Stocking up on cash

Usually buzzing with teenagers loitering in the food courts, moviegoers buying overpriced popcorn, mothers dragging their children to several shops and passersby dropping in for relief from heat, India’s malls have suddenly turned into ghost towns. Zero footfalls due to the pandemic-induced lockdown have translated into modest revenue for some of India’s biggest mall developers and operators. Among them is Phoenix Mills, that reported an income of ₹1.34 billion in Q1FY21 recording 78% drop from ₹6.15 billion reported in Q1FY20. The real estate company also reported a loss of ₹505 million in the quarter ending June 30, against profit of ₹482.57 million in Q1FY20.

In such an uncertain environment, most promoters are either holding on to cash or raising it. Phoenix Mills promoter Atul Ruia is doing the same. His holding companies, Radhakrishna Ramnarain and Senior Advisory Services, offloaded shares worth ₹8.33 billion in late August. From the earlier 6.8% and 9.02%, their holding now stands at 0.1% and 8.44% respectively. While Ruia still individually holds 2.58% stake, the total promoter holding now stands at 45.57%.

In the press release announcing its Q1FY21 result, the company mentioned that discussions are ongoing with retail tenants and licensees for certain waivers and concessions till March 20, 2021. While this will definitely affect cash flow, Phoenix Mills has already raised ₹10.9 billion via QIP in August. Reportedly, the QIP saw investment from the Government of Singapore, UK’s Baillie Gifford and several mutual funds. Recovering from its 52-week low of ₹466 hit in May, the stock currently trades near the ₹615 mark. Analysts remain optimistic about business picking up. According to Antique Stock Broking, the company’s cash flow situation is expected to improve with further relaxation of lockdown rules. It has maintained a ‘buy’ rating with a target price of ₹688.

Betting on Phoenix Mills’ strong market positioning, marquee assets and a robust financial track record, analysts at HDFC Securities have also initiated a ‘buy’ call on the stock. “We expect the company to benefit from the rise in consumer spend after consumption normalizes,” mentions the report. Factoring in the recent QIP, ICICI Securities, too, has a ‘buy’ rating with target price of ₹780.

Some mutual funds are also buying into the growth story. ICICI Prudential MF has increased its stake from 1.8% in March 2020 to 2.24% in August 2020. So has Nippon India MF, from 1.28% to 1.48%, and Motilal Oswal MF, from 0.74% to 1.06%. However, DSP MF has reduced its holding from 1.75% to 1.71%. UTI MF, too, has cut its stake from 1.58% to 1.55%. Meanwhile, FII holding has increased from 25.74% to 29.53% after the QIP.