Phoenix Mills Ltd
NSE:PHOENIXLTD
Earnings Call Analysis
Q3-2024 Analysis
Phoenix Mills Ltd
The third quarter of fiscal year '24 has shown a remarkable 25% surge in total consumption to INR 3,296 crores compared to the same quarter in the previous year, highlighting the strongest quarterly consumption yet with noteworthy increments in Phoenix MarketCity Mall Kurla and Phoenix Palassio Lucknow.
Retail rental income experienced a significant 33% year-over-year growth in Q3 FY '24, reaching INR 447 crores. This performance outpaced the nine-month FY '23 period by 25%, generating INR 1,213 crores, testament to an uptick in trading occupancy, especially in newly launched malls such as Phoenix Citadel Indore, Phoenix Palladium Ahmedabad, and others.
The commercial office portfolio is witnessing an escalating lease-up rate, now at 72%, contributing to a 17% income increase to INR 50 crores in Q3 FY '24. The EBITDA followed suit with a 27% rise, driven by higher occupancies particularly at AGH and Tower 3 of Fountainhead at Viman Nagar.
The hospitality portfolio, including St. Regis Mumbai and Courtyard by Marriott Agra, has observed appreciable revenue and EBITDA leaps of 24% and 28% for St. Regis and 20% and 29% for Courtyard by Marriott in Q3 FY '24, respectively. These increments mirror advancements in both Average Daily Rate (ARR) and Revenue per Available Room (RevPAR).
The residential sector surpassed FY '23's total gross sales, with bookings of INR 515 crores in just the first nine months of FY '24. Furthermore, collections for the same period achieved an impressive INR 565 crores, exceeding the entirety of the previous fiscal year's collections.
A lucrative trend is evident as income from operations climbed a striking 44% to INR 986 crores in Q3 FY '24. Operating EBITDA mimicked this rise, marking a 44% increase for the quarter and a 43% increase across nine months. The hike in profit after tax was even more pronounced at 69% year-over-year for the quarter.
The consolidated gross debt was managed to INR 4,228 crores, backed primarily by operational assets and maintaining a conservative borrowing rate of 8.78%. Impressively, group liquidity was reinforced, standing at INR 2,058 crores by the end of December 2023, while net debt was carefully controlled at approximately INR 2,230 crores.
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Ladies and gentlemen, good day, and welcome to the Q3 and 9M FY '24 Results Conference Call of The Phoenix Mills Limited. [Operator Instructions] Management of the company is being represented by Shishir Shrivastava, Managing Director; Mr. Anuraag Srivastava, Group CFO; and Mr. Varun Parwal, Group President, Strategy, Audit and Head Corporate Finance. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand over the conference to Mr. Shishir Shrivastava. Thank you, and over to you, sir.
Thank you. Good morning, ladies and gentlemen. We take pleasure in welcoming you all to discuss the operating and financial performance for the third quarter and 9 months ended December 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.
If I may draw your attention to Slide 3, retail overview. Total consumption in the third quarter FY '24 was INR 3,296 crores, up 25% over Q3 FY '23. And for 9 months FY '24, it was at INR 8,509 crores, up 21% over 9 months FY '23. Retail rental income for Q3 FY '24 stood at approximately INR 447 crores, a 33% growth over Q3 FY '23. And for 9 months FY '24, retail rental income was at INR 1,213 crores, up 25% over 9 months FY '23.
Slides 4 through 7 illustrate or demonstrate the trading occupancy across the new malls. Increase in trading occupancy across newly launched malls with more stores getting opened for patrons post fit-outs. At Phoenix Citadel Indore, which was launched in December 2022, with one year since launch, the mall has seen a fast trading occupancy ramp-up from 42% at launch to about 91% in December 2023. At Phoenix Palladium Ahmedabad, which was launched on February 26, 2023, trading occupancy stood at 78%. And with Zara and PVR due to open, we expect to end the financial year FY '24 -- FY '25 with occupancy in excess of 90%. Phoenix Mall of the Millennium, Wakad, was launched on September 1, 2023. It's currently at 60% trading occupancy. We expect this trading occupancy to inch up to about 80% by end of March 2024 and reach an average of approximately 90% during FY '25. Phoenix Mall of Asia Bangalore was launched on October 27, 2023. It's at 50% trading occupancy at the end of December, and we expect it to touch approximately 75% by end of March '24 with a significant move upto close to 90% average during FY '25. We are very happy to add that Phoenix Mall of Asia Bangalore recently achieved the prestigious USGBC LEED Gold Certification, making this the second USGBC LEED certified retail asset in our portfolio.
