PHOENIXLTD — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Ladies and Gentlemen, good day and welcome to the Q2 and H1 FY24 results for the conference call of The Phoenix Mills Limited.
As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Management of the company is being represented by Mr. Shishir Shrivastava, Managing Director, Mr. Anuraag Srivastava, Group CFO and Mr. Varun Parwal, Group President, Strategy and Corporate Finance.
Should you need assistance during the conference call, please signal an operator by pressing “*” followed by “0” on your touch tone phone.
Please note that this conference is being recorded.
At this time, I would like to hand the conference over to Mr. Shishir Shrivastava.
Thank you and over to you, Sir.
Thank you so much.
The next question is from the line of Puneet Gulati.
From HSBC.
Please go ahead, Sir.
Puneet
Thank you so much and congratulations on good numbers.
My first question is on your office project.
So, the Bangalore and the Pune one are close to completion and set to launch.
Can you elaborate on what is the progress on leasing there and how are you seeing the market?
Moderator · Conference Operator
The next question is from the line of Kunal Lakhan from CLSA.
Please go ahead.
Kunal
When I look at your trading occupancies in the last 12 months, right, I mean across your assets, they've increased from say 4 to 8% and when I look at same store consumption, it's grown by 10%, so, adjusted for the trading occupancy is it fair to say that the consumption growth like to like same store would be about 4 odd percent.
Moderator · Conference Operator
The next question is from the line of Murtuza Arsiwalla from Kotak Securities.
Please go ahead.
Murtuza Arsiwalla
How much money has already been spent on the projects we talked about another 4,800 crore that is to be spent.
How much money is already spent on these projects?
That's one and 2nd for, a lot of projects that have been commissioned, is there any sense or understanding with the partners in each of these individual projects on the utilization of cash that these operational malls now throw our?
Moderator · Conference Operator
The next question is from the line of the Biplab Debbarma from Antique Stock Brokers.
Please go ahead.
Biplab Debbarma
Good morning and wish you all a very happy Diwali.
So, my first question is on the Alipore and Project Rise.
Sir, from when do you see rental generation from these two assets, the Alipore and the Project Rise?
Moderator · Conference Operator
The next question is from the line of Parvez Qazi from Nuvama Group.
Please go ahead.
Parvez
Hi, good afternoon and thanks for taking my question.
So, on the residential portfolio, considering that we now just have about 0.5 million square feet of inventory left, any thoughts about launching Tower 8 and 9 in Bangalore?
And also related question about the residential project in Kolkata.
When can we see a launch there?
Moderator · Conference Operator
Thank you so much.
The next question is from the line of Pritesh Sheth.
From Motilal Oswal, please go ahead.
Pritesh
Hi, good morning.
Thanks for taking my question.
Firstly, on slide 69, where you have given the expiry details.
So based on that data, if I calculate roughly, 4 million odd square feet of space in these malls is going to come up for expiry over the next three years, over roughly 1 million square feet each.
So how should we look at rental growth in one of these assets for renewals?
Moderator · Conference Operator
Thank you so much.
The next question is from the line of Kunal Lakhan from CLSA.
Please go ahead.
Kunal
Hi, thanks for the follow up.
We had earlier highlighted that we will be looking at acquiring 2 land parcels a year.
Just wanted some clarification on that, the two land parcels would be towards retail and over and above you would look at say for the residential expansion or two land parcels in total and it could be either residential or mixed or retail.
Moderator · Conference Operator
The next question is from the line of Biplab Debbarma from Antique Stock broking, please go ahead.
Biplab Debbarma
So, my earlier question was going forward as we keep investing in new land parcel in the major cities.
Do you see that we would be doing mixed- use development rather than purely kind of retail focus? because of the high competitive landscape as you are paying in Thane or Thane is just a one of the incidences that we are seeing?
Moderator · Conference Operator
Thank you so much.
The next question is from the line of Atul Mehra from Motilal Oswal Asset Management, please go ahead.
Atul Mehra
Good morning and thanks for the opportunity.
So just one question in terms of with this outlay of Rs.
4,800 crores till FY27 that we mentioned.
And given that along the way we will have renewals and escalations from existing customers.
What is the operating cash flow trajectory we will get to in your opinion from the current Rs.
2,000 crore number that we add, can this be more like Rs.
4,000 crores if we were to go by the current plan?
Moderator · Conference Operator
Thank you so much.
As there are no further questions from the participants, on behalf of The Phoenix Mills Limited, that concludes this conference.
Thank you for joining us and you may now disconnect your line.
Questions and answers
The Phoenix Mills Limited
Good morning, ladies and gentlemen.
We take pleasure in welcoming you all to discuss the operating and financial performance for the second quarter and half year ended September 2023.
