The Phoenix Mills Limited (NSE: PHOENIXLTD) Q1 2026 Earnings Call dated Jul. 24, 2025
Corporate Participants:
Unidentified Speaker
Shishir Ashok Shrivastava — Executive Managing Director
Varun Parwal — Group President
Kailash Gupta — Group Chief Financial Officer
Rashmi Sen — Whole Time Director
Analysts:
Unidentified Participant
Puneet Gulati — Analyst
Praveen Choudhary — Analyst
Girish Choudhary — Analyst
Parikshit Kandpal — Analyst
Pritesh Sheth — Analyst
Murtaza Arsiwalla — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Q1FY26 result conference call of the Phoenix Milk Limited. As a reminder, all participant lines will be in the lesson only mode and there will be an opportunity for you to ask questions after the presentation concludes. The management of the company is being represented by Mrs. Srivastava Managing Director, Ms. Reshmi Jain, Whole Time Director and CEO Mall Mr. Kaleesh Gupta, Gupta Group CFO and Mr. Varun Paiwal, Group President. Should you need assistance during the conference call, please signal an operator by pressing Star to zero on a dashing phone.
Please note that this conference is being recorded at this time. I would like to hand the conference over to Mr. Srishi Sivasar. Thank you. And over to you sir.
Shishir Ashok Shrivastava — Executive Managing Director
Thank you. Good evening ladies and gentlemen and welcome to our Q1FY26 quarterly conference call. I am joined today with Ms. Rashmi Sen, CEO Malls and Whole Time Director, Mr. Kailash Gupta Group CFO and Mr. Varun Parwar, Group President. Today marks a pivotal milestone in the growth journey for our company. Before we discuss the Q1FY26 results we are excited to share a strategic development that strengthens our control over a high performing retail and office platform and reinforces our long term vision. We are glad to share that our Board of Directors has approved a proposal to acquire 100% stake in Island Star Mall Developers Private Limited platform which the group has seeded and grown over the past decade.
In the process we are providing an exit to CPP Investments 49% stake in ISML. The transaction is subject to shareholder approvals, CCI approvals and other customary approvals. The agreed consideration for the proposed transaction is Rupees 5,449 crore payable to CBP Investments over a 36 month period in four tranches subject to applicable laws and any adjustments including those related to payment prepayment of tranches. Allow me to walk you through the investor presentation and share with you some key messages. The investor presentation and the press release for this in relation to this transaction has been uploaded on our website and at the Stock exchange.
If I may draw your attention to slide 2. The payment of rupees 5,449 crore is spread over 36 months. In the interim, ISML continues to be a cash flow generating asset. The large portion of this 5,449 crore will be paid by the cash flows generated at the platform as well as additional leverage headroom available at ISML. ISML was the foundation of our partnership with CPP Investments starting with Phoenix Market City Bangalore in 2017 which comprised of a million square feet of retail space. Together we have grown it into a large portfolio of marquee operational retail and office assets in key cities of Bengaluru, Pune and indore spanning approximately 6.6 million square feet marking a 6.6 time growth in eight years and clocking rupees 617 crore of EBITDA in FY25.
If I may introduce the ISML platform for reference and continuity of our conversation today the portfolio comprises 4.4 million square feet of operational retail space, 2.2 billion square feet of completed offices, a planned expansion of 0.8 million square feet of retail and 1.6 million square feet of offices along with two hotels totaling approximately 700 keys at the Phoenix Market City Bangalore development. The idea of PML looking to acquire this 100% stake stems from the management’s belief that the untapped growth potential in this platform can add significant value for shareholders over a period of time as we complete the projects under construction and undertake expansion based on the unutilized development potential or FSI potential.
Moving on to Slide 3, the Management Plan Basis 2030 would generate approximately a 13x growth over 13 years since 2017 when CPP entered this platform which was 1 million square feet in 2017 growing to 13 million square feet in 2030. Over this period of time we will move from being a retail only asset to a diversified portfolio of retail offices and hotels. Slides 4 through 6 capture the overview of the three assets which have been developed in ISML platform using the cash flow of the seed asset Phoenix Market City Bangalore Moving on to slide 7 here we introduce our vision for Phoenix Market City Bangalore.
We have an ambitious multi phase expansion plan for Phoenix Market City Bangalore set to evolve it into a world class integrated super campus exceeding 4 million square feet. The subsequent slides detail the phase wise approach encompassing enhanced retail offerings, premium office spaces and hospitality developments. This superb campus will be a peak amalgamation of the best in class retail offices and hotels, all of which will sync with each other to create an ecosystem. Details are discussed in the subsequent slides. Moving on to slide 9. Amongst the key deal rationale that makes the acquisition attractive to PML is the tranched payment structure where rupees 5,449 crore consideration is paid across four tranches over 36 months with the flexibility to prepay along with adjustments on the aggregate consideration.
This structure preserves PML’s liquidity to pursue our stated growth plans while also allowing for asset level monetization options within ISML and its subsidiaries should we choose to do so. Moving on to slide 10 as we see from this slide, the cash flow has grown by approximately 9 times to Rs 513 crore in FY25 when compared to FY17. FY25 net debt to EBITDA is just 1x at ISML. This also allows us meaningful room to borrow at the platform level and such borrowing, if any, would be staggered over 36 months to fund the acquisition and upstream cash flows to PML IF required.