If I may draw your attention to Slide #8 under construction retail assets. A quick update, if you may. At the retail expansion for Phoenix Palladium Mumbai, spanning across a retail GLA of approximately 250,000 square feet in the current phase, civil works have reached an advanced stage and contract awards for facade, et cetera, are in progress. We expect to launch this additional retail GLA in 2024. Construction is underway for the retail portion of our commercial office-led, mixed use development at Lower Parel of approximately -- where the retail component is approximately 200,000 square feet, forming part of the larger building called Rise, and this is expected to launch in 2025.
At our ongoing retail expansion at Phoenix MarketCity Bangalore, spanning across a retail GLA of approximately 200,000 square feet in the current phase, we are currently at the stage of final approvals and design. We expect this block to launch some time in 2025. At Phoenix Grand Victoria Kolkata, construction has commenced. Diaphram wall, piling works are complete and currently, we are progressing on the final bit of excavation and foundation. We expect this mall to be ready for launch in 2027. Our second retail destination in Gujarat at Surat, construction has commenced. Diaphram wall, excavation are presently progressing at a fast pace. We expect this mall to also launch in 2027.
Moving on to our retail portfolio performance from Slide 9 onwards of the presentation. Q3 FY '24 saw the highest-ever quarterly consumption of approximately INR 3,300 crores, a growth of 25% over Q3 FY '23. On a like-to-like basis, if we exclude the contribution from the new malls launched in December '22 and adjust for the impact from closure of the lifestyle block at Phoenix Palladium Mumbai, the consumption has grown at approximately 5%. We've seen double-digit consumption growth at Phoenix MarketCity Mall Kurla and Phoenix Palassio Lucknow, driven by a ramp-up in trading occupancy versus Q3 FY '23 at both these malls. Ramp-up in consumption at the newly launched malls continues with increasing trading areas.
Drawing your attention to Slide 11, which is the 9-month FY '24 mall-wise consumption. Consumption for 9 months FY '24 was at INR 8,500 crores, witnessing a growth of 21% over 9 months FY '23. 8% on a like-to-like basis with Phoenix Palassio, Phoenix Mumbai -- MarketCity, Mumbai and Phoenix MarketCity and Palladium Chennai registering double-digit growth in consumption during this period.
If I may draw your attention to Slide 12, which is the category-wise consumption growth. The top-performing category for Q3 FY '24 were Jewelry, which showed an increase of about 19%, and Gourmet & Hypermarkets, which showed an increase of about 20% over the same period last year. Comparing 9-month category-wise consumption growth, the top-performing categories for 9 months FY '24 were FEC and Multiplex, up 15% over the last year; Jewelry, up 22%; and Gourmet & Hypermarket up 38% over the same period last year.
Moving on to Slide 14 for the financial performance of our retail portfolio for the year so far. Comparing Q3 FY '24 versus Q3 FY '23, retail rental income stood at INR 447 crores, up 33% in comparison to the previous Q3 FY '23, 5% on a like-to-like basis excluding the new malls launched. Phoenix MarketCity Kurla, Phoenix MarketCity and Palladium Chennai both grew 14% over the same period last year. Rental growth at Phoenix MarketCity Kurla was partially led by base rental escalations and partly due to ramp-up from newly launched stores such as Uniqlo, Timezone, Game Luxe, Tim Hortons and Homes to Life.
Rental growth at Phoenix MarketCity and Palladium Chennai was mainly led by growth in these rental escalations as per the cycle. Slide 15 compares Q3 FY '24 versus Q3 FY '23 EBITDA. Retail EBITDA for the quarter was INR 435 crores, up 27% compared to the same quarter last year, up 5% on a like-to-like basis, excluding the newly launched malls.
Phoenix MarketCity Kurla saw the benefit of improved trading occupancy, rentals and operating efficiency, leading to an EBITDA growth of 17% over the quarter. At Phoenix MarketCity Bangalore, rental growth was driven by an increase in average trading occupancy for the quarter and with the opening of new stores such as RnB, FirstCry, Avantra and UCB. Further escalations to the base rentals contributed to the rental growth. Rental growth, coupled with a decrease in some operational costs, led to an EBITDA growth of about 6% over the same quarter last year. 9 months FY '24 versus 9-month FY '23, the retail rental income stood at INR 1,213 crores, up 25% and up 5% on a like-to-like basis, excluding the newly launched malls.
