Share prices of Phoenix Mills continues its climb from the depths of March 2009 when it was available for Rs 44. It recently hit its 52-week high at Rs 222. And this is despite the fact that the company announced a substantial fall in its standalone net profit for the quarter ended June 2009. Analysts reckon that this is due to the fact that a revival in the retail business has started becoming visible. Moreover, Phoenix?s innovative financial structuring involves creating joint ventures and development where it gets asset exposure without taking on any debt recourse on the balance sheet. And the overall debt to equity ratio is at 0.4, which would enable the company to expand. Moreover, the company?s revenue streams are not purely dependent on developmental activities.
According to analysts at Citi Investment Research, the company?s rental annuity is around 51% of its net asset value and this differentiates it from its peers. Others in the industry have a dominance of developmental revenues with around 60-85% coming in from developments. This flagship property is a landmark in Lower Parel, South Mumbai and boasts record footfalls and near 100% occupancy. Developed over 17acres in four- phases, it offers a wide mix of services and is already yielding healthy rentals of an average Rs170 per square feet. It has plans to develop around 29msf, with an economic interest of around 10.9msf, focusing on retail malls and hotels, say analysts. There would be 1000 rooms being added over the next 2-4 yrs across all its projects through its 75% subsidiary, Phoenix Hospitality.
The management would also be creating smaller ?Market City? projects in upcoming locations. Interestingly, the management is also looking at the revenue sharing technique with its tenants rather than depend on pure rentals. The revenue-sharing arrangement is typically structured as following: hypermarket formats ? 5-7% rev share, whereas vanilla stores are on 17-18% of revenue share. However, analysts are also looking at the real revival of the sector and the management?s ability to replicate its success with High Street Phoenix in its other projects.