Phoenix Mills Ltd

NSE:PHOENIXLTD

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, good day and welcome to the Q3 and 9 Months FY '23 Results Conference Call of The Phoenix Mills Limited. [Operator Instructions] Management of the company is being represented by Mr. Shishir Shrivastava, Managing Director; Mr. Anuraag Srivastava, Group CFO; and Mr. Varun Parwal, Deputy CFO. [Operator Instructions] Please note that this conference is being recorded.At this time, I would like to hand over the conference to Mr. Shishir Shrivastava. Thank you and over to you, sir.

[Shishir Shrivastava, executive]

Good afternoon, ladies and gentlemen. Thank you for joining us today and we take pleasure in welcoming you all to discuss the operating and financial performance of the third quarter and first 9 months of FY '23. I hope you have had a chance to look at the results presentation shared by us. The same is uploaded on the stock exchanges as well as on our website. We will now take you through the key highlights of the results and will refer to relevant sections of the results presentation from time to time. We will now start with the performance of our retail portfolio. May I draw your attention to Page 4 onwards of the results presentation. Consumption in Q3 FY '23 stood at INR2,647 crore showing a growth of 28% over Q3 FY '20, which was historically our best year. Excluding Phoenix Palassio Lucknow and Phoenix Citadel Indore, the growth was 14% of Q3 FY '20. Consumption was robust across categories in the third quarter.Some of the top performing categories were jewelry which was up 142% from Q3 FY '20, electronics up 21% from Q3 FY '20, fashion and accessories up 26%, food and beverage up 31%, FEC, multiplex and entertainment up 30% from Q3 FY '20. Turning to Page 5. Consumption in 9-month FY '23 stood at INR7,037 crore, up 27% compared to 9 months FY '20. Excluding Phoenix Palassio and Phoenix Citadel's contribution, growth was 14% compared to 9-month FY '20. Retail collections for 9-month FY '23 stood at INR1,585 crore, maintaining the quarterly average run rate of over INR525 crore per quarter. Moving to Page 6 and 7. January '23, we saw consumption at approximately INR816 crores, which was up 27% compared to January 2020. At Phoenix Palladium 2 of our key stores, Zara and Reliance Digital, are undergoing renovations. Zara is recreating a flagship store with a much larger GLA and is currently not operational since January 1.This has had a negative impact of about 8% on consumption growth at Phoenix Palladium, a 3% impact on consumption growth on a like-to-like basis and a 2% impact on overall consumption growth. YTD April to January '23, we achieved consumption of approximately INR7,853 crore and are on track to cross annual consumption of approximately INR9,000 crore. Any bump up on account of new trading areas becoming operational inside existing malls at Chennai, Pune, Kurla; sustained consumption growth in existing malls and new mall opening at Ahmedabad in this month; and consumption growth at our latest mall Phoenix Citadel Indore will account for an increase beyond the INR9,000 crore estimate. We have had a robust event calendar for each mall with major spike events scheduled for weekends and engaging mini spike events during weekdays.We continue to invest in innovative eye-catching decor across properties and bring in the best of brands and categories and fine dining food and beverage experiences. We gear all of these activities towards making each mall the de facto destination for consumers. Turning to Page 10 through 13. We have some photos depicting the beautiful interiors at our recently launched Phoenix Citadel Indore, which is the largest mall of Central India with a GLA of 1 million square feet. Phoenix Citadel currently has a trading occupancy of 50%, up from 42% in December and we are on track to cross occupancy of 85% by March 2023. The trading density for this month was in the range of INR700 to INR800 per square foot per month and we expect to reach approximately INR1,000 per square foot per month in FY '24.Please turn to Slide 14 onwards for an update on our upcoming malls. I'm happy to announce that we are set to launch Palladium, Ahmedabad later this month with a retail GLA of approximately 770,000 square feet. This mall is 99% leased as of January '23. This will be followed by the launch of Phoenix Mall of Asia at Bangalore and Phoenix Mall of the Millennium at Pune in Q1 FY '24. Phoenix Mall of Asia, Bangalore has a retail GLA of approximately 1.2 million square feet and has achieved leased occupancy of 87%. Phoenix Mall of the Millennium Pune has a retail GLA of approximately 1.1 million square feet and has achieved leased occupancy of 88% by January '23. At our retail project in Calcutta, we have completed the demolition work for the old on-site structures and currently piling and diaphragm work is in progress. At Project Rise in Lower Parel, shore piling work has been completed, rock anchoring excavation is in progress.Moving on to offices. Our Phase 1 of offices at Bangalore, part of the Mall of Asia development. We have a GLA of approximately 800,000 square feet in the first phase and the RCC structure of the towers are completed. We are in advanced leasing discussions and expect to operationalize the offices in the first half of FY '24. Moving on to other office projects. Design work has been completed for both Palladium offices at Chennai and Millennium offices at Wakad, Pune with a target completion in FY '25 for both. In case of Millennium offices, construction has commenced for 2 out of 4 towers. And for Palladium offices at Chennai, slab casting has commenced on the top of the mall podium. Excavation and shore piling is underway for our retail and office expansion at Phoenix MarketCity, Bangalore.As we make fast inroads in Gujarat and with the launch of Phoenix Palladium Ahmedabad later this month, we also completed the acquisition of a 7-acre land parcel in Surat in December '22 to develop a premium retail destination for customers. Now moving on to our performance of our retail portfolio from Page 25 onwards. In line with consumption, our rental and EBITDA growth has also been strong. Q3 FY '23 retail rental income was approximately INR336 crore, up 21% compared to Q3 FY '20. Retail EBITDA for the same quarter was INR339 crore, up 29% compared to Q3 FY '20. In the first 9 months of FY '23, our retail rental income stood at INR972 crore showing a growth of 22% over 9 months FY '20 and retail EBITDA stood at INR982 crore showing a growth of 28% over the same period FY '20. Page 33 gives you a status on leased occupancy, trading occupancy and trading areas. We have seen a significant ramp-up across these 3 parameters vis-a-vis June '22.May I now request Anuraag to take you through the office, hotel and residential section and overall financial results.