For 9 months same period compared to last year, retail EBITDA stood at about INR 1,225 crores, which was up 24% compared to the 9-month period in FY '23, up 7% on a like-to-like basis if you exclude the new malls launched. Trading occupancy saw an increase across all major malls in December 2023 when compared to September '23.
Weighted average trading occupancy for December 2023 stood at 84%. As trading occupancy inches up in our newly launched malls with more stores becoming operational, we continue to remain confident of touching the INR 11,300 crores to INR 11,500 crores consumption mark for FY '24, which we had alluded to earlier this year.
May I now request Anuraag to take you through the office, hotels and residential sections and the overall financial results.
Thank you, Shishir. Good morning, everyone. Please refer to Slide 18 and onwards for an update on the commercial offices. I'm referring to Slide 20.
Our commercial office portfolio is seen improving traction with gross leasing of about 1.7 lakhs square feet for the quarter and 4.8 lakhs square feet in year-to-date December 2023 with about 3.4 lakhs square feet of new leasing and 1.4 lakhs square feet of renewals. Our commercial office portfolio is now leased up to 72% at 1.43 million square feet, and we are seeing improving traction across assets. Rent levels have been healthy with renewals and new leases at market rates.
Moving on to Slide 22. Income from commercial offices in quarter 3 FY '24 was INR 50 crores. This is up 17% as compared to quarter 3 of last year. And total EBITDA stood at INR 28 crores. It is up 27% over quarter 3 of FY '23. EBITDA growth has been mainly on account of higher occupancies at our properties at AGH and Tower 3 of Fountainhead at Viman Nagar. Strong rental growth on account of increased traction in Mumbai offices and occupancy growth at Fountainhead 3 contributed to the growth during the quarter.
Moving on to an update of under-construction commercial office projects in our portfolio, it is on Slide 24. We are progressing well with the development of next leg of growth in commercial offices. At Phoenix Asia Towers, lobby, common area finishing and facade work is underway. First phase of these offices which is about 0.8 million square feet is expected to be operational within 2024.
At the Palladium Offices in Chennai, we target completion in 2024. At Millenium Towers, Wakad, slab work is in advanced stages for all the 4 office towers. Tower 2A and 2B are expected to be ready in 2024. And Tower 1A and 1B are scheduled for completion in 2025. As far as the commercial office component within the expansion of our mixed-use asset in Whitefield is concerned, excavation work is nearing completion and Phase 1 is expected to be operational in 2026. For Project Rise, all development permissions have been secured. Foundation work has been completed and basement slab 2 has also been completed. The commercial offices are scheduled to be ready in the year 2027.
Moving on to our hospitality portfolio, which are the 2 properties in Mumbai -- 1 property in Mumbai and 1 property in Agra. I'm starting with St. Regis, Mumbai, and this is on Slide 26. We continue to see significant improvement in our performance. ARRs in Q3 FY '24 was about INR 20,000, and RevPAR stood at INR 16,391, both showing a growth of 23% over quarter 3 of FY '23. Similarly, for 9 months of FY '24, ARR was about INR 17,200 and RevPAR stood at INR 14,066, again showing a good growth of 29% and 26% over 9 months FY '23, respectively.
The financials for St. Regis, Mumbai. Income from quarter 3 FY '24 stood at INR 135 crores, which is up 24% over quarter 3 FY '23. Revenue from F&B and Banqueting which accounted for 48% of the revenue for quarter 3 FY '24, registered a growth of 27% over quarter 3 FY '23. EBITDA for quarter 3 FY '24 was at INR 62 crores, which is a growth of 28% and an improved EBITDA margin of 46%.
Income from 9 months FY '24 stood at INR 348 crores, up 26% over 9 months of last year. This increase in total income, EBITDA for 9 months FY '24 stood at INR 155 crores and have margin improvement to 45% in 9 months FY '24 compared to a 42% margin in 9 months of FY '23. Moving on to our property in Agra, the Courtyard by Marriott. ARR in quarter 3 FY '24 was INR 6,194 and 9 months FY '24 was INR 5,011, increasing by 10% and 13%, respectively, over the previous year.
