Phoenix Mills Ltd

NSE:PHOENIXLTD

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Results Conference Call of The Phoenix Mills Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. We have with us on the call today the management of the company being represented by Mr. Shishir Shrivastava, Managing Director; Mr. Anuraag Srivastava, Group CFO; and Mr. Varun Parwal, Group President, Strategy and Corporate Finance. [Operator Instructions]. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Shishir Shrivastava, thank you, and over to you, sir.

[Shishir Shrivastava, executive]

Good morning, ladies and gentlemen. We take pleasure in welcoming you all to discuss the operating and financial performance of the first quarter of FY '24. We hope you've had a chance to look at the results presentation shared by us. It has also been uploaded on the stock exchanges as well as on our website. We will now take you through the key highlights of the results, and we'll refer to relevant slides of the results presentation from time to time. We start with the operational update on our retail mall portfolio. Please refer to Slide #3 onwards of the results presentation. Consumption in Q1 FY '24 stood at INR 2,574 crores, with a growth of approximately 18% over Q1 FY '23. If we exclude the contribution from Phoenix Citadel Indore and Phoenix Palladium Ahmedabad, which were not operational in the corresponding quarter in the previous year. This growth in consumption would be approximately 9% over Q1 FY '23. At Phoenix Palladium Mumbai, the Lifestyle block has been closed for renovation from May 2023 onwards. Adjusted for the reduction of consumption from this specific renovation, Q1 FY '24 consumption has grown by approximately 10% over Q1 FY '23. Consumption was robust across categories in the fourth quarter, fashion and accessories up 17% from Q1 FY '23. Jewelry has continued its momentum with a 31% growth over Q1 FY '23. Food and beverages are up 24% from Q1 FY '23. FEC, multiplex entertainment, up 3% from Q1 FY '23, this is promising considering the ramp-up from new movie releases expected in the running quarter. Gourmet stores and hypermarkets have come back with full recovery of supply chain and clocked 88% growth over consumption in Q1 FY '23. Our retail collection stood at INR 614 crores from Q1 FY '24. Moving on to Slide #4, for the month of July ‘23, consumption stood at approximately INR 931 crores, demonstrating a growth of 15% over July '22. On a like-to-like basis, adjusting for malls, which were not operational in the last year, that is Phoenix Citadel Indore and Phoenix Palladium Ahmedabad growth has been approximately 6% on a like-to-like basis. Adjusted for the renovation of lifestyle at Phoenix Palladium Mumbai, the growth in overall like-to-like consumption was approximately 7% over July '22. Retail collections for the month of July ‘23 stood at INR 210 crores. End-of-season sales this year started in June compared to July in the previous year, also heavy monsoons in the cities across Maharashtra, Ahmedabad, Indore and Bangalore through the entire month of July impacted weekday and weekend footfalls and consumption, especially in Mumbai. We expect some momentum to come in the remaining months of Q2 FY '24 from some factors like strong content pipeline in Q2 with encouraging lineup of new releases, which will continue from the pickup we saw in July ‘23, monsoon subsiding. The Independence Day weekend Rakhi, Onam in July, followed by Ganesh Utsav in September -- sorry, independence a weekend Rakhi and Onam in August, followed by Ganesh Utsav in September. Please refer to Slides #5 through #8 for an update on Phoenix Palladium Ahmedabad. 