[Anuraag Srivastava, executive]

Thank you, Shishir. Good afternoon, everyone. Please refer from Page 35 to 37 for an update on our commercial portfolio. Our commercial office portfolio continues to demonstrate a strong leasing traction. For the period of April to January 2023, we saw gross leasing of 3.95 lakh square feet, of which 2.45 lakh square feet is the new leasing and 1.5 lakh square feet is the renewal. Total office income for quarter 3 FY '23 stood at INR42 crores, up 16% year-on-year. Total EBITDA stood at INR23 crores. Collection efficiency for the quarter was at 96% and we collected about INR55 crores. During 9 months of FY '23, office income stood at INR126 crores was up by 10% year-on-year and EBITDA was flat year-on-year at INR71 crores. Collection efficiency for the 9 months was at 98% and we collected about INR146 crores in this part of our business.For a update on hotels, I'll request you to please refer to Page 39 to 44. At both our hotels, we have witnessed strong improvement on account of social and corporate events, pickup in F&B and the festive season, which has led to the higher occupancies and the ARRs. At The St. Regis, during January 2023 our ARR stood at INR17,765 and RevPAR at INR14,786 showing significant improvement over the same period last year. The operating performance at St. Regis Mumbai has surpassed most parameters in last 9 months led by resumption of foreign travel, domestic corporate travel, social events and staycation. These factors provide an excellent visibility for high occupancy and ARRs in the coming months. Total income stood at INR109 crores, up 13% from quarter 3 FY '20. Occupancy for the quarter stood at 81% and ARR was at INR16,392, up 18% as well. Operating EBITDA came in at INR49 crores, which was a 21% growth compared to quarter 3 FY '20.At Courtyard by Marriott Agra, total income stood at INR14 crores, up 13% from quarter 3 FY '20. Occupancy for quarter 3 FY '23 was at 79% and ARR at INR5,610, up 14% from quarter 3 FY '20. During the month of January, Courtyard by Marriott RevPAR stood at INR4,125. Moving on to residential business update, please refer to Page 46. We are witnessing very good traction in residential sales mainly led by robust demand of ready to move in inventory and faster conversion. We achieved overall sales of INR104 crores in quarter 3 FY '23, of which INR14 crores worth of sales is pending registration. Momentum in sale continues with sale of INR275 crores in the period from April to December 2022. Further, we have now crossed a sale of INR300 crores if we take the first week of February also into consideration. Collections in quarter 3 were at INR129 and 9 months at INR254 crores.We are following through our strategy on marquee residential projects in mature markets and we are pleased to announce that we expect to close the acquisition of very prime 5.5 acre land parcel in Alipore, Kolkata for a consideration of INR430 crores. More details to follow on this account in the coming quarters. I would request you to turn to Page 48 to 51 for our financial results. Some of the key highlights of our consolidated financial performance are as follows. Income from operations for quarter 3 FY '23 was at INR684 crores, up 66% year-on-year and 34% compared to quarter 3 FY '20. Income from operations at INR1,909 crores for 9 months of FY '23, up 93% year-on-year and 24% compared to 9 months FY '20. EBITDA for quarter 3 FY '23 at INR384 crores, up 67% year-on-year and 48% compared to same quarter FY '20. EBITDA at INR1,088 crores for 9 months FY '23, up 121% year-on-year and 43% compared to 9 months of FY '20.Reported PAT after minority interest and before comprehensive income for quarter 3 at INR176 crores, up 78% year-on-year and 92% compared to quarter 3 of FY '20. Same numbers for 9 months, PAT at INR1,081 crores compared to INR133 crores for 9 months FY '22 and INR288 crores for 9 months of FY '20. I would now move to cash flow, debt and liquidity position and would request you to refer Pages 50 to 58. For quarter 3 FY '23, we generated INR419 crores of net cash from our operations and our operating free