Slide 11 this slide explains how the buyout is significantly accretive for for PML from the first year itself. This is an illustration and for representation purposes only, where even if we choose to fund the entire first tranche through debt, the platform remains accretive to PML’s earning. By moving to 100% ownership, we will capture the full share of operating free cash flows and the additional interest cost will be covered by increase in the share of such operational free cash flows. The deferred payment schedule combined with projected operating free cash flows growth ensures we will continue to maintain a healthy interest cover for each tranche.
In the same illustration, with 100% of the first tranche being funded by debt, BML share of cash flows from ISML could increase by 58% assuming the FY25 free cash flows. The transaction structure also provides a high margin of safety. Moving on to slide 12. The 100%. Ownership by Phoenix of this platform brings with it a large flexibility at PML level to gain unrestricted access to cash flows ability to raise money using multiple means available at the ISML and underlying SPV levels, each of which shall be evaluated at an opportune time. Full ownership also gives us complete control over capital allocation and execution timelines. With this structure, PML’s attributable EBITDA is expected to grow many fold over a period of time which will be allocated to PML at the same time. At the right time, we will also retain the flexibility to monetize selectively, whether at asset level or through a platform level read or listing if required.
Moving on to slide number 13 this is just to go back and show you a snippet of our 2020 QIP deck where we had promised three malls, two offices and one hotel under the ISML platform. I’m pleased to announce that we have delivered all of these assets in totality. With the hotel being under construction and expected to be completed by 2027. We’ve continuously demonstrated strong execution and accountability. This consolidation is in line with PML’s objective of owning and developing high growth retail led mixed use assets to add to shareholders value. With the clear identified growth levers in place in the ISML platform, we remain confident in our ability to deliver robust EBITDA growth over the next five years.
Slide 14 illustrates the growth drivers where we expect the EBITDA to grow from 617 crore rupees in FY25 to a much larger number over a period of time through organic growth from our operational retail portfolio, further optimizing trading occupancy and increasing trading density via premiumization and brand mix improvements. The ramp up of occupancy in our completed office assets unlocking their full earning potential the Phase 2 expansion at Phoenix Market City Bangalore which adds additional retail office and the hotel. Further Phase three expansion potential which will further strengthen our mixed use ecosystem with additional retail office and a second hotel offering balanced FSI potential across the developments in Indore, Pune and Bangalore give us additional room for future value creation.
Moving on to slide number 15 across our completed office spaces of 2.2 million today only 6% is leased. Our internal target is to achieve a 90% leasing in 2026 and we have a strong leasing pipeline in place. This brings a huge upside potential as all the construction work is already complete. OC is received for two out of the four office towers across Pune and Bangalore. Leasing of these offices is also gathering a strong momentum. Moving on to slide 16 Millennium Towers and Millennium Club. Our vision of Millennium Towers is for it to be the best office building in Pune.
These assets are high quality and have high visibility. They are located in strong micro markets with limited new supply expected. These will drive consistent annuity style earnings. The vision for these offices is to provide a lifestyle oriented offering with Grade A amenities along with high quality office spaces. Moving on to slide number 17 at Phoenix Asia Towers we are ramping up leasing to 90% by 2026 which currently stands at approximately 10% and this will drive strong EBITDA growth and further value creation. The offices sit in a well established office micro market with upcoming Metro and infrastructure projects which will enable seamless access to the campus and increase the catchment area and the attraction of offices at this location.
The highlight is a Metro station which has access from within the campus itself. Moving on to slides 18 through 23 which explain the Phoenix Market City Bangalore phase two and phase three expansions we have several initiatives underway. Under phase two we will be launching the Gourmet Village in 2026, a brand new floor of FNB and entertainment spanning 19 new experiential dining options set in a beautiful theme with a 400 key Grand Hyatt focused on events. We plan to establish ourselves as one of the most renowned hotels in in Bangalore and perhaps a very high performing with very high performance focusing on strong occupancy and ADRs.
The case study of a similar hotel in the same micro market gives you an idea of the healthy revenue and EBITDA margins achievable. The hotel product has been designed based on our learnings at the St. Regis Hotel Mumbai and and the designs have been optimized to yield the highest revenue per square foot. In addition, we will also be introducing about 400,000 square feet of state of the art offices in this campus in phase two. Moving on to phase three where this campus further expands, we intend to add a second hotel of approximately 300 keys offices of about 1.2 million square feet and a further retail expansion of about 600,000 square feet by 2030.
This will take us and help us deliver our vision of a Super Campus, one of the largest retail led mixed use campuses across the country. Moving on to slide number 24 the Super Campus is a preferred and top of the mind destination for any consumption. All parts of the campus designed to feed each other with higher visits, longer stays, stronger consumption, all from PML’s point of view fueling stronger rental eats and driving consumption. Moving on to slide number 25 the EBITDA growth drivers at Operational Malls. EBITDA growth at our malls is driven by optimizing anchor spaces for higher yield tenants, enhancing category and brand mix, attracting star and luxury brands to prime locations and with the upgraded infrastructure in the neighborhood this will also improve access and and visitor experience to our malls.
Slide number 26 represents the significant rental upside. This is an illustration or rather an explanation of initiatives undertaken at Phoenix Market City Bangalore in the last year where the hypermarket and a fashion anchor were exited from their current locations. The space was redesigned and the layout was expanded to accommodate the growing fashion category. This has created prime space for re leasing to flagship inline and mini anchors at higher rental yields driving stronger trading density. In this particular case we believe we have nearly doubled our monthly rental from the same from the same space. Slide number 27 at Phoenix Mall of Asia we have about 10% vacancy.