26th February 2023 marked our entry in Gujarat with the launch of Phoenix Palladium Ahmedabad. Slide #6 and #7 depictally images of the mall. We opened the city center to our patrons with a trading occupancy of 32%, which has steadily ramped up to 68% as of July '23. Trading density in the month of July '23 remains strong at INR 1,064 per square foot per month with new trading units becoming operational. We expect the ramp-up in trading occupancy to continue and touch approximately 85% by the end of Q2 FY '24. The mall is currently leased at approximately 95%. Moving on to Slides #9 through #11 for an update on Phoenix Citadel Indore, Phoenix Citadel Indore, which is the first retail asset in India to have received the IFC Edge Advanced certification was open to up at patrons on 1st December 2022. Trading occupancy at the city center location has shown a steady ramp-up and now stands at approximately 87% in July '23 versus 42% at the time of launch in December '22. We have seen excitement picking up at Phoenix Citadel Indore with new stores opening in Q1 FY '24, such as Clikctra, OneExchange, Reliance Digital, Chroma, Smart Bazar, Under Armour, Senco Diamond, Malabar, iNSPiRE, which is an Apple reseller, food and beverage outlets such as Pizza Hut, Xero Degree and Plated. We are all going to see further see addition of some gastropubs and F&B options in the coming months to enhance the offering. May I draw your attention to Slide #12 onwards for an update on our upcoming assets, Mall of the Millennium at Wakad Pune is on track to commence operations by Q2 FY '24. And currently, it has over 190 stores, which is approximately 700,000 square feet, which is under fit-out. The construction work at Millennium Towers, the commercial office is integrated with the mall at this mixed-use development is progressing well, and these offices are set for launch in FY '25. At Phoenix, small of Asia located in Hebbal, Bangalore, we have received the occupation certificate for the retail portion of the development. It currently has over 214 stores under fit out, which translate to approximately 0.7 million square feet. Phoenix Asia Towers, which are the commercial offices integrated with the Mall of Asia, mixed-use development. The lobby and common area finishing and facade work is nearing completion. The first phase of these offices of approximately 800,000 square feet is expected to be operational during the current financial year. At Whitefield, Bangalore, part of our Phoenix Market City mixed-use development, excavation and shoring is progress is under progress for the expansion, which includes offices. We also plan to densify this asset by adding on a retail area of about 200,000 square feet and a Grand Hyatt Hotel with approximately 400 keys. The offices integrated with Palladium Chennai. We see considerable progress in the project on the project. We have completed slabs up to the first 2 floors of the office building and are seeing an expeditious progress. Project Rise at Lower Parel Mumbai forming part of Phoenix Palladium mixed-use development. All our acquisite approvals are secured and construction has progressed. Our retail project at Kolkata, we have completed the excavation and moving on to the next stage of construction. For our retail project in Surat, we are at the final stages of approval and building plans have been submitted. Consultants for the various work streams have been onboarded and design development is progressing swiftly. We have received the height and ULC clearance as well and fencing work for our luxury project at Alipore Residential is also complete. For our warehousing development at Sohna, NCR, we have received all the NOCs, including the road access permission. Land development work at site has commenced and consultants across various work streams are finalizing the design development and working drawings. We now move to the financial performance of our retail mall portfolio, and I draw your attention from Slide #26 onwards. In line with consumption, our retail rental income and EBITDA growth has also demonstrated a steady increase. For Q1 FY '24, the retail rental income was INR 377 crores, up 17% compared to Q1 FY '23. With increasing operational efficiency, retail EBITDA for this quarter grew by 19% and was at INR 387 crores compared to Q1 FY '23. I now request Anuraag to take you through the office, hotel and residential section and the overall financial results.

