Phoenix plans to go shopping for malls

Phoenix Mills, one of India's leading developers and operators of malls under Phoenix MarketCity brand, is taking the acquisitions route to expand presence across markets that offer good potential in the country. The company's current mall portfolio is spread over 5.78 million square feet with seven malls (two are under development / fit-out) across six cities -- Mumbai, Pune, Bangalore, Chennai, Lucknow and Bareilly. However, the company management also sees good potential for its malls in a few other cities where it has not established presence yet and will acquire existing malls and land parcels for the same.

According to Shishir Shrivastava, joint managing director and group chief executive officer, The Phoenix Mills Ltd (PML), the company is aggressively looking at expansion and growth opportunities. "We have been evaluating a few existing malls across the country for acquisitions. We will share the details when we get closer to finalising some of these deals," said Shrivastava during an earnings call to discuss the company's financial performance for the first quarter of fiscal 2017.

The company is simultaneously looking at land parcels for developing mixed-use projects. "At the moment we have not concluded any such acquisitions," said Shrivastava. On the kind of malls being looked at – whether in tier II cities and beyond – for acquisitions and the budget being set aside for the same, Shrivastava said that the company was approaching it slightly differently. "There are certain key markets where we want to be present. We see opportunities in markets like Kolkata, Hyderabad, Chandigarh, Kochi, Chennai, another location in Bengaluru, Gurgaon, Goa, Nagpur, Mumbai, Thiruvananthapuram, Visakhapatnam, Jaipur and Indore. So these are the markets that we believe that there are opportunities for Phoenix to own malls and establish ourselves as market leaders.

"So wherever we believe the opportunity is to become the number one mall in that city, that's where we want to be. In fact, in few of the cities, there are opportunities to buy existing assets which we believe are of the quality and standards of a Phoenix Mall. We believe we can step in and turn-around the assets and show significant ebitda improvements," said Shrivastava. The PML management feels, in several of the aforesaid cities, there are no existing malls. "And even if there are some, they are not of the quality and standards of a Phoenix Mall. In those cases we will look at establishing our presence by acquiring land and doing development on it," said Shrivastava.

As for the budget being set aside for inorganic growth opportunity, Shrivastava said, it would vary from city to city and asset to asset. "Our approach is more focused towards seeing what is going to be the internal rate of returns (IRRs) as opposed to overall budget allocation. If we are confident of seeing IRRs of mid-20s and above, then that's the kind of asset we would want to go ahead with and buy," said Shrivastava, adding that the company will be looking at brownfield, greenfield and operational malls for acquisitions.