Similarly, for quarter 3 FY '24, RevPAR stood at INR 5,189 and RevPAR for 9 months FY '24 was at INR 3,752, showing a growth of 17% and 21% over quarter 3 and 9 months FY '23, respectively. Financials for Courtyard by Marriott Agra, income for quarter 3 FY '24 was at INR 17 crores, up 20% for the same quarter last year. And EBITDA stood at INR 6 crores, up 29% from previous year. EBITDA margin for the quarter saw an expansion by 2 basis points compared to quarter 3 FY '23 and stood at 35%. Income for 9 months stood at INR 37 crores, up 20% from last year, and EBITDA stood at INR 9 crores, demonstrating a 25% growth.
Update on our underdevelopment hotel projects in Bangalore, the development of the Grand Hyatt at Bangalore is on track and is expected to be launched in 2027. This completes our hospitality overview. I'm moving on to residential business now. Please refer to Slide 32. Residential business performance, we continue to witness very good traction in residential sales. We have completed gross residential sales booking at INR 515 crores in 9 months of FY '24, which is higher than gross sales booking of INR 466 crores done for the full year of FY '23.
Then going on for collections. INR 565 crores was collected in the first 9 months of FY '24, surprising -- surpassing a full year collection of INR 369 crores, which we did in FY '23. We have built and delivered about 2.83 million square feet across One Bangalore West and Kessaku, of which now we have about 4.7 lakhs square feet of unsold inventory left.
Slide 34 covers our underdevelopment residential project. At our underdevelopment premium residential project in Alipore, Kolkata, consultants of various work streams have been on-boarded and we are in the process of obtaining our development permission. Structural design is also underway. Now I would like to move to financial results from Slide 35 onwards. Slide 36 has got a snapshot of our financial performance at a standalone level.
To get a better picture of group-level performance, I would like you to move to Slide 37 for the consolidated financial performance. Income from operations for quarter 3 FY '24 stood at INR 986 crores, is up 44% year-on-year and INR 2,672 crores for 9 months of FY '24, up 40% year-on-year. Operating EBITDA for the quarter stood at INR 552 crores, up 44% year-on-year, and INR 1,558 crores for 9 months, up 43% year-on-year. Reported PAT after minority interest and after comprehensive income for the quarter stood at INR 297 crores, which is up 69% year-on-year and stood at INR 827 crores for 9 months FY '24.
Moving on to our debt position, which is on Slide 38 onwards. Consolidated gross debt stood at INR 4,228 crores as on December 31, '23, down by INR 285 crores since March of 2020. 100% of our gross debt is backed by operational assets. And despite a recent land acquisition at Thane, we have seen only a marginal movement in gross rent. We have been able to borrow funds at a competitive average borrowing rate of 8.78%. Currently, our lowest cost of borrowing stands at 8.5%. On Slide 37, consolidated gross debt of INR 4,228 crores as of December 31, 2023, is now 2.1x of annualized EBITDA as compared to 4.7x around FY '20.
Moving on to cash flows on Slide 40. For the 9 months FY '24, we generated about INR 1,716 crores of net cash from operating activities, supporting all of our investments in growth and leaving a surplus.
Slide 41, our operating free cash flows for the period. The operating cash flows were at INR 1,419 crores, growing by 56% over the same period in FY '23. And moving on to liquidity position on Slide 42. Group level liquidity on December 31, 2023 stood at INR 2,058 crores, is up by INR 303 crores from this position as of March 2023. This excludes amount remaining unutilized in OD accounts. Net debt stood at about INR 2,230 crores, down by about INR 52 crores from the position as on March 31, 2023. We have had some good credit rating upgrades across the board. This is covered in Slide 44. With increasing cash flow stability and reducing net debt, the credit ratings across portfolio entities have been improved in current year. 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 deploying our capital to expand our portfolio.
I'll hand over back to Shishir.
Thank you, Anuraag. Before we open the call for questions, may I take a moment to address some questions around Mr. Rajendra Kalkar and Mr. Anuraag Srivastava's decision to pursue opportunities outside of Phoenix Mines Limited. While we are sad to see talented individuals move on from our organization, we understand and appreciate their desire to pursue new opportunities, and we wish them all the very best in their future endeavors.