[Anuraag Srivastava, executive]

Thank you, Shishir. Good afternoon, everyone. I'll draw your attention to Slide #30 to #32 for an update on our commercial offices portfolio. Our commercial office portfolio continues to see strength in leasing traction with gross leasing of about 1.76 lakh square feet during the period from April to July '23, of which about 0.88 lakh square feet were new leases and about 0.87 lakh per renewals. Weighted average effective net rental for the portfolio stands at about 90 per square per month. The total income from commercial office portfolio for quarter 1 FY '24 stood at INR 45 crores, with EBITDA at about INR 26 crores, demonstrating a growth of about 11% over quarter 1 FY '23. Sales were approximately INR 51 crores. Moving on to update on the hospitality segment, please refer to Slide #33 to #39. The St. Regis, Mumbai, the performance for quarter 1 FY '24 was led by increased occupancy for the quarter at 82% with ARR at about 16,500, which was up 38% from quarter 1 FY '23. ARR for the month of July '23 stood at INR 14,191, up 29% from July '22. The total income for Q1 FY '24 stood at INR 112 crores, up 34% over quarter 1 FY '23. EBITDA for the quarter stood at INR 48 crores, demonstrating improved efficiency with a growth of over 50% over quarter 1 FY '23. With programming of events in the coming quarters and update of various venues, we are hoping for the continued momentum for this marquee asset. Our hotel in Agra, Courtyard by Marriott, total income for Q1 FY '24 was at about INR 11 crores, up 33% from quarter 1 FY '23 driven by occupancy at 72% and ARRs at INR 4,408, showing a growth of about 18% over quarter 1 FY '23. Moving on to our residential business, which is on Slide #41, sales in the quarter stood at about INR 135 crores and collections were INR 136 crores. Revenue recognized for the first quarter was INR 106 crores. This traction of demand in our luxury residential projects in Bangalore continued in July 2023 with sales of INR 94 crores, taking the April to July the year-to-date number to about INR 229 crores. Moving on to financial results, please refer to Slides #42 onwards. Some of the key highlights of our consolidated financial performance, as presented on Slide #44 are as follows: Income from operations for Q1 FY '24 stood at INR 811 crores, up 41% over quarter 1 FY '23. EBITDA for Q1 FY '24 at INR 492 crores, up 52% over Q1 FY '23 reported profit after tax after minority interest and after comprehensive income for Q1 FY '24 at INR 241 crores. On the cash flows, debt and liquidity position, it is in Slide #45 onwards. In Q1 FY '24, we generated about INR 545 crores of net cash from operating activities and our operating free cash flow adjusted for interest outflow stood at about INR 450 crores vis-a-vis INR 254 crores in Q1 FY '23 last year and INR 492 crores in Q1 FY -- Q4 FY '23. During Q1 FY '24, we continue to fund development of our assets and spent over INR 340 crores in capital expenditure. Debt on Slide #48 onwards, consolidated gross debt, which stood at about INR 4,050 crores as on 30 June '23 showed a remarkable decrease of INR 523 crores since March 2020, which was a pre-COVID period. We have borrowed approximately INR 73 crores for last mile funding of construction of our upcoming malls in Wakad, Pune and Hebbal Bangalore. These facilities will be converted to lease rental discounting facilities after start of operation within this financial year for optimizing the leverage position over these assets. During the same period, we have repaid approximately INR 60 crores of our outstanding debt on the operational portfolio. Average cost of borrowing is up 13 basis points to 8.87% in March 2023 -- from 8.74% in March 2023. Currently, our lowest cost of borrowing stands at about 8.5%. However, with loan refinance underway at Indore and Ahmedabad, we expect our borrowing rates to reduce in quarter 3 FY '24 onwards. Credit ratings of several facilities have been upgraded by 1 or 2 notches, and now all of our facilities are rated between A-1 to AA- stable. Liquidity is outlined on Slide #50. Our liquidity position as on 30th June 2023 was INR 1,873 crores. This excludes amount remaining in unutilized OD accounts. At a group level, our net debt is about INR 2,177 crores, and PMLs share of net debt is INR 1,629 crores. We are bullish on our business prospects and with a strong balance sheet position, our focus is now on to deliver our under construction projects in time and judiciously deploy our capital to expand our portfolio. With this, we would close our opening remarks, and we'll open the call for an interactive question-and-answer session. Thank you.

[Operator]

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Puneet Gulati from HSBC, please go ahead.

[Puneet Gulati, analyst]

Thank you so much and congrats on good numbers. My first question is on your guidance where you indicated last time that you're looking at double-digit growth on the consumption side and rental side on a like-to-like basis. How happy are you with what you are seeing right now, especially in the context that even if you look at broad numbers, the trading area seems to have gone up by almost 28%, while your rentals have gone up by 17%, say or end consumption by similar numbers? How should we think about the consumption growth in NT growth now?

[Anuraag Srivastava, executive]

Hi, Puneet, thank you for your question. I would say that our goal continues to remain the same to drive double-digit consumption growth that achieving that and a combination of addition of new assets and the same mall consumption growth. Yes, we would say that if you just look at it on a like-to-like basis and seeing this approximate 7% growth compared to the same quarter in the last year. But it's also important to understand that last year, we had seen a substantial growth in the month of July, which was the post-COVID period, and I think at that kind of a concern everybody had was is this level of consumption sustainable? Or is this as a result of event shopping or otherwise? I think the consumers have shown resilience. You continue to see a 7% growth. And we hope that with the additions and the changes and the upgrades that we are making across all our assets. We are going to continue to see this inch upwards again toward double-digit growth. The trading occupancies across our malls will be at 95% or more by Q3. We are expecting that, and then, of course, we have Mall of Asia, Bangalore and all of the Millennium at Pune, which will also open up in Q3, which will further add to that consumption growth. Today, in 4 months, we've seen a consumption growth of about INR 3,500-odd crores. And I think that's -- that should be certainly sustainable, and of course, we are now heading into a high consumption season in the month of August through November, December, Jan and even Feb.

[Puneet Gulati, analyst]

Would it be a right observation that so far, we've seen the consumption growth being attributed only to the increase in trading area growth?