8% is located at the upper ground level which was kept strategically kept last for leasing to bring in the highest rent yielding luxury and star brands. Some of the watch brand deals recently concluded are currently at a minimum guarantee rental of approximately 550 rupees a square. Foot. Moving on to slide number 28 we expect the proposed infrastructure upgrades in near and around Phoenix Citadel in Indore to significantly benefit the mall. The new flyover and underpass are expected to be ready by 2026. This not only improves access but also reduces the interim hardship that our mall visitors are currently facing because of the road works which have been ongoing. This will further enhance footfalls and consumption. Moving on to slide number 29. After accounting for all the expansion plans and the ongoing projects across locations, we continue to have balanced SSI potential across all these developments.
It’s expected to be at about 2.7 million square feet cumulatively across three cities. We do not. This is based on land that we already own. Clearly it is subject to regulatory and planning approvals and payment of premiums and charges as may be applicable. We have not yet planned the CAPEX for exploiting the potential of this balance. FSI potential slide number 30 takes us to ESG initiatives. We are fully aligned with sustainability expectations of long term investors and we continue to be driven by them. The US GBC LEED certification has been achieved with a Gold rating in place for three of the latest retail assets.
We have already initiated solar energy, smart building systems, water conservation, EV charging efforts. To conclude, this transaction fully aligns with our strategic objectives. It gives us complete control of a high performing platform structured in a capital efficient manner that safeguards PML’s liquidity. The transaction enhances operational flexibility, removes minority interest leakage and provides a piece of clear path to unlocking further value at both asset and platform levels. Since the inception of the JV we have delivered marquee developments including three retail assets, two office assets and an iconic hotel and additional offices currently under construction. We remain committed to building destinations of international standards, vibrant retail hubs attracting a large catchment, lifestyle oriented offices and integrated mixed use super campus in Whitefield.
The next phase of growth is already in motion and full ownership of this platform positions us to execute this seamlessly. Our other partnerships with CPP Investments at Kolkata and Movoparel continue as planned and we look forward to exploring future opportunities with CPP Investments to further expand this fantastic partnership. Thank you. We will now move to Earnings Call earnings section and thank you. Thank you. May I request Varun Parwal to kindly take over this section.
Varun Parwal — Group President
Thank you Shisher and just moving on very quickly to an update on quarter one results. I will first start with the retail portfolio. Retail consumption at our MOSS was strong during quarter one coming in at 12% year on year we had very strong year on year growth at Phoenix Palladium, Phoenix Palacio and our malls in Ahmedabad, Indore, Pune and Bangalore. I would also like to highlight that this strong growth was despite a temporary and a strategic dip in trading occupancy during the quarter. Our portfolio level lease occupancy is at an average in excess of 95% plus but there was a temporary dip in trading occupancy owing to a significant repositioning exercise that is currently underway across our field its market city malls particularly in Mumbai, Pune, Chennai and Bangalore.
We are actively reshaping the brand mix across these key centers and the broad goal here is to replace low efficiency formats with stronger better trading brands while also creating more room for high performing flagship in line stores and other key categories. In parallel we are also upgrading the underutilized all lower easing areas by bringing in premium brand across watches, electronics, beauty etc. This churn has a temporary impact on occupancy and rental income but it is a planned investment in creating sustainable long term value for our retail assets over the coming quarters. We expect this reposition to result in much stronger and improved brand mix, higher consumption and stronger rental income growth ultimately supporting and driving the double digit EBITDA growth that we have seen historically in our retail malls.
For the quarter retail rental income stood at approximately 506 crores up 4% despite an impact from the planned churn at Phoenix Margaret Moss and also the loss of rentals from the planned convergence block redevelopment at Phoenix Palladium. If I account for the impact from the churn as well as conversions block, this impacted our retained income growth by approximately 5 to 6% for the quarter. This is of course temporary in nature and as training occupancy returns to stabilized levels of 95% plus in coming quarters we expect to see much stronger growth coming through. Moving on to our offices, we have had a great start to the year with completion of Phoenix Asia Towers and receipt of OC as well as completion of the three towers in Pune and receipt of occupation certificate for one of the three towers.
Our leasing has also picked up in line with delivery of these developments as well as the commercial offices in Chennai which are nearing completion. Overall for the quarter we have leased area in excess of four 30,000 square feet and we expect demand to remain strong especially for these quality well located office spaces. Our quota portfolio had a strong performance for the quarter with revenue coming in 11% higher at 130 crores and EBITDA showing very strong growth of 19% reaching 58 crores for the quarter. Our quota portfolio Consists of the St. Regis Mumbai and Kotecat by Marriott in Madhura.
Our operational performance in residential was also very strong with cross sales in excess of 160 crores and collections of rupees 99 crores. The price hike that we had undertaken in Kesaku and one Bangalore west has been well accepted by the market and we recorded an average sales price of 27,000 rupees a square feet for the sales done during quarter one. A large part of the sales were completed during the month of June and as such revenue recognition for quarter one came in only at about 40 crores. However, the rest of the sales booking done in quarter one will reflect in terms of revenue recognition in coming quarters on completion of registration and that should boost our revenue and EBITDA performance from the residential portfolio in coming quarters and now wrapping up.