While leadership transitions are never easy, I would like to assure everyone that PML remains on a strong and stable footing. And these individual decisions do not reflect on the current or future performance of Phoenix Mills. We are seeing that these changes present an opportunity for us to showcase the success of our unique approach to leadership development within the organization. At Phoenix, we have a longstanding culture of leadership grooming and a very detailed program. We have a very high-performance culture where we invest considerable amount of time and effort to identify and groom top talent across all levels with a focus on second and third line.
These individuals go through an accelerated leadership program to get them ready for future growth, and we invest heavily in their growth through challenging assignments, mentorship and opportunities to scale up. In fact, we have cases of individuals who joined us as management trainees 10 to 12 years ago and who today have evolved into senior leaders handling large functional or mall portfolios or other portfolios such as debt, treasury, marketing, et cetera.
This fosters a flat organizational structure where employees have -- at all levels, have access to Mr. Ruia, our Chairman and mentor, or myself, respective business and function heads such as Rashmi Sen for retail, Rajesh Kulkarni for architecture projects, Hardeep Dayal for offices, Raghav Bajoria for the residential business, Gautam for HR, Vidya Sagar for Legal. This leadership program has also been very rewarding journey for individuals who've seen significant wealth creation, who customized tailored wealth creation and retention programs. This open communication and accessibility fosters an environment where ideas are heard, talent is recognized contributing to a culture of collaboration, transparency and growth.
And as we've seen, it has demonstratively produced exceptional leaders within this company. It's important to know that we have a proven track record of producing successful leaders over the last 2 decades, many of those who started their careers here, such as myself and have gone on to thrive and deliver exceptional results within Phoenix and beyond. Unfortunately, this also becomes a talent pool for the industry, and we see many of our reputable peers benefiting from the growth and development of many of the individuals within our teams, and we wish them all the very best. Rajendra and Anuraag have both made very valuable contributions to our journey, and we thank them for their dedication and wish them all the very best in the future endeavors. We are a very close-knit family of talented individuals, and we are well equipped to hold [indiscernible] study while we conduct the search for suitable replacements.
It's also important to understand that we have -- as an organization, we have an open door. We welcome leaders who've worked with us in the past, have moved on, gained valuable experience elsewhere and come back. And we've seen that happen.
Recently, we had Sashi Kumar who joined us after a gap of 7 years. He worked with us for 8 years, went out in the industry, explored opportunities, learned a lot, came back and now is poised to implement best practices that he's experienced as well within our organization. We are confident about Phoenix's future. We have a strong foundation, a talented team, a clear vision for continued growth, and we remain committed to our values, our team members and our stakeholders. May I also request Anuraag to share a bit about his experience with the company and about his time here with us.
Thank you, Shishir. I mean, all of you heard that I've decided to move on from the role of Group CFO [indiscernible]. This is to take up another opportunity for me. I want to assure that this decision was a difficult one. My time here has been incredibly rewarding, both personally and professionally. I've learned immensely from leading the finance team and collaborating with such talented colleagues across the board in Phoenix.
As you are aware, Phoenix has seen tremendous growth in past few years. During this period, financial strength of the balance sheet has improved significantly, company has solidified its market leadership and embarked on an exciting -- very exciting journey of expansion. I credit this success to the company's exceptional leadership and the dedication of our employees. Phoenix Mills has a long runway of growth ahead. I think the company has just started on this long runway. The leadership team, supported by a pipeline of skilled and passionate individuals, is well equipped to navigate the future challenges and capitalize on upcoming opportunities.
Before I end this statement, I wanted to express my sincere gratitude to Mr. Ruia, our Chairman, the Board of Directors and especially Shishir for their unwavering trust and guidance. Additionally, I extend my heartfelt thanks to my dedicated team and colleagues for their immense support and collaboration. My last day will be March 18. During this transition period, I remain absolutely committed to ensure smooth handover and supporting the team in any way I can.
Thank you for your time and attention, and I wish PML continued success and look forward to witnessing its future [development]. Thank you. .
Thank you, Anuraag. May I now request the operator to open the call for questions.
We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Pritesh Sheth from Motilal Oswal.
Congrats on a strong growth. First question is on consumption growth versus your rental growth. So if I look at 9-month numbers, consumption growth was at 21% while rental growth was at 25% for your retail portfolio. Generally, we have a -- we keep a close track on the consumption growth, I mean, in terms of our performance. But of late, it has been higher. It's just largely due to mix of tenant or it has something to do with something -- a trend which is going forward we can see, and how should one look at your rental growth as a percentage of consumption growth, will that increase in future as well?