cash flow adjusted for tax stood at INR339 crores. For 9 months period, our operating cash flow stood at INR1,152 crores and our free cash flow stood at INR911 crores, which has surpassed our FY '22 numbers of INR501 crores. Our CapEx for the quarter was INR775 crores. The pace of spending has picked up as 3 of our under construction malls enter into their final phase of completion.As mentioned earlier, Palladium, Ahmedabad is set for launch later this month and Phoenix Mall of Millennium and Phoenix Mall of Asia are set to commence operations in first quarter of FY '24. Moving on to our debt numbers on Page 55. Consolidated gross debt which stood at INR3,953 crores as on 31st December '22 showed a decrease of INR311 crores from INR4,264 crores as on 30th September '22. On the operational portfolio, there has been a decline in debt due to gradual repayments as well as few planned repayments that have been done during the quarter. As Phoenix Citadel Indore has become operational, the debt has been moved to operational asset as a result of which the under construction portfolio has witnessed a decrease in debt. Average cost of borrowing is up 52 bps to 8.41% in December '22 from 7.89% in September '22. Currently, our lowest cost of borrowing stands at 7.35%.Despite RBI increasing rates by 225 bps since March '22, our borrowing cost have gone up only by 111 bps so far. As the overall interest rates in the economy start to rise, our effort will be to minimize the impact of this on our cost of borrowing by reducing the spread charged by the banks on top of the repo rate. Moving to liquidity on Page 57. Our liquidity position as on 31st December '22 was INR1,863 crores. This excludes INR1,285 crore in unutilized OD accounts. At a group level, our net debt position is INR2,090 crores and PML share of net debt is INR1,550 crores. We are bullish on our business prospects and with a strong balance sheet position, our focus is now to deliver on our under construction projects in time and judiciously deploy our capital to expand our portfolio. Last but not the least, I'm pleased to announce our foray into warehousing through our recent acquisition of a land parcel measuring about 33 crores at Surat NCR. The acquisition cost of this parcel was about INR53.2 crores.With this, we would close our opening remarks and will open the call for an interactive session and question-and-answer session. Thank you.

[Operator]

[Operator Instructions] We have our first question from the line of Puneet Gulati from HSBC.

[Puneet Gulati, analyst]

My first question is with respect to the 2 malls, Kurla and Chennai, which seems to be lagging behind the others. Can you comment on what's happening there and what steps are you taking and when should we expect them to come back to normal sustainable levels?

[Varun Parwal, executive]

Puneet, Varun this side. Thanks for your question. Kurla, I would say that if you see the January consumption, we are seeing a recovery in the numbers in Kurla. We have undertaken a relook at the brand mix and we have opened several new stores, which has helped freshen up the brand category mix in Kurla. We also have the first [indiscernible] store in Mumbai, which is under fitout at this point in time and that would also add further to help draw customers to Kurla. Secondly, I think we are also stepping up our spike events both over the weekend as well as during the week to ensure that we continue to establish Kurla as a go-to destination as people increasingly come back to offices. I think January has seen a turnaround and going forward in the coming months, you should continue to see a turnaround. Going to your second question which is on Chennai. Chennai, as you're aware we had a significant amount of renewals that were lined up in Chennai and as part of that, we have been phasing out some of the nonperforming retailers both even in Q3 at this point in time. Now several new stores have opened up and you see the positive impact on consumption coming through as we go through the rest of the month in this year.

[Puneet Gulati, analyst]

Okay. And when should they ramp up?

