Key takeaways of conference call

Favorable consumption trends across all retail assets as well as its efforts to bring more operational efficiencies across the portfolio are visible in the financial performance of the company. Consumption in Q3FY19 was up by 10% to Rs 1890 crore.

Consolidated revenue from operations for the quarter ended Dec 2018 stood higher by 6% to Rs 440.4 crore driven by 7% growth in retail revenue to Rs 289.9 crore, 89% growth in commercial revenue to Rs 32.7 crore and 2% growth in Hospitality Revenue to Rs 97.9 crore. However the residential revenue was down to Rs 19.9 crore from Rs 31.1 crore in the corresponding previous period. The EBITDA was higher by 8% to Rs 222.5 crore with EBITDA margin stand higher by 100 bps to 51%.

The company as end of Dec 31, 2018, has leased out 1.02 msft of total net leasable commercial area of 1.33 msft. Art Guild House in Mumbai, which is one of the company's premier commercial properties, had occupancy of 91% as on December 2018. Fountainhead Tower-1 (at Pune) that became operational in Q3FY19 has seen leasing of 74% of its total leasable area so far with response being very positive.

Aggregate consumption at the company's 8 malls across 6 cities during 9M FY2019 was Rs 52.6 billion, up 10%yoy. Aggregate retail rental income was up 16% y-o-y at Rs 7.4 billion in 9MFY19

Retail Rental income up 16% driven by strong performance from all retail assets.

Phoenix Market City (PMC) Mumbai and PMC Pune were the top performing retail assets demonstrating strong consumption and rental Income growth in Q3FY19. The consumption of PMC Pune & PMC Mumbai was up by 15%yoy and 14% yoy respectively in Q3FY19 and similarly the trading density was higher at 12% yoy and 9% yoy respectively.

Commenced work at all three of the green-field under-development retail development projects i.e. PMC-Hebbal at Bengaluru; PMC Wakad at Pune and Palladium at Ahmedabad in Q3FY19. Excavation work at PMC Wakad has commenced on Feb 7, 2019 and the mall is expected to become operational by FY2023. Similarly the excavation work at PMC Hebbal is expected to commence in next two weeks and turn operational during FY2023. Palladium Mall at Ahmedabad, the third of the company after Mumbai & Chennai is expected to commence operation during FY2022 with excavation commence in January 2019.

Work at PMC Lucknow is going on in full swing and it is expected to commence operation by H2FY20. This being retail development being acquired as under development more than 80% of RCC work was completed at the time of acquisition.

Phoenix Market City Indore – The work at Indore PMC should commence in Q4FY19. At the time of acquisition the RCC work at Indore PMC was completed to the extent of 75% and the company is waiting for revalidation of necessary approvals. Multiplex tenant was tied up for this retail project.

Palladium Chennai that opened on Feb 2018 had a trading density of Rs 852/sft per month in Q3FY19. The consumption in Q3FY19 was Rs 29.7 crore. This property consistently registers growth in consumption and rental. The trading occupancy and lease occupancy of the property currently stand at 81% and 84%. The average rental that started at about Rs 131-132/sft is expected to go up with increase in consumption and trading density. If trading density reaches about Rs 1400 the rentals will improve. The brand mix is different to Mumbai. Contribution from revenue share will increase with consumption growth.

The company is well placed to achieve its target of 11-12 msft of operational retail portfolio by FY23. It continues to scout for opportunities in select Tier-1 under-served retail markets.

Total debt as end of Dec 2018 was Rs 4474.9 crore of which the debt on operational projects being Rs 4125.6 crore and on under development projects being Rs 349.4 crore. About 94% of the debt is long term. Moreover the debt on operational portfolio is primarily lease rental discounting for retail and commercial or backed by steady hotel revenue. Debt maturities were modest at about Rs 200-300 crore per year over the next 3 years, which are backed by strong cash flows from the annuity-type assets of the company. Blended cost of borrowing of the company stands at about 9.29%.