CMP 275.95

Target Price 312.00

ISIN: INE211B01039

MAY 29th

2014

THE PHOENIX MILLS LTD Result Update (PARENT BASIS): Q4 FY14

BUYBUYBUYBUY

Index Details

Stock Data

Sector Realty

BSE Code 503100

Face Value 2.00

52wk. High / Low (Rs.) 309.00/185.00

Volume (2wk. Avg. Q.) 15000

Market Cap (Rs. in mn.) 39969.98

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 2948.02 3331.26 3731.01

EBITDA 2730.72 3142.62 3511.25

Net Profit 1525.55 1721.81 1922.72

EPS 10.53 11.89 13.27

P/E 26.20 23.21 20.79

Shareholding Pattern (%)

1 Year Comparative Graph

THE PHOENIX MILLS LTD BSE SENSEX

SYNOPSIS

The Phoenix Mills Ltd. began operations as a textile

manufacturing in 1905 & later entered the growing

real estate market in 1987 at Mumbai.

The company’s net sales registered 8.95% increase

and stood at a record Rs. 786.77 million from Rs.

722.12 million over the corresponding quarter last

year.

During Q4 FY14, Net profit jumps to Rs. 363.73

million a growth of 0.71% as against Rs. 361.15

million for Q4 FY13.

Operating profit of the company was up by 12.31%

from Rs. 619.42 million in Q4 FY13 to Rs. 695.68

million in Q4 FY14.

The company has recommended a dividend of Rs.

2.20/- per share on face value of Rs. 2.00/- each for

the year ended March 31, 2014.

New stores include Ethos Summit, Reliance Digital

Express and Maspar Furnishings which are opened

in Q4 FY14.

Net profit grew by 14% for the end of the FY14 to

Rs 1525.55 million as against Rs 1338.79 million in

the previous year.

The Company has investments of Rs. 579.27 million

in the equity shares of Entertainment World

Developers Limited (EWDL) and Rs. 1000.00 million

in FCDs of Treasure world Developers Pvt Ltd.

Net Sales and PAT of the company are expected to

grow at a CAGR of 11% and 13% over 2013 to

2016E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

The Phoenix Mills Ltd. 275.95 39969.98 10.53 26.20 2.13 110.00

DLF Ltd. 203.75 446061.40 1.43 142.48 3.03 100.00

Sobha Developers Ltd. 442.20 43363.80 21.06 21.00 2.05 70.00

Mahindra Lifespace Developers Ltd. 433.00 17687.30 19.03 22.75 1.40 60.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q4 FY14,

Phoenix Mills Ltd. has achieved a turnover of Rs. 786.77 million for the 4th quarter of the current year 2013-14 as

against Rs. 722.12 million in the corresponding quarter of the previous year. The company has reported an

EBITDA of Rs. 695.68 million an increased by 12.31% over the prior period of previous year. During the quarter,

net profit is at Rs. 363.73 million against Rs. 361.15 million in the corresponding quarter of the previous year.

The company has reported an Earning per Share of Rs. 2.51 for the 4th quarter as against an Earning per Share of

Rs. 2.49 in the corresponding quarter of the previous year.

Break up of Expenditure

During the quarter, total expenditure rose up by 71% mainly on account of increased Property Taxes and other

expenditure by 2% are the main attribute for the growth of expenditure. In Q4 FY14 total expenditure stood at

Rs. 372.00 million as against Rs. 217.36 million in Q4 FY13.

Rs. In millions MAR-14 MAR-13 % Change

Net Sales 786.77 722.12 8.95

PAT 363.73 361.15 0.71

EPS 2.51 2.49 0.71

EBITDA 695.68 619.42 12.31

Break up of Expenditure

Rs. Millions

Q4 FY14 Q4 FY13

Employee Benefit Expenses 18.18 20.42

Electricity Expenses 78.76 96..48

Depreciation & Amortization

Expense 65.32 70.68

Property Taxes 91.37 10.23

Other Expenses 118.37 116.03

Latest Updates

• Highest Footfall of 2.04 Mn achieved in the month of January 2014.

• The company has recommended a dividend of Rs. 2.20/- per share on face value of Rs. 2.00/- each for the

year ended March 31, 2014.

