The Phoenix Mills Limited (503100) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q4 and FY '20 results call of The Phoenix Mills Limited. [Operator Instructions] Please note that this conference is being recorded. The management is represented by Mr. Shishir Shrivastava, Managing Director; and Mr. Pradumna Kanodia, Director of Finance. At this time, I would now like to hand the conference over to Mr. Shrivastava. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. Hope you are all doing well and staying safe. We take pleasure in welcoming you all to discuss the operating and financial performance of the fourth quarter and full year FY 2020 for the company. The outbreak of COVID-19 happened at a time when all our business segments were witnessing a sustained period of robust growth. We were witnessing strong double-digit consumption growth in the range of 12% to 20% across our retail portfolio until the end of February 2020. However, our malls started operating with restrictions from March 13, 2020, as per the guidelines issued by the respective state governments. Consumption fell between 40% to 60% across the malls in the period of March due to the outbreak of COVID-19 and the subsequent nationwide lockdown. On 8th June 2020, we resumed operations at 3 of our malls, Phoenix MarketCity, Bangalore; Phoenix United, Lucknow; and Phoenix United, Bareilly. We expect our other malls to open gradually as governments ease lockdown measures. We have adopted the highest standards of safety and hygiene across all our malls. We are conscious of the fact that our retail partners are going through tough times. And based on reasonableness, we have offered them a moratorium of 3 months for the rents payable. We are hopeful that as the lockdown eases in the coming days, visibility of retail businesses will improve. We anticipate that COVID-19 will have a short- to medium-term impact and remain bullish on the long-term prospects of our business model, and our malls will continue to play a pivotal role as social hubs in city centers as we return to normalcy. Our commercial office segment, which is least impacted, continues to remain an important pillar for our growth aspirations. We have seen good traction in gross rental collections in the recent months and continue to see interest from clients for leasing new spaces. We promptly took various measures to safeguard our properties and increased security and housekeeping services to maintain the highest hygiene and safety standards. We have 2 towers at Fountainhead, Pune, which are nearing completion, and traction for leasing appears strong there as well. With regards to our hospitality segment, The St. Regis, Mumbai, had an occupancy of 85% in January and February 2020 before air travel restrictions in early March and the subsequent lockdown impacted operations. We continue to operate the hotel at a limited capacity as permitted by the state government guidelines. Courtyard by Marriott in Agra is expected to remain shut temporarily until July, as we do not anticipate any tourist demands in the near term. Demand for new bookings is expected to improve in the second half of FY '21 with gradual relaxation of lockdown norms. With regards to our projects under development. In the retail segment, work across our various market cities in Pune, Bangalore, Indore and Palladium, Ahmedabad has restarted. Phoenix Palassio, Lucknow, the latest addition to our portfolio, is expected to become operational in early July. The opening of this mall was earlier stated for mid-March. Despite the current challenges, we are on course to double our retail portfolio and significantly increase our commercial office portfolio by FY '24. This is based on projects that are already under development. As we all understand humans by nature are social beings, and while COVID-19 has presented us an unprecedented challenge, all of us together will overcome it in some time. Our business model will continue to be relevant in the times to come. As cities expand, they give rise to multiple hubs, which -- within which the go-to -- they become the go-to places for the city. We are in the business of building such town-centric locations across key cities of India, where people can come and experience shopping, dining, entertainment and socialize in a safe and regulated environment. We believe that our business model will become more relevant as people will now prefer to go to places that are considered to be safe. With this, I would like to hand over the call to Mr. Kanodia, our Director of Finance, who will brief us on our financial performance.

Good afternoon, ladies and gentlemen. Thank you for joining us on this call. Continuing with the briefing which Shishir just gave, I would like to share with you some of the key financial highlights of our consolidated operating performances. Retail consumption was at INR 13,874 million for Q4 FY '20, which was down 15% year-on-year and was at INR 69,309 million for the full year FY '20, which is up by 1%. Aggregate retail rental income was down 11% year-on-year at INR 2,227 million for the quarter for FY '20, while it was up 3% year-on-year at INR 10,200 million for the full year FY '20. Retail EBITDA was down 12% year-on-year at INR 2,123 million for Q4 FY '20, while the same -- it was up at 3% year-on-year at INR 9,774 million for FY '20. Commercial income was at INR 1,138 million for the quarter, which was up 29% year-on-year. And for the full year, it was at INR 290 million, up 19% year-on-year FY '20. Income from hospitality and others were at INR 867 million, down 14% in Q4 FY '20 and was at INR 3,486 million, down 3% for full year FY '20. The consolidated revenues from operations were at INR 3,992 million for the quarter 4 FY '20, which was down 45% year-on-year, while for the full year FY '20, it was at INR 19,411 million, which is down marginally at 2% year-on-year. Despite a challenging business environment, we continue to maintain a robust balance sheet. Our consolidated debt stood at INR 45,732 million as on the end of 31st March 2020. Our cost of borrowing is down to 8.93% as compared to 9.29% for the last quarter. And we are hopeful that the borrowing costs should further go down in the coming quarters as the banks start passing on the rate cuts benefit to the customers. We have availed moratorium offered by our banking partners as per the RBI guidelines for a period of 6 months across all our SPVs. We have also carried out various cost-rationalization efforts across our business verticals to ensure we can bounce back strongly once the business environment normalizes. To summarize, our company is comfortably placed with sufficient liquidity to navigate through this crisis period. We are confident that in the long run, consumption will be back to normal, and the people will continue to look at malls as a safe and regulated way to shop, dine, entertain and socialize. Thank you very much, once again, and we would be happy to take any specific questions now.

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

I have 2 questions. Number one, on the commercial side, you mentioned that there is an 80% collection rate. Is it normal? Or is it less than normal in the current perspective?

Yes, Puneet. Well, we've -- just to give you a perspective, for this last quarter, we have probably invoiced close to about INR 37 crore in the commercial office business. And collections for the month of June are still ongoing. So this number will soon creep up beyond this 80%. We expect to be closer to 87%, 88% or 90% as well. And the balance is -- this is pretty normal, I would say. The impact is nominal, if at all. So I would say this 80% collection by this point in time is pretty normal.