[Anuraag Srivastava, executive]

I don't think it's mainly because of that. I think there is an inherent increase in consumption compared to last year even for the same stores. When we compare same-store sales growth across the mall, and as we've explained in the growth contributors across categories during my opening remarks, and if you like, we can recap that. We are seeing same category, same-store sales growth also increasing and contributing to the overall growth. Plus, there is some impact on account of the -- like as we've illustrated for Phoenix Palladium Mumbai, closure of Lifestyle has certainly impacted consumption. But when we adjust it from on a like-to-like basis, we don't adjust what is the secondary impact, right, because visitors who go to the lifestyle store also visit other parts of the mall.

[Puneet Gulati, analyst]

Right, understood, and secondly, can you comment up on what are you seeing on the leasing for upcoming office spaces? And what is the timeline that you're expecting in terms of meeting those office space as well as the commission over the upcoming year?

[Anuraag Srivastava, executive]

So the 800 approximately 800,000 square feet of offices that will go live this year in -- at the Mall of Asia development. We are expecting to find executing our first deal in the next few weeks. In fact, we are waiting the part OC for that building to come through before we can go ahead and execute. There's a strong lineup. In fact, the pipeline that was built was close to about, I would say, about 2 million square feet of pipeline that was built, and we are seeing demand for front office being coming back, and I think there's a lot of curiosity and interest for people for existing tenants at other office buildings where their tenure is coming up for to an end to move. So there's a lot of interest for the new development for sure. But I think we should have this conversation perhaps in the next quarter when we'll be able to report some deals that we've done.

[Puneet Gulati, analyst]

Understood, that's helpful. Thank you so much. I'll come back in with you.

[Anuraag Srivastava, executive]

Thank you, Puneet.

[Operator]

Thank you. The next question is from the line of Pritesh Sheth from Motilal Oswal, please go ahead.

[Pritesh Sheth, analyst]

Hi, thanks for the opportunity and congrats on the great numbers. First is on margins, where I think since last 2, 3 quarters, we have been ramping that up quarter-on-quarter. Now as you said, I mean, our trading occupancy, which is really at 89%, 90% across the mall portfolio right now will go up to 95% in the next couple of quarters. How should we think the trajectory of margins from year on?

[Anuraag Srivastava, executive]

I think margin improvement, as you rightly said, some of it is related to a strong operating performance and a significant increase in terms of people visiting through their vehicles, et cetera, so parking and other services like market even marketing event, signage, et cetera. They're all adding to the margins. The other important part is with improving of the trading densities, the common area gets apportioned over a lot of operating stores. So that increases the margin. I think we are moving towards -- once we hit our 90%, 95% of trading occupancy -- that said, the true margin trajectory will go, and after that, it will be linked to, I think, specific operating performance. Right now, EBITDA is at about 12% to 14% of rental income, and I think this is a sustainable margin even for the new malls, which we are constructing. The second part of this is on the hotels, where I think the strong ARRs, you've seen the ARR increasing significantly in both St. Regis and Agra. So that sort of increases the hotel margin over last year, so over the same cost base, we are able to increase our profitability. Offices, occupancies have picked up. I think we've seen a net addition in the rented space in office. So there, again, the apportionment of common areas, et cetera, is giving us better margin.

[Pritesh Sheth, analyst]

So another maybe 100, 200 basis points increase in this if possible because of share -- share coming from the trading occupancy growth?

[Anuraag Srivastava, executive]

I think, yes, we can say that the numbers so I don't have the exact numbers mapped out, but yes, I think that seems to be the trend. Between INR 100 to INR 104 is what we have said is where we will -- I think where this will stabilize and we'll see our organic growth afterwards.

[Pritesh Sheth, analyst]

Sure. Got it, that's helpful. Ahmedabad this quarter contributed really high in terms of rental income, rental you're also at 150. Was there some unusual? I mean, maybe some previous months rents getting approved now because stores are opening up. How should I look at it?

[Shishir Shrivastava, executive]

Hi, Pritesh we're on the side. So I think one thing you should consider is that Ahmedabad is a premium and a luxury government compared to Palladium Indore, so Indore average centers could stabilize in the range of INR 87 to INR 90, whereas Ahmedabad rentals would stabilize at a range of INR 145 plus. So we did see trading occupancy going up sharply during this quarter, and we expect Ahmedabad to continue ramping up over the next 2, 3 quarters as well such that by quarter 4, it would be at 92% and above of paying occupancy. Why it is a pore-size asset than Indore? Ahmedabad is only 750,000 square feet of CLA compared to Indore, which is a mini square feet. The rent -- average rent at Ahmedabad is much higher than [indiscernible], it can and it will contribute more in rental income compared to, St. Regi and Indore.

