Mall operators are projected to clock a healthy revenue growth of 10-12 per cent during the current financial year (FY25), building on last fiscal year’s 15 per cent spurt, according to a Crisil report released on Tuesday.
The growth will ride on contractual rental escalations, improvement in overall occupancy due to ramp-up of the malls launched in the last two fiscals, the full-year impact of malls launched during last fiscal, and an increase in share of tenant revenues supported by consumption growth, among other factors, the report stated.
According to an analysis of 32 ‘Grade A’ malls rated by Crisil Ratings, steady rental income and comfortable balance sheets will keep credit profiles stable.
For the current fiscal, mall operators will prioritise maximising occupancy in malls commissioned over the past two years as ongoing under-construction projects are at a nascent stage, the report points out.
"Overall occupancy for malls is expected to increase to 92-93 per cent this fiscal from 89 per cent last fiscal. This will be driven by a surge in occupancy for malls that were launched in the last two fiscals, while occupancy for established malls will remain stable at around 95 per cent, with timely renewals,” said Crisil Ratings director, Gautam Shahi.
This, along with full-year impact of the newly launched malls, steady rental escalations of 4-5 per cent and moderate retail consumption growth, will drive revenue growth for mall operators to 10-12 per cent this fiscal, he added.
Retail consumption growth of these malls is estimated to have moderated to 3-5 per cent in the first half of this fiscal, from 12.5 per cent in the corresponding period last fiscal, due to a high base effect and heat wave.
Notably, tier 1 cities have seen higher moderation than tier 2 cities. Consumption is likely to pick up in the second half of this fiscal, with an above normal monsoon and the festive and wedding season partly offsetting the lower growth in the first half, said the report.
The impact on the mall operators will be limited as revenue sharing accounts for only 10-15 per cent of total revenue.
Meanwhile, mall operators have maintained their operating efficiency, with EBITDA margin holding firm around 70 per cent over the past few years and expected to sustain at a similar level this fiscal, the report observed.
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