We hope that you have had a chance to look at the results presentation shared by us.
The same is uploaded on the stock exchanges as well as on our corporate website.
I will now take you through the key highlights of the results with reference to the relevant slides of the results presentation.
Over the last 10 months, we were tasked with launching four malls and today we are extremely proud of having delivered these world class experiential developments which set new benchmarks in retail and mall design.
Starting with Phoenix Mall of Asia, Bangalore, if I may draw your attention to Slide 3 onwards, we launched this mall on October 27th 2023 with over 440 national and international brands, complete with India's largest international luxury watch cluster, a wide array of entertainment and dining options, complemented with beautiful and captivating interiors and decor.
We expect Phoenix Mall of Asia not only to be a luxury destination for Bangalore, but a complete family destination and become the true landmark retail asset for the entire South of India.
As of October 2023, the mall was operating with a trading occupancy of approximately 43% and we expect this to inch forward towards the second-half of this financial year.
From our experience, the ramp up that we have seen at Phoenix Citadel Indore or Palladium Ahmedabad, we expect Phoenix Mall of Asia to be at a trading occupancy of approximately 75% by March 31, 2024.
Next up is Phoenix Mall of the Millennium at Wakad, Pune you may see on slide 7.
We launched Phoenix Mall of the Millennium on September 1st, 2023.
The mall is home to over 350 national and international brands and an entertainment zone of over 1 lac square feet with various attractions such as a fan park, entertainment centers such as Time Zone and Fun City, a 14 screen Inox multiplex and over 75 dining options with the food court having a capacity of more than 550 people.
Trading occupancy has shown a strong ramp up since launch and stood at 50% in October 2023 versus 44% during September 2023 with about 177 stores now operational.
We expect this trading occupancy to inch up to about 80% by March 2024.
On slide 12, we have Palladium Ahmedabad.
This asset, which was launched on 26th February 2023, marked our entry into Gujarat and the trading occupancy again has seen a fast ramp up from 32% at launch in February 2023 to 77% in October 2023.
Moving on to slide 13, Phoenix Citadel, Indore was launched in December 2022.
Here again, we have seen the trading occupancy ramp up from 42% at launch to about 90% in October 2023.
Now on to a quick update on our underdevelopment retail assets.
If you may look at slide 14 and onwards.
At Phoenix Grand Victoria, Kolkata we have received all development permissions.
We have also completed the pre-construction activities and currently excavation and foundation work is under progress.
Our second retail destination is in Gujarat, at Surat, we expect the construction to commence in Q3 of FY24. At the retail expansion for Phoenix Palladium, Mumbai spanning across retail GLA of approximately 250,000 in the current phase, civil works have reached an advanced stage, and we expect to complete this project by about March of 2024.
Moving on with our retail portfolio performance for Q2 FY24, from slide 17 onwards of the presentation.
Consolidated consumption, which represents net sales reported by the retailers at each of our centers, at a portfolio level, for the quarter ended September 2023, stood at Rs.
2,639 crores with a growth of 20% over the same period last year.
To compare this growth on a like to like basis, if we exclude the contribution from the new malls launched which are Phoenix Citadel, Palladium Ahmedabad and Phoenix Mall of the Millennium and adjust for the impact from closure of the lifestyle store at Phoenix Palladium, Mumbai, the consumption has grown by about 10%.
Turning to slide 21 onwards for the financial performance of our retail portfolio for the year so far.
For Q2 FY24, retail rental income stood at Rs.
392 crores, up 25% when compared to Q2 FY23 and 8% on a like to like basis excluding the new malls launched.
Retail EBITDA for this quarter was Rs.
402 crores up 26% compared to Q2 FY23 and up 11% on a like to like basis.
For H1 FY24, retail rental income stood at Rs.
769 crores, up 21% compared to H1 FY23 and up 6% on a like to like basis excluding the new malls launched.
Retail EBITDA for this period was Rs.
789 crores, up 23% compared to Q2 FY23 and up 9% on a like-to-like basis.
With the onset of the festive and the winter season now for FY24, we look forward to a fabulous performance in the second half of the year as well.
I now request Anuraag to take you through the office, hotels and residential section and the overall financial results.
Thank you, Shishir.
Good morning, everyone.
Please refer to slide 27 and onwards for an update on commercial offices.
Our commercial office portfolio is seeing improving traction with gross leasing of over 3 lac square feet in the period from April to October 2023 with about 2 lac square feet of new leasing and 1 lac square feet of renewals.
Total income from commercial offices in Q2 FY24 was Rs.
47 crores, up 9% compared to Q2FY23 and total EBITDA stood at Rs.
26 crores with a growth of about 6% over Q2 FY23. During H1FY24, income stood at Rs.
91 crores, which was up 9% year on year and EBITDA was Rs.