Okay. Okay. And what will be the update on the leasing pipeline for the new Fountainhead which is coming up?

So Fountainhead Towers 2 and 3 are nearing completion. We are awaiting OC for Tower 2, and Tower 3 still has some work ongoing. We -- I think on a leasing side, we've seen some -- we were waiting to commence leasing in this last quarter. And while we've reached out to clients, there is some level of interest, but there is a little bit of cautiousness. So I would think that we will open up for leasing only in the month of August or September where we see some demand picking up. So I think, decision-making from occupant side at present is a little bit on hold. But these offices are not the large IT offices. These are our smaller-sized offices. We are seeing a lot of consolidation in the space, especially in Pune, where people are looking at reducing the size of their offices, but looking for smaller spaces. So I think we will -- this asset is poised to benefit from that.

Okay. Okay. Secondly, on your CapEx plan, if you can give more color on what is the spend that you intend, both on the malls and office side and also on the residential side?

Okay. So for this current year and the rest of FY '21, when we look at our retail portfolio, which is namely, Phoenix MarketCity, Bangalore, Hebbal in Bangalore, Wakad, Pune and Indoor, we expect to spend between now and the end of the year close to about INR 75 crore to INR 80 crore in that range on these 3 projects. And...

Each?

No, cumulatively, simply because right now, while we have recommenced construction activities, construction pace is not picked up, so we are working with a limited labor force at site. So we don't expect the billing to really cross that roughly around 6 to 7 -- sorry, about 75 -- INR 70 crore to INR 75 crore by the end of this year is what we expect to spend. And we have the -- we still have the equity available, which was brought in by our JV partner to fund this construction activity. Offices would -- in these projects, offices would have logically been -- we would have incurred expenditure on the office construction only after completion of the mall because offices sit on top of the mall structures. With regards to Phoenix Palassio, Lucknow, we have, by and large, completed all works over there. So there may be some outflow towards vendor bills as they have -- as they present their final bills, et cetera. There, again, I would -- don't think we would spend more than INR 7 crore to INR 8 crore -- INR 6 crore to INR 8 crore between now and end of the year. When we come to Palladium, Ahmedabad, where we have a balanced strength between now and the completion of the projects, which will be about 2.5, 2 years or thereabouts. In this -- so that's roughly around INR 340-odd crore between now and the end of 2.5, 3 years. But within this year, again, we don't expect to spend more than about, I would say, INR 10 crore to INR 12 crore between now and the end of the year -- sorry, in between now and the end of the year FY '21, this number would be closer to INR 50 crore. And we've recently drawn down the debt on this asset in the month of May to fund this construction.

Right. Right. So in all, we are looking at only INR 140-odd crore of CapEx?

We also have CapEx on our Fountainhead Tower 3, where we would expect to spend about INR 15 crore between -- INR 50 crore between now and end of the year. Between completion of Tower 2 and the bills there and Tower 3 about INR 50 crore there, so that will take that number up. And then, of course, we have the resi project where we are continuing to spend -- continuing completion activities for the Kessaku, where we expect to spend about INR 80 crore to INR 100 crore. We have deferred the launch of Towers 8 and 9 in Bangalore -- One Bangalore West. Right now, we are incurring expenses on Tower 7 and completion of some reconfiguration activities in Kessaku, where the cost would be nominal.

Next question is from the line of Kunal Lakhan from CLSA.

Just on the Board approval to raise fund of 1,200 crore odd, broadly, can you give us some color on what will it be utilized for? And how much would be the equity and debt mix? And what will be the form of equity in terms of it will be at the entity level? Or are you looking at the platform deal, if you can give some color?

Yes. Before I answer this question, I want to just talk a little bit about our cash flows. See, at present, we have close to about INR 700-odd crore in terms of -- at the end of -- by mid of this month, we had about INR 770 crore in terms of liquidity available. If we look at all the investments, cash, cash equivalents, OD limits and the Dasara accounts. Now going forward, as I mentioned, in terms of CapEx, we are fully covered in terms of our funding availability. When it comes to operating expenses of the malls, that is also fully covered because that is -- the operating expenses are passing through as CAM, and we've reduced the quantum significantly. And in our understanding with the retailers, we will be recovering all the operating expenses there as well. With regards to the Ahmedabad -- Phoenix Palladium project in Ahmedabad, we've achieved financial closure, and that will fund the construction activity. So from a cash position, we are fine. We've also availed of the 6 months -- 3-month extension on the bank moratorium. So our debt obligations we will be able to cover between now and the end of the year and even beyond. So we are comfortable from that cash position. Having said that, we believe that this is the time to have some cash available because we are seeing unprecedented times, and we don't -- there's no visibility to the end of the crisis. So it will help to have some kind of a war chest to meet uncertain times to pay down debt, to probably even if there's some spectacular distressed opportunity that comes our way because we believe in the long-term potential of our business to be able to participate in such an acquisition opportunity. So while we have taken currently an enabling resolution, it's only -- it's to an extent of INR 1,200 crore. The decision on whether we want to raise capital at the listed company level or not, will finally be taken -- has not yet been taken, and we need -- we are going to be deliberating on that. As of now, we are not contemplating any debt increase, except to the extent where we may draw down on Palladium Ahmedabad and maybe where we have Fountainhead Towers 2 and 3, which are debt-free, we may raise some capital -- we may raise some debt there. So we are not really looking at a significant debt increase. Sorry, does that answer your question?

Yes. Just as a follow-up on that. So you mentioned that a part of this fund base could be utilized towards paring down debt. So would that be fair to assume then that a large part of this INR 1,200 crore would be equity raise?

Yes. We are saying that if we go ahead with a capital raise, the quantum has not yet been decided. We have -- the Board has given their approval to raise a maximum of up to INR 1,200 crore, but we may be well within that number. So it would be an equity raise if we go down that path.

Sure. That's helpful. And my second question was on how are your negotiations panning out with tenants on rentals, especially for the post lockdown period? I mean are you closing on those negotiations? Is that a -- have you reached understanding with the retailers on this? What kind of structures you're working on, if you can help us with that?

