Real Estate firm Phoenix Mills was hit hard by the pandemic; MD Shishir Shrivastava’s innovative strategy pulled it through
The Covid-19 pandemic severely impacted the real estate sector, with the sudden lockdown crippling consumption and causing a steep decline in demand. In this situation, resilient businesses survived solely through determination and grit. Shishir Shrivastava, Managing Director of The Phoenix Mills Ltd., exemplifies this. With nearly 25 years of experience, the 48-year-old Shrivastava, winner in the Real Estate category of the BT-PwC India’s Best CEOs ranking, reflects on those times and says that when the virus threatened livelihoods, he had no choice but to intensify efforts and quietly prepare for the challenges ahead.
What did he do? When most of his industry peers were scrambling in search of a survival strategy, Phoenix Mills, under his guidance, launched an upgradation drive for its retail assets. The company’s top line comes mainly from mall rentals, and with cities coming to a halt, malls had turned into empty shells. But Shrivastava persevered. The company management saw the pandemic also as an opportunity, and it used it to change the brand- and category mix in its malls.
Furthermore, Shrivastava drew valuable insights from the 2008 global financial crisis, which proved instrumental. This was when the company was initially expanding beyond its base in Mumbai’s Lower Parel neighbourhood. However, its assertive approach then had placed the company under considerable duress, with debt exceeding equity by a significant margin.
“The learnings stayed with us. So, almost all of the new projects that we launched since 2017 were financed by leveraging equity. That was one of the very important decisions that we took, to not grow our debt to higher levels for under-construction projects,” Shrivastava tells Business Today. Along with massive cost cutting measures in place, while most other real estate developers were either staring at debt piling up or were selling some of their key assets to reduce debt, for Shrivastava the strategy came handy. “So during Covid-19, it was really helpful as we did not have that undue pressure of debt service on our head,” he recalls. To fuel its operations, Phoenix Mills secured Rs4,873 crore in capital through equity and joint ventures from 2020 to 2022. With investments totalling close to Rs7,000 crore, including land acquisitions and capex, Shrivastava asserts that this strategic move positioned Phoenix as a leader, particularly as lockdown restrictions eased.
The numbers bear testimony. After taking a hit on its top line in FY21, the firm’s operating revenue surged 38% year-on-year to Rs 1,483 crore, while its net profit jumped 4.6 times to Rs 268 crore. In FY23, Phoenix Mills recorded a 78% rise in its operating revenue to Rs 2,638 crore and its profit after tax jumped by a whopping 449% to close the year at Rs 1,472 crore. According to analysts at Geojit Financial Services, its earnings growth was “impressive”, driven by rising consumption and successful project launches. “The company’s strategic positioning in the retail and entertainment business has contributed to increased footfall and revenue. With a robust pipeline of upcoming projects, the company is well-positioned to sustain its growth trajectory,” the market analysis firm notes. The revamping exercise yielded rich dividends. Rental income from retail categories like jewellery (up 164% between Q2FY20 and Q4FY23), food and beverages (64%), fashion and accessories (62%), multiplex (33%) and electronics (15%) boosted its performance as the segment contributed nearly 70% to Phoenix’s top line.
Shrivastava aims to swiftly expand Phoenix’s footprint in the office and hospitality sectors. With 30 million sq. ft. of retail assets in eight cities like Mumbai and Bengaluru, Phoenix will soon extend its reach to Kolkata, Surat, and Thane. Together with expansion in its existing locations, Phoenix will add another 2.5 million sq. ft. of retail assets. As the expansion progresses, Shrivastava remains proactive. He’s actively seeking opportunities in cities such as Jaipur, Chandigarh, Hyderabad, and Coimbatore, identifying untapped potential for consumption in areas lacking quality retail centres.
Industry observers are also upbeat. According to Pritesh Sheth, research analyst at Motilal Oswal Financial Services, Phoenix’s rental income will stay ahead of the consumption growth in the retail sector. “Aided by densification of existing malls, we expect Phoenix to report a 14% CAGR in rental income over FY24-FY26,” he says. In the office space segment, the plans are even more aggressive. Shrivastava now aims to add 5.5 million sq. ft. of office space to Phoenix’s portfolio and wants to venture into key markets like Bengaluru and Chennai, to take the total number to over 7 million sq. ft. by FY27. This, believes Shrivastava, will push the segment’s contribution to the top line to 25%. There is also the company’s ongoing luxury hotel project, under the Grand Hyatt brand in Bengaluru. When this is completed, it will take the group’s hospitality assets count to three.
With wind underneath his wings, small wonder, therefore, that a quiet smile is ubiquitous on Shrivastava’s face these days.
@arndutt