52 crores, up 7% year on year.
Moving on to an update on the under construction commercial office projects from slide 31 onwards.
We are progressing well on our development of the next leg of growth in commercial offices.
At Phoenix Asia Towers, lobby, common area finishing and façade work is underway.
The first phase of these offices, which is about 0.8 million square feet, is expected to be operational during the current financial year i.e., FY24. At Millennium Towers Wakad, slab work is in advanced stages for the office towers.
At the Palladium offices at Chennai, we target completion in FY25. We have also received USGBC LEED Pre-Certification with Gold Rating at this asset.
For Project Rise, all development permissions have been secured, foundation work has been completed and basement slab 2 has also been completed.
As far as the commercial office component within expansion of our mixed-use asset in Whitefield is concerned, excavation work is nearing completion.
Moving on to the hotel portfolio, from slide 37 onwards, first covering The St.
Regis Mumbai, we continue to see significant improvement in our performance.
ARR in Q2 FY24 was about Rs.
15,040 and in H1 FY24, it was Rs.
15,767.
Both showed an increase of 27% and 32% respectively over previous year.
Total income for Q2 FY24 stood at Rs.
102 crores with growth of 20% over Q2 FY23 and at Rs.
213 crores for H1 FY24, up 39% over H1FY23.
With the increase in total income, EBITDA margin has also improved to 43% in H1 FY24 compared to 40% in H1 FY23. At our property in Agra, Courtyard by Marriott, ARR in Q2FY24 was at Rs.
4,196 and in H1 FY24 it was Rs.
4,303, both showing an increase of 8% and 13% respectively over the previous year.
Total income for Q2FY24 stood at Rs.
9 crores, up 7% from Q2FY23 and EBITDA was Rs.
1 crore up 7%.
Total income for H1 FY24 stood at Rs.
20 crores, up 20% from last year and EBITDA stood at Rs.
3 crores, demonstrating a 19% growth.
Our residential business update is from slide 44 onwards.
We continue to witness very good traction in residential sales.
We have completed gross residential sales booking of Rs.
495 crores in YTD October 2023 which is already higher than gross sales booking of Rs.
466 crores done in FY23. Same goes for collections, which stood at Rs.
423 crores in YTD October 2023, surpassing the full year collection of Rs.
369 crores seen in FY23. We have built and delivered about 2.83 million square feet across One Bangalore West and Kessaku, of which we now have only about 5 lac square feet of unsold inventory left.
At our under development, premium residential project at Alipore, Kolkata, consultants for various work streams have been on boarded and we are in the process of obtaining our development permissions.
I would like to now move to financial results from slide 47 onwards.
Some of the key highlights of our consolidated financial performance are as follows.
Income from operations for Q2FY24 stood at Rs.
875 crores.
This is up 34% year on year and at Rs.
1,686 crores for H1 up 38% year on year.
Operating EBITDA for the quarter stood at Rs.
514 crores, up 35% year on year and Rs.
1,006 crores for the first half, up 43% year on year.
Reported PAT after minority interest and after comprehensive income for Q2 FY24 stood at Rs.
262 crores, which is up 40% year on year and stood at Rs.
531 crores for the first half.
Debt position from slide 48 onwards, consolidated gross debt stood at Rs.
4,263 crores as on 30th September 2023, down by Rs.
310 crores since March 2020.
97% of our gross debt is on operational portfolio with very competitive average borrowing rate of 8.71%.
Currently our lowest cost of borrowing stands at 8.50%.
Despite RBI increasing rates by 250 bps since March 2022, our borrowing costs have gone up only 141 bps so far.
As the overall interest rates in the economy start to rise, our effort will be to minimize the impact of this on our cost of borrowing by reducing the spread charged by the banks on top of the repo rate.
Cash flows from slide 50 onwards.
For H1 FY24, we generated about Rs.
1,060 crores of net cash from operating activities and our operating free cash flows stood at Rs.
882 crores.
Liquidity position from slide 53 onwards, group level liquidity on 30th September 2023 stood at Rs.
2,166 crores up by Rs.
411 crores from the position as of 31st March 2023.
This excludes the amount remaining unutilized in OD accounts.
Net debt stood at about Rs.
2,096 crores, down by Rs.
186 crores from the position as on 31st March 2023.
We are bullish on our business prospects and with a strong balance sheet position our focus remains on delivering our under-construction projects on time and judiciously deploy our capital to expand our portfolio.
Moderator · Conference Operator
Thank you.
We will now begin the question and answer session.
The first question is from the line of Resham Jain from DSP asset managers.
Please go ahead.
Resham Jain
Hi, good morning, team.
So, I have just a couple of questions.
So first one is if you can just help with your overall capex to be incurred over the next three years based on the current development which you are going to do.