So I would like to say that, by and large, with most retailers, we have arrived at an understanding. We did commence operations of our malls in Bangalore, Lucknow and Bareilly on the 8th of June. And of the permissible area that we have, which -- when I say permissible area, the leasable area that is allowed to be operational as per the government guidelines, we have seen close to about 80-odd percent becoming -- even higher than 80% becoming operational. Now we have not taken a very general, I would say, solution across the board for all retailers. But if I were to break that into -- put that into 2 buckets, the first bucket being that, what have we arrived at for the period of lockdown. We believe that we should be somewhere in the region of about -- at an average of about 50% of the minimum guarantee rent to be paid during this period. But it varies from brand to brand marginally here or there. And post the lockdown, we have agreed to a waiver only for a limited period. It may vary from between 3 months to the rest of financial year '21. And that also, on a case-to-case basis, we have arrived at a solution. In -- the solution broadly entails relief to a certain percentage, which is subject to negotiation with retailers on the minimum guarantee rent. But on the other side, we have -- the retailers have also understood that in the event consumption does go up, they are willing to share a higher percentage of their revenue as -- when compared to the contract for this limited period. And also, generally, we also addressed that should the retailers arrive at a 70% to 75% of consumption for the last year, then the original rental terms get -- we revert to the original rental terms. So again, just to reiterate that any relief that we are providing is only for this limited period of 3 months or for the rest of FY '21, which is negotiated on a case-to-case basis. And lastly, in some cases, where we have agreed to this reduction in minimum guarantee rents and the retailers did not have a cash flow issue, we have also received some advance rental for the next 6 months based on the minimum guarantee.

Sure. That's very helpful. Just again, a follow-up on that. So you said 80% plus have -- of the permissible area is operational. So the balance, 20% is not operational because of disagreement on the rental? Or is it because of...

So let me clarify, for example, in Phoenix Market City, Bangalore, where we have more than a little over 1 million square feet of GLA, about 82% is operational of the permissible area. F&Bs were allowed to commence operation only a little later. So they are now gearing up to become operational, including the food court, et cetera. So we expect this number to move up significantly by the end of this week -- by this weekend, when a lot of F&B will also become operational. So it's not about not achieving a closure on the understanding. And of course, in a few cases, we still have ongoing discussions, but that's not going to really materially impact the number. In case of Lucknow and Bareilly, we have close to 88% -- anywhere between 85% to 90% of the permissible area of becoming operational. And there again, we're seeing the numbers increase every week.

We take the next question from the line of Sourabh Taparia from UBS.

2 questions from my side. Shishir, can you highlight if there is a change in strategy towards residential business or the inventory that we have? And what has been the target set for this vertical in terms of cash flow for the year?

So there is no change in strategy in residential business as such. We are not -- if the question is, are we looking at undertaking more residential projects at the present time, no.

My question was more about are we looking to monetize this rapidly or increase the pace of monetization?

So right now, we -- the significant assets that we have, we have about INR 1,400 crore of inventory, which in Bangalore -- in Kessaku at Bangalore and where we have received the OC. Now also, the debt on this is -- there is no debt on this asset. There's about INR 100 crore of debt on the -- on Palladium construction, which owns this asset. Now here, we had larger apartments in Kessaku, and the ticket size was very, very high. So about 8 months ago, 9 months ago, we embarked on the journey on looking at how we could reconfigure the apartments to have smaller 3- and 4-bedroom apartments in the ticket size of INR 4.5 crore as opposed to a higher number of INR 10 crore, INR 12 crore, et cetera. Now we have recreated or rather reconfigured these apartments, and we have recently gone into market. And there seems to be a very high interest for apartments in this ticket size. And the number of site visits that we are seeing have increased. So we've been seeing about 100 people come to per site visits and inspections, 100 buyers, potential buyers coming each week. And we are quite confident that this product has a significant demand. And -- so just to -- I would say that our target would be to, say, sell about 30 apartments in the next 6 months in the [indiscernible] of INR 4 crore to INR 5 crore. And -- sorry, so this is about Kessaku. We also continue to -- continue on with the construction of Tower 7 of One Bangalore West. And there, we -- from the sales that we have already completed to customers, the proceeds will fund the construction cost of that Tower 7. Towers 8 and 9, for present, we are going slow on construction. We've already come up above ground there, but we are going slow on construction. We will progress on that once we've launched that, which will be at a later date.

Okay. So just a follow-up on this, what are our cash flows for this year, given that we are trying to -- we have remodified our product, would the cash flows from this business be higher than the last 3, 4 years average?

We hope so. We certainly hope so. From a cash flow perspective, I would say that -- not for 2021. I mean, I'm going to let Mr. Kanodia answer this question, if you don't mind.

So just to give you a perspective, last financial year... [Technical Difficulty]

Ladies and gentlemen, please stay on line. We're just trying to reconnect the management back to the conference. Requesting you all to please stay online. [Operator Instructions] Sir, we proceed to the next question. It's from the line of Mohit Agrawal from IIFL.

Sir, my first question is on the CAM charges. So I understand that CAM would have been built entirely to the retailers during the lockdown also. Have we received the CAM already for the malls that we have already started? That's the first question. And secondly, also on the rentals bit for the malls, which you started on June, May, have we received any rentals till now?

Firstly, our sincere apologies. We got dropped off the call. And I think we -- but coming down to your question, yes. So on CAM, we have made every effort of reducing the expenses for the period of lockdown. And also going forward for some period in time, we expect that our marketing expenses are going to be lower since we are focusing only on communication on our health and safety standards that we are maintaining in the mall today and mostly on social media. So we expect the marketing expenses also to be lower going forward. For the period of lockdown, we are recovering the reduced CAM as per our understanding with the retailers. And with regards to rentals, we expect that for the month of April, May and June, whatever is the reduced rental as we may have agreed on a case-to-case basis, that will be recovered for the month -- along with the month of July since we had offered a 3-month moratorium for that period in any case. So from the month of July, we will start seeing -- in addition to the rental of July, we will -- we expect to receive the rental of March. In August, we'll expect to receive the rental of May as well and in September for the month of June, along with the rental of that particular month.