Thank you for your question, Pritesh. I would say that we've seen a rental growth of approximately 24% as a combination, of course, with new malls being launched. But aside from that, at our existing operating assets, we have seen end-of-contract renewals which is a natural escalation at that point in time where the fixed rental moves up to whatever is the market at that present time.
We've also seen some new brands which are coming, which have driven up the rentals. Also, where you have new stores opening, there is a little bit of a lag between opening and ramp-up on consumption. So we are quite confident that in the coming quarters, stores which launched in the last 6 months will show a higher trading density and higher consumption.
At some point and as you also know, in our rental cycle, it's very typical that at some point, consumption growth will exceed rental growth as well. We saw this in FY '20. We saw it in FY '23. So typically, there's always a bit of a catch-up where rental -- fixed rental escalations will catch up, perhaps result in a higher rental growth in percentage terms compared to consumption in some particular years or in some quarters.
Yes. Sure. That's helpful and answers my question. Second, all the upcoming malls, the timeline that you have mentioned is the FY financial year, right? I mean not a calendar year?
No, we've mentioned calendar year.
You mentioned calendar year. Okay. And so Kolkata would be calendar year '27. Any reason for that much of delay &A because earlier you were expecting to be '25, '26. And if the next upcoming mall is in FY '27 -- I mean, calendar year '27 or FY '28, now how should one look at the growth in your retail portfolio? Because more or less beyond FY '25, we would be largely looking at the consumption-led growth in the existing malls. So how should one look at that growth?
Yes. Currently, we are -- I would say that for Kolkata specifically, since you asked that question, I think we will be able to define more accurate time lines as the construction progresses, and we get out of the excavation which in itself was a hugely challenging task in that market or in that geography where the terrain is different.
I don't think we are delayed in that project. We also have makeup programs in place. We had indicated previously calendar year '26, which would have been FY '27, we may be in the first half of FY '28 or let's say, in the second half of the calendar year of FY 2027 when this mall will open, similarly on Surat. But having said that, I would like to focus on what the growth is likely to be in our G&A in the -- between now and FY '27. Our flagship property at Mumbai, Phoenix Palladium at Lower Parel, we are adding 250,000 square feet of prime, I would say, bridge to luxury retail, which is likely to be completed in this current financial year and become operational some time towards the second half of this calendar year. This will soon be followed by some expansion that we are currently working on in Bangalore where we are adding more retail as part of the Phoenix MarketCity Bangalore project, and that is scheduled to be completed some time in calendar year 2026.
So all of this will continue to add, I think, between -- and then of course, we also have Project Rise, which is a 1.2 million square feet development with at least 200,000 square feet of retail, again, at our flagship property, Phoenix Palladium Mumbai. So there's another 200,000 square feet that will get added there. We expect this also to be operational some time in calendar year 2026, followed by Kolkata and Surat in calendar year 2027. So there is a significant area ramp-up between now and 2027 and at the best performing malls in the country today, which is Phoenix Palladium Mumbai and Phoenix MarketCity Bangalore where we will be adding lot of retail GLA very soon.
The next question is from the line of Resham Jain from DSP Asset Managers. The participant got disconnected. [Operator Instructions]
The next question is from the line of Parikshit Kandpal from HDFC Securities.
Shishir, congratulations on a decent quarter. So my question is on the residential piece. So any thoughts around the Thane land, what do you want to do? Because I think last quarter, you were not quite clear what you want to do with that. So any update on that?
Parikshit, thank you for your question. So Thane is looking to be a mixed-use development with some residential component, perhaps some retail component and maybe a hotel. We're currently still working on the final set of plans. So I think we are maybe about a quarter away from sharing the final development mix at that location.
And any idea what could be the CapEx here for this hotel and [retail] portion?
Yes. CapEx, I would say, land and FSI itself is about INR 1,000 crores, and construction is, depending on the development mix, it would range between INR 4,000 to INR 6,000 per square foot on approximately a total of 3 million square feet, 3.2 million square feet.
So one could say about roughly around INR 1,300 crores to INR 1,500 crores of construction and land we've already paid for. There will be some cost for FSI for cumulatively about INR 2,400 crores to INR 2,500 crores would be on the higher side and estimate on the total CapEx.
And any tentative areas you have freezed for hospitality and retail. I mean, so out of this, I would understand that [indiscernible] followed by retail and hotel?