Overall, if we look at our group level, our EBITDA across the portfolio came in at about 544 crores registering a 6% growth. Our group debt stood at about 4435 crores and our net debt to EBITDA reduced moderately from the March ending quarter. We have also seen a significant reduction in our cost of debt. Cost of debt came at about 7.92% fourth quarter ending June 2025 and we expect some of the recently announced rate cuts for RBI to transfer into the balanced loan portfolio in the coming quarters. Overall, we have continued to maintain a prudent balance sheet and disciplined capital deployment which gives us significant headroom to continue investing in high quality assets while maintaining our financial flexibility to pursue growth.
This brings me to the end of our format update. We can now move to the Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on the touchdown telephone. If you wish to remove yourself from question queue, you may Press Star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Puneet from hsbc. Please go ahead.
Puneet Gulati
Yeah, thank you so much and congratulations on this acquisition. It’s quite an interesting one. My first question is if you can, you know, give us some color on what is the cap rate you are ascribing to this valuation in your mind.
Shishir Ashok Shrivastava
Puneet, we haven’t approached this transaction on a cap rate basis. Okay. We see it as being significantly value over the next five years with the several ongoing construction nearing completion as well as you know the further expansions that we’ve planned in phase 2 which are yet phase 3 in ISML Bangalore which will commence shortly. So that may not be the appropriate way to assign an enterprise value by simply looking at a cap rate on NOIs. Having said that in FY25 the EBITDA was at the ISML platform was at rupees 617 crore. And with all the ongoing developments which are nearing completion plus what is planned to be completed by 2030 in this platform we are going to see, we hope to see the EBITDA grow by multiples over this period of time and it becoming highly value accretive to us.
We believe that today’s acquisition price is at fair value. This has also been, you know I would say based on the valuation reports that have been put together by the valuers, registered Valuers, Bunsee s. Mehta Valuers LLP and the fairness opinion provided by Morgan Stanley Co. India Private Limited in FY27 while the retail EBITDA was about 6 EBITDA contribution came in mainly from retail which was about 617 crore. Across 4 malls. We have 2.2 million square feet of offices which are ready. And a sizable part of that OC is received. And for the balance we expect the OC to be received but they are pre leased only at about 6% cumulatively.
Right. So there is a huge headroom which will also be a significant valuation upside trigger as these get leased out during this year. We have a very strong pipeline in place and we have a very strong team now Spearheaded by the CEO for Commercial Real Estate and Offices Mr. Vikhal Suryavanshe who’s recently come on board. We have about 300,000 square feet of retail. Right, sorry. 170,000 square feet of retail which is currently ongoing expansion. Ongoing. And this will be delivered by 2027.
Puneet Gulati
Got it. So from the valuation perspective is it fair to assume 5,400 is only equity value? There is roughly thousand crore of existing debt in ifnn, right? Those numbers are right.
Shishir Ashok Shrivastava
So no, that may be the gross. Debt. About 950 crore or 950 crore is the gross debt is also about 650 crore. So adjusting for cash on the balance sheet the net Debt is about 650 crore.
Puneet Gulati
Okay. And when you talk about this 5,400 crore of value which you pay over three years. Is the entire EBITDA attributable to you from day one or gets attributable?
Shishir Ashok Shrivastava
Okay. No. Under this, under the way this transaction is structured, it is pretty much like a spot transaction. And I mean obviously every tranche will only be payable as per the applicable law and fair value as certain. But the EBITDA is attributable to us and cash flow uses are exclusively for us going forward from the day the transaction gets approved and the first tranche payment is made.
Puneet Gulati
Interesting. And lastly, if I can ask you, what can you do now which you couldn’t do earlier in this platform?
Shishir Ashok Shrivastava
Okay. From PNL’s perspective, I think, you know, it helps because minority leakages are kind of addressed. It reduces that or eliminates minority leakages entirely. It allows us PML to, you know, upstream all the cash flows to be upstream to PML for efficient utilization. And it allows, you know, we estimate that our EBITDA could potentially grow 3 to 4x over a period of time and this will all result in a. Growth to P and L pack. At the ISML level, it allows us several synergies to optimize structure and drive operational efficiencies, including costs. It allows us the optionality of future platform monetization of ISML by way of REIT or listing, etc. And at the subsidiary levels, again we retain the optionality for individual asset level monetization should we choose to do so and gives us the opportunity to create new growth platforms.
Puneet Gulati
Understood. But is there a thought at this point of time to monetize individual assets? This is what you.
Shishir Ashok Shrivastava
No, no, that is. That is an option available to us. As I mentioned, that is not the desired. That is not the strategy.
Puneet Gulati
Okay. And from timing perspective, is it the right time? Even your offices are not yet leased and CPP IB theoretically would have provided good insights on the office leasing side. From timing perspective, are you comfortable or could you have.
Shishir Ashok Shrivastava
Perfect. The timing is perfect. In fact, as I mentioned earlier, the scale up or ramp up of occupancy at the offices from current approximate 6% across locations to what our target is to be at 90% in 2026 and that’s what Vital and the team are actively working on. I think that is where there’s a huge, huge valuation upside that can be achieved based on our performance and our delivery.
Puneet Gulati
And lastly, if you can tell us what is your capex plan for this year and next year, how much should we consider?
Shishir Ashok Shrivastava
I think about 1200-1300 crore over the next 12 months.
Puneet Gulati
That’s it. Okay, that’s it. Okay, great. That’s all from my hand. Thank you so much and all the best.
Shishir Ashok Shrivastava
Clarifying that that 1200 to 1300 crore is at a group level not just at ISMI.