So sir, the CAM will also -- so if I understand correctly, the CAM will also be received along with the rentals only?

CAM has been ongoing -- recovery has been happening during the period of shutdown as well.

Okay. Okay. Sir, one -- another question is on the industry level. There were major reports suggesting that there could be a onetime restructuring of the retail sector loans. However, it is expected that realty may not be covered. Just wanted to understand what's your -- what is an update on that? Have you been in discussions with any part of the government, which is taking a decision on this? And will you -- because it's a COVID-impacted sector, if there is a onetime restructuring, will you also be considered for that? Any thoughts on that?

So I think the RBI and the Ministry of Finance have been very forthright. And in the last 2 extensions that they have allowed 3 months each for the industry to benefit from the extended period of payment of interest and principal, clearly helped us and helped everyone in this period of crisis. As far as restructuring is concerned, I think RBI is yet to take a decision while the Finance Ministry is of the view that there would be a window, which may be made available. So from that point of view, our ongoing discussions with banks are not really around restructuring because our cash flow position remains healthy. But once we get a complete sense of how long the lockdown exists and what is the complete -- because this is a dynamic situation where every day, things are changing. So as of now, enough liquidity and cash available for us to sustain our operations. But if the opportunity of restructuring was to come and we -- it has given to the real estate sector also, we will evaluate it on the merits of it and see if there is a need case-to-case basis from that point of view. I think we are a little premature in taking any decision at this stage.

Sure, sir. And sir, last bookkeeping question. Could you share the CapEx number for FY '20, full year FY '20 number?

FY '20, around INR 300 crores -- we'll just come back to you offline. Just give me a minute. Let me just put -- 1 sec. Let us just come back to you offline. Just give us some time regarding that number, we need to just -- we don't have it handy, but we'll come back to you quickly.

We take the next question from the line of Abhishek Bhandari from Macquarie.

I have 2 questions. The first one is, if you look at the last 4 years of our mall performance, one of the reason was remitting it towards more social experience, where F&B, HSP and multiplexes helped up a lot. Now -- but as things stand without vaccines, probably these parts of economy will have more trouble in terms of paying rents and if the businesses are uncertain. So do you think from a medium-term perspective, you would want to reduce the exposure what you have with [indiscernible]? And on related lines, has there been any movement on the preleasing for the new 5 malls which have come, where these kind of factors would have probably taken up maybe between 10% or 15% of the business?

Abhishek, thank you for your question. So you're right. In the short to medium term, we do expect to see several of our F&B partners go through a little bit of stress. However, from a consumer point of view, we don't expect the demand to be significantly reduced, but there will be operating restrictions, which will impact their revenues. So when I say operating restrictions, for example, we expect that the various state governments are going to implement a minimum or a maximum density approach. So they may say that restaurants need to operate at 50% occupancy, et cetera, which is likely to impact the revenue. Also, liquor sales have not yet commenced in F&B outlets in Bangalore, for example. So that may take some time because that impacts -- that's going to impact revenue as well. Additionally, we are seeing that a lot of the manpower of working out of these F&B spaces have -- are generally from other towns. And they may have -- there may be a shortage of manpower for some period in time. So we understand that there is going to be some stress on F&B operations for some period of time. Having said that, from a product perspective, we don't expect to reduce the F&B offering because this is going to be in our opinion, a short- to medium-term impact. So while we continue to -- we also expect that consumer demand may not really be very, very low simply because people are going to move or prefer coming to a safe and controlled environment, such as a mall, even for their F&B offerings as opposed to going to high street locations simply because they will have that confidence in -- and trust in health and safety standards, which will be higher than other locations. So we are not in fact -- we're not looking at reducing the F&B offering. But we understand that the number of restaurants that may be operating may -- maybe fewer or the number of people that they can accommodate maybe fewer and that will impact the revenues.

What about the contract with the multiplexes in the 5 new coming malls? Have they come up with you with some kind of renewed business plan asking you to push out, believing, et cetera or things stand as they were as 5 months, 3 months before?

Yes. For the moment, multiplex operators also don't have -- really got any visibility on how their business operations will pan out and what is the government regulations and guidelines that will govern their operation. So for the present, we are not -- we've not had discussions because they don't know what their business plan looks like right now.

Sure. My second question is more around business model and LRD. So if you look at last [indiscernible], one of the hallmark has been arriving minimum guarantee, which probably is now around 90%, 91% of revenues. That makes the income predictable and hence LRDs are available for a longer duration and a much higher number. Do you think with probably the revenue sharing increasing, making the revenue a little more volatile, the LRDs might be asked to topped up. And going forward, you would want to increase our equity, not only for operating assets but also for the under-construction assets?

