GIC To Acquire A Stake In Phoenix Mills Subsidiaries
Shoppers ride the escalators inside a shopping mall in Mumbai, India. (Photographer: Adeel Halim/Bloomberg)

GIC To Acquire A Stake In Phoenix Mills Subsidiaries

Shares of Phoenix Mills Ltd. rose to the highest in nine months after India’s largest mall developer, along with its subsidiaries, signed a non-binding term-sheet with an affiliate of GIC to create a strategic, retail-led mixed-use platform.

GIC will invest in the PML subsidiaries—Offbeat Developers Pvt., Graceworks Realty and Leisure Pvt. and Vamona Developers Pvt.—by way of a combination of primary infusion and secondary purchase of equity shares. As part of the deal, GIC will initially acquire a 26% stake, which can be raised to 35% within 12 months from closing of the proposed deal, the mall developer said in an exchange filing.

Phoenix Mills will contribute retail assets Phoenix Marketcity Mumbai and Phoenix Marketcity Pune, and the commercial assets Art Guild House, Phoenix Paragon Plaza and Centrium, Mumbai as a part of the platform. Together these assets, which are held by the PML subsidiaries, constitute a retail gross leasable area of 2.33 million square feet and office area of 1.03 million square feet, the filing said. The assets had a net operating income of about Rs 370 crore in FY20.

“The consummation of this transaction would be a big positive for Phoenix Mills with improved cash flow situation and endorsement in the quality of its assets with premium valuations,” said Biplab Debbarama of Antique Stock Broking—which maintained its ‘buy’ rating on the mall developer and raised its price target to Rs 845 apiece from Rs 745 earlier. “With such a substantial war chest, Phoenix Mills is well poised for significant growth through acquisitions and gain significant market share,” Debbarama said in a note.

Avinash Gorakshakar, director of research at Profitmart Securities, agreed. “This is a positive development for Phoenix Mills... It’s a decent transaction in this kind of market as cash infusion will result in a reduction of liabilities on Phoenix Mills’ books,” he told BloombergQuint.

The company, according to the filing, intends to utilise the proceeds from this proposed transaction as growth capital for further expansion and acquisition of greenfield, brownfield, operational and or distressed mall opportunities. The parties may also consider various options of monetising this platform, including through a REIT over a three to five years from the closing of the proposed transaction.

This, Gorakshakar said, could be “sentimentally positive as there could be further monetisation if the proposed new entity becomes a REIT”.

Shares of Phoenix Mills gained as much as 13.1% to Rs 779.9 apiece - the highest level since March this year. The stock is up for the fifth straight day. Of the 21 analysts tracking Phoenix Mills, 20 have a ‘buy’ rating and one suggests a ‘hold’. The average of Bloomberg consensus 12-month price targets implies an upside of 1.2%.

Brokerages Remain Bullish

  • ICICI Securities: Buy rating maintained; price target raised to Rs 804 from Rs 780 apiece.
  • HSBC: Buy rating maintained with a price target of Rs 860 apiece.
  • Macquarie: Outperform rating maintained with a price target of Rs 720 apiece.
  • IIFL: Buy rating maintained; price target raised to Rs 820 from Rs 740 apiece.
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