The Phoenix Mills Limited analyst Q&A

Yes. Thank you so much, and good morning. My first question is, if you can talk a bit about the non-retail part of the business. There seems to be a bit of slowness in commercial leasing , on the residential sales, especially given the environment. Can you talk about what you are doing to accelerate those sales and leases?

Hi, Puneet. This is Shishir. Thank you for your very relevant pertinent question. Let me talk a little bit about the offices first. Across the country, we are seeing the demand to grow for office space leasing. In Bangalore, as I mentioned earlier in my communication, we have just recently received the occupation certific ate, and we now see a lot of interest going up there. Also, I want to talk a little bit about course correction. While we were building all of these offices, we came to realize that it was very important to get the front office ; Grade A; best-in-class positioning right. And in that context, we have now created some significant experiences at the offices, the amenities that we have created, executive lounges, meeting room facilities, flex spaces for our occupants over there, fantastic F&B options within the office development itself, including cafes, gyms, I would say community spaces. All of these were a part of the course correction that we did when we started looking at what competition was all about . A nd in the market of Pune and Bangalore , we realized that the competition was all focused on IT and ITES spaces. And for us to create a niche and carve out and attract the right clientele , it was important to get the positioning and the amenities and the entire building specs upgraded. We commenced this enhancement about six months ago and we have now nearly completed it. Very interestingly, H &M's India corporate office has signed up for space at Asia Towers, Bangalore, and we have got some very good clientele lined up now. I think we are going to see the benefits of all of this in the coming three quarters and we are going to see a very, very promising leasing velocity going forward. We have done the same course correction at Millennium Towers, Pune , as well. And we are very, very excited to see that this building has pretty much turned out to be the best -in-class new benchmark setting asset for that city. As I mentioned earlier, it's all about creating the right experiences. We have learned the value of this enhancement and the creation of significant revenue at The St. Regis and in our malls , and we are taking those learnings and duplicating them across our office assets across the portfolio. Moving on to residential, Puneet, we have an inventory at the current pricing of approximately Rs. 1,000 crores. We are gearing up to expand that development with Tower 8 also getting launched perhaps sometime in the next financial year. We are very keen not to dilute the positioning. I guess your question is more about, how does one accelerate the sales velocity?

Yes, sir.

The trade is, you drop pricing you get a higher sales velocity. For Rs. 1,000 crores inventory in our books, we want to maintain that premium positioning and pricing, we want to stay true to the product. We do not want to disappoint the buyers who already have occupied spaces there and we want to set right the positioning for Tower 8, which will get launched in the next fiscal year. So, we are not seeing the benefit of dropping pricing to improve sales velocity.

Understood, sir. That’s helpful. And from the numbers at least it looked like the net sales were actually negative, so are we worried on the cancellation or those are some routine ones?

No, no, this is more of a timing issue. I just want to point out one more, let me bring about one more point for you to understand. In 2018, see, our pricing was roughly at about Rs. 15,000 to Rs. 16,000 per square feet . And as a conscious call, we have decided to inch it up. As I mentioned earlier in my communication, we are currently at about Rs. 26,100 or thereabouts per square foot is the current pricing. And we have really inched it forward, we have set a new benchmark, I think it's amongst the highest pricing in that micro market or across the city in fact. We strongly believe in the strategy and we know that it will pan out well in the long run for us.

And second part is on the retail side, right. I mean, I guess a year and a half back you had said that retail consumption should on the same stores basis grow between high single digit to low double digits. When are we likely to see that? And what needs to be done for your existing pre- 2020 portfolio?

Yes. So I think in the older malls, again, I want to go back a little bit into history and let's look at the period of 2017, 2018 and 2019. Across the same portfolio of assets which you are talking about, the earlier older portfolio , in that period of two to two and a half years, we had seen consumption kind of plateau, and this is cyclical , in our opinion. When I say cyclical, it's not economic cycles, it's cyclical because brands kind of need to be enhanced , the product needs to be enhanced. And in 2018 -2019, we took up the significant exercise of premiumization , category upgradation, bringing more bridge to luxury brands in. And in the subsequent years, three, four, five years we have seen how consumption has grown. So, we are now again at that same point where all of these assets we need to be working on premiumization, category upgradation , and of course optimizing the store size, introducing newer brands. We are very excited about Bershka opening up at Phoenix Palladium. I think it's completely new brand for this market and it's a much anticipated brand by our consumers. So I would say it's the same strategy. Our teams are working on it. We have a lot of confidence on how this is panning out from our ongoing discussions with retailers. I think just let's look at the performance of Mall of Asia and Mall of the Millennium, where we have created more efficient layouts and optimized store sizes to accommodate new brands. We have given more space to performing retailers. There are newer categories that have come in. F &B, we have increased the allocation of area. We have brought in more fine dining, cafes, bars, F &B densification on multiple floors, creating the whole F&B village or eclectic village at Pune. We have seen how strong the performance is now at Family Entertainment Centers (FEC), and now we have multiple FECs across the location creating these indoor social venues, adding smaller but high density trading stores like watches, cosmetics, electronics. So, this is a strategy that we have and it was something which is in execution. And it's very routine to our business. You are going to see in the retail space in any mall there is going to be a plateau every let's say five to seven years in consumption, and you have to take all of these steps for consumption to grow and take it to the next level.