[Anuraag Srivastava, executive]

Just to add, this is Anuraag. I think there has been a decent increase in trading occupancies on both malls. I think we were at in middle 80%s a couple of quarters back on both the malls and both these malls have moved in early 90%s in terms of trading occupancy. Also I think there is healthy growth in the trading density in both these malls. I think it's just a question of time. As these malls catch up to the other malls in terms of trading occupancy, we will have the similar numbers on consumption.

[Puneet Gulati, analyst]

Okay. And rentals should follow the same I presume because they're still lagging a bit compared to consumption?

[Varun Parwal, executive]

I think if you see Kurla, Puneet, rentals at Kurla have increased to INR118 compared to about INR108 that they were pre-COVID.

[Puneet Gulati, analyst]

Yes. But Kurla is still okay. Chennai, if I look at Y-on-Y rentals, they're still 14% despite consumption up almost 20% Y-o-Y so they seem to lagging behind a bit.

[Varun Parwal, executive]

So Chennai also I think if you see the rental rate, Puneet, that has gone to INR159. Now as the trading occupancy ramps up, you will see a positive impact happening on the rental income and the asset EBITDA well. Right now it's flat compared to the pre-COVID period, but that's also because that the trading area is about 9% lower than what it was in the pre-COVID period. So with the new stores and we have a very active Instagram profile for all of these assets and I encourage everyone to follow it because you will get far quicker updates on the new stores that are opening up at each one of these centers. And Chennai has seen a lot of new stores opening up in January.

[Puneet Gulati, analyst]

Understood. That's helpful. My second question is on your new malls, both Pune and Bangalore. Now you're indicating to start in first quarter of FY '24 so by June and there is still almost INR400 crore in my view that needs to be spent there. Is there enough -- is there reasonable certainty that they will start in 1Q or is there a risk of them getting pushed out to 2Q? And following up on that, how soon should we see them ramp up to 90%? For example Indore now you're guiding in 4 months you'll be 80%. How soon will these malls reach about 90% in trading occupancy?

[Varun Parwal, executive]

So I think first if you see Indore, Indore started at 42% occupancy and it has gone to 50% today and I think we are looking at it crossing 85% by March 2023. Even in Indore, there is a bit of retention money that is held back and that is a figure of about INR48 crores which is there and this retention money is typically spent or released rather within 12 months of the mall getting completed. So when you look at Pune and Hebbal as well, right now our monthly spending run rate here is going to be at about INR60 crores a month in the 2 malls combined. So by the time we open up, we would have spent another INR250 crores to INR300 crores. So the balance amount that would be left with us would be about INR100 crores to INR120 crores, which is very typical for an asset of this size, Puneet.

[Puneet Gulati, analyst]

Okay. And ramp-up should we expect similar 4 months these malls going up to 85% level or are these different in some sense?

[Varun Parwal, executive]

See, our typical guidance is to ramp up to 85% plus within 12 months, right? And we have seen a significantly aggressive ramp-up and a very positive ramp-up in both Lucknow and Indore. And fingers crossed, our teams would endeavor for the same show and even a better show for Pune and Bangalore as well.

[Puneet Gulati, analyst]

Understood. Last one on the residential. Have you paid anything for Kolkata Alipore land?

[Anuraag Srivastava, executive]

No, we haven't paid anything as yet. Only I think an initial amount of about close to INR5 crores we have paid. The balance payment will go out in this quarter and I think the formalities are underway and we should be acquiring that land parcel soon.

[Puneet Gulati, analyst]

Okay. And how much is the balance?

[Anuraag Srivastava, executive]

INR432 crores.

[Puneet Gulati, analyst]

INR432 crores. And what would you need to spend to build it up fully, any estimate you have for this kind of thing?

[Anuraag Srivastava, executive]

I think very rough estimates, it's very initial and it will depend on the kind of project and how it will go, but roughly about I think in ballpark of INR1,000 crores.

[Puneet Gulati, analyst]

INR1,000 crore additional construction cost?

[Anuraag Srivastava, executive]

INR1,000 crore is total, Puneet, including that.

[Shishir Shrivastava, executive]

Puneet, this is Shishir. While we have INR1,000 crore of total estimated outflow on this project at Alipore, I think we will need to fund only about 20% of the construction cost because balance will get funded from sales. So INR500-odd crores of construction. About INR100 crores, INR120 crores is what we will require to fund initially before the project goes into sales and collections from there will fund the balance.

[Operator]

[Operator Instructions] We have our next question from the line of Pritesh Sheth from Motilal Oswal.

