Retail-led mixed-use assets developer and operator The Phoenix Mills is eyeing inorganic growth opportunities as the Covid-19 pandemic and subsequent lockdowns have made the valuations of probable acquisitions attractive.
India’s largest mall owner is looking to acquire at least three malls in the next 9-12 months including a large greenfield project in Kolkata, discussions for which had already started prior to the pandemic, said a top company executive.
Last week, the company raised Rs 1,100 crore through a Qualified Institutional Placement (QIP) taking its cash position to Rs 1,920 crore.
“This crisis might present some good opportunities. We have already built a safety net through our recent QIP issue and will start using that as a war chest after 4-6 months provided the current trajectory of recovery is maintained. We expect operational cash-flow normalcy to return in the market by then,” Shishir Shrivastava, MD, Phoenix Mills, told ET.
These acquisitions–both new or brownfield projects–are expected to be in the range of 7 lakh to 1.2 million sq ft each and will be driven by the company’s stated strategy to emerge as a dominant consumption center in the market.
Currently, the company has a total 7 million sq ft gross leasable area across 9 operational malls in 6 cities including Mumbai, Pune, Bengaluru and Chennai. Except Chennai, all other malls of the company have started operations post lifting of lockdown by various state governments. In addition to this, around 5 million sq ft gross leasable area is under development that will take its portfolio to 12 million sq ft by 2023-24.
Phoenix Mills, known for its large format retail malls, is looking at markets including Hyderabad, Chandigarh and Gurgaon for these acquisitions apart from a few micro markets in Mumbai Metropolitan Region and Bengaluru, he said.
The company and Canada Pension Plan Investment Board (CPPIB) have already formed an alliance–Island Star Mall Developers (ISMDPL)–to develop, own and operate retail-led mixed-use developments across India. However, whether the new acquisitions will be made through this platform or not will be determined later.
According to Shrivastava, the investors’ demand for the QIP issue is an indication of sustained long-term retail-led consumption growth in India. Total investor demand for the QIP was around Rs 5,000 crore, which included new investors like UK’s Baillie Gifford, SBI Mutual Fund, Sundaram MF, HDFC MF, HSBC Global Asset Management etc. and existing shareholders like Schroders, TT International, ICICI Pru MF, Birla MF, Invesco, Whiteoak amongst others.
“We have virtually zero debt on all our under-construction projects and will continue to be cautious on leveraging. We will not be using debt to support any of these acquisitions at least until these are stabilized,” he added.
Across each asset, the company is aiming to maintain comfort around the debt servicing in terms of adequate interest coverage ratios or tenure of the debt.
Given the Covid19 pandemic and subsequent lockdowns across various states has impacted the performance of retail malls hitting them both on sales and lease rentals front. Phoenix Mills’ revenues also declined 78% from a year ago to Rs 135 crore for the quarter ended June.
Source: Economic Times