I -- sorry, Parikshit, but I cannot give you an answer on that right now because generally, we are still working on what is the ideal development mix and also the positioning of the different asset classes, which is very, very key to find the right balance of the development mix.
Yes. Just on the consumption vision. I mean, if I just compare like-to-like basis for trading and occupancies ramp up, if one has to do the calculations. So what according to you for the matured assets could be the consumption growth? Because when I was doing my numbers, I am getting that we are not able to even match up the inflation. The numbers have been slightly underwhelming. So just wanted your sense or color on that.
See, I think it's not -- it is more appropriate to track consumption growth as a CAGR over a 3- to 5-year period as opposed to tracking it on a year-to-year basis. For example, all our malls saw a huge significant jump in consumption in the last year. Phoenix MarketCity Bangalore, as an example, was about 50% higher, correct? Now that set a very high base in one particular year. But if you were to look at a CAGR of 5 years, I would say, a 15%, 18% consumption growth forecast is a practical and achievable number. And perhaps with a little bit more effort on our part on marketing and brand mix, et cetera, which keeps happening every few -- every year, that number could see another 1 or 2 percentage point increase there.
Okay. But on this high base now, so given your internal estimates, do you think that under such a high base, we can still grow Y-o-Y and beat inflation?
No, that high base was a 1-year impact, right? I mean -- so at best, I would say in FY '24 -- sorry, in FY '25, maybe one quarter of impact one could see of this high base. Because see, we are working on upgrading the brand mix at every center. And you see the impact of that in the -- you've seen the impact of that in the past. This is actually a routine in our business, right? Every zone, every quarter, every year, we keep making changes and improving it. So if you look at Phoenix MarketCity Kurla, Phoenix MarketCity Chennai and Palladium Chennai, strong double-digit growth, 14%, 15%, and this is all an outcome of the exercise that we had undertaken a year ago over there.
Similarly, I would say, at Phoenix MarketCity Bangalore, we have some incredible upgrades planned over there. Plus, we are increasing the size of the development retail GLA. We are adding more -- we're adding the Grand Hyatt there. All of these are going to result in consumption growth. For that matter, Phoenix Palladium Mumbai, we've seen an impact, but that impact is actually also due to Lifestyle which we have shut down and we've demolished that structure. That has seen an impact of consumption to the extent of about INR 40 crore -- INR 30 crore a quarter.
And -- but next -- when the next 250,000 square feet come online this year, it's going to again add to the consumption because it will drive more customers, newer customers. There's always a freshness in the market. So like I said, Parikshit, it's routine in our business, and the most appropriate approach is to look at a 3- to 5-year CAGR on consumption.
The next question is from the line of Pulkit Patni from Goldman Sachs Management.
To clarify, I'm not from the asset management arm. I'm from the research side. My question is on jewelry. Can you give a sense of how your understanding of rental movement for jewelry is given the fact that gold prices can be extremely volatile. So if you could get a sense of how that works so that we can model it better?
Okay. See, jewelry as a category, the rentals, one can assume, would be in the range of anywhere between 1.5% -- 1% to 2%, right? So 1.5% of consumption. We have undertaken, I would say, a program to position all our malls as one-stop wedding destination. We've also collaborated with St. Regis, for example, for Shaadi by Marriott to extend beyond the scope of the hotel, but into the mall.
So all of this adds to the growth in consumption in jewelry. And I would say, jewelry across various price points are available in our mall. You have brands such as Tanishq and Malabar Gold to, let's say, CaratLane, Swarovski, and Zoya. So I think it's a very good category. Consumption growth has been, I would say, sizable in this last year in this category. I would think as disposable income moves up and I think people are getting back -- more and more weddings happening. You've seen a blockbuster year for weddings across increases and in our malls, jewelry as a category should continue to see a good growth. I would -- if I were to hazard a guess, I would put it in the early teens of annual growth over the 3-, 4-year period.
Sure. But 1.5% on average of consumption is what we can model it?
1.5% as rental, yes.
The next question is from the line of Chetan Gindodia from PGIM India Mutual Fund.
Sir, coming back to the earlier question on retail mall addition. So we have -- based on the presentation, we have planned additions of 2.7 million square feet only till 2028 over a base of 11 million square feet. So the number seems abnormally low given that we have a very strong balance sheet and there are very few players in this market who are bringing up Grade A malls. So given this opportunity landscape and given our balance sheet and the place we are right now, are you looking at building up this pipeline further or to accelerate our mall additions over the coming 5-, 7-year period, how are you overall thinking about it?
