30 May 2012
4QFY12 Results Update | Sector: Real Estate
Phoenix Mills
BSE SENSEX
S&P CNX
16,439
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
4,990
PHNX IN
144.8
229/149
-8/-5/10
26.8
0.5
CMP: INR184
TP: INR255
Buy
Phoenix Mills' 4QFY12 standalone/consolidated results were in line with estimates. High Street Phoenix
(HSP) revenue grew 14% YoY to INR531m in 4QFY12. For FY12, HSP rental stood at INR1.98b (v/s our est
INR1.97b and management guidance INR1.95b). Standalone EBITDA grew 13% YoY to INR363m (margins at 68%
down ~5.5% QoQ), PAT remained flat YoY led by higher other income (largely as interest income from loan and
advances given to subsidiaries).
Consolidated revenue improved 74% to INR3.7b (v/s our est INR3.6b). Barring INR1.98b from HSP, key revenue
contributors have been (a) Pune Commercial Phase I (INR0.7b), (b) Pune Mall (INR0.6b) and (c) BARE malls
(INR0.3b). However PAT growth was dented owing to commencement of depreciation and interest in Pune
Market City mall.
Market City projects are steadily transforming into next growth driver for the company with (a) retail assets
ramping up, and (b) monetization of Phase II underway. Incremental leasing has been visible in Bangalore
and Chennai Malls during 4QFY12. All three operational malls (Pune, Kurla and Bangalore) have ramped up to
50-70% occupancy levels and witnessing encouraging consumptions growth.
Consolidated gross debt increased to INR15.2b in line with guidance, on account of drawdown of debt at (a)
Shangri-La hotel and (b) other Market City projects (Pune, Kurla and Bangalore). Consolidated net debt
increased to INR14.2b v/s INR13.7b in 3QFY12. Net DER of 0.85x.
Key triggers for the stock would be (1) leasing momentum and operational ramp-up at Market City SPVs, (2)
de-leveraging, and (3) value unlocking from Phase IV at HSP, where an increase in FSI could lend further
upside.
The stock trades at P/E of 22.2x FY13 EPS of INR8.3, 1.5x FY13 BV and 33% discount to our NAV. Maintain
Buy.
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436

Phoenix Mills
Operational highlights
Standalone revenue up 14% YoY; steady consumption growth, re-negotiations at HSP
led 12% YoY growth in annual rentals
Standalone revenue from HSP grew 14% YoY to INR531m, up 5% QoQ. QoQ rental
uptick is attributable to (a) higher revenue sharing led by consumption growth,
(b) partial contribution from Palladium Annexe (16,000sf) opened in 4Q, and (c)
full quarter contribution from re-priced Pantaloon rentals - concluded in 3QFY12
at 40% higher effective rentals. Revenue sharing has gone up to INR17m/month
(9.6% of rentals) from INR15.5m/month in 3QFY12.
FY12 rental at HSP grew 12% YoY to INR1.98b, led by 23% growth in sales (13%
growth in average sales/sf). Re-negotiation of rentals with 3 major anchor tenants
(0.15msf) led to effective hike of ~60%, boosting average rental from INR154/sf to
INR174/sf. Average rental for anchors stood at INR110/sf.
Standalone EBITDA grew 13% YoY to INR363m (margins at 68% down ~5.5% QoQ).
Decline in EBITDA margin is largely due to some provisioning assumed during the
quarter with regards to a) ~INR10m for demolishing one small mall management
office block at HSP, and b) ~INR25m towards one tenant.
PAT remained flat YoY led by higher other income (largely as interest income from
loan and advances given to subsidiaries).
Consolidated revenue up 74% YoY driven by Market City assets – albeit
commencement of depreciation/interest dent PAT growth
Consolidated revenue improved 74% to INR3.7b (v/s estimate of INR3.6b). Barring
INR1.98b from HSP, key revenue contributors have been (a) Pune Commercial
Phase I (INR0.7b), (b) Pune Mall (INR0.6b) and (c) BARE malls (INR0.3b).
EBITDA grew ~50% YoY to INR2.1b, with EBITDA margin moderating to 58% (v/s
67% in FY11), due to comparatively lower margins in commercial projects and
retail mall at Pune, which are yet to reach steady-state optimum margins.
Depreciation and interest commenced in Pune Mall post incubation in June 2011,
leading to sharp rise in these two components by 1.8x/4x. This has led to only 4%
YoY growth in PAT before minority interest and associate profit, and 29% YoY growth
in reported PAT.
Key balance sheet changes
Consolidated gross debt increased to INR15.2b
in line with guidance, on account
of drawdown of debt at (a) Shangri-La hotel and (b) other Market City projects
(Pune, Kurla and Bangalore). Consolidated net debt increased to INR14.2b v/s
INR13.7b in 3QFY12. Cost of debt for HSP has been 12%, refinanced debt 12.75-
13.25%, while loan given by HSP to subsidiaries has 200-300bp higher cost of debt.
The debt level is likely to peak at ~INR16b in FY13 with remaining construction
expenditures on Hotel Shangri-La and Chennai Mall.
Standalone investment up by INR3.2b,
due to reclassification of share application
money (earlier reflected in loans and advances) in Phoenix Hospitality Company
Private Ltd (PHCPL) and GKW (Bangalore) as investment. The standalone loans
and advances declined accordingly. Consolidation of PHCPL has also led to sharp
increase in consolidated net block. PHNX has acquired 56.9% stake in PHCPL in
3QFY12.
30 May 2012
2