• Consumption at the mall increased to Rs 3394.00 Mn in Q4 FY14, a 8% y-o-y growth and Average Trading

Density increased to Rs 2,323 psf. pm. in Q4FY14, a 9% y-o-y growth.

• Highest ever consumption at the mall of Rs 1,401Mn achieved in the month of January 2014.

• New stores include Ethos Summit, Reliance Digital Express and Maspar Furnishings which are opened in Q4

FY14.

• Approx 2,81,500 sq. ft. of area coming up for renewal in the next 12 months.

• Renewals for new stores are being achieved at minimum Rs. 400 psf pm of MG

• The Company has investments of Rs. 579.27 million (including through wholly owned subsidiary) in the

equity shares of Entertainment World Developers Limited (EWDL) and Rs. 1000.00 million in FCDs of

Treasure world Developers Pvt Ltd. (TWDPL), subsidiary of EWDL, which are considered a strategic & long

term in nature.

Financial Highlights for the end of FY 2013-14

• For the end of FY14, the company registered a growth of 9% in Net sales to Rs. 2948.02 million from Rs.

2706.01 million of last year.

• Net profit grew by 14% for the end of the FY14 to Rs 1525.55 million as against Rs 1338.79 million in the

previous year.

• For the end of 31st March, FY14, Growth in Operating profit registered 16% to Rs. 2730.72 million from Rs.

2350.76 million of last year.

COMPANY PROFILE

The Phoenix Mills Ltd. began operations as a textile manufacturing in 1905 and gradually the company entered in

growing real estate market in 1987 at Mumbai with High Street Phoenix emerging as the most frequented

destination in the city.

Phoenix Mills Ltd is poised to carve a niche in the booming Indian real estate sector. The Phoenix Group is set to

take on the challenge of redefining life style in Indian cities. Be it mega retail malls, entertainment complexes,

commercial space or hospitality units, the Group are determined to make its presence felt in India.

It has become the model for development of shopping & entertainment hubs across the country. The plan

includes retail units, entertainment complexes, commercial units, hotels, parking and residential complexes. The

Group has been a pioneer in converting mill land into modern, multi-use integrated property. High Street

Phoenix was the first consumption center developed in India. The complex has been developed on 1.5 million

square feet of space and houses retail and entertainment, commercial and residential complexes.

The Group plans to foray into developing real estate in eight cities measuring a total of 214 lakh square feet.

These include Mumbai, Bangalore, Chennai, Pune, Raipur, Agra and Indore. The Phoenix Group relies on its

team's strengths, which include exceptional project management capabilities; project planning and aggressive

rollout plans.

Core Business

� Retail: Build and Lease

The company has a strategic alliance with the “Pantaloons Group” India’s fore-runner in the retail segment

through their brands “Pantaloon” and “Big Bazaar”, and a significant stake in Galaxy Entertainment Corp. Ltd,

a publicly listed company that specializes in setting up Leisure & Entertainment Centers, as well as food

courts/kiosks across the country.

High Street Phoenix Phoenix Market City – Bangalore

Phoenix Market City - Mumbai

Phoenix Market City - Pune

Phoenix Market City - Chennai

Mall

� Hospitality: Build and Operate

India's rich culture and heritage, ancient history and monuments, unity in diversity, colorful people &

festivals are some of the reasons that India is one of the most attractive tourist destinations in the world.

In an attempt to bridge this demand-supply gap, the Market Cities retail destinations are ideal locations for

hotels, catering to business travelers as well as tourists. The company is handling its projects in Mumbai,

Pune, Chennai, Bangalore & Agra in the segment.

� Entertainment

The Indian entertainment industry is estimated to grow at a booming 18 per cent per annum, computed with

a target of 45,000 crores. The Phoenix Mills Limited group joined hands with Galaxy Entertainment in 1998

and together they have set a new benchmark for leisure and entertainment in Mumbai. The 20 alley Bowling

Co. was the first of its kind in Mumbai and still remains one of the largest and most popular destinations in

the city. Today, multiplexes, gaming arcades, food courts and shopping centers have made malls a destination

for myriad consumers, with varying needs and interests.

