Phoenix Mills Ltd. jumped as much as 7.3 percent, its highest intraday gain in the last four months, after it announced a partnership with Canada Pension Plan Investment Board (CPPIB).
The Canadian pension major will invest in Island Star Mall Developers Pvt. Ltd., a wholly-owned subsidiary of Phoenix Mills, according to a stock exchange filing. The venture will develop, own, and operate real estate properties in India for retail use.
CPPIB will initially invest Rs 724 crore for up to 30 percent stake in Island Star Mall, and will eventually take its stake up to 49 percent, taking its total investment to Rs 1,600 crore.
Phoenix Mills expects the first tranche of investment to come in the next one week and the remaining only after the Rs 724 crore is deployed, Joint Managing Director Shishir Shrivastava said during the company's conference call.
We are in advanced discussions on many acquisitions across the country and a significant portion of Rs 724 crore will be deployed in six to eight months. CPPIB is very committed to bring in the balance and we have estimated the complete deployment of Rs 1,600 crore in a three-year period.Shishir Shrivastava, Joint Managing Director, The Phoenix Mills
The proceeds will be used to acquire and develop both greenfield assets on newly purchased land, and as well as for existing assets. Part of the investment will go towards expansion in tier-I cities.
Island Star Mall owns Phoenix MarketCity Bangalore, which has a gross leasable area of approximately one million square feet with a 97 percent occupancy rate. Island Star Mall had a debt of Rs 478 crore as on December 31, 2016, while its net worth was more than Rs 280 crore as of March 31, 2016.
The capital infusion by CPPIB values the subsidiary at Rs 3,265 crore, which works out to a 48 percent premium to its current enterprise value of Rs 2,200 crore.
The Phoenix Mills stock has underperformed peers so far in 2017, rising 12 percent compared to 33.5 percent increase in the S&P BSE Realty Index. The stock is also one of the most preferred bets on the index with all analysts tracking the stock have a ‘buy' rating, according to Bloomberg.
The stock erased early gains and closed 1.85 percent lower at Rs 401.45.
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