Phoenix Mills goes all in: Will India’s retail revival deliver long-term profits?

In the June 2025 quarter, spending across Phoenix’s malls jumped 12 per cent compared to last year, showing that the appetite for shopping in physical spaces is alive and growing.

What makes the story more interesting is how Phoenix is shaping this demand. Instead of simply filling every vacant space, the company has been replacing older, low-yield tenants with premium brands. This has meant a short-term dip in trading occupancy and only a 4 per cent rise in rental income.

At the same time, Phoenix is preparing for its next big leap. It has struck a Rs 5,449 crore deal to buy out Canada Pension Plan Investment Board’s stake in its key mall platform, giving it full ownership of marquee properties in Bengaluru, Pune, and Indore. That portfolio, which already earned Rs 617 crore in EBITDA in FY25, could more than double in scale by 2030.

For everyday investors, the question is: Can Phoenix Mills turn this shopping boom into lasting profits? The answer lies in how well it executes its expansion plans, manages its debt, and keeps its malls relevant in a market where consumer tastes change fast.

Figure 1: Stock Price Movement of Phoenix Mills Ltd. Source: Screener.in

Taking full control: Why Phoenix is buying out its partner
This year, Phoenix Mills announced its decision to buy out Canada Pension Plan Investment Board’s 49 per cent stake in Island Star Mall Developers Pvt Ltd (ISMDPL).

This is the platform that owns and operates some of Phoenix’s most important malls in Bengaluru, Pune, and Indore. The price tag is hefty: about Rs 5,449 crore, but the payment has been smartly structured. Instead of paying it all up front, Phoenix will spread the cost over four installments across three years.

What makes this deal interesting is how Phoenix plans to fund it. The company says most of the money will come from cash flows generated by the malls, plus some additional borrowing capacity at the platform level. In other words, the malls will help pay for their own buyout. This keeps Phoenix’s overall balance sheet lighter and avoids stretching corporate debt too far.

Why take on this deal now? Because the ISMDPL portfolio is already showing strong performance, and management sees a much bigger runway ahead. In FY25, these malls and offices together generated Rs 617 crore in EBITDA. With expansions and unutilised development rights still to be tapped, the company believes the platform can grow to nearly 13 million square feet by 2030. Full ownership means Phoenix will no longer share these future gains with a partner.

There is also an immediate financial benefit. By removing the minority interest, Phoenix will get to keep the entire share of free cash flows from these assets. Even if the first tranche of the buyout were fully funded by debt, management says the extra interest cost would still be more than covered by the higher cash flow share. In simple terms, Phoenix is swapping out a partner for debt, and still coming out ahead.

The strategic upside is clear. Complete control gives Phoenix freedom to decide how to use the cash flows, how fast to expand, and how best to package or monetise these assets in the future. Options like launching a REIT or bringing in new investors later remain open.

Malls are back: What the latest numbers show

In the June 2025 quarter, retail consumption across its portfolio grew by about 12 per cent year-on-year. Shoppers are not just window browsing; they are spending more, and that is driving healthy sales for tenant stores. Malls in Mumbai, Lucknow, Bengaluru, Pune, Indore, and Ahmedabad all reported strong growth, showing that this is not limited to a city or catchment.

But even as consumption rose strongly, rental income increased by only 4 per cent in the same quarter.

The reason is not weak demand, but Phoenix’s strategy. The company is in the middle of a large-scale “repositioning” exercise across several of its older MarketCity malls in Mumbai, Pune, Chennai, and Bengaluru. It is phasing out lower-performing tenants and bringing in stronger, premium brands to improve the long-term profile of its malls.

This has led to a temporary dip in ‘trading occupancy’ — the percentage of space actually operating at a given time, even though ‘leased occupancy’ remains above 95 per cent. Some big spaces have been deliberately vacated and are under fit-out for new luxury, electronics, or fashion tenants. The short-term impact is a few quarters of slower rent growth.

But the payoff could be significant. For instance, in Bengaluru’s Phoenix MarketCity, the company reconfigured space previously occupied by a hypermarket and fashion anchor, replacing them with smaller but higher-yielding brands. The result: the same area is now projected to generate nearly double the rent once stabilised.

Similarly, in the new Phoenix Mall of Asia, management held back 8 per cent of prime upper-ground space until it secured luxury and star brands.

Some watch retailers that recently signed on are paying minimum guaranteed rents of around Rs 550 per sq. ft. per month, far higher than the mall’s average of Rs 170. Moves like this explain why Phoenix is willing to accept slower growth today. It is building a tenant mix that can command higher rentals and sustain stronger trading densities for years to come.