[Pritesh Sheth, analyst]

Sure, so basically, nothing unusual about this quarter. This is how we should look at in terms of rentals per square feet and MD contribution coming from one year. Right?

[Shishir Shrivastava, executive]

Yes.

[Pritesh Sheth, analyst]

Okay, great. That answers that question, thank you for answering, all the best.

[Operator]

Thank you. The next question is from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, analyst]

Hi, and good afternoon. So firstly, just a follow-up on an earlier question, Shishir, once, like, say, casting occupancy stabilizes at say, 95% from Q3 onwards, what kind of same-store consumption growth would you expect?

[Shishir Shrivastava, executive]

Well, Kunal, let's tough question to answer like this. I would just say, historically, we've always seen 10%, 12% same-store sales growth. We are hopeful that we'll be in that early teens, early 2-digit growth.

[Kunal Lakhan, analyst]

Sure, Okay. Just coming to the rentals right now, you've seen that in the last 1 year or so, rentals increasing by, say, anywhere between, say, 4% to 6% average rental Y-o-Y. Is this something that would one should like expect going ahead also? I'm talking about average model.

[Shishir Shrivastava, executive]

It would be a fair assumption, I would say. But let's also see that there will be some impact on account of the retailer mix change, so for ongoing contracts, et cetera, that would be a fair assumption. 6%, 7% would be fair. But with the change in retailer mix that the base will increase initially, you know our model, how the minimum guarantee in the first few years is much higher than the revenue share component kicks in and takes the overall rental even higher, so we expect to see some changes on account of that. We have quite a few good brands coming in. In Kurla, we are opening Armani. We are opening Tim Hortons, Blue Tokai and of course, Uniqlo in October. There will be -- there are similar in mix changes that are being undertaken at Pune and Bangalore as well.

[Kunal Lakhan, analyst]

Got it, but like when I try to correlate this 10% to 12% same-store growth and then 6% to 7% average rental growth. I mean, even the -- even if there's a revenue share kicking in, technically, right in the long term that your average mall rental growth should kind of fall in line with your consumption growth, like the way you work out your resets, so is there some disconnect there, like no?

[Shishir Shrivastava, executive]

So see, we've had -- as you are aware, we've had churns in the last year across centers, right? So when a churn happens, the minimum guarantee moves up, so while same-store sales growth has increased, the revenue share component over the increased minimum guarantee on account of these new contracts has just about started kicking in. We are seeing that additional contribution of rev share over MG at Kurla that has already happened. We're going to see that at other centers as well, so there is a direct correlation, but there's a trailing effect because at the start of the contract, the MG is high. As the trading density of that store picks up, that's when the revenue share component goes beyond the minimum guarantee and the contribution starts moving up.

[Kunal Lakhan, analyst]

Sure, my last question was on the debt side. We are generating enough OCF and which is funding our interest as well as our CapEx. Would this be the peak debt level you think or the kind of OCF that we are generating and plus the new malls kicking in from this year onward? Will this be the peak debt you think?

[Shishir Shrivastava, executive]

I mean, peak debt in what period of time is the question. I think as we add on more malls, et cetera, while -- I mean, we have stated in the past many times that our strategy is that we don't borrow on our under construction asset, unless there is a line of sight available for opening the asset, which surely comes in between 6 to 9 months. Once the asset is operationalized, we would like to borrow on that asset because it gives us various advantages. It releases the capital for further deployment, and we have -- I mean, while we are very, very robust operational cash flows as well, but we would like to release our equity in some projects to deploy new projects, and as long as the operational asset supports the debt, we are fine to borrow within conservative limits, so I don't think so this will be a peak level of debt. We may add LRD debt in few of few of our assets. Yes. If I may add to that Kunal.

[Kunal Lakhan, analyst]

Yes.

[Shishir Shrivastava, executive]

Let me just add one point to that. See if you look at our interest cover, it's almost 5x, right? So our EBITDA is almost 5x of the interest cover. We used to be at 3x, and now, of course, we are seeing a higher EBITDA margin, so we are seeing that number -- and we have paid down debt, so there is a lot of elbow room. I think we are going to always use that as a measure of how we want to be placed in terms of drawing down further debt, and as Anuraag explained, we will be drawing down further debt on operational assets and make sure that we have enough elbow room on account of this interest cover and borrow probably much lower levels of construction finance.

