BACK COVER Spine to Adujsted by the Printer COVER GATEFOLD THE PHOENIX MILLS LIMITED STEADY Performance. “View life through a wide PROGRESSIVE Thinking. angle lens attitude and see GROWING Portfolio. your horizons broaden.” – Stephen Richards ANNUAL REPORT 2016-17 ANNUAL ANNUAL REPORT 2016-17 Shree Laxmi Woollen Mills Estate, 2nd Floor, R. R. Hosiery Bldg., O Dr. E. Moses Road, Mahalaxmi, Mumbai - 400 011. www.thephoenixmills.com ANNUAL REPORT 2017 dickenson www.dickensonworld.com dickenson Spine to Adujsted by the Printer GATEFOLD INSIDE COVER INSIDE Spine to Adujsted by the Printer BACK COVER INSIDE STEADY Performance. PROGRESSIVE Thinking. GROWING Portfolio. CORPORATE INFORMATION BOARD OF DIRECTORS REGISTRAR AND SHARE AUDITORS Mr. Ashokkumar Radhakrishna Ruia TRANSFER AGENT M/s A. M. Ghelani & Company Chairman & Managing Director Link Intime India Private Limited. Chartered Accountants M/s Chaturvedi & Shah Mr. Atul Ashokkumar Ruia C101,247 Park, L B S Marg, Chartered Accountants Joint Managing Director Vikhroli (West), Mumbai : 400 083. Mr. Shishir Shrivastava Tel.no:+91 22 49186000 REGISTERED OFFICE Joint Managing Director Fax : +91 22 49186060 462, Senapati Bapat Marg, Mr. Pradumna Kanodia Lower Parel, Director - Finance BANKERS Mumbai - 400 013. Mr. Amit Kumar Dabriwala Standard Chartered Bank Tel: 022 - 2496 4307 Independent Non-Executive Director Hongkong & Shanghai Banking Corporation Fax: 022 - 2493 8388 Mr. Amit Dalal Kotak Mahindra Bank Limited Website: www.thephoenixmills.com Independent Non-Executive Director HDFC Bank Limited Yes Bank Limited Email: [email protected] Mr. Sivaramakrishnan Iyer Corporation Bank Independent Non-Executive Director Punjab National Bank CORPORATE