[Pritesh Sheth, analyst]

First question is on the retail rental income for this quarter. While consumption growth was roughly 25%, 26% quarter-on-quarter, but our retail rental growths were 7%. And even if we compare the ratio of retail income to consumption, that's at 13% versus on an average it has been 14%, 15%. So anything to read into or this is I mean not supposed to be followed on a quarterly basis, but over the period so if you can just highlight.

[Anuraag Srivastava, executive]

Yes. So I think our overall guidance on our number is I mean we've been growing at a CAGR of about 15%, 16%, mid-teens and I think we continue to be on that trajectory. The consumption increase vis-a-vis rental increase, I think there are a couple of things. I think it largely also depends on the category which is growing in consumption. Like for this quarter we have seen jewelry on a much higher growth rate than in the other categories because it's a festive season and wedding season and those kind of things. So quarter 3, jewelry tends to be on the higher amount. So that is one aspect. Second is I think our revenue share is about 15%, 16% -- sorry, between 12% to 15% and proportionate amount will only fall down to a rental increase, which we are seeing this quarter as well. So broadly these 2 are there. I'll say there's nothing much to read into this. I think this is business as usual and on an overall basis, I think our guidance remains intact of those numbers.

[Pritesh Sheth, analyst]

Sure, got it. Secondly on office so we have had a good leasing at least in January for Fountainhead Tower 3. What sort of timeline we built in to see full occupancy in that project? And since we are completing our Bangalore Asia offices in first half FY '24, any pre-leasing that we have done till now or what's the timeline that we are looking there?

[Shishir Shrivastava, executive]

This is Shishir. For Fountainhead Towers 2 and 3, actually we have a fairly good pipeline in sight. We would expect to see about -- by the end of FY '24, we should be at about 90% leased occupancy. And we are seeing visibility of being at Fountainhead Tower 3 reaching about 50% by July or August of this year. So there's a decent pipeline in place. We have ramped up the team. We've got some very, very good senior members on board now across our leasing teams. Bangalore Asia Towers we expect the OC sometime around June or July of this year and again we have about 8,70,000, 8,80,000 square feet of GLA there. All the RFPs where we are engaged with and other requirements that have come in, we've seen approximately 30 lakh or 3.5 million square feet of visibility, which is part -- and we are engaged with potential tenants there. So we remain very optimistic seeing the bounce back in demand, which is arising out of the confidence that's coming out of the RFPs which are in the market.

[Pritesh Sheth, analyst]

That's very helpful. Just lastly on Citadel. The rental if I see you're at INR114, INR115 per square feet while we have earlier guided around INR95, INR100 per square feet. Is it that initial mix has higher rental and probably when mall fully stabilizes we'll get back to INR95, INR100 kind of a per square feet rental or do we see these rentals continue for that asset?

[Shishir Shrivastava, executive]

Sorry, which asset are you referring to in the retail?

[Pritesh Sheth, analyst]

Citadel Indore.

[Shishir Shrivastava, executive]

So we had originally underwritten our business plan I think at about INR85. I think we should be somewhere in that range of about INR95 to INR100 only. So I didn't quite understand your question. Did you say that the average...?

[Pritesh Sheth, analyst]

I said rentals are right now higher at INR114 is what you have mentioned in the presentation versus we had underwritten it lower. So should we consider INR114 as the normalized rental run rate for that asset?

[Shishir Shrivastava, executive]

Yes, your analysis is correct that it's basis the current mix. As the mall gets occupied and more of the anchors open, we expect it to stabilize in that range of about INR95 to INR100.

[Operator]

We have a question from the line of Kunal Lakhan from CLSA.

[Kunal Lakhan, analyst]

My first question was on this month actually Jan, you've seen some extended end of season sales both in the physical and online format. [Technical Difficulty]

[Operator]

Sorry, Mr. Lakhan, your voice is breaking. It's coming muffled.

[Kunal Lakhan, analyst]

Am I audible now?

[Operator]

Yes, please go ahead.

[Kunal Lakhan, analyst]

So what I was asking was that we have seen extended end of season sales from retailers both in physical as well as online format. So are we seeing some pressure on retailers in that context and also like any segment that highlight little more pressure than others?

[Shishir Shrivastava, executive]

Kunal, I didn't quite understand your question. I got the part that you've seen an extended end of season sale in the month of Jan. of both online and offline. I did not understand the question pertaining to the pressure on the retailers.

[Kunal Lakhan, analyst]

So how should we read this whole extended end of season sales. Like are retailers seeing more pressure in terms of offloading inventory or parallely is there any slowdown in the distribution and the consumption side?