[Kunal Lakhan, analyst]

Got it, thank you.

[Operator]

Thank you. The next question is from the line of Mohit Agrawal from IIFL, please go ahead.

[Mohit Agrawal, analyst]

Hi, thanks, and good afternoon, everyone, so my first question is in your opening comments, you gave some numbers around the category-wise growth, so the SMB premium gross in hypermarket doing very well. How do we connect those numbers with the overall numbers that you reported for July 7%? So what are the key laggards there? If you could give some color on that? And are there any post-COVID how these categories have been doing? Are there any learnings that you want to -- are you applying that to the new leasing that you're doing in the under construction malls?

[Shishir Shrivastava, executive]

Let me answer the last part of your question first. The learnings have definitely translated in a slight change in the category mix, I would say, to some extent. But contractually, the business model structure, I don't think that there is any structural change to that. In fact, we are back to where we were pre-COVID and neither do our retailer partners expect much of any structural change to the overall contractual terms or the commercials. Your question pertaining to July '23, I think the information is a little raw for the moment. But we've seen -- I would say we've seen -- just give me one moment, let me try and pull out some information for you. Yes, we are still -- the numbers are a little raw. So I would hesitate to plant percentages in terms of growth across categories. But specifically on entertainment and FEC, when you ask that, I think July numbers are very, very high compared to last year for the month of July. The growth is quite higher.

[Mohit Agrawal, analyst]

And just a couple of clarifications, so what would be the laggard in this month? And also, you mentioned about the slight change in category mix in new leasing, if you could elaborate on that?

[Shishir Shrivastava, executive]

For July, I'm unable to give you an answer on this on the laggards because we -- I think we'll cover it in the next quarter, and as I mentioned, the information at this stage is still a little wrong.

[Mohit Agrawal, analyst]

Sure.

[Shishir Shrivastava, executive]

But if you look at Q1 FY '24 versus Q1 FY '23, you can see that electronics and multiplex were up about 2% and 3% approximately. Here, this is where I think we hope to see some growth in this ongoing quarter. In terms of the category mix, we have -- I think this is something that we have stated right from 2022 when we reopened our malls that we have taken a fashion up. We have taken jewelry as a category up. We've taken food and beverage as a category up in terms of the overall square footage, so fashion and accessories typically are seeing about 55% of the trading area today. Jewelry is still at 1%, but it contributes 11% of consumption. Food and beverage is at about 9% to 10% depending on location to location, and it contributes about 11% of the overall consumption.

[Mohit Agrawal, analyst]

Okay. Perfect, and my second question is on the business development, so what is the outlook like there? And any challenges that you may be facing in terms of availability of land parcels or the prices going up very high, so if you could give some color on that as well?

[Shishir Shrivastava, executive]

I think we have a very strong pipeline, which we should be able to announce hopefully something in the next quarter. But we do have a strong pipeline across different geographies, different markets in the country. Yes, of course, there are challenges in finding clean, clear land with no title issues. Price expectation has moved up, but I think we're still being able to find line passes, which really help fit well within our mandate and our overall return expectations.

[Mohit Agrawal, analyst]

Okay. Any color on what kind of additions you could do this year? Any indicative pipeline?

[Shishir Shrivastava, executive]

I'm sorry, but at this point in time, I won't be able to share that information more.

[Mohit Agrawal, analyst]

Sure. That's fine. Thank you so much to answer my questions.

[Operator]

Thank you. The next question is from the line of Biplab Debbarma, please go ahead.

[Biplab Debbarma, analyst]

Good afternoon and thank you for taking my call. Sir, my first question is on the retail on the of this under construction market. So we have seen that in the past in the retail malls under construction will [indiscernible] significantly pre-leased a month before the mall became operational. There is for OpEx, we have not started listing significantly. So just trying to understand, is there any strategy different for office and office versus mall? And I mean, intuitively would not be reduced significantly easing the [indiscernible] in advance in August.

