Towards an even
Brighter Tomorrow
Dear Shareholders,
In a world of continual transformation, only those equipped with resilience have the
ability to transform a challenge into an opportunity. An uncertain macro-environment for
the second year in a row notwithstanding, we stayed on the growth track with a commitment
to maintaining our position as India's largest retail-led, mixed-use asset developer and
operator. Our resilient financial performance also kept us motivated to move ahead with
determination and continue to deliver excellent outcomes. We are leveraging the robustness
of our business model and staying true to our values and ideals to shape a better
tomorrow.
Key developments of the year
With the virulence of the COVID-19 virus fading, consumer spending picking up and
retail as well as leisure facilities reopening, monthly consumption at all our malls moved
back to pre-COVID-19 levels by the end of FY22. As we enter Q2 of FY23, the trajectory
remains strong and resilient. With a strategy to 'build back better', we responded with
newer ways of working and impressive displays of innovation to capitalise on the
opportunities presented to us.
During the year under review, we achieved a gross retail leasing of over 4 msft across
our existing and upcoming malls; and clocked residential sales of ~H 3,500 million. Our
office portfolio also showed remarkable resilience, as we ended the financial year with a
commercial income of ~H 1,580 million. The hospitality portfolio, which was highly
impacted by the pandemic, witnessed a remarkable comeback during the year with
consistently high occupancy levels and improved ARRs across our properties.
In a significant development, we raised ~H 34,330 million of equity in an environment
of fluctuating investor confidence. We strengthened our association with our existing
partner, Canada Pension Plan Investment Board (CPP Investments), by partnering with them
on two new projects during the year. Our first partnership was for a Greenfield retail
mall development in Kolkata, while the second was for a Greenfield, office-led, mixed-use
development project at our flagship asset Phoenix Palladium in Mumbai. Additionally, PML
and CPP Investments also committed to contribute additional equity to the existing retail
platform Island Star Mall Developers Pvt. Ltd (ISML) during the year.
We are leveraging the robustness of our business model and staying true to our values
and ideals to shape a better tomorrow.
Further in June 2021, we announced the formation of a retail-led, mixed-use platform
with GIC, Singapore's sovereign wealth fund. PML contributed two of its 100% owned
operating malls (Phoenix MarketCity Pune & Phoenix MarketCity Mumbai) and existing
commercial offices (Art Guild House, Centrium and Phoenix Paragon Plaza) in Phoenix
MarketCity Mumbai to the platform as its equity contribution and GIC has invested H 15,110
million in a combination of Primary & Secondary between June 2021 to June 2022 to
acquire a 33% stake in this platform. This transaction has created liquidity at the PML
level as well as the platform level. Our partnership with CPP Investments and GIC is a
strong testament to investor confidence in our Company.
The year was also important as we remained balanced and prudent in our use of leverage.
During the year, we focused on optimising the cost of debt across our assets, which helped
us lower our borrowing costs by 87 basis points during the year to an average cost of
~7.30% per annum. Our gross debt levels have remained steady despite an intensive ongoing
capex due to our strategy of funding the capex largely through equity. Our gross debt is
down from H 45,731 million in FY20 to H 43,795 million in FY22. Our net debt at group
level is down from H 42,632 million in FY20 to H 18,803 million in FY22.
We ended the year with strong liquidity position of H 24,992 million. Additionally, we
have commitments to receive H 9,670 million as investments from our various transactions
with CPP Investments.
In May 2022, in line with our strategy to consolidate our asset holdings, we acquired
the remaining 50% stake in Phoenix Marketcity, Chennai for a total value of H 9,360 mn.
Funded through internal accruals and cash on balance sheet, the acquisition helped attain
sole ownership in one of the largest malls in India, with a chargeable area of ~1 msft in
Velachery, a prime consumption hub in the city of Chennai.
Delivering on our promises
Today, we own 9 irreplaceable, large-scale, retail assets - accounting for ~7 msft
across 6 Indian city- centres. In 2019, we outlined a vision to double our retail
portfolio by 2024. Since then, we have opened one new mall in Lucknow, Phoenix Palassio,
in July 2020 and are now looking at commencing operations across four new malls at Indore,
Ahmedabad, Pune and Bangalore in next 12-15 months.
Phoenix Citadel at Indore, which is 83% leased out and Palladium at Ahmedabad which is
98% leased out are all set to get operationalised during FY23. Phoenix Mall of Asia in
Bengaluru and Phoenix Mall of the Millennium in Pune, which are scheduled for launch in
the first half of FY24, also have 76% and 73% of their gross leasable areas already
leased.
We have also received requisite building plan approvals for our upcoming mall in
Alipore, Kolkata and we expect to commence construction soon. Further, construction at our
flagship office-led, mixed-use development at Phoenix Palladium was also initiated
recently; this development will comprise of Grade-A office space of ~1 msft and high-end
luxury retail of ~0.2 msft.
We take pride in having translated our strategies into action and having delivered on
our commitments with perseverance. Today, we are well on our way to commanding an
operational retail portfolio of ~13 msft and a commercial portfolio of 7+ msft by FY26.