Understood. That’s really helpful. And thirdly, anything more in terms of pipeline for new business development? And when should we expect start of work in Thane, Coimbatore and Kolkata residential launch?

Okay. So, clearly this has been a significant year for us. We are really committed to growing the retail, office, hotel and even the residential portfolio, right. So for now our plans indicate that Thane is going to see a retail GLA of about 1.3 million square feet. Plus, we have additional FSI of another 2.5 million square feet, and we are currently working on the plans to identify what is going to be the best asset classes to develop over and above the mall.

We are currently in the state of approvals, etc. and we hope that during this calendar year we will be able to break ground once we get all our approvals in place. Unlike earlier Puneet, we now go to the very last detail on all design development before we break ground, because we see once you break ground and efficiently and quickly you build it out, I think that's the most prudent way to allocate capital and see the best returns. Continuing on, Chandigarh is going to be another 1.3 million square feet mall . And again, we have additional FSI potential over and above, which is unlimited. So we are looking at perhaps a fantastic hotel over there as part of the mixed -use development. Coimbatore is going to be again 1 million square feet of mall space. We have, at our Phoenix Market City location, as part of that mixed-use development in Bangalore, we have already planned the expansion of about 600,000 square feet and that construction is ongoing. So i t's been a significant year for us in terms of acquisitions . A nd we continue to evaluate opportunities. As I have always mentioned to you and our other investors and shareholders and analysts, we expect to launch at least 1 million square feet each year from 2027 onwards as well. And we are well to deliver on that pipeline that we had anticipated by FY 2030.

Understood. Very helpful. Thank you so much. And all the best.

And also, you had a question on Resi in Kolkata.

: Yes.

So, One Belvedere is the product , that's the name of our product . W e expect to launch it towards the middle or end of Q1 of FY26. And work is commencing over there already.

Got it. Thank you so much.

Thank you.

Thank you. We will take the next question from the line of Biplab Debbarma from Antique Stock Broking. Please go ahead.

Good morning, Shishir and team. First question is on , I calculate normally the rental income divided by the consumption of your mall portfolio. Typically, it is 14% to 15%, but this quarter it was around 12.7%. Just trying to understand, should we read anything into this ? Or does it indicate that we will see rental income growth for the ratio to reach to 15%?

So, this is a great thing. It's a significant opportunity for us, Biplab, and I am glad you asked this question. In any good ; well performing mall where you are seeing, let's say , Rs. 1,000 -1,200 crores plus of consumption annually , at an average, the retailers’ ability to pay rent is in the range of about 15 % to 16%, considering that their costs remain pretty much fixed and the margins continue to improve as consumption reaches Rs. 1,000 crores. So there is a significant opportunity and we do not need to do anything to take our rental income up. It's just a trailing effect. You will first see consumption growth and then in the subsequent quarters you will start seeing rental growth.

Sir, Biplab Debbarma has rejoined the queue.

Yes. Sir, second question is on the new Palladium area, that expansion area. So, has it been fully leased? And by when should we expect the numbers from this new Palladium area?

Yes, it's about 90% leased. We are holding onto some space, because as the retailers commence their operations there, there is the opportunity to extract premium rentals from the last remaining space. There is more than enough demand for us to reach 100% as soon as we decide. But the effect of this you are going to start seeing perhaps from this first quarter of the next financial year. It's very exciting because it's been very, very well received. A brand like Uniqlo, when they opened up over there , we had underwritten our rental model at a sale or consumption of about Rs. 8 to - 10 crores or thereabouts, in December the consumption was hovering close to Rs. 20 crores out of that one single store, which is unheard of from any anchor. So we are very excited about the future and the potential of the Phoenix Palladium expansion, which is about 250,000 square feet. And also the product is incredible, what we are creating there. The two-level F&B village is going to really become the hub for leisure, entertainment and F&B which sits over and above all the retail that we have created there.

And my final question is on, we have been reading slowdown in urban consumption everywhere, there is some kind of negativity. How do you, sir, you see consumption in the next, say, one year? Can you give us your thoughts on that?

Well, i f we go by how January has panned out for us, it's been extraordinary across the portfolio. So I cannot crystal gaze, on how the consumption will be for the rest of the year. But we are very, very confident that we are going to continue to see a significant growth in consumption and that's not just coming out of natural ; I mean it's organic, but we are also putting in efforts on introducing new intellectual property and marketing events to boost consumer. For example, the Black Friday sales at the end of November, which was a three day event, this was an important factor this year in reviving consumption growth in the lean period, which comes between Diwali and end of season sales in December. So we identify these dips in consumption and we curate experiential events which boost consumption during that period. And this is something that we work on very closely with all the brands to make it very, very successful.

Okay sir. Thank you and all the best.

Ladies and gentlemen, as there are no further questions , t hank you members of the management. On behalf of The Phoenix Mills Limited, that includes this conference. Thank you for joining us. And you may now disconnect your lines.