Pradumna here. So from a technical point of view, just the mathematics, what you spoke about is a fact which can happen, but I think reality is quite different. Banks are looking at the FY '21 as a period of really an uncertain period and abnormal period. So clearly, any decisions based on that would be not right. Having said that, I think most of our malls were -- anyway, when you look at the eligibility criteria, we had already repaid loans significantly downwards, so like example, Bangalore Mall, the loan was less than INR 400 crores when even -- in the current avatar, the EBITDA could be in excess of INR 100-odd crores, even for this financial year. So from that point of view, we have been discussing all our current situations with our bankers, and there is no such sort of a request that has come in from any banker. Second, as the RBI and Finance Ministry also is talking about onetime window of restructuring, so if there is that window that comes in and some banks feel that there would be some mismatch between the revenue for the current year, definitely, but not from the year FY '22 onwards. So then some bit of a restructuring around that may be necessitated, which we may evaluate on its merit. But from a group level perspective, I don't think so there is a need for us to -- and of course, the second point, which is important is the loan to cover. So the value of these each assets and the security cover that it provides to the bankers is tremendous. So any case which you take the security cover would always be greater than 2x, while the stipulation would be 1.5 or 1.6. But having offered the entire asset to the bank, the security covers are greater than 2x in most of the cases. Now coming to the fact that currently we have used the moratorium as extended by RBI and with the current cash flow that we have and the deferrals that are available at the bank, we don't foresee any such issue coming up from a banking side where extra equity may be required. And I don't even foresee that going forward because our ongoing construction side, if you were to look at, the construction finance, have not been -- there is no need for construction finance loan for 3 of our underdevelopment assets under the Canadian Pension and PML joint venture because equity is still available, and there is no cost over and that is happening there. Ahmedabad project is going as per schedule. The debt has been tied up, and the first disbursement has happened. Again, we don't foresee any change in our time lines on cost parameters for the bank to be worried about looking at any form of additional equity that may be required. So from that point of view, there is no need for us to worry about additional capital infusion in any of our projects given the fact that there may be some revenue dip for the FY 2021 period, which is normal in the current scenario. And to give you also a perspective of the other 2 verticals that we have, the commercial side, we spoke about how the collection from the commercials continue to be robust. And here we have not got impacted by the current lockdown and the fact that 2 more additional towers of -- Tower 2 will become almost ready for leasing towards August-September of this year, should add to our equity in terms of our commercial collection. So from Art Guild House at Kurla, from Centrium units at Kurla and Tower 1 and 2 at the Alliance at Pune, we should have a very robust cash flow, which has very limited debt on that. So that would come in good stead for us. And on the residential side, we had a outstanding of around INR 164 crores at the beginning of FY 2021. And this INR 164 crores largely will get collected in the current year, and that is going to be a good sign from a cash flow point of view, while our expenses on the CapEx would be limited since we are only doing Tower 7 right now. So from that extent, there is enough and more liquidity surplus that will be available. And also important to highlight that our completed OC received inventory between Kessaku and OBW at our Bangalore residential develop is in excess of INR 1,400 crore. So any additional sales that we do there would completely come down as a positive cash flow because there is no CapEx spending on those accounts. So the outstanding debtors as on day 1, the limited CapEx and the high value of inventory, which has no CapEx required, really gives us the great comfort that there will be surplus getting generated from our resi portfolio as well.

And 1 last question. Shishir, the inline stores, in particular, probably would need more handholding from us, rightly so because the balance sheet might be weaker compared to the larger brands. So do you want to really reduce the dependence on inline stores going forward because such kind of volatility is unpredictable, and we don't know if it will differ in future or not. It probably makes more sense to partner with only bigger brand. So any thoughts there would be helpful?

So Abhishek, in our malls, we've -- you may be aware that basically groups which have anchor as well as inline, they comprise about 40-odd percent of our retail space. We have very few franchisee-operated stores, even the other inline stores, bulk of them are company owned. So we are not -- and we are very, very few brands which are local single stores which may have severe cash stress at this point in time. So we don't expect to reduce our dependency on inline stores because they are -- most of them are owned by groups or company-operated, where we are not seeing -- where we don't expect to see them to have a significant cash issue.

Next question is from Abhinav Bhandari from Nippon India.

I actually had a few clarifications to understand rather than questions. So first is, sir, on the March lockdown period, as you mentioned that selectively, you have given a 50% of waiver on the minimum guaranteed rental. So just to understand, on the 6 to 8 days of March, has that already been done in FY '20? Or some impact of that would come this fiscal because these negotiations are still ongoing?

So firstly, for the month of March, what we have done is -- see, we were in discussions with -- in negotiations with retailers. And almost every retailer had reached out to us for some kind of a relief for the month of March for the period of shutdown as well. So we've been a little conservative in our approach in terms of accounting and knowing fully well that we -- that retailers will expect some relief during this period. We have already considered that, and we've taken that impact in our Q4 rental numbers. So that -- I would say that we've been more than conservative for the month of March. We have assumed that for the half of the month, one would not receive the minimum guarantee rent. However, we continue to remain in conversation with these retailers. And it cannot be assumed that for the entire period of lockdown, that there will be no rent, as I mentioned. We expect to be somewhere at least -- recover at least 50% in that range for the period of shutdown or based on the minimum guarantee rate.

Sure. That's fair and understandable. The related clarification that I needed is in some places, specifically, Maharashtra, the lockdown has now been continuing, announced to be there till 31st of July. So fair to assume that wherever lockdown situation persists, this kind of equation would be there in Q2 as well?

Yes. For the period of shutdown in Q2.

Got it. Got it. There is this one line in our press release that we are looking to extend the renewables as well by 6 to 12 months, so -- in some of the cases. So just to understand how much area was overall up for renewal in this year or next 6 to 12 months? And how much of upside it could have fetched us, just to understand how much deferment would happen?

So firstly, let me address the extension with wherever we had any renewals coming up in the mall for over the next 6 to 12 months period, we have taken the view and discussed with retailers and extended the existing contract and existing terms by a period of 6 months to 9 months to 12 months, depending, again, for the renewal. We -- and whatever relief we have separately negotiated is for a limited period during that renewal, okay? Now coming up in FY '20, let's talk about FY '21 and FY '22, one would -- the renewal schedule varies from mall to mall. So let's talk about our large mall. At...

Broader number would be fine, broader number.

Broader number would be roughly in the range of about 20% at an average of the area coming up for renewal in FY '21, which, as I mentioned, some of those contracts, we have extended. And in FY '22, it would also be in the range of about 30% at an average -- 30%, 32% at an average of the entire GLA in retail.

Got it. Got it. And ideally, we would have been expecting how much of a leg up just to understand if this 20% would have gone ahead as usual?

Yes. So the leg up is on the minimum guarantee. So normally, what happens is because of these malls already deriving a higher number on account of revenue share, the leg up on minimum guarantee would not impact the overall rentals significantly. It will be more of a catch-up with the revenue share component. So normally, that leg up would -- probably this impact -- the minimum guarantee would probably impact, say, 4% to 5% of the overall rental or 3% to 5%, it's somewhere in that range.

Got it. Got it. Perfect, sir. Just one last thing on this RBI guideline on moratorium, as you mentioned, that you have availed of it. Just to understand, is this only on the principal repayment or on the interest as well that we have availed?