Enriching our proposition consistently
We are continually evaluating the growing consumption strengths in India's key cities
and micro-markets and exploring newer opportunities. We have been exploring alternative
ways to establish fresh channels of growth and value creation, extracting long-term value
from land, uncovering urban demand and creating a superlative experience. Our
single-minded objective is to make our assets future-proof.
Take the case of Phoenix Palladium in Mumbai, which today offers an immense opportunity
to significantly increase our retail footprint in the light of rising demand from domestic
and international brands, scarcity of premium, organised retail space in southern Mumbai,
and our unique ability to transform spaces into 'revenue generating' retail developments.
Till date, we added ~0.15 msft retail area in Phoenix Palladium and plan to add another
0.25 msft by 2024 and another 0.20 msft by 2025, increasing our total gross leasable area
to ~1.43 msft by FY25.
Phoenix Palladium has already established itself as the 'go-to' retail destination in
the financial capital of India. Higher GLA presents us with an opportunity to serve our
valued customers with a wider array of brands. Taking into consideration the limited capex
required to add incremental area in an existing asset, the incremental rentals generated
will be significantly value-accretive for our shareholders.
Similarly, adding grade-A office towers on top of our retail anchored destination malls
is a smart way to improve the return on capital employed on these assets. Fountainhead
Towers in Pune, our mixed-use, grade-A commercial development, built on top of our mall,
Phoenix Marketcity, is one such example. Fountainhead Towers 1 and 2, which are already
operational, have been witnessing strong leasing traction and premium, in comparison with
the prevailing rent in the market.
Given that the land cost is zero and cost of construction is 3,000 msft, the
incremental pre-tax yields generated by Fountainhead Towers is ~30%, which is what makes
commercial developments very lucrative for us. Over the next ~5 years, we plan to more
than treble our operational office space from the current 2.0 msft to over 7.0 msft by
adding office towers as a part of our existing mixed-use developments in Pune, Bengaluru,
Chennai and Mumbai.
Partnering the journey of a sustainable ecosystem
While we expand our portfolio and create extraordinary experiences for the customers,
we are concurrently working to ramp up consciousness around our direct and indirect impact
on the environment. We are taking concrete steps to reduce our environmental footprint and
inspire the stakeholders to collectively contribute towards the mission, which is close to
our hearts. All our upcoming malls and offices will have a USGBC LEED rating. In addition,
we also intend to obtain a WELL ratings for our offices. Besides transitioning to green
energy (solar/wind), wherever possible, we are making every effort to reduce dependence on
conventional sources of energy.
We are working on our water conservation goals in association with the Aakar Charitable
Trust.
We are helping create check-dams across rural India for wide-reaching impact. During
the year, PML contributed towards the construction of 46 check dams in water-scarce
regions of India. These check-dams, in addition to providing water security enhanced
income in the area and are helping revive the environment. Our work has also helped
provide multiple indirect benefits such as enabling women empowerment, education of the
girl child, reverse migration to villages and financial independence for the communities
we operate within. These check dams are estimated to have benefitted over 138,000
individuals in these rural areas.
Moving forward
With rising affluence, increasingly upward mobile population, expansion of the
middle-class income segment and an enabling macro-economic environment, India's
consumption story has multiple drivers and we remain convinced of the long-term growth
story for grade-A malls.
We look to the future with positivity and confidence and believe that our sustainable
and differentiated business model, combined with expertise and experience, will continue
to empower us in creating significant, sustained and accretive value across the
stakeholder fabric.
Today, we are on a veritable path of becoming India's largest and most admired
retail-led development company. Our ability to access capital and tap global development
expertise from the best of institutional sources, prudent capital management and focus on
retail-led, mixed-use development enabled us to continue moving forward at an impressive
pace, especially at a time when the presence of competing malls reduced in several cities.
We look to the future with positivity and confidence and believe that our sustainable
and differentiated business model, combined with expertise and experience, will continue
to empower us in creating significant, sustained and accretive value across the
stakeholder fabric.
Vote of thanks
We take this moment to thank our team of professionals, who with their experience, have
participated in the creation of our unique destinations, undeterred by the tough
macroenvironmental challenges.
Today, we are proud to be an organisation strongly led by a very cohesive team of
professionals and individuals with relevant domain expertise.
I would like to extend a warm welcome to Mr. Anuraag Srivastava, who was onboarded in
December 2021 as the Group CFO. He brings with him three decades of diverse experience in
business planning, management, finance, and raising private and public capital. I am
confident that he will further strengthen the management team for the exciting journey
ahead of us.
I end this letter with a vote of thanks to all our stakeholders for reposing their
continued faith and trust in our vision. A big thank you to the entire Phoenix Mills
family.
We are excited for the next phase of our growth by operationalising our
under-construction assets and broadening our leadership by way of expanding into newer and
promising cities of India.
Stay safe, stay healthy.
With best regards,
Atul Ruia
Chairman