Puneet Gulati
Yeah. Okay, great. Thank you so much.
operator
Thank you. The next question is from the line of Praveen Chaudhary from Morgue Stanley. Please go ahead.
Praveen Choudhary
Hi. Thank you so much for taking my call. Congratulations on this deal. I have a few questions but related to the business segment can you talk about why Mall of Asia Bangalore business performance have been down year over year. I thought it’s a new mall so it must be ramping. So that was one small question. I had another question on depreciation which jumped massively. And then the third question I have is on the timing of Kolkata and Surat and the new malls. If you can talk about. Thank you so much.
Varun Parwal
I’m ravin1 on this side. I will take the first question before. Handing it over to other management people on the call to your question on Mall of Asia Praveen, I think last quarter and quarter one we had significant one time rental billing that happened for several retailers. That was a one time increase in renter of about 10 crores. So if you compare quarter one FY25 renter billing and you compare it with quarter four FY25 rental billing we reported about 47.5 crores for quarter one whereas the quarter four rental billing was at about 40 crore. So the normalized billing for mall a preference in FY25 was about 40 crores per quarter.
And if you see quarter one FY26 it has come in at about 48 crore. So existed for the one time billing that we have taken in the prior year we would. We are seeing a strong 20% growth as far as the relative billing is concerned. Praveen, does that answer your question?
Praveen Choudhary
Yes it does, it does. I’m just waiting for other questions. Yeah. Thank you. Varun.
Shishir Ashok Shrivastava
Praveen, may I request you to repeat the follow up questions that you had on this so we can address them one at a time.
Praveen Choudhary
Yeah, just wanted to. Just wanted to get a sense of the latest timing for the opening of new malls that is expected to come in the next two, three years. But just wanted to get if you have better clarity on Calcutta and Pseudo Smalls. And then I had a question on depreciation. It seems like depreciation number on your PL jumped year over year and I just want to understand anything which is one off.
Shishir Ashok Shrivastava
Sure. So we’ll take the first part which is the completion of. We expect the Grand Victoria Mall Kolkata to be completed in 2027. Surat will also is also expected to be completed in 2027. Thane phase one retail is likely is expected to be completed in 2029. Coimbatore retail in the same year and Chandigarh phase one retail between 2029 and 2030. We also have a sizable expansion going on at our flagship property Palladium Mumbai which has retail and offices. All of this is expected to be completed by end of 2026 and mid of 2027 in phases.
Praveen Choudhary
Yeah, yeah.
Kailash Gupta
So on our accounting piece basically there are two, two things. One is that the. The rise portion actually which we have recently opened in the Palladium mall. So that has added a depreciation and that will be a continuous, you know over the period of time. And apart from this There is a one time depreciation of around 7. 7 to 8 crore. Primarily driven from the demolition of couple of, you know, couple of pieces in the Palladium side. Because where we have used the accelerated. Depreciation basically.
Shishir Ashok Shrivastava
So existing retail blocks have now been demolished. We have therefore written down that in our value for about 8 crore.
Praveen Choudhary
Understood? Understood. Can I ask on the deal? Last question from me. So this deal that has been done, it will reduce your minority interest and there’s a lot of optionality here clearly. Would you think of similar deal maybe not this year but in future with another partner that you have or should I put it differently. Was this deal initiated by the other party or it was mutual?
Shishir Ashok Shrivastava
Well it was mutual. If I may clarify that there was no exit obligation on us to provide our partners an exit but it was a mutual discussion and both sides saw the benefit of it. With regards to our other joint venture with the other partners we have the Coimbatore project and the Surat project under development in there. And I think you know our partners will only see full true value once those projects near completion or other are completed and commence operations and become revenue generating. There is no conversation ongoing to for any similar transaction on that.
Jv.
Praveen Choudhary
Thank you and once again congratulations. The deal definitely looks good. If you continue to execute the way you have been. Thank you.
Shishir Ashok Shrivastava
Thank you very much.
operator
Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference please limit your question to two questions per participant. Do you have follow up question? We request you to rejoin the queue. The next question is from the line of Girish Chaudhary from Evinder Spark. Please go ahead.
Girish Choudhary
Hi, good evening. Firstly if you can help us understand the funding of this 5,400 crores. I mean how. I mean will it be like significantly buyback at the ISML level or let it be standalone entity also buying out the stake. So how will the funding route happen? And also I mean internal approvals and what’s the incremental debt we can see from this.
Shishir Ashok Shrivastava
So now the transaction is structured in four branches. Payment concentration is to be paid in four tranches. We have multiple modes of providing, of making this, paying this consideration. These include buybacks, payment of dividends, capital reduction and secondary by PML or any of its affiliates. So this is a combination that, that we are going to be looking at and in each year, depending on the cash flows at the ISML level, we are going to be effecting dividend payouts or buybacks or capital reduction. Currently we don’t envisage the secondary transaction to take place until perhaps the last lunch.
There may be some small amount initially which PML or any of its affiliates may need to fund. But again as I mentioned, with this, with this 100% ownership we get the ability to upstream funds free cash flows from the ISML platform to PML as well, which could also fund such secondary transactions.
Girish Choudhary
My second question is again from a capital allocation perspective. In the past generally you have said is that, I mean for your investments, generally you look at 14, 15% yield on cost. So I mean for this 5,400 odd crores of investments of payout, can we expect a better yield on cost? I mean once everything is up and running, I mean just a follow up to that, just a follow up to that. I mean this investment, does it also signal that, I mean are, I mean in the past we had a development led growth, right now, I mean are we seeing that we are shifting towards union focused asset consolidation.