[Shishir Shrivastava, executive]

I think the nature of the product is only very different. Typically, in a mall, you can you-- when you launch the mall, even before you break ground, you end up doing some kind of pre-leasing to large anchors, which set the tone for the brand mix, et cetera, and retailers can take a look ahead of 4 years because they know their expansion strategy across geographies. In offices, RFPs come out typically maybe 6 months prior to the intended date of occupancy. So while the building is under construction in very few cases are -- the one is one able to do a pre-lease unless you do a build-to-suit requirement, which is -- which are very few, not too many numbers. Also, if our front office spaces, which is what we are building, the sweet spot we are seeing is in the range of about 30,000 to 50,000 square feet in terms of demand, now that's the kind of demand that comes typically 6 months prior to the actual need.

[Biplab Debbarma, analyst]

Okay, that's a -- and sir, what kind of enter do you expect in this upcoming office spaces like Hebbal, Wakad and Chennai?

[Shishir Shrivastava, executive]

We have -- see, we had underwritten our returns or our business plan for Hebbal, which is the office building, which is going to become operational in this financial year. We had underwritten that at the range of if I remember correctly, about INR 65 crore or INR 70 a square foot. We expect to lease higher than that for sure.

[Biplab Debbarma, analyst]

And what about the other options in Wakad likely you mentioned in?

[Shishir Shrivastava, executive]

So Wakad will also be in the range of -- we expect to outperform the business plan, but we would expect to be in the range of about INR 80 or thereabout, Whitefield is a little far out in terms of the project completion, so at this point in time –

[Biplab Debbarma, analyst]

And Chennai?

[Shishir Shrivastava, executive]

Chennai should be in the range of, again, INR 65 to INR 70 -- today is rental in that micro market.

[Biplab Debbarma, analyst]

Okay, and one final question. Just is to know. Sir, when you start I mean, start looking at the landing and initial after preliminary evolution and we have a short list of the based on the preliminary information they have shortlisted a land, and from there, to finally doing that agreement, definitive closing the deal. Typically, is there a ballpark number which 1 year, 1.5 years, 6 months? Is there any ballpark number all in [indiscernible] from reconsigned from location to location and...

[Shishir Shrivastava, executive]

It varies no. I mean, if it's a simple straightforward clear land cycle without requiring any statutory governmental approvals, et cetera, one can complete the transaction, and we've done it in the past -- in 3 months also. So when we acquired Hebbal, that was concluded in less than 3 months. But there are -- typically, if there is a government auction, then you conclude it in 1 to 2 -- between 1 to 2 months. If there are transactions which require land use conversion, et cetera, then the timeline can be anywhere between 6 to 9 months.

[Biplab Debbarma, analyst]

And what takes most of the bank? Is it the deal negotiations on the valuation or post-agreement there are...

[Shishir Shrivastava, executive]

[indiscernible] is anywhere between a 60- to 90-day process, and like I mentioned, the timeline varies on account of other aspects, depending on statutory approvals, if any, required for transfer of land, land use conversion if it is required. Mainly approvals, and that depends from... You may take that away from this conversation.

[Biplab Debbarma, analyst]

Okay, sir. Thank you.

[Operator]

Thank you. The next question is from the line of Ashwani Kumar Agarwalla from Edelweiss Mutual Fund, please go ahead.

[Ashwani Kumar Agarwalla, analyst]

Good afternoon, sir. I've got a couple of questions. Can you tell me that the broader inflation is roughly in the range of 6%, whereas our retail consumption is in the range of 6% to 7%? So how do we see the value -- the actual real growth coming in? And from the 7% also, the jewelry part really did very well, and that was aided by a 15% jump in the coal prices. So how has been the overall footfalls ticket size purchase per person? And do we see real growth coming in?

[Shishir Shrivastava, executive]

I would say that the footfalls would have -- certainly footfalls are back to the pre-COVID levels now. The ticket price has probably been marginally impacted. If your question is, are we going to expect to see consumers spending a larger wallet share on during their mall visits. I think that, that is what we are working on by way of improved category and brand mix and upgraded offering and newer products in our mall. So that's always the goal to certainly out beat the inflation, and we have consistently done that for the last 20 years, and it's -- I think it's just -- there's no long-term impact in our opinion, but it requires probably an upgrade and meeting customer aspirations on newer brands and newer categories.

[Ashwani Kumar Agarwalla, analyst]

Okay, and another question. I've got a few questions. So if you see the last Diwali, the last festival season had a lot of pent-up demand because people didn't celebrate the festival for 2 or 3 years. No, this would be a normal year, so do you see real traction coming in this festival?

[Shishir Shrivastava, executive]

Are you planning to spend more this Diwali, I hope so.

