Footfalls improving every month– Phoenix Mills

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.3% lower at 12,772. Within NIFTY50, POWERGRID (+2.6%), ITC (+2.2%), and NTPC (+1.7%) were the top gainers, while SBIN (-5.0%), ICICIBANK (-4.2%), and AXISBANK (-4.1%) were the top losing stocks. Among the sectoral indices, FMCG (+0.4%), and MEDIA (+0.3%) were the only gainerswhilePSU BANK (-3.1%), BANK (-2.9%), and PRIVATE BANK (-2.6%) were the toplosing sectors.

Footfalls improving every month– Phoenix Mills

Excerpts of an interview with Mr. Shishir Shrivastava, MD, Phoenix Mills, aired on CNBC-TV19 on 18thNovember 2020
● Average footfalls for October and November have reached 55%. Footfalls were higher in the first 2 weeks of November. Consumption, especially in the first 2 weeks of November has been 104% of last year. This means that conversion rates have gone up, i.e more people entering the mall are actually buying/consuming.
● 2QFY21 revenue was down 48% YoY as retail stores and hotels were not operational. But Phoenix Mills is seeing very good pick up now. Management expects FY21 to end at 58% of FY20’s rental income.
● Phoenix Mills has concluded negotiations with bank partners and have absolute visibility on how cash flows will pan out.
● Any discounts and waivers given by Phoenix Mills for the period of shutdown and the period after unlocking will end by the close of FY21. FY22 rentals will be close to what was recorded in FY20.
● When malls opened in August, footfalls were 25% which has increased to 55% now. So the trend is encouraging. People are being careful leading to still subdued footfalls. Phoenix Mills are also regulating the people density in their properties.
● Every month footfalls are improving 25-30%. Management hopes that they should be close to 75-80% of footfalls by 4QFY21. That being said, the important metric of consumption is tracking very well.
● All of Phoenix Mills’ expansion projects are well underway. They opened a new 1 mn sq ft. mall in Lucknow in July 2020 which is performing well. There are some delays on account of shortage of manpower but they are largely on track with expansion projects.
● Under construction projects of Phoenix Mills were funded by equity and there was no draw down of debt- which continues.
● Phoenix Mills have lease rental discounted debt on the operational assets. The moratorium has helped and now as cash flows are improving, management has visibility that they will be able to service all debt obligations by 3QFY21. This also includes amounts to be paid for deferment of moratorium.
● Phoenix Mills has around Rs 45,000 mn gross debt, and aroundRs 18,500mn cash on book. As free cash flow keeps improving, net debt levels can come down further.

Consensus Estimate (Source: market screener website)
● The closing price of PHOENIXLTD was ₹ 645/- as of 19-November-2020. It traded at 215x/ 33 x/ 25x the consensus EPS estimate of ₹ 3.0/19.8/26.2 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 732/- implies a PE multiple of 28x on FY23E EPS of ₹26.2/-.

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