Phoenix Mills Limited - Rating outlook revised to 'Stable', Rating reaffirmed

CRISIL Ratings has revised its outlook on the long-term bank facilities of Phoenix Mills Limited (TPML; flagship company of the Phoenix Mills group) to 'Stable' from 'Negative', while reaffirming the rating at 'CRISIL A+'.

The outlook revision reflects strong recovery in retail sales witnessed across malls in Q2 2022 and October 2021 post reopening after the second wave of the pandemic, expected further improvement in retail sales in H2 2022 and strengthening of liquidity position of the group through stake dilution in assets and equity fund raising through qualified institutional placement (QIP).

While the pandemic and consequent closure of malls have impacted performance, the recovery has been steady post reopening. After closure of malls in April 2021 due to the second wave, malls gradually reopened from June 2021 albeit with restrictions. Despite the restrictions, strong recovery was witnessed, with retail sales reaching 74% of pre-pandemic (Q2 2020) level in Q2 2022. Consequently, revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) for Q2 2022 were adequate at 67% of pre-pandemic level each (excluding for Phoenix Palassio, Lucknow, which became operational in July 2020). Retail sales further improved to around 90% of pre-pandemic level in October 2021. Recovery in revenue and profits in H2 2022 is expected to be strong.

The group has also taken steps to ensure availability of ample liquidity to tide over the current situation and meet growth capital requirements in the medium term. Since August 2020, the group has raised a total of ~Rs 3400 crore through -

a) Rs 1,100 crore through QIP,

b) an agreement with Government of Singapore Investment Corporation (GIC) for stake sale of 26% in 3 subsidiaries for Rs 1,111 crore (realised in June 2021),

c) infusion of Rs 196 crore from Canada Pension Plan Investment Board (CPPIB) for meeting capital expenditure (capex) requirements in under construction assets housed under Island Star Mall Developers Pvt. Ltd (ISML; rated CRISIL A/Stable; part of the group and owns and operates the Phoenix Market City mall in Bengaluru) and

d) deal with CPPIB for investment of Rs 384 crore in two tranches for development of the group's new asset in Kolkata for a 49% stake in the project (Rs 180 crore of this has been realised).

Additionally, on November 15, 2021, CPPIB committed to invest Rs 1,350 crore in tranches for acquiring 49% stake in Plutocrat Commercial Real Estate Pvt. Ltd (PCREPL; holding company for developing an office-led mixed-use asset in Mumbai). CPPIB has already infused Rs 787 crore towards the development as of date. All these initiatives have strengthened the liquidity position of the group with cash balances, liquid investments and undrawn bank lines standing at an aggregate of Rs 2,622 crore as on November 18, 2021. CRISIL Ratings expects the liquidity position to remain strong in the near to medium term.

The rating continues to reflect the Phoenix Mills group's leadership position in the Indian retail mall segment, diversified revenue profile, and comfortable financial risk profile. These strengths are partially offset by exposure to project risks because of significant expansion plans, skewed debt amortisation schedule impacting near term coverage ratios, volatility in occupancy, and vulnerability to cyclicality in the real estate sector.

Shares of The Phoenix Mills Limited was last trading in BSE at Rs. 970.85 as compared to the previous close of Rs. 1046.55. The total number of shares traded during the day was 13672 in over 2561 trades.

The stock hit an intraday high of Rs. 1040.45 and intraday low of 942.00. The net turnover during the day was Rs. 13371352.00.

Source : Equity Bulls

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