The presentation does not cover the land use definition for Thane. I just want to clarify that. And of course, we do not announce or make any -- I would say, we do not allude to any transactions or deals which are under discussion. I would say that we have multiple acquisitions which are under evaluation at various stages of advanced due diligence impact. We would -- we should be -- we are looking at in the next 24 months, we want to close 4 to 5 new transactions, and we are working actively at it. And it's quite -- I would say, the opportunities are very rare and advanced.
Okay. So would you -- like would you be targeting 1 million square feet a year? That is what we had earlier planned also. So is that a broad number?
Probably, we will be there. Maybe in the next 2 years, cumulatively, we will launch about 1 million square feet across all locations, which is the expansion of our existing malls. And thereafter, we have a pipeline between Kolkata, Surat, Thane there maybe some detail and the new additions that we add now, that we acquire now.
But what everyone has missed out on is the significant densification of the front office, front of the house commercial offices, which portfolio is moving up very, very fast from the current 2 million square feet to 7.5 million square feet in the next 2 years.
Right, right. Still this won't be like -- we won't be able to utilize 100% our cash flows towards this commercial addition, right? We'll still be having a significant surplus given over and above the construction cost?
See, our free cash flows definitely are in excess of our current CapEx and land acquisition commitments. But as we announce the next 2, 3 transactions, which we hope to do soon, I think we will demonstrate the commitment of next 2 years cash flows in these new projects that we have planned. Then we have the ability to leverage up further if we want to close multiple opportunities. Does that answer your question?
Yes, yes, sir, it does.
The next question is from the line of Sabyasachi Mukherjee from Bajaj Finserv AMC.
My first question is on the fixed versus variable rentals, what is the mix now? And what was it, let's say, pre-COVID?
Sabyasachi, Varun this side. Pre-COVID in FY '18/'19, our fixed rents were 85% of our total rental income and revenue share was at about 15%. That also on account of a large number of ADR which were due for renewals in FY '21 and '22. Post-COVID, with the renewals being undertaken, we have seen the fixed rents moving up to about 89% and the revenue share coming to about 11%. There is a natural uptrend in this as the new store stabilizes and consumption picks up in coming quarters. Does that answer your question?
Yes. Okay. I was of the opinion that -- I mean, I was under the impression that probably the revenue share has gone up because a lot of the retail guys talk about now going for revenue share model rather than a fixed rental model, so.
So I think for destination consumption centers like us, we prioritize doing these with a reasonably high threshold of fixed rent and with revenue share -- incremental revenue share on top of the fixed rent. So as performing stores come up for renewals, the fixed rent tends to move up over and above the last drawn total rent from the particular brand. And it's also a cycle, Sabyasachi, right? In the initial years, the fixed rent tends to be higher and then the revenue share tends to cross the fixed rent and come to us as an incremental rental over and above the fixed rent and then towards end of the contract of the fixed rent resets at a base higher than the last drawn total rent.
Got it. Got it. And a follow-up to that is, what percentage of area is up for revision escalation in FY '25, '26, if you can give a broad idea?
We have the details in our presentation. There is a particular slide that is in the presentation, but just roughly, I will give you a number of about 700,000 square feet, which is up for renewals in FY '25.
Slide 59 has the days for each mall, but if you total it up, you would get to about 700,000 square feet of renewals in FY '25. And over our FY '24 to FY '27 period, about 4 million square feet is what is getting renewed out of our operational portfolio of 7 million square feet. We have operating portfolio of 7 million square feet.
Right, right. Got it. Last question, if I may. So I think there was a question on what is the like-to-like consumption growth that we are expecting going forward? I missed the number. Is it somewhere around early teens that you mentioned?
I think what Shishir had mentioned in response to Parikshit's question is that you have to look at it over a 3- to 5-year period and look at low double-digit -- yes, 15%, 16% growth.
Sorry, 15% growth?
As a CAGR, yes.
We would say that it's for good well-performing malls, well-managed malls such as our own. It would be fair to expect over a 3- to 5-year period, a CAGR of about 15%, 16%. In some years, it could be higher. Some years, it could be slightly lower.
And our retail income would follow suit, right? I mean, give -- year back, I mean, take...
Similar.
That was the last question for the day. On behalf of The Phoenix Mills Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.