Pedestrians walk past Phoenix Market City shopping mall, developed by Phoenix mills Ltd., in Chennai. (Photographer: Dhiraj Singh/Bloomberg)

Phoenix Mills Expects Revenue Boost From New Accounting Standards

Phoenix Mills Ltd. expects its revenue for the last financial year to jump as the new Indian Accounting Standard will allow the nation’s largest mall developer to recognise sales based on the completion of projects.

The company expects its consolidated top line to grow at around 25 percent for 2018-19, aided by a low base and Rs 350-crore revenue recognition from its two residential projects, One Bangalore West and Kessaku, Shishir Shrivastava, joint managing director at Phoenix Mills, told BloombergQuint in an interview. Indian Account Standard 115 allows developers to recognise revenue on the completion of the project.

Of the developer’s 17-million-square-feet property portfolio, residential segment contributes around 3.72 million sq ft comprising three projects in Bengaluru—Crest, One Bangalore West and Phoenix Kessaku, according to its investor presentation. Six out of the nine towers of One Bangalore West are ready with occupancy certificates, while two out of the five towers of Kessaku project are complete, Shrivastava said.

According to the average of estimates compiled by Bloomberg, Phoenix Mills is expected to report a consolidated revenue of Rs 1,860 crore compared with Rs 1,542 crore the company reported in 2017-18; and a profit of Rs 307 crore against Rs 232 crore a year earlier.

Over the last five years, the company’s profit and Ebitda increased at an annualised rate of 28 percent and 4.4 percent, respectively, driven by increase in commercial rentals.

Despite the successful listing of India’s first real estate investment trust, Shrivastava said Phoenix Mills won’t go for a REIT. Embassy Office Park raised Rs 4,750 crore through its REIT initial public offering to partly reduce its debt.

Shrivastava said deleveraging the balance sheet is not the objective and the company’s interest coverage ratio is over three times. Phoenix Mills, he said, is carrying around Rs 3,100 crore worth of debt in retail assets and is seeing interest from foreign funds for joint ventures.

The Mumbai-based developer, in an exchange filing, said it’s open to Canada Pension Plan Investment Board and other strategic investors for undertaking projects having a leasable area of around 4.6 million square feet. The Canadian pension fund has already invested in the developer’s three projects in Pune, Bengaluru and Indore.

The mall developer’s stock has jumped almost 28 percent from the lows in October last year compared with a 36 percent surge in the Nifty Realty Index. All the 13 analysts tracked by Bloomberg have a ‘Buy’ rating on the stock, according to Bloomberg data. The 12-month target price implies a return potential of 10.5 percent.