Phoenix Mills
QoQ EBITDA margin trend (%)
Rental from HSP (INR m) witnessed
steady growth and…
…expect trend to continue with
booming consumption (INR m)
Source: Company/MOSL
Market City projects transforming into next growth drivers; Ramp-up of
retail malls and monetization of Phase II going steady
Pune Market City
Retail:
Pune mall (1.1msf, 58.5% stake) commenced operation in Jun-11, with 33
retailers and scaled up to 235 in 4QFY12. Occupancy of 70% in 9 months. Total and
per sf sales trends are encouraging.
Commercial:
Sold ~85% of 0.26msf (total sales value of ~INR1.4b); construction
has also been completed. However, due to company’s stringent practice of revenue
booking (linked to certain milestones in transactions), it booked only ~INR0.8b in
FY12 (in addition to INR0.17b in FY11). Collection stood at INR1.25b.
Due to high interest cost and depreciations, Pune SPV (Mall and commercial) has
made accounting loss of ~INR150m (EBITA of INR570m)
Bangalore Market City
Retail:
Commenced operation in Oct-11 with 110 stores and ramped up to 178
stores currently.
Residential:
Launch of residential projects at Bangalore West (GKW, ~2.8msf) in
1HFY13.
Kurla Market City
Retail:
Mall commenced operation in Nov-11 with 75 stores and moved up to 171
stores currently. Opening up of Reliance mart and PVR would be key crowd pullers.
Commercial:
Sold ~61% of 0.28msf (total sales value of INR1.4b) at 15LBS. Average
sales realization stood at INR9,200/sf. Soft launch commenced for Phase II at Orion
Park (0.84msf, sold 10%) and Graceworks (0.42msf, PHCPL assets) during
4QFY12.PHNX is yet to book any revenue from Kurla commercial since most
registrations happened post Mar-12. Collection stood at INR1.1b.
Chennai Market City
Retail:
Launch expected in 1HFY13. Key tenants are undergoing fit outs.
Residential:
Launched 0.25msf, sold 0.2msf (v/s 0.17msf in 3QFY12) at average
realization of INR6,750/sf and collected INR440m (v/s INR230m in 3QFY12).
Construction work in progress.
30 May 2012
3

Phoenix Mills
Details of Market City projects – Incremental leasing at Bangalore and Chennai over 4Q
Key Market city projects
Total area (msf)
Retail Area (msf)
Commercial/Hotel (msf)
Residential (msf)
Leasing as on 3QFY12 (%)
leasing as on as on 4QFY12 (%)
Average Rentals (INR/sf/month)
Operational date
Occupancy (%)
Number of stores operational
Total stores
Expected FY13 rental (PHNX stake INRb)
Kurla
2.3
1.1
1
75-80
75-80
90-95
Commenced
in Nov-11
50
171
330
0.25
Pune
1.8
1.1
0.6
80-85
80-85
60-65
Commenced
in Jun-11
70
235
300
0.45
Bangalore East
2.0
1.0
0.4
0.6
75-80
85-90
65-70
Commenced
in Oct-11
60
178
280
0.21
Chennai
1.5
1.0
0.5
60
68
75-80
1HFY13
0
0
220
0.15
Source: Company/MOSL
Enters into SPA to buy Kshitij’s stake in Chennai Market City; stake increase in
stabilizing market city projects key positive
During 4QFY12, PHNX has entered into a Share Purchase Agreement (SPA) with
Kshitij VCF to acquire the latter’s stake in its Chennai Market City projects – Classic
Mall Development Company Pvt Ltd (0.9msf retail mall and 0.25msf residential
project) and Classic Housing Projects Pvt Ltd (another 0.25msf residential project).
Currently PHNX effectively holds equity stake of 31%/34% in Classic Mall/Classic
Housing; post the transaction, it will hold 63%/66% stake.
The transaction has been valued at INR1.06b (INR300m to be paid within 90 days
and the balance at the end of 15 months i.e. by 1QFY14). Current net worth in
Chennai SPV stood at ~INR1.5b, implying transaction value of 1.9-2x BV. Valuation
is in line with our calculations. Going forward, we believe this is a key positive for
the company to tap the upside potential from stabilizing assets.
Valuation and view
With stabilization of its Market City malls over the next 2-3 quarters, we see
PHNX's asset-heavy model becoming a strong proxy to the booming domestic
consumption story, leading to sharp growth in rental income from INR1.8b in FY11
to INR6.8b (PHNX share of INR 3.9b or 52%) in FY14.
Healthy annuity income, cash flow visibility from monetization of 2nd phase of
Market City projects, supported by potential re-capitalizations with fund raising
of ~INR10b provide strong cushion to address leverage concern.
We believe continuous stake increase in Market City projects is a key positive.
Post increase in stake in Bangalore and Pune Market City, PHNX has acquired
Kshitij VCF's 31-34% stake in Chennai Market City. Most of these acquisitions have
happened in line with expected valuation. We believe higher stakes in stabilizing
assets would offer meaningful upside going forward. Additionally, to improve
the capital efficiency, the company has been avoiding long-gestation projects
and re-positioned several hotel plans to other asset classes.
Key triggers for the stock would be (1) leasing momentum and operational ramp-
up at Market City SPVs, (2) de-leveraging, and (3) value unlocking from Phase IV at
HSP, where an increase in FSI could lend further upside.
The stock trades at P/E of 22.2x FY13 EPS of INR8.3, 1.5x FY13 BV and 33% discount
to our NAV. Maintain
Buy.
4
30 May 2012

