26, grounded in robust consumer demand, especially with significant portions of the portfolio set for renewal in the next five years.
4. Capital Expenditure and Balance Sheet: Operating cash flow for the nine months was Rs.1,508 crores, up 24% year-on-year, allowing continued investment in high-quality assets while maintaining a strong balance sheet.
5. Upcoming Changes: Expected increases in trading density and renewal opportunities in the retail and office spaces could lead to a 20%-30% improvement in rental yields going forward.

Overall, management believes the combination of disciplined execution, portfolio enhancements, and strategic expansions positions the company well for sustained value creation.

Q&A Section of Earnings Transcript

Question 1: Can you talk a bit about what is happening in Mall of Asia, consumption level numbers off the charts, but rents still lagging and it looks like it is much low?

Answer: Mall of Asia has performed phenomenally, reaching Rs. 732 crores in consumption for Q3, a 112% year-on-year increase. The rental growth has been 58%, totaling Rs. 62 crores. We expect occupancy to stabilize at 94%-95%. The discrepancy between consumption and rent will converge over the next three to five years as consumption scales up and we renegotiate contracts.

Question 2: How much of the retail outperformance is attributed to footfall versus value growth?

Answer: Our retail partners indicate their performance is an outlier. All retailers reported double-digit growth during Q3, primarily due to festive demand and significant repositioning efforts. We replaced underperforming tenants with top brands, enhancing overall trading density and profitability across high-performing categories.

Question 3: Where are we in terms of launching Kolkata Residential, and what is the plan for Thane now?

Answer: In Thane, we are progressing towards a mixed-use development with a retail mall of 1.3 to 1.5 million square feet and a Grade A office tower of up to 1 million square feet. We expect to secure necessary approvals soon. For Kolkata Residential, we are finalizing design and approvals, and aim to provide a launch timeline in the next two quarters.

Question 4: What is the impact of the GST cuts on consumption strength this quarter?

Answer: The GST cut had a sentimentally positive impact, but it's not significantly affecting our metrics. We estimate it only influenced prices by about 3% to 4%. Our mall's performance remains robust, particularly for listed retailers, indicating that brand outlets are outperforming broader market averages.

Question 5: Can you explain the delay between consumption growth and rental growth?

Answer: Rental growth often lags consumption due to initial fixed rental contracts that kick in before consumption scales. For newly opened malls, rents can start lower, and as consumption increases over time, we expect rents to follow suit, realigning over a three-to-five-year period while maintaining a historical parallel growth.

Question 6: What improvement can we expect in trading occupancy at MarketCity Pune and Bangalore?

Answer: We are on track to reach 90% trading occupancy by March 2026, anticipating 95% occupancy by mid-FY27 as new brands are launched, including IKEA. Historical data supports our target as brand expansions drive occupancy and subsequently rental increases.

Question 7: Can you provide insight into the potential repricing opportunities during upcoming tenant renewals?

Answer: We expect a 20% to 30% improvement during tenant renewals due to our ongoing optimization efforts. With over 50% of the area up for renewal in the next three years, we will focus on enhancing revenue through better negotiation and utilization of space with both existing and new brands.

Question 8: What are your thoughts on the 50% renewal opportunity available in the next three years?

Answer: The 50% opportunity comprises contractual expirations expected to yield annual increases of 16%-17%. This is beyond standard growth rates, as we also plan targeted churn and optimizations to ensure we're maximizing revenue while creating appealing retail environments for high-demand brands.