So how should we look at this transaction from that point of view as well?
Shishir Ashok Shrivastava
Okay, several questions in that question. We’ll try and break it up into parts. Right. In the first instance, the illustration that we have on slide number 14 will give you kind of an indication on the growing EBITDA at ISML level. And you should be able to, you know, work out the yield on cost. Right. So I don’t. And we can get into details offline with our team on this on the structure and the anticipated returns. But we see that if you look at also slide number. Just one moment please. If you look at slide number 10 where we have shown what the cash flows are and the leverage headroom is, we’ve explained how in the last eight years between FY17 to 25, our asset EBITDA has grown six times.
We hope to see at least double digit growth in EBITDA from all the initiatives which are underway including completion of the under construction projects, leasing out of the already completed offices and organic growth at our operating retail malls.
Kailash Gupta
Just to add to what Shisher is saying and we have already narrated in our commentary earlier, so we are not compromising in terms of our expansion projects which we will continue to do because largely the transaction will be paid through the ISML platform. So effectively the PML and its other entities are free to use its cash for acquisition or expansion. So I don’t think they’re compromising on any of the parameters which we had set as a benchmark for our company. But at the same time, since the cash flow or the free cash flow generation is growing year on year basis, we thought to even console because this opportunity was like, you know, very tempting for us because one reason is that the even the current EBITDA is quite strong and secondly the expansion plan is quite big if you see the overall slides and presentation.
Shishir Ashok Shrivastava
Lastly, again give you some guidance. If we look at our FY25 of operational free cash flows, they were about 1,225 crore at the PML level excluding the ISML and its subsidiaries. Now just assume a similar run rate over the next five years without anything else. That itself could potentially Translate to over 6,000 crore of operating free cash flows. Add to that cash flows from the residential sales which as Varun explained earlier, we’ve seen a phenomenal quarter in resi sales. We are gearing to launch the Calcutta residential project sales as well. Add to that the organic growth at retail, the completion of expansion, leasing out of offices plus the significant potential to leverage the the PML portfolio excluding ISML.
So 6000 crore plus growth triggers plus the leverage potential at PML excluding ISML assets is more than adequate to pursue our growth aspirations including acquisitions of Greenfield Brownfield operating assets in identified 1011 cities, including funding the CapEx required for for our FY2030 envisaged portfolio of 14 million square feet of retail taking the gross portfolio to 14 million of retail, 3.5 million of offices, 1200 keys and hotels and roughly 2.5 million square feet of additional resi inventory.
Girish Choudhary
Got it? Fair enough. Thank you and all the best.
operator
Thank you. The next question is from the line of Parishit Kanpal from hdfc. Please go ahead.
Parikshit Kandpal
My first question is what is the current book value of the assets which you are buying?
Shishir Ashok Shrivastava
The gross block of all the assets and of all the assets under these ISML and underlying SPVs is about 5080 crore rupees.
Parikshit Kandpal
You’re paying a slight premium to buy this out. So which covers the balance Growth? Growth opportunity.
Shishir Ashok Shrivastava
Growth opportunity. Not opportunity, growth underway FSI potential which is, which continues to get exposed, exploited over the next five years.
Parikshit Kandpal
But your share will be 50% of this approximately. So 2500 worth of bronze log which is going out for the share you are buying out. So that is you are paying almost two times, right? 54, 5500.
Kailash Gupta
I think this is the wrong way to interpret, you know, real estate especially because what you are seeing is the historical value of the assets but you are not seeing the potential of the market value of the asset which would be much higher. I mean while we have not assigned the number but I think the book value, looking at the book value is not certainly the right approach, you know to value the transaction.
Parikshit Kandpal
I’m just trying to arrive at the IRR which the CPT is getting in seven, eight years it’s almost doubling. So just from that point I was asking. Sure. And what is the balance capex for rest of all the assets and also what is the balance cap capex for the SML assets till you reach FY30 when all these development opportunities complete. So this can help us.
Kailash Gupta
So we barring the new acquisitions and the three assets basically we are talking about excluding Thane, Coimbatore and Chandigarh. The capex for next five year would be in the range of around 5 to 6,000 crore and against that the. Cash flow generation will be much higher.
Parikshit Kandpal
I just want ISML when it’s in stage two, you want to take it up.
Varun Parwal
See if your voice is cutting out. Can you just repeat this question again?
Parikshit Kandpal
I was asking what is the residual CAPEX in IFML to reach that FY34 development potential which you highlighted in the presentation?
Shishir Ashok Shrivastava
May I? If I we hear you clearly now, phase two which is ongoing at ISML will roughly require about 1000 crore between now and 2027 to take it to completion. Phase three, we will share the details when we have crystallized on our development plans and we received all the final approvals.
Parikshit Kandpal
And just last question on the EBITDA of 627odd crore. So what is the clean EBITDA in based on 617crore which you highlighted? So out of that if I remove the cam ebitda, EBITDA or is it just the asset level EBITDA from the amount or does it include the CAM and other charges, other income and all? So what is the level, Chief? This is the clean. There’s no other income.
Varun Parwal
Yes. If you see the reported numbers for each of these assets we have reported the bitter numbers every quarter, every year. And if you add up the reported EBITDA for Phoenix Market City, Bangalore, Phoenix Citadel Indoor, Phoenix Mall of the Millennium and Phoenix Mall of Asia, you will get to the FY25 asset of 617 crores. The offices that were completed and they received OC just you know in Jan and April, they are not yet able to contributing.