No. So we have availed for both because it comes as a package. And of course, we thought that it will be better to conserve our cash flows in the current environment. So for both interest and principal that was due for this period, we have availed of this moratorium as per the RBI guidelines.

And if I understand it correctly, these amounts get accumulated at the end of your loan tenure. Is that understanding correct?

So the principal part gets extended and gets -- the tenure of the loan gets extended to that period. But as far as the interest is concerned, that needs to be repaid to the bankers as per the current directive within the balance 6 months of the current financial year.

We take the next question from the line of Manish from JM Financial.

I was going through the average daily consumption data, which you have provided for the malls, which have opened. So there seems to be variation across Lucknow, Bareilly and Bangalore. So going forward, this trend is more likely to play out because Bareilly is at 38, Lucknow I can see is much higher. So what sort of trends do you expect?

So let's talk about Bareilly for the moment. Bareilly, there are several containment zones in the vicinity of our [indiscernible] and that has impacted footfalls and consumption. And also, we have quite a few franchise stores -- franchise-operated stores there, where they have commenced recently -- they're slowly starting commencement of operations. Therefore, if you look at Bareilly weekend -- last weekend is when several stores had also opened up in increment. And of course, the third week shows a 34% daily consumption versus 2019. Also, I would like to highlight that it's -- one doesn't realize this, but in North India, with this solar eclipse, et cetera, on that particular Sunday, we did notice a huge drop in consumption on that 1 particular day, and that was because people were not stepping out on that solar eclipse day. So we saw that in Lucknow as well. So if you really look at the average daily consumption of week 2, which is 82%, that was -- that drop was because of Sunday consumption getting impacted. But the big positive is if we look at our -- the profile of vehicles coming in, the categories, if we look at the sale in terms of categories, you can see that the higher ticket item seem to be generally being showing a higher sale. And more so if you go to -- for example, if you look at Phoenix United, Lucknow, electronics showed a 240% growth in terms of consumption as compared to the same period last year in June. And watches and fashion accessories were high. Of course, hypermarkets are operating across generally at very high consumption levels. When we come to Bangalore, also, one can see that consumption in terms of higher ticket items is higher for the moment. We are seeing certain electronic stores have even demonstrated 130% of consumption compared to last year same period. And again, here the profile of the vehicles coming in, profile of the customer coming in is -- we have seen that it's a very high profile. Also, if you look at -- a good indicator is what is the average spend per footfall, which in week 3, has shown a 50% growth or slightly higher than 50% growth as compared to week 1 and week 2. And the average daily consumption on weekends is 51% of what we saw in June 2019. So we are seeing that slowly and steadily consumption is building, but it's going to take a time, and we are cognizant of the fact that as there is a high element of fear today and that fear will take time to dissipate as we build trust and that will impact positive consumption.

So going forward, you expect these trends to improve only? You wouldn't attribute this to some pent-up demand, showing higher consumption numbers?

Yes. So one more important point for us to understand is in June 2019 for the most of the month, we had the end of season sales going on, where in Phoenix MarketCity, Bangalore is just picking up. We've just started with that. So typically, the consumption is much higher for the -- during the end of season sale. Though there is -- I wouldn't say that there's any revenge shopping, but there is -- certainly, there is a pent-up demand because you are seeing that home and electronics and these high ticket items of televisions, et cetera are doing very well. So there has been a pent-up demand for the last 3 months in this segment.

And would it be fair to extrapolate the performance of maybe Bangalore as an urban city to maybe Mumbai, Pune and Chennai malls going forward, whenever they open?

I think it would be fair to assume that, yes.

Okay. Okay. Okay. And just 1 clarification on the minimum guarantee part. So for the closure period, whenever the malls are closed, 50% of the minimum guarantee needs to be paid. Is that the correct assumption?

Broadly, yes, that is what we expect in terms of our rental recovery for the period of lockdown. But as I had mentioned earlier in the call, we negotiate -- we are not -- we don't have a blanket rule across for all retailers. Customizing our understanding for each 1 of them after understanding whether they have a cash flow issue or they have a P&L issue. For example, there are very few retailers with whom we've understood that they had a P&L issue and not a cash flow issue. So we've been able to give them a greater relief during this period, but they have also upfronted the next 6 months rent in [indiscernible]. So that reduces the impact to us from a cash flow point of view. In some cases where cash flow is an issue, we have a different solution. But broadly, I would say that we expect to recover about 50% for the period of lockdown.

And if by chance, post the lockdown period also, you're unable to recover consumption, so at least 50% of the rental should be locked in basically for the full year?

Yes, because the negotiations are not in excess of 50% relief for the full year in any event.

Okay. Okay. And just 1 last question. Any color on when Maharashtra malls would perhaps open or Chennai malls would open?

Well, I think the state government does understand that this is impacting the likelihood of many, many people, and they are taking a -- and there is a general intent to open up the cities to whatever extent they can. But it's a state government decision, and we are hopeful that they will take a positive decision soon enough.

[Operator Instructions] Next question is from the line of Pulkit Patni from Goldman Sachs.

Just to understand the accounting bit of this a little more in detail. So as we look at Q1, which you will be reporting in some time, would the revenue be recognized in full and rest would be shown as receivable? Or we are going to be showing only revenue, which is going to be a lower amount, which is basically 50% of the minimum guarantee? How would the accounting work? And similarly, if you could talk about how would the accounting work in terms of interest payments? Would we accrue the entire interest and rest would be in payable? If you could talk about both these aspects, please?

Yes. So I'll answer the second question first. As far as the interest is concerned, yes, it will show us an accrued interest and will reflect as an expense for the quarter for which it will be reported. So Q1, when I report, in spite of me taking the moratorium, the number would appear there because it's a liability which will have to be paid in the same financial year, and it's not converting into a term loan or any other form. So the interest figure will continue to be reflected as expense in my Q1 results. Coming to the other question, yes, we will not be reporting or accounting for the entire amount as a top line and having the balance as receivable. Whatever we have so-called negotiated and had an arrangement with, to that extent, we will reduce our top line, and to that extent, our revenues from retail would be down compared to what we would have done in an otherwise situation.