Phoenix Mills
Phoenix Mills: an investment profile
Company description
Phoenix Mills is a pioneer in the development of large-
scale, mixed-format retail development in India. It is a
unique, low-risk play on the booming domestic
consumption story with no retail-specific risks. Through
its subsidiaries and associate companies it is undertaking
40 retail/ hospitality projects, totaling ~50msf, across
India. It owns one of the most successful malls in India,
High Street Phoenix (HSP), in Parel, Mumbai. We
estimate, with the commencement of market city
projects and Shangri-la hotel. rental income from retail
to increase from INR1.8b in FY11 to INR3.9b in FY14.
Recent developments
FY12 rental at HSP grew 12% YoY to INR1.98b, led by
23% growth in sales (13% growth in average sales/
sf).
Pune mall (1.1msf, 58.5% stake) commenced
operation in Jun-11, with 33 retailers and scaled up
to 235 in 4QFY12.
Valuation and view
The stock trades at P/E of 22.2x FY13 EPS of INR8.3,
1.5x FY13 BV and 33% discount to our NAV. Maintain
Buy.
Key investment arguments
According to the Global Retail Development Index
(GRDI), organized retail in India is set to increase from
~5% in 2007 to ~14% by 2013. Industry experts
estimate the number of operational malls will cross
412, with 205msf by 2010, and 715 malls will be added
by 2015, due to retail development in tier-II and tier-
III Indian cities. We believe PML is well poised to
benefit from this strong growth.
PHNX's growth story is ready for take-off, with several
assets slated to yield rent over the next 12-18
months, taking its total operational assets from
2.5msf in FY11 to 5.8msf/8.9msf/10.7msf in FY12/13/
14 respectively.
Sector view
RE sector has been a major underperformer over the
last 12 months with multiple operational and non-
operational headwinds such as volume slowdown
(due to declining affordability), monetary tightening,
pilling liquidity pressure etc. However, with a
buoyant macro-picture, likelihood of interest rate
cut and increasing focus on execution, we believe
the outlook will improve going forward.
Comparative valuations
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
Phoenix
22.2
13.1
1.5
1.4
8.5
5.3
14.8
9.9
Anant Raj
9.7
6.7
0.3
0.3
4.4
3.1
8.5
6.0
Prestige
22.1
16.0
1.6
1.5
3.4
2.8
11.6
9.4
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
8.3
14.1
Consensus
Forecast
9.4
13.3
Variation
(%)
-11.3
6.6
FY13
FY14
Target price and recommendation
Current
Price (INR)
184
Target
Price (INR)
255
Upside
(%)
38.6
Reco.
Buy
Stock performance (1 year)
Shareholding pattern (%)
Mar-12
Promoter
Domestic Inst
Foreign
Others
30 May 2012
65.9
5.0
23.2
5.9
Dec-11
65.9
5.3
22.7
6.0
Mar-11
65.9
5.2
22.3
6.5
5

Phoenix Mills
Financials and Valuation
30 May 2012
6

Phoenix Mills
N O T E S
30 May 2012
7

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Phoenix Mills
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