Mall developer Phoenix Mills Ltd raised sum 1,100 crores from institutional investors this week through
an eligible institutional offering (QIP), said two people aware of the development, at time malls, see
sharply lower footfalls in the midst of a health crisis and weak consumer sentiment.
The QIP offering saw demand for five times the number of shares offered, underscoring that despite near-term challenges facing the realty sector, investors, flush with liquidity, are keen to back market leaders in commercial and retail real estate.
Foreign and domestic institutional investors participated in the share sale, including a large check from the sovereign wealth fund GIC in Singapore, said the first person mentioned above, who spoke on anonymity condition. The person has not disclosed GIC ‘s investment quantum.
Emails sent to Phoenix Mills and GIC did not elicit a response. Kotak Mahindra Capital and UBS advised Phoenix Mills on the QIP.
GIC was one of the largest investors in the recent ₹4,500 crores initial public offering (IPO) of Mindspace Business Parks REIT, which has a portfolio of almost 29 million sq. ft of office space across metros. GIC, along with the government of Singapore, invested ₹688.9 crores in the IPO.
The nationwide lockdown and localized restrictions in several states later forced mall operators to either waive or defer rentals for most tenants.
“Phoenix Mills reported retail rental income decline of 69.8% y-o-y to ₹88.5 crore mainly due to COVID-19 led lockdown and rental waiver, thereof. We note that the company has agreed to a 50% rental waiver in the lockdown period for 75-80% retailers. For a further period of up to six months in FY21, rentals are expected to be restructured with a reduction in minimum guarantee by ~25-30% but with higher revenue share,” said ICICI Direct in a 31 July report.
But investors are betting that as things start to recover, market leaders such as Phoenix Mills will be at a significant advantage than peers, said the second person cited above, also requesting anonymity.
“Demand will eventually come back. It is not as if people are going to stop going to malls. And companies such as Phoenix Mills, which has ₹500 crore cash on its balance sheet, and didn’t really have an urgent need to raise cash, will be better suited to tap that recovery,” he added.
The Reserve Bank of India’s recent consumer confidence survey showed that individuals are upbeat about their prospects in a year’s time though they remain skeptical of the current state of things.