Next question is from the line of [ Anubhav Sinha ] from Jefferies.

Shishir, just 1Q on -- you did say that wherever stores are hitting about 70%, 75% of last year's sales, you will be getting roughly the same rent as last year. So based on the current trend, what percentage of your mall should be in that direction?

Wow, that's a very tough question. But first, I want to clarify that it's not in all cases that we have this provision of full rental recovery when they hit 70%, 75%. I would say broadly about half or 60% of the stores, we would have this provision. If we just look at the existing trend, it's tough to say, but one hopes that in the next 3 to 4 months, I would say that by the time we get into Diwali, consumption is going to start picking up. And we would say by sometime in the fourth quarter -- definitely by the fourth quarter of this year, we should start hitting that 70%, 75%. But it's a shot in the dark for anybody to say this because there's so many factors that determine the number of tests, number of cases testing positive, government action. So generally, I would say that retailers and us have understood that we start seeing some form of normal consumption by Q4. That's been the general discussions and assumption while we have arrived at our commercial arrangement. And therefore, we have restricted any relief only for this balance period of FY '21.

We take the next question from the line of Ashish Maheshwari from Antique Stockbroking.

Shishir, Biplab here. I am using Ashish's number. And my line got disconnected, unfortunately. Anyway -- so my question is basically you were evaluating some projects, new projects, in Kolkata, Chandigarh, Hyderabad, et cetera. What are the status of those projects? Have you ever done those projects? Or I mean, have you stopped working on those projects? Or still under evaluation?

I think all these discussions are presently on hold because we are not aggressively pursuing growth in these uncertain times. We've kept our new acquisitions on hold. But we remain -- I think one can assume -- safely assume that the next 12 to 18 months will present some very interesting and good, well-priced opportunities. So we'll keep our eye out for that. But we're not aggressively looking at any land acquisition for greenfield development, et cetera, for the moment.

Okay. And regarding Phoenix Palassio, you have 85% -- around 85%, 90% leased, and you have some rental agreement. And this is going to be opened in July. The rental structure, does it changed? Or it remained the same? Or it will be decided after 2, 3 months of operations?

Sorry, may I request you to repeat your question again?

The -- do you have some rental arrangement structure in Phoenix Palassio pre-COVID, when it was supposed to be launched in 14th March. Has it changed that rental structure agreement with the tenants? Or it remain the same as it was earlier?

No, no, the rental arrangements for the term of the contract remain unchanged. There may be some relief for the initial period that we will certainly look at, and we've been in discussions with retailers. There -- again, there may be a reduced -- for example, there could be a reduced minimum guarantee rent for the first 3 months after we commence operations before we move to the original agreement terms.

We take the next question from the line of Alpesh Thacker from Motilal Oswal.

Sir, 1 question is on the HSP expansion plan that we have. So can you just throw some light and when are we planning to go ahead with that?

Well, as we had always stated in the past, we are waiting to get the approvals from the authorities to take that project forward. But for the moment -- so I think the administration needs some time before they grant any approvals. And there will be no rush to go out and commence construction because as we understand right now, we want to be a little tight on our cash flows. We want to maintain -- conserve the cash flow. So we won't rush into construction over there. We will time it right with the market and the demand.

Okay. Okay. And sir, 1 last question, if I may, please. So that is on the retail -- the rental collection for the month of April to June. So I understand that we collect the rentals at the start of the month. So definitely, we were in the negotiation stage with them. So -- but if I look at -- standing today, how much of the rentals have we collected for our retail asset, ballpark figure would work?

So for the month, April, May and June, as I had mentioned earlier, we had provided relief to retailers and allowed them a moratorium of 3 months. So what that essentially meant was that the rent that was payable for the month of April, whatever it would be finally negotiated down, would actually get paid out in July; what was payable in May would get paid out in August; what was payable in June would get paid out in September. So now that we have also concluded on the release for this limited period of the next 3, 4 months, I think we will start seeing collections only in July, August and September for the past period.

We take the next question from the line of Atul Mehra from Motilal Oswal AMC.

So my -- I don't have a question, I have a suggestion to make on behalf of our clients who are shareholders. Sir, one is that in today's environment, what we are seeing is that anybody which has -- any business which has a large amount of debt and given the uncertainty we are living in, it is generally on the negative side of things. So from a sustainability perspective and from a longevity perspective, the suggestion is that if we could utilizing multiple avenues, be it residential in terms of project that we have, which can get us about INR 1,500 crores of cash flow. Similarly, if at all, commercial assets is something that we can, say, monetize to an extent we have a partner in CPPIB, if we can monetize to an extent to bear down the debt. And to add to that, if maybe as you guys have already put in place a resolution to raise INR 1,200 crores, if we can maybe do a rights issue at a certain level of price so that the existing shareholders' stake is not diluted. If we can do these multiple things so that maybe we can get towards 0 debt in the next 12 to 18 months' time. That will be something, in our opinion, which can substantially give you in terms of sustainability, number one, at the same time, it will give you the ammunition to take advantage of the distressed opportunities, which will be available in the next 12 to 18 months' time. So obviously, it is the decision of the Board and the management team to think about this. But I would strongly recommend you take this as a suggestion so that as you would also realize that businesses today, which are cash rich, they are very differently positioned than businesses which are indebted. So if we can get on the other side of things where we are not just doing a little bit of debt, but we are having ample cash in the books, that will actually place us in a position that we can really capitalize on the next 10 years of opportunities. So -- and just one final thing is that we are the -- in our understanding, Phoenix Mills is the best small operators in the country. So the ability for you to raise money today is unparalleled to anybody else in your business. So if you are able to take advantage of that and -- then act accordingly, your -- in terms of business for the next 10, 20 years for you will be, to a very large extent, will get sorted. So I think, sir, that is the only thing I had to say. And maybe if you can take that under consideration.

Atul, thank you very much for your suggestion.

We'll take the next question from the line of Atul Tiwari from Citigroup.

Sir, my question is on -- again, on the moratorium and waver, a combination of which you have offered. So for the lockdown period, this 50% of the minimum guarantee, would it be fair to say that most of your clients have already agreed to this and/or the negotiations are still on?

I would say we've generally come up with a solution, which averages out to, let's say, 50%, 55% -- 45% to 55% kind of a waiver for the period of lockdown. But -- and this is -- this would hold true for at least 75% of the GLA as -- because when it comes to multiplexes, we've not -- the discussions are yet to be concluded. Several F&B operators, we are still trying to find the right solution, which will help them. But for about 70% to 75% of the mall GLA, this would apply.

Okay. So on a weighted average base roughly, 75% of the clients have agreed to pay roughly 50% of minimum rent that much -- very roughly, we should be comfortable assuming, right?

I would think so, yes.

Okay. And sir, for the post-lockdown period, though, you touched on it, what is the exact payment? So once the mall open, you offer a lower minimum guarantee for how many months, like 3 months or 1 year? Or what is arrangement...

Maybe -- it may be 1 to maximum of 2 quarters. It varies from contract to contract. And while we may offer a relief of some 20%, 30% on the minimum guarantee rent, we are, on the other side, also negotiating with retailers for an increase in the revenue share percentage for this period.

Okay. So roughly speaking, the discount being offered to the current minimum guarantee is 20%, 30% for 1 or 2 quarters maximum?

Yes, it could be higher in some few cases as well.

Okay. But roughly, I mean, broadly on...

Yes, 30% would be a good estimate because...

30%?

Yes.

And again, would it be fair to say that 75% for weighted average while rentals clients have agreed to this? Or this is also still an open matter with most of the clients?

Yes. 70% to 75%, that would be generally there.

We take next question from the line of Adhidev Chattopadhyay from ICICI Securities.

My question is on our CAM charges and on our St. Regis total expenditure. Could you tell us how much we have brought this down by? And in the case of CAMs, how much have we collected from our tenants for the lockdown period?

So CAM has been reduced for the period of lockdown. It's a pass-through expense, as you are aware. So we've really reduced that common area maintenance costs down significantly. And in terms of collections, we've been collecting. So generally, we would have collected about, I would say, about 40%, 45% of the CAM invoices so far. And now that we have concluded on the commercial negotiation for the period of lockdown and for the limited period thereafter, collections are underway. We expect most of it to come along with the rent in July.

Okay. So just to understand, so the CAMs should go back to the pre-COVID levels once the mall start. Is the right understanding? Or it may be higher also because of the sanitation and the digitization which you have to implement?

Well, honestly, the cost of the sanitization, et cetera, is not much higher than what we were incurring in any case, simply because we were maintaining high levels of cleanliness and hygiene standards in the mall. Now the sanitizer, et cetera, is a nominal increase in our costs. I don't think that, that's going to result in an increased CAM because on the flip side, we've also cut down on -- we've reduced the number of public entrances into the mall. So your requirement of manpower has gone down. We've made several changes to our mall operations, which have resulted in a lower CAM cost. So the retailers are not likely to see any increase in their CAM cost.

Okay. And just on the hotel, what are the expenses now versus pre-COVID, what are the expenditure levels?

So really what we have -- I mean, if you look at St. Regis today, our cash burn is about, say, INR 2 crore and INR 2.2 crore, INR 2.3 crore a month as of now. And that's also likely to reduce with other initiatives that we are undertaking. In Agra, it's about INR 30 lakhs a month.

We take the next question from the line of Dhaval Somaiya from PhillipCapital.

I just wanted to understand that in Q4 consumption and EBITDA numbers, the HSP seems to be quite resilient compared to other assets. Any specific reason for that?

Sorry, may I request you to repeat that question again?

Yes. So for Q4 numbers of EBITDA and consumption, the decline for the rest of the malls are relatively higher compared to that which has been witnessed in HSP. So any specific reason for that?

So we had a very, very strong month -- strong 2 months of January and February in terms of consumption, which was up about 15%, 16% year-on-year compared to the previous year in HSP. The other malls were probably in the range of about 8% to 9% or thereabouts compared to last year. And -- so I think the support of the month of Jan and Feb was -- for HSP was much higher. And in March, Mumbai malls shut down on the 16th -- 14th or 15th of the month and Bangalore was probably 2, 3 days prior to that.

And Pradumna, just 1 question, if I may ask, that it's just a bookkeeping question on tax rate, it seems to be higher for this particular quarter. So what is that we should expect for the next couple of quarters? Should it be around 25%? Or will it be notched up a little higher?

No, no. Actually, the tax rates have not gone up. In fact because of the last budget announcement, some of the companies where we have chosen to go with the new tax rates, it is down as compared to the old tax rate. So we have the option of choosing between the old and the new. And we have done our analysis on that. But what you feel as a hit in the -- as a tax hit is probably the write-off of MAT or the deferred tax credits, which were available. So to that extent, some of them are onetime in nature, especially the MAT write-off. So going forward, you will not be able to -- you will not see those similar kind of expenses coming under the tax expense part. And hopefully, as we have cleared up our MAT credits write-off, et cetera, the next year, our tax expenses would be lower as compared to what you have seen in the current financial year.

We take the next question from the line of [ Shankar Mehta from Global Capital. ]

Actually, my question was for the future projections about your revenue in year 2021 and '22? Like what kind of division are you expecting?

What -- sorry, may I request you to repeat your question?

Yes. What percentage of deviations are you expecting in your revenues for '21 and '22?

Deviation.

Deviation, Okay, in FY '21. No -- so we hope that at least the current outlook is that FY '22 should see normalcy. So we should be similar to the levels of FY '19, if not FY '20.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Over to you all.

Thank you, everyone, for joining us on this call. We request you all to stay home, stay safe. And hopefully, we will see normalcy return soon. Looking forward to our next interaction. And we look forward to welcoming you all into our malls very, very soon. Have a good day.

Thank you. On behalf of The Phoenix Mills Limited, we conclude today's conference. Thank you for joining. You may now disconnect your lines.