The shares of Phoenix Mills surged nearly 6 percent on July 25, a day after the company announced the plan to acquire remaining 49 percent stake in subsidiary Island Star Mall Developers (ISMDPL) from CPP Investments. Brokerages noted that the deal may unlock long term value for the stock.
Phoenix Mills released its results in the post market hours of July 24. The firm's net profit rose 3.5 percent on-year to Rs 241 crore in Q1 FY26 from Rs 232.5 crore in Q1 FY25. Its revenue from operations meanwhile rose 5 percent year-on-year to Rs 953 crore during the quarter under review. Operating EBITDA grew 6 percent on-year to Rs 564 crore, while EBITDA margin remained flat at 59 percent.
The company announced that its board also approved the proposed transaction for the buy-out of the 49 percent shareholding of Canada Pension Plan Investment Board (CPP Investments) in Island Star Mall Developers Private Limited (ISMDPL). Once completed, the stake buyout will take Phoenix's shareholding in the subsidiary from the existing 51 percent to 100 percent.
CPP Investments will exit ISMDPL, a mall and offices development platform that had formed with Phoenix in 2017, with CPP Investments receiving around Rs 5,449 crore as part of the stake buyout. The platform includes a shopping mall in Indore, and two retail-led mixed-use mall-and-office developments in Bengaluru and Pune.
In an exchange filing, PML announced that the company will pay the consideration to CPP Investments over four tranches in a three-year period. For FY25, the three projects that are part of the ISMDPL platform, had a consolidated turnover of nearly Rs 920 crore, compared to Rs 612 crore the year prior.
"ISMDPL marked the beginning of our long-standing partnership with CPP Investments. What started with a single asset has grown into a portfolio of premium, retail-led mixed-use developments across key urban centres. As we consolidate our stake in the JV, we remain focused on building on this strong foundation and creating some of the most vibrant and high-performing mixed-use destinations in the country," said Atul Ruia, Chairman at Phoenix Mills. He added that the firm’s other collaborations with CPP Investments will continue as planned.
The firm's MD Shishir Shrivastava meanwhile said that this transaction will allow the firm to "consolidate full ownership of a portfolio of high-quality, retail-led mixed-use assets across key Indian cities".
Motilal Oswal Financial Services kept a 'Neutral' rating on the stock, but cut its target price to Rs 1,646 apiece. This implies an upside potential of nearly 14 percent from the stock’s previous closing price of Rs 1,448 apiece.
The domestic brokerage noted that the firm's earnings missed its estimates significantly. However, the acquisition may unlock long term value as it strengthens its high quality retail asset portfolio. "The transaction is expected to be earnings-accretive from year one, with a significant upside when rental income stabilizes and the 2.71msf incremental FSI potential is developed over the medium-term post FY27. Staggered payments over three years takes net debt-to-equity to 0.2x for the FY27 which was expected to net cash earlier," it said.
HDFC Securities also noted that Phoenix Mills reported a muted quarter, with its earnings missing out on estimates on several fronts. The brokerage however remained positive about the firm's proposed acquisition. "The transaction implies an EV of Rs 117 bn (5.3% cap rate on FY25 EBITDA, can add INR 65/share to SOTP) for the platform. The deal strengthens Phoenix’s portfolio and offers strategic flexibility for long-term expansion," the firm said.
Phoenix Mills shares were trading at Rs 1,538 apiece. The stock has gained nearly 3 percent in the past five days, but dropped over 5 percent in the past one month.
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