[Shishir Shrivastava, executive]

Not at all. In fact this impact that was the concern in December. But looking at Jan performance, I think the demand continues to be sustained and we continue to drive that demand through our innovative marketing. So previously the end of season sales used to be I think from 10th of December to 14th of Feb typically and presently in fact the duration has shortened it's from 20th of December to 30th of Jan.

[Kunal Lakhan, analyst]

Okay. So you're not seeing any slowdown in the distribution and consumption side?

[Shishir Shrivastava, executive]

No, we are not seeing any slowdown in the distribution and consumption. And if you also look at specifically, I would say that jewelry at 142% growth, we are also trying to understand what the drivers are. As Anuraag mentioned, it's on account of perhaps a lot of the wedding season being an extended period. But if you look at the other categories of discretionary spend; whether it's SMB or fashion and accessories, electronics; they've all shown significant growth, even entertainment for that matter.

[Kunal Lakhan, analyst]

Sure. My second question was on the Alipore land. Sir, this is not under any platform, right? This will be done by us, right?

[Shishir Shrivastava, executive]

Yes, it's 100% under a subsidiary of -- it's under a 100% subsidiary of Phoenix Mills that we are developing it.

[Kunal Lakhan, analyst]

Sure. Sir, just wanted to understand the thought process here because there's a lot of capital to be deployed there, right, almost INR900 crores from our book and then some part being funded by presales. Just how are we thinking about this? How should one read this like in terms of our strategy going ahead? Because historically you're a mall developer and operator, but now like incrementally we are seeing a lot of capital getting deployed into newer business segments. Should one read that the incremental opportunities in the Tier 1 cities that we are targeting are getting fewer and fewer or is it like a conscious strategy for us to like diversify our business? How should one read this?

[Shishir Shrivastava, executive]

Yes. I think in the last year we have actually on multiple occasions stated what our strategy is both on the residential side and on other businesses such as warehousing. So I would like to just reiterate that. As far as resi is concerned, our stated strategy has been to look for opportunities in mature locations which are usually value accretive where a product similar in format and quality would be like a One Bangalore West, which we already have, and accordingly we've gone and acquired or we're in the midst of concluding the conveyance on the Alipore land parcel. That immediate neighborhood or that market has typically seen sales at a rate of about INR17,000, INR18,000 going up to INR20,000, INR21,000 for good quality projects per square foot.So this is really the kind of micro market where we would like to build out residential. The reason why we did that of course was again, as I've explained in the past, this has been a learning through COVID where retail income had actually come to a halt, but the office business and the residential business supported our cash flow. So we want to have some diversification of risk. So it's in line with our strategy of marquee projects, iconic residential developments in mature markets. Having said that, the mall business itself continues to grow and we continue to focus on the key markets that we have identified in the past. We have check boxed Kolkata and Surat in that and we are actively looking for opportunities in other markets.

[Kunal Lakhan, analyst]

So the way I'm reading it is like you are not seeing any dearth of opportunities in Tier 1 towns like it's just a conscious strategy of deploying this capital to diversify our portfolio.

[Shishir Shrivastava, executive]

Visibility of cash flows as I think you've seen that we are at an approximate INR900 crore of free cash flows in the 9 months of this financial year. So if one looks at about INR1,200 crore kind of free cash flow this year growing to about we would estimate INR1,500 crore, INR1,600 crore or INR1,800 crore in the next year; we have a capital deployment strategy in place. And Anuraag and Varun will delve into that deeper in a short while if you would like to move to your next question.

[Kunal Lakhan, analyst]

My last question was on the warehousing side. Yes, we made that foray with a small deployment of capital. But in the long run what is the strategy here and how big this can be and what kind of capital would you look to deploy in the next 3 to 5 years?

[Shishir Shrivastava, executive]

Okay. Warehousing, the whole idea started with providing quality warehousing space because our retailers had a demand in cities where there isn't good quality warehousing real estate available. So we are focusing on those markets to start with. I think as we have progressed and we've concluded the first acquisition in NCR and the demand pipeline that is being built for this location, it does appear to be an extremely attractive business. For the present we are looking at deploying our own capital to grow it to a certain point to fulfill the needs of our retailers. Approximately INR300 crore to INR350 crore is what we expect to spend from our own pocket before we decide to probably expand that business by a way of bringing in a financial partner.

[Operator]

We have our next question from the line of Mohit Agrawal from IIFL.

[Mohit Agrawal, analyst]

So my first question is currently where are the footfalls across your malls? So I think last quarter that number was in that 85% to 90% range. So have they recovered back to 100%?