Parikshit Kandpal
But they’re also not adding retail. Okay. Purely retail. And there is no negative or any. Nothing from other income. Nothing from CAM coming in.
Varun Parwal
No other income gets you know it. We reported below ebitda. So whatever is the contribution from other income is coming below the. With the line item like Kailash mentioned earlier. If I just see the FY25 balance sheet, our gross consolidated debt on the ismf platform was 960 crores. And our cash on books at the end of FY25 was 360 crores. So our net debt is a shade under 600 crores at this point in time. The 617 crore of EBITDA generated by the platform also converted into an operating free cash flow of 510 crores for FY25 if you take out interest and tax expense just for the platform.
So out of PML’s 1800 crore of operating free cash flow that we reported in FY25 510 crore came from the ISML platform itself.
Parikshit Kandpal
Sure. Okay, thank you. Those are all my questions and congratulations on the deal.
Varun Parwal
Thank you.
operator
Thank you. The next question is from the line of Pritesh seed from Access Capital. Please go ahead.
Pritesh Sheth
Yeah, thanks for the opportunity. A couple of questions on the transaction. First, you know has the value report mentioned about valuation for operational under construction and future potential assets. I mean has there been is the breakup available and if you can provide that to us.
Kailash Gupta
No, there is no breakup as such is in the public domain and I don’t think we’ll be in a position to declare or you know inform you. Any kind of the.
Shishir Ashok Shrivastava
The valuers have not published a sum of parts if that’s what you’re.
Pritesh Sheth
Yeah, okay. Okay, okay. Fair enough. And from you know, cppids perspective, you know while some of the assets have been recently completed, Citadel, Bangalore, Pune and the office assets which you recently delivered, you know what was the thought process from their side to exit this assets without even seeing that five years of maturity or a steady state, you know, kind of in a rate. So what was the thought process of exiting these assets at early stage. And would this be a precedent for the next assets which we are building under this platform, be it Kolkata, Project Rise and even for that matter, I don’t know.
So. So yeah, yeah. So thoughts on that?
Shishir Ashok Shrivastava
Okay. So I cannot speak for cbpib. Their rationale is obviously well deliberated. As I mentioned earlier, I want to clarify that we had no stated commitment or contractual commitment to provide an exit to cptib. I think it’s, it’s their own, you know, considerations on the timeline of their investment, etc. And this was a conversation that we have mutually arrived at after negotiations, so I can’t speak on their behalf. Coimbatore does not sit under the CBP platform. I’m clarifying since you mentioned that and this is not intended to be a precedent for CPP to look for an exit in the other on JVs where we have ongoing construction or otherwise.
Pritesh Sheth
Got it.
Shishir Ashok Shrivastava
Again, I want to mention again that we have a fantastic partnership in cppib and we’re looking forward to this relationship growing as we, you know, as we grow our own portfolio.
Pritesh Sheth
Sure. And, you know, taking this partnership. Right. With our other partner, will we be offering some of the recent assets to GIC for some stake acquisitions in this asset? Or do you think that given the cash flows and the leverage potential that we have, we’ll be able to easily fund these, you know, the consideration and create a lot of value and hence. No need to offer to them. So what would, what would be our. Thought process in this?
Shishir Ashok Shrivastava
I think it’s important for you to. Understand why we have created these two platforms. At the time when we did in 2017, when we entered into this first joint venture with CPP iv, we were looking for growth capital. We had estimates of potentially future cash flows. However, there was opportunities that could be exploited at that point in time. And there was a timing issue in terms of free cash being generated from our AZI sales and organic growth resulting in higher free cash from our operating assets. Which is why at that point in time we were looking for capital for growth. And we entered into this transaction moving forward in 2021 when we executed our second JV with our other partners.
We were looking at creating sizable liquidity at Phoenix Mills level. This was immediately post Covid and we were looking at creating some kind of a safety net. And we have been very committed to the growth of that platform. And we’ve added Coimbatore and we’ve added Surat to that platform and we’ve committed the Entire funds or the entire capital that was infused as a primary into that joint venture, we’ve committed that capital for growth of that platform. Now when we look at our balance sheet, we have a very, very strong balance sheet. We have sizable free cash being generated on a year to year basis and we don’t have intention of creating more platforms.
At least we have no need to create those more platforms because we have enough cash.
Pritesh Sheth
Sure, thanks for the answer and completely agree on that. Just one last on the assets beyond this platform. So there has been drop in terms of trading occupancy for bank, Market city malls in Bangalore, Chennai, Pune, is that it? In terms of whatever turn we wanted to plan and potentially from this year end and next year we’ll start seeing out good outcomes and good growth outcomes from the Churn X size that we are doing, you know, in these three months.
Varun Parwal
So please repeat the first part of that question and then I will hand it over to Rashmi to expand on what we are doing here. You have seen a significant drop in trading occupancy for this quarter in Phoenix, Market City, Bangalore and you know, dip in training occupancy, which are lower but still there in Pune and Chennai. These are of course very strong, strategic and planned in nature and they are aligned in terms of the brand mix and the key anchor, flagship and inline stores that we want to bring into these malls. At this point in time, Bangalore, the Churn is happening.