The next growth engines: Bengaluru super campus, new malls, offices, and hotels

Phoenix Mills is not just resting on its existing malls. It is building what could become one of the most ambitious retail-led destinations in India: a 4 million square foot super campus in Whitefield, Bengaluru. The existing MarketCity mall is already one of the busiest in the country.

Now, through Phase 2 and Phase 3 expansions, Phoenix plans to add new retail wings, a ‘Gourmet Village’ with 19 restaurants, Grade A offices, and two hotels, including a 400-room Grand Hyatt slated to open in 2027. The idea is to create an ecosystem where shopping, dining, working, and staying all feed into each other, making the site more resilient and more profitable.

This vision is part of a broader expansion drive. Large malls are under construction in Kolkata and Surat, both expected by 2027, while Mumbai’s flagship Palladium is being expanded in phases through 2026-27. Across Bengaluru, Pune, and Indore, Phoenix also holds additional development rights of about 2.7 million square feet, giving it scope to add capacity without buying new land.

At the same time, offices and hotels are emerging as serious income streams. Phoenix has about 2.2 million square feet of newly built offices in Bengaluru and Pune. These projects were completed in 2025 and are now being leased out.

Occupancy was only around 6 per cent mid-year, but leasing is ramping up quickly, with over 430,000 square feet signed in Q1 FY26 alone, with a target of 90 per cent by 2026. Because the construction is done, every new lease directly boosts income.

Hotels are following a similar trajectory. The company’s two operational properties, the St. Regis in Mumbai and Courtyard by Marriott in Agra, brought in Rs 130 crore revenue in Q1 FY26, with EBITDA growing 19 per cent to Rs 58 crore. Once the Grand Hyatt Bengaluru opens, followed by a second hotel in Phase 3 of the Whitefield campus, hospitality will add both direct income and stronger footfalls for the malls.

For investors, these projects are important because they broaden Phoenix’s base. Retail malls remain the core, but offices and hotels add stability and diversification. Combined with the new malls in the pipeline, they form the next set of growth engines that can keep cash flows rising well into the next decade.

Balancing growth with debt, and what valuation tells us
A question that always comes up with real estate companies is simple: how much debt is too much? Expansions need capital, but too much borrowing can hurt. Phoenix Mills has tried to strike a balance.

Take the Rs 5,449 crore buyout of CPP Investments’ stake in its mall platform. The payment is spread over three years, and most of it will be funded by the cash flows of the malls themselves, plus some borrowing at the project level.

This means Phoenix does not need to overload its own corporate balance sheet. In fact, even if the first tranche is entirely debt-funded, management says the deal will still add to earnings because Phoenix will now keep all of the cash flows instead of sharing them.

At a group level, Phoenix had about Rs 4,435 crore of debt as of June 2025. That sounds large, but it sits against steady operating cash flows of nearly Rs 1,800-1,900 crore a year.

Net debt to EBITDA has been trending lower, and importantly, the average cost of debt has fallen to around 7.9 per cent, with the prospect of further reduction as RBI’s rate cuts filter through. Management also highlighted a capex plan of about Rs 1,200-1,300 crore over the next year, which they believe can be funded without stressing the balance sheet.

Now, what about valuation? Unlike many real estate stocks that trade at steep discounts, Phoenix Mills has long commanded a premium. Investors pay up because of three things: the strength of the Phoenix brand in retail, its ability to attract top tenants across cities, and the visibility of its expansion pipeline. By some estimates, the stock trades closer to high-growth consumer companies than traditional developers.

This premium, however, cuts both ways. It means there is little margin for error. If leasing takes longer than expected, if rental growth lags, or if debt rises faster than cash flows, investor sentiment could turn quickly. On the other hand, if Phoenix delivers on its expansion plans, filling up its new offices, launching Kolkata and Surat on schedule, and ramping up the Bengaluru super campus, then today’s valuations could look justified, even cheap, a few years from now.

In short, the market is giving Phoenix Mills credit for being India’s most successful mall operator. To keep that faith, the company needs to show consistent execution quarter after quarter.

Conclusion: Can Phoenix keep delivering?

Phoenix Mills has rewarded its investors well, with the stock compounding at about 37 per cent annually over the past five years. That track record reflects strong execution and India’s retail revival.

The road ahead is ambitious: new malls in Kolkata and Surat, a super campus in Bengaluru, and fresh income streams from offices and hotels. Debt is under control, but expectations are high because the stock trades at a premium.

Note: This article relies on data from annual and industry reports. We have used our assumptions for forecasting.

Parth Parikh has over a decade of experience in finance and research and currently heads the growth and content vertical at Finsire. He holds an FRM Charter and an MBA in Finance from Narsee Monjee Institute of Management Studies.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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