[Shishir Shrivastava, executive]

This last quarter we should be close to about 100%, yes. At some locations it may be even higher. Bangalore for example maybe about at 115%.

[Mohit Agrawal, analyst]

And what do you think will lead to that growth from here? And if you could also elaborate what segments were earlier lagging, which have recovered and what segments are doing fine within -- across your malls?

[Shishir Shrivastava, executive]

When you say growth, are you referring to -- is this a continuation to your question on footfall growth or is this growth of...?

[Mohit Agrawal, analyst]

Yes, footfall. So I mean to suggest that do you see the footfall growth and the consumption growth kind of converging or do you see the gap between let's say you see 127% consumption level. Do you see 127% versus 100% to kind of that difference you sustain? How do you see that going forward?

[Shishir Shrivastava, executive]

Let me just clarify that our focus is consumption so I'm not going to delve into footfall. Everything that we -- all the marketing initiatives that we undertake is to drive that correct profile of footfall to our mall, but the focus is consumption and a growing ticket size per person. So consumption growth we have always said that once we are back to pre-COVID levels and beyond, one can estimate 15 or whatever -- mid-teens growth annually and I think we should be on track with that. And your next question was on -- was it on categories? Were you referring to categories?

[Mohit Agrawal, analyst]

Yes, categories. So my question was actually on footfalls, which categories have turned around which were going slow when we were at 85% and now which one has recovered?

[Shishir Shrivastava, executive]

Of late we have seen a significant growth in the entertainment bit, which is family entertainment centers and multiplex, which in this quarter compared to Q3 FY '20 has shown a 30% growth. We expect that this may in the subsequent quarter also grow further because this quarter again there's a good line-up of content and of course the summer will also bring in a lot of content for multiplexes. So we expect that also to grow. Supermarkets and hypermarkets have shown a degrowth, but that may be more on account of specific brand related issues, which we are trying to fix. But our dependency on the hypermarket or supermarket business contribution to rental is only 1%.

[Mohit Agrawal, analyst]

Okay. Understood. My second question is on the GIC platform. So it's been about 2 years and we have recently added the Surat asset. How do you see the progress in this? Because initially we had said that within 3 to 5 years we might do a REIT. So what are your thoughts on that given the progress that we've seen in the last 2 years? And are we still looking to do a REIT and especially considering post budget changes? What are your thoughts on that?

[Shishir Shrivastava, executive]

So the GIC joint venture platform is on track. We are also looking at a significant expansion potential both at Mumbai -- in Phoenix MarketCity, Mumbai and at Phoenix MarketCity, Pune. So we are working on the plans for that expansion. Beyond that, we are actively looking for opportunities for one more mall to be added immediately in that joint venture, which we hope in the next quarter or so we should be able to secure some opportunity there. Moving on to your question on REIT, I think one has to wait and watch. There have been some regulatory changes. We already have a retail REIT, which is on the road. We would like to see the performance. And we will take that decision depending on how value accretive it is for us in terms of being a capital source.

[Mohit Agrawal, analyst]

Okay. And when you talk about expansion in the Mumbai and Pune mall, is it utilizing the unused FSI in this or is it talking about some redevelopment opportunity within that asset?

[Shishir Shrivastava, executive]

Can you hear me?

[Operator]

Yes, we can.

[Shishir Shrivastava, executive]

Would you like me to repeat that? So the answer was that it is to utilize the additional FSI potential available under the current regulations.

[Operator]

[Operator Instructions] We have a question from the line of Parikshit Kandpal from HDFC Securities.

[Parikshit Kandpal, analyst]

Congratulations on a decent quarter. My first question is in this quarter, the contribution to...

[Operator]

Mr. Kandpal, please use your handset. The audio is not clear.

[Parikshit Kandpal, analyst]

In this quarter, how much is the contribution from the revenue share?

[Shishir Shrivastava, executive]

It's approximately 13%. If you look at the overall rental income as a percentage of consumption, we are at about 12.5% or 12.6%. The incremental revenue share over and above the minimum guaranteed rental would also be in the range of about 12% to 13%.

[Parikshit Kandpal, analyst]

Shishir, you mentioned about the addition of a new mall. So if you can highlight how is the business development pipeline again, refresh us? And also what could be the incremental FSI potential in [Technical Difficulty].

[Shishir Shrivastava, executive]

You're not very clear. May I request you to bring the phone closer.

[Parikshit Kandpal, analyst]

Is it better now? Can you hear me?