You know, it has come together. So that’s why there is a big drop from where we were in December at 98% occupancy to today where we are at about 84% occupancy. And through the rest of the year this will, you know, the occupancy will go up significantly from here. There are still some few more turns. That are planned, but they are more. Staggered and they will take place in the coming year. Now I think I will hand the call over to Rashmi to just talk a bit on our philosophy and strategy.
Rashmi Sen
Yeah. Hi. Currently, you know, as you would know, we are undergoing a significant repositioning and premiumization change for most of our legacy assets which are completing close to 14, 15 years. And we see that there is a lot of headroom and appetite for increasing rental for a lot of these older deals. We also see that there is a lot of room for optimizing the anchor sizes to inline stores. And over the last few years there has been increased demand and appetite from international brands for coming and opening stores in our centers. And I think it’s sort of A moment in pivot where everything is coming together for us because a lot of these large boxes, expiries are coming up and it gives us a beautiful opportunity to sort of rethink, reimagine because change is the only constant and we want to continue to give newer expansion experiences to our customers.
And so all these changes that we are making is from a long term perspective. And even though you may see a drop in trading occupancies, all of these are, you know, typically leads to the newer premium international brands. And what we do is like if hypermarket, we feel like a 50,000, a larger hypermarket may not be relevant. So the hypermarket may get leased to another brand in a different category, but we move the hypermarket to a smaller gourmet concept. And basically these are the things that we do. And what you see right now is basically a short term impact of the long term visionary changes that we are making.
Pritesh Sheth
All right, so just to clarify, there would still be some bit of staggered churn across the three assets which will come through the year and then we’ll be done and probably 27 is when we’ll stabilize one on the side.
Varun Parwal
You have trading going up and there may be some churns that could happen. But overall we should see a ramp up in trading occupancy. You will see the progression of occupancy towards the lease occupancy.
Puneet Gulati
Got it.
Varun Parwal
Repositioning. They are already under very active setups. So if you’re just in Bangalore anytime, give us a shout. And we would love to show you and walk you around either the Bangalore mall or the Pune or the Chennai mall.
Shishir Ashok Shrivastava
So to summarize what Varun is saying, that the gap between what you see as the trading occupation and the leased occupancy. Leased occupancy is much higher than trading occupancy. That gap is going to become operational soon.
Pritesh Sheth
Got it, Got it. That’s, that’s really helpful. Thank you. All the best. That’s it from my side.
operator
Thank you. The next question is from Malaya Murtuja from Kotak Securities. Please go ahead.
Murtaza Arsiwalla
Yeah. Hi gentlemen. Firstly, congratulations on the deal. I think it’s a very elegant exit that you’re planning to get cpp. But just on the operational numbers, there’s two or three pieces. One is, if I look at this quarter’s numbers, 12% consumption growth, 4% rental income, should that be just explained by a possible less favorable shift in naics or anything else that we should read into that number. Number one, number two on the CPP piece. You also amongst other things highlighted the potential upside in the occupancies for the recently commissioned office assets. Any visibility because to me that number on how much is leased appears low on an asset which is just received OC but any site you have said that you’re targeting 90% in 26 but any near term visibility numbers on how you look at a ramp up in that occupancy.
So two pieces. One on the retail side the growth in consumption versus rental income. Second on the least occupancy for the new commercial assets.
Varun Parwal
Sure. Murtagha warrant aside, I think first on the quarterly performance for the renter income compared to the consumption trend. We spoke about it earlier on at the starting of the call that this quarter we had impact on two accounts. One is because of the planned churn that we had undertaken and the significant churn that we had undertaken at our Phoenix Market city malls. Even in Mumbai, Pune, Chennai and significance in Bangkok that churn contributed to about a 3% drop in renter in income compared to the numbers that we reported. There is also the negative impact from when you compare year on year at Phoenix Palladium we have demolished a large part of the retail block which housed retailers like Nike and Hamley which for the full year last year contributed about 200 crores in consumption and over 45 crore in rental income.
So the quarterly rental loss from the demolition of that retail block is also at about 12 crores. The land churn and the loss of rent from convergence block between them have a 5, 526% impact on our rental income growth for the quarter. I’m not taking into consideration the other aspects, you know, where there may be smaller fit outs or you know, any rent impact from, you know, retailers being exited. But broadcast these are the two main reasons for the gap between consumption and for the gap between consumption and rental income growth.
Murtaza Arsiwalla
So a couple of high yielding pendants have been sort of turned out. Is that the way to read it? Nike and Lease would have been yes. How should I do that? On the office assets, the newer office assets in terms of visibility in the near term on occupancy ramp up.
Shishir Ashok Shrivastava
So we have every reason to be confident about seeing a significant ramp up in the next 12 months. In calendar year 2026 our target is to see a 90% occupancy across assets. We have completed these assets and completed all the amenities at these locations. Also we have a very strong pipeline. Just to give you an illustration in Chennai the office asset we have completed about 60% leasing in about four months and we expect to see a similar know trend even in Bengaluru and Pune.
Murtaza Arsiwalla
Thank you.
Shishir Ashok Shrivastava
Thank you.
operator
Thank you. A reminder to all the participants, you may play Stars in one to ask questions. If there are no further questions from the participants, I would now hand the conference over to the management for closing comments. Over to you sir.
Shishir Ashok Shrivastava
Thank you very much ladies and gentlemen, for joining us on our Q1 earnings call. Wish you all the very best and talk to you next quarter. Have a good evening.
operator
Thank you. On behalf of the Phoenix Mills Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.