[Ashwani Kumar Agarwalla, analyst]

Not really.

[Shishir Shrivastava, executive]

I would hope so. See, again, when last year's performance, there was speculation whether it is even shopping and pent-up demand for the full year. That was the question that we have, I think this Q1 is giving us the confidence that that consumption, while it may not have grown the way we would have liked it to. There is certainly a growth and there is -- it was not an interim spurt of consumption that we saw. This time, Dasara is in October, Diwali in November, Christmas in December. The celebration is also more spread out. So logically, there should -- one would hope that we can get more of the consumer wallet share.

[Ashwani Kumar Agarwalla, analyst]

Okay, and sir, now if I come to the financials. So post-COVID, we had a round of price negotiation, where we had a significant price increase or the rentals in fees. Now how -- what's the kind of rental increase which you expect in the next 1 year or 6 months, especially from the ongoing current mods?

[Shishir Shrivastava, executive]

See, I'll try and answer this question slightly differently, okay. If you look at rent collection on consumption, I think that's a good measure to understand where we are. We are -- this quarter, we've been at approximately 14%-odd in malls where consumption continues to grow, trading density continues to grow up higher, you have the ability to push this number even higher, so for example, at Phoenix Palladium Mumbai -- just give me one moment. So Phoenix Palladium, which is our flagship mall in Bombay, where trading density is approximately at about 4 – 3,800, 3,500 to 3,800. There typically, the cost of occupancy, which is rent on sale is -- can be as high as 17% as well. So as the mall consumption moves up, you have the ability to take up your rental received because the margins are higher and the retailers can afford to pay that higher rental.

[Ashwani Kumar Agarwalla, analyst]

[indiscernible]

[Shishir Shrivastava, executive]

I didn't hear, your pardon?

[Ashwani Kumar Agarwalla, analyst]

Apart from Palladium in the other malls because Palladium is quite concentrated.

[Shishir Shrivastava, executive]

Bangalore this year, if you look -- compare Bangalore's growth, rental growth, this year, you will see that Bangalore has really outperformed into in terms of consumption in this quarter, and our rentals have started to show an improvement, and currently, we would be at approximately -- we would see rental income growth over there.

[Ashwani Kumar Agarwalla, analyst]

Okay, sir. Thanks a lot.

[Operator]

Thank you. The next question is from the line of Nimit Gala from [indiscernible], please go ahead.

[Unknown Analyst]

Thanks for the opportunity, so just wanted [indiscernible] trends. Currently -- for the current quarter, using commercial [indiscernible] has been quite strong, so would you be able to provide the verticals from what's the timing path from? And the second is, I remember you did mention about the experience collective in the residential, so I just wanted your thoughts on expansion plans on beyond Bangalore or Kolkata for that matter?

[Shishir Shrivastava, executive]

Yes, I request you to repeat your question, there's a lot of background noise.

[Unknown Analyst]

Okay. Can you hear me last...

[Shishir Shrivastava, executive]

Yes, please go ahead.

[Unknown Analyst]

So firstly, on the leasing trends, commercial using trends, I see that the commercial leasing has been quite strong in the current quarter. So would you be able to provide the verticals from where this the tenants are? And secondly, about the resident, I remember you've been mentioning in the last quarter about the extremely selective in the residential segment. So just wanted your thoughts on the expansion plans beyond Bangalore or Kolkata?

[Shishir Shrivastava, executive]

Okay. On commercial leasing, we've -- I think you can connect with the team to get a breakdown on which sectors the occupants have come from. We have seen about 175,000, 176,000 square feet of rental in this first 4 months of this financial year. In -- just to name a few, I think we have Adani, Indigo, JSW Steel, Bajaj Group in Pune, so you can get a detailed list from our IR being on that perspective.

[Unknown Analyst]

Sure.

[Shishir Shrivastava, executive]

In terms of residential, we are -- as we mentioned in the past, we are only looking at opportunistic situations today, where we have the ability to acquire a land parcel at an established market where the established rates are high, so at present, we're not actively going out for -- to look at the growth in that space. But we're going to continue to look at opportunities where the returns expectations are high and where we established and mature as extent.

[Unknown Analyst]

Understood, that is helpful. Thank you.

[Operator]

Thank you. We'll take that as the last question. On behalf of The Phoenix Mills Limited that concludes this conference call. Thanks for joining us. Ladies and gentlemen, you may now disconnect your lines.