[Shishir Shrivastava, executive]

Yes, this is much better.

[Parikshit Kandpal, analyst]

As I was saying within the business development pipeline, how is it looking now in different regions? Again on the FSI side which you said 2 malls, so what could be the incremental FSI potential in these 2 malls?

[Shishir Shrivastava, executive]

Yes. In the past we have explained how we are looking at Jaipur, Chandigarh, NCR, Navi Mumbai, Hyderabad and Thane as opportunities and we are actively engaged in 4 of these markets today on opportunity. And we were also evaluating Nagpur, Goa and Visakhapatnam as the next priority set for us.

[Parikshit Kandpal, analyst]

And what is the FSI potential [Technical Difficulty], which you're looking to expand at...

[Operator]

We have our next question from the line of Niket Shah from Motilal Oswal.

[Niket Shah, analyst]

I just had 1 question. Given the kind of cash flow that you are generating this year and next year, you will effectively be ending with say roughly about INR500 crores, INR600 crores worth of net debt. What do you plan to do with such massive cash flow generation going forward?

[Anuraag Srivastava, executive]

This is Anuraag. So if you look at our cash generation and the uses, we still have about INR4,500 crores to about INR5,000 crore, INR5,500 crores to be spent as CapEx on our existing line of expansions and new malls, et cetera. So that should consume a significant amount of cash. Then we have -- as the earlier caller had asked, we are planning to expand in some of the newer cities as well. So we expect to acquire 1 to 2 land parcels every year at least so that will take up about I think INR1,000 crores of cash per year for that. So that takes up most of the cash which we are generating. We don't expect to increase the debt significantly. We tend to be on the similar levels. But these are the requirements which are there and of course we have very minimum amount of cash going in, let's say, warehousing a project here and there or resi. But that will be just I think 10%, 15% of our overall cash deployment. So these are the uses of cash. I think the story continues as usual, focus on retail and 80% to 85%, 90% cash will be utilized there and balance in other areas.

[Operator]

We have our next question from the line of Vasudev Ganatra from Nuvama.

[Vasudev Ganatra, analyst]

Sir, I was asking that once the Bangalore and Pune malls are operational so what kind of rents are we expecting from these malls?

[Varun Parwal, executive]

Varun this side. So from Bangalore mall, we are expecting average rentals in the range of INR150 to INR160 so at 90% trading occupancy and when fully leased, we should see a rental income of about INR180 crores. And Wakad Pune we expect to see annual rental income of about INR140 crores to INR150 crores when fully leased and at 90% trading occupancy.

[Vasudev Ganatra, analyst]

Okay. And second thing, what would be your total collections for this quarter?

[Varun Parwal, executive]

So from retail or all assets combined?

[Vasudev Ganatra, analyst]

All assets combined share.

[Varun Parwal, executive]

Okay. So from retail we have INR540 crores, from residential we have INR129 crores, from hotels we have INR123 crores and from commercial we have INR55 crores. So that takes it to about INR850 crores for 3 months ended December '22. And for 9 months we are at an aggregate of about INR2,300 crores in collections from operations.

[Operator]

We'll take our last question from the line of Puneet Gulati from HSBC.

[Puneet Gulati, analyst]

My question is you're now 1 year into the lease renewal cycle, almost I think about 17%, 18% of the meaningful area would have already been re-leased and you would have had discussion. What kind of rental growth are you seeing in these re-leasing discussions or renewal discussions?

[Shishir Shrivastava, executive]

Puneet, sorry, just lost the last part of your question. If you could repeat that?

[Puneet Gulati, analyst]

Yes. So my question was in the re-leasing discussions that have happened in FY '23, what kind of rental growth are you seeing in these discussions and if you can guide to what do you see for '24 and '25 as well?

[Shishir Shrivastava, executive]

So typically we have seen approximately in the range of about 10% to 15% growth on minimum guarantee depending on the category and the size of the store. So it's about 10% to 15% on the minimum guarantee and plus there is an increase in revenue share as well that we have been negotiating. So again, varies from category to category. In fashion, you may see a 1%, 1.5% increase, 2% increase; similarly in F&B as well.

[Operator]

Thank you. As there are no further questions, I would now like to hand over the call to management for closing comments. Over to you, sir.

[Shishir Shrivastava, executive]

Thank you, ladies and gentlemen, for joining us today and we look forward to our next interaction at the end of the last quarter. In the interim should you need any further information or assistance, please feel free to reach out to our IR team. Thank you very much.

[Operator]

Thank you. On behalf of The Phoenix Mills Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.