Phoenix Mills consumption growth and new malls underpin rental income scale-up

Investment View and Outlook

Motilal Oswal Financial Services retained its Buy rating on Phoenix Mills after the company delivered a broadly in-line 1QFY27 performance. The broker maintained its estimates and rolled its valuation forward to FY28E.

Growth is expected to be supported by asset additions, rental escalations, improved retail and office occupancy, and stronger mall consumption. Motilal Oswal forecasts consolidated revenue to grow at a 14 per cent CAGR from FY26 to FY28E, reaching Rs 57,300 million.

1QFY27 Financial Performance

Phoenix Mills reported consolidated revenue of Rs 10,749 million in 1QFY27, up 13 per cent year on year. EBITDA increased 14 per cent year on year to Rs 6,415 million, while the EBITDA margin improved by 50 basis points to 59.7 per cent. Reported PAT rose 23 per cent year on year to Rs 2,969 million, with a PAT margin of 27.6 per cent.

Revenue and EBITDA were each 4 per cent below Motilal Oswal's estimates of Rs 11,150 million and Rs 6,651 million, respectively. Reported PAT was 16 per cent below the broker's estimate of Rs 3,517 million. Operating free cash flow after interest and taxes increased 20 per cent year on year to Rs 6,000 million, or Rs 5,800 million excluding residential operations, up 31 per cent year on year. Consolidated net debt increased to Rs 36,600 million from Rs 31,600 million in 4QFY26.

Retail Consumption and Rental Growth

Retail was the principal growth driver during the quarter. Rental income increased 17 per cent year on year to Rs 5,900 million, while retail EBITDA rose 17 per cent to Rs 6,200 million. Mall consumption increased 32 per cent year on year to Rs 47,300 million, supported by the ramp-up of Phoenix Mall of Asia, Bengaluru, and Phoenix Mall of the Millennium, Pune.

Consumption at Phoenix Mall of Asia, Bengaluru grew 96 per cent year on year, while consumption at Phoenix Mall of the Millennium, Pune increased 34 per cent. Electronics consumption rose 61 per cent and jewellery consumption increased 55 per cent. Food and beverage and fashion consumption grew 26 per cent and 24 per cent, respectively.

Motilal Oswal estimates retail rental income to increase at a 10 per cent CAGR from FY26 to FY28E, reaching Rs 25,900 million. The broker believes initiatives to accelerate consumption in mature malls, rising trading occupancy and new asset additions should sustain consumption and support medium-term rental growth. Phoenix Mills expects retail gross leasable area to exceed 18 million square feet by FY30, compared with 11.5 million square feet currently.

Office Leasing and Development Pipeline

The commercial-office business also showed leasing traction. Commercial-office income increased 44 per cent year on year to Rs 750 million in 1QFY27, while EBITDA rose 31 per cent to Rs 420 million. The EBITDA margin declined by 9 percentage points year on year to 56 per cent. Operational office occupancy stood at 72 per cent.

Established Mumbai and Pune assets, with combined gross leasable area of approximately 2.0 million square feet, had 84 per cent occupancy. New developments, with combined gross leasable area of approximately 2.9 million square feet, had leased occupancy of 79 per cent in Pune, 63 per cent in Bengaluru and 40 per cent in Chennai.

Motilal Oswal forecasts office-segment income of Rs 7,300 million by FY28. Phoenix Mills expects office gross leasable area to reach 9 million square feet by FY30 from approximately 5 million square feet currently.

Hospitality Performance and Expansion

Hospitality performance remained resilient. St. Regis Mumbai reported 85 per cent occupancy, an average room rate of Rs 20,862 and RevPAR of Rs 17,763 in 1QFY27. Total income increased 19 per cent year on year to Rs 1,300 million, while EBITDA rose 20 per cent to Rs 600 million. The EBITDA margin remained flat at 45 per cent.

Courtyard by Marriott, Agra reported 79 per cent occupancy and an average room rate of Rs 4,948. However, EBITDA declined 22 per cent year on year to Rs 13 million, and the EBITDA margin fell by 4 percentage points to 11 per cent. Phoenix Mills expects hospitality keys to increase from 588 currently to 2,188 by FY30.

Valuation and Target Price

Motilal Oswal's target price of Rs 2,200 per share is based on a sum-of-the-parts valuation. Retail assets are valued at 6.5 to 7.5 per cent cap rates, while office assets are valued at 7 to 8 per cent cap rates. Hospitality is valued at 15 to 18 times March 2028E EV/EBITDA, and residential is valued using net present value based on an 11 per cent weighted average cost of capital.

The valuation approach produces a gross asset value of Rs 835,000 million and a net asset value of Rs 787,000 million after FY27 net debt, equivalent to Rs 2,200 per share.