� Residential & Commercial: Build and Sell

The Phoenix Mills Limited, in all projects, pays special attention to the consumer's/ retailer's needs. The

commercial office blocks have been incorporated into the market city projects. Commercial office blocks of

approximately 3000 sq ft are an integral part of all the projects, from High Street Phoenix to all the Market

city projects. These projects are in prime locations, with easy connectivity to important city centers, airports

& railway stations, making the development an ideal location for office space. The office blocks have latest

facilities & amenities including parking, internet & other telecommunication connections, electricity,

illumination, etc.

Group Companies

• EWDPL

EWDPL is a Tier II city centric retail mall, mixed use developer, currently engaged in the construction and

operation of mixed-use retail centers and townships.

• Big Apple

Big Apple Real Estate Pvt. Ltd was formed as a holding for development of Malls, Multiplex's and other real

estate ventures, in India. The Company has formed to develop malls by brand name Phoenix United across

north India, particularly in UP covering cities including Lucknow, Agra, Bareilly & Varanasi.

GEOGRAPHICAL - SPREAD

Strong presence in metropolitan and Tier I cities like Mumbai, Pune, Bengaluru & Chennai. Spreading to Tier II,

Tier III cities by partnering with experienced and reputed developers.

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March31, 2013 -2016E

THE PHOENIX MILLS LIMITED FY-13A FY-14A FY-15E FY-16E

I EQUITY AND LIABILITIES

A) Shareholder's Funds:

a) Share Capital 289.69 289.69 289.69 289.69

b) Reserves and Surplus 17396.17 18547.90 20165.84 21779.10

Sub-Total Net worth 17685.86 18837.59 20455.53 22068.79

B) Non Current Liabilities:

a) Long term borrowing 2067.00 3806.81 5786.35 7637.98

b) Other Long term liabilities 770.85 701.40 645.29 613.02

c) Long term Provisions 3.64 2.00 2.16 2.31

Sub- Total Non Current liabilities 2841.49 4510.21 6433.80 8253.32

C) Current Liabilities:

a) Short term borrowings 120.64 391.80 560.27 711.55

b) Trade payables 440.61 491.20 540.32 588.95

c) Other Current liabilities 1124.75 1583.80 1805.53 2043.86

d) Short term Provisions 465.55 380.00 292.60 219.45

Sub-Total Current Liabilities 2151.55 2846.80 3198.73 3563.81

TOTAL EQUITY AND LIABILITIES (A + B + C) 22678.90 26194.60 30088.06 33885.92

II ASSETS

D) Non-Current Assets:

Fixed Assets

i. Tangible assets 4424.55 4093.00 4170.77 4212.47

ii. Capital Work in Progress 1089.75 1227.50 1374.80 1484.78

a) Sub-Total Fixed Assets 5514.30 5320.50 5545.57 5697.26

b) Non Current Investments 9386.25 11110.00 12887.60 14434.11

c) Long Term loans and advances 3888.11 6498.60 8058.26 9831.08

d) Deferred Tax Asset 30.21 3.50 3.82 4.08

e) Other non-current assets 5.08 2.80 3.30 3.83

Sub-Total Non-Current Assets 18823.95 22935.40 26498.55 29970.37

E) Current Assets:

a) Trade receivables 294.17 253.00 263.12 271.01

b) Cash and Bank Balances 223.23 247.30 272.03 296.51

c) Short-terms loans & advances 3188.80 2484.10 2682.83 2870.63

d) Other current assets 148.75 274.80 371.53 477.40

Sub- Total Current Assets 3854.95 3259.20 3589.51 3915.55

TOTAL ASSETS (D+E) 22678.90 26194.60 30088.06 33885.92

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 2706.01 2948.02 3331.26 3731.01

