Retail sales in malls rebound post COVID-19 2nd wave: CRISIL

Malls have been recovering faster after the second wave of COVID-19 compared to the first. Rental revenue for mall owners has jumped back to 80-85% of pre-pandemic levels this fiscal, compared to 55-60% last fiscal, according to an analysis of India's top 14 malls rated by CRISIL Ratings,

"Improving consumer sentiment driven by faster vaccinations, pent-up demand and discount sales by major retailers have contributed to the recovery," said Anand Kulkarni, Director, CRISIL Ratings.

Investor confidence in malls seems to have improved, as reflected in equity investments, funding for asset development, and outright asset purchases, the CRISIL report said.

However, an intense third wave could shrink the rental revenue of mall owners by 10% if it impacts the upcoming festive season.

Categories such as apparels, cosmetics, electronics and luxury are expected to see faster recovery, owing to pent-up demand, which will reduce the burden on mall owners because of lesser rental waivers.

Recovery will vary for other segments. Food and beverage, cinema and family entertainment centres are expected to see only a gradual recovery. Malls in the southern states and Maharashtra would take longer to recover, compared with those in the north due to the knock-on effect of the pandemic.

While the rental income of mall owners would be better in FY22 than the last fiscal, complete recovery to pre-pandemic levels is likely to only happen in the next fiscal.

"The debt service coverage ratio (DSCR) will continue to be below 1 time for most mall owners this fiscal, indicating a dip in their liquidity reserves for debt servicing even in the base case," said Kshitij Jain, Associate Director, CRISIL Ratings.

Even if liquidity erodes, strong sponsor support and fund-raising initiatives will support credit profiles of rated malls.

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