Other Income 565.28 799.97 983.96 1082.36

Total Income 3271.29 3747.99 4315.23 4813.37

Expenditure -920.53 -1017.27 -1172.60 -1302.12

Operating Profit 2350.76 2730.72 3142.62 3511.25

Interest -264.96 -444.09 -563.99 -631.67

Gross profit 2085.80 2286.63 2578.63 2879.58

Depreciation -275.40 -254.38 -279.82 -302.20

Profit Before Tax 1810.40 2032.25 2298.81 2577.37

Tax -471.61 -506.70 -577.00 -654.65

Net Profit 1338.79 1525.55 1721.81 1922.72

Equity capital 289.69 289.69 289.69 289.69

Reserves 17291.30 18444.03 20165.84 21779.10

Face value 2.00 2.00 2.00 2.00

EPS 9.24 10.53 11.89 13.27

Quarterly Profit & Loss Statement for the period of 30 SEP, 2013 to 30 JUNE, 2014E

Value(Rs.in.mn) 30-Sep-13 31-Dec-13 31-Mar-14 30-Jun-14E

Description 3m 3m 3m 3m

Net sales 707.16 755.86 786.77 810.37

Other income 172.35 196.65 215.59 234.99

Total Income 879.51 952.51 1002.36 1045.37

Expenditure -228.64 -258.55 -306.68 -284.44

Operating profit 650.87 693.96 695.68 760.93

Interest -97.07 -146.06 -129.26 -138.31

Gross profit 553.80 547.90 566.42 622.62

Depreciation -65.32 -58.59 -65.32 -62.05

Profit Before Tax 488.48 489.31 501.10 560.56

Tax -123.20 -111.06 -137.37 -140.70

Net Profit 365.28 378.25 363.73 419.86

Equity capital 289.69 289.69 289.69 289.69

Face value 2.00 2.00 2.00 2.00

EPS 2.52 2.61 2.51 2.90

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 9.24 10.53 11.89 13.27

EBITDA Margin (%) 86.87 92.63 94.34 94.11

PBT Margin (%) 66.90 68.94 69.01 69.08

PAT Margin (%) 49.47 51.75 51.69 51.53

P/E Ratio (x) 29.86 26.20 23.21 20.79

ROE (%) 7.61 8.14 8.42 8.71

ROCE (%) 13.28 13.02 12.77 12.54

Debt Equity Ratio 0.12 0.22 0.31 0.38

EV/EBITDA (x) 17.84 16.08 14.65 13.68

Book Value (Rs.) 121.38 129.34 141.22 152.36

P/BV 2.27 2.13 1.95 1.81

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs. 275.95, the stock P/E ratio is at 23.21 x FY15E and 20.79 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.11.89 and

Rs.13.27 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 13% over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 14.65 x for FY15E and 13.68 x for FY16E.

� Price to Book Value of the stock is expected to be at 1.95 x and 1.81 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.312.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

Real estate in India continues to be a favoured destination globally for investors, developers and non-resident

Indians (NRIs), driven largely by investor-friendly government policies and increasing globalisation. The second

largest employment generation sector after agriculture, real estate contributes about 6.3 per cent to India’s gross

domestic product (GDP). The foreign direct investment (FDI) in the sector is expected to touch US$ 25 billion in

the next 10 years from its current US$ 4 billion.

The sector’s progress is driven by factors such as rapid urbanisation, a growing trend towards nuclear families,

positive demographics, rural–urban migration, ever-developing infrastructure, higher income levels and housing

demand. The real estate sector, with its growing investment opportunities, is expected to post annual revenues of

US$ 180 billion by 2020.

Market Dynamics

The real estate sector in India is witnessing rapid growth in the residential, commercial and industrial segments.

Real estate development, once restricted to bigger cities, have shown marked progress in smaller cities and

towns owing to availability of banks loans, higher earnings and improved standard of living.

The real estate sector of India is projected to post annual revenues of US$ 180 billion by 2020 against US$ 66.8

billion in 2010–11, a compound annual growth rate (CAGR) of 11.6 per cent. The demand is expected to grow at a

CAGR of 19 per cent in the period 2010–2014, with Tier I metropolitan cities expected to account for about 40

per cent of this growth. As of now, Mumbai, Delhi-National Capital Region (NCR) and Bengaluru cater for 46 per

cent of total office space demand in India. This demand is expected to be rise sharply in Tier II cities such as

Kolkata and Chennai in the period 2010–14.

Today, Delhi-NCR accounts for about 30 per cent of the total mall supply in India. About 53 per cent of demand

for total mall space is projected to come from the country’s top seven cities, namely Delhi-NCR, Bengaluru,

Mumbai, Kolkata, Pune, Hyderabad, and Chennai, in the period 2010–2014.

Investment Opportunities

The Indian retail realty sector is projected to grow at around 15 per cent year-on-year over the next 3–5 years as

against a 12–13 per cent nominal growth of India’s GDP estimated by the International Monetary Fund (IMF). If

the sector does indeed manage the aforementioned growth, it will touch Rs 34 trillion (US$ 544.73 billion) by

2016.

India’s office space stock is estimated to rise by 40 per cent to 642.2 million sq ft by 2017, according to a report

by real estate consultancy Knight Frank India. The current Indian market offers some of the most competitive

rates in the Asia-Pacific region, according to a report by property services firm DTZ. The report also states that

Indian cities will have some of the fastest rental growths in the region over the period 2013–17, but will remain

among the most competitive.

The share of luxury retail space in India will be 1.4 per cent by 2015, according to a report by real estate services

firm Cushman & Wakefield. NCR and Mumbai, areas that have embraced the mall culture, are the two most

favoured destinations for luxury retailers.

The construction development sector, including townships, housing and built-up infrastructure garnered total

FDI worth US$ 22,671.95 million in the period April 2000–August 2013. Construction (infrastructure) activities

during the period received FDI worth US$ 2,280.95 million, according to the Department of Industrial Policy and

Promotion (DIPP).

The following are some of the major investments in the Indian real estate sector:

� Godrej Properties Ltd plans to invest Rs 90000.00 million (US$ 1.44 billion) in 15 new real estate projects in

India over the next 10 years.

� Unitech Ltd has signed a Rs 8000.00 million (US$ 128.17 million) deal to lease an 800,000 sq ft space at one

of its IT Special Economic Zones (SEZ) in Gurgaon, to multinational human resource firm, Aon Hewitt.

� NRI billionaire Mr Ravi Pillai plans to purchase stake worth about US$ 100 in a special purpose vehicle

floated by Pune-based realtor, Panchshil Realty. The investment will go into the construction of Trump

Towers and World Trade Centre in Pune, Maharashtra.

� Infrastructure Leasing & Financial Services (IL&FS) Ltd has claimed a project worth Rs 2444.60 million (US$

39.17 million) from realty firm Emaar MGF for construction work at the latter’s residential project at

Gurgaon, Haryana.

� French luxury hotel chain Sofitel, which is managed by Accor Group, is targeting 10 properties in India,

mainly in major luxury destinations, in the next few years.

� One of the world’s top manufacturers of elevators, US-based Otis, is setting its sights on the Indian real estate

market. The pace of construction in India makes the country an attractive proposition for such an investment.

The company will be working with the Delhi and Hyderabad Metro projects. The former has placed an order

for 222 escalators for its Phase III project, according to Otis.

Government Initiatives

According to the existing FDI policy, 100 per cent FDI in the construction development sector is permitted

through the automatic route. DIPP is looking at relaxing FDI norms further to encourage investment. It has also

proposed a reduction in the minimum capitalisation for wholly-owned subsidiaries from US$ 10 million to US$ 5

million, and from US$ 5 million to US$ 2.5 million for joint ventures with Indian partners.

One of the major initiatives of the Ministry of Housing and Urban Poverty Alleviation (MHUPA) is to provide

affordable housing for poor people living in urban areas. The Jawaharlal Nehru National Urban Renewal Mission

(JNNURM) is one its flagship schemes, a reform driven investment programme which started with the objective

of creating economically productive, efficient, responsive and inclusive cities.

The Real Estate (Regulation and Development) Bill, 2013, as approved by the Union Cabinet is a pioneering

initiative aimed at delivering a uniform regulatory environment to protect the consumer, help in quick verdicts of

disputes and ensure systematic growth of the sector.

Road Ahead

India needs to invest US$ 1.2 trillion over next 20 years to modernise urban infrastructure and keep pace with

the burgeoning urbanization.

Demand for space from sectors such as education and healthcare has opened up opportunities in the real estate

sector. Also, growth in the number of tourists has led to demand for service apartments. This demand in the

tourism sector is expected to generate 50,000 new hotel rooms over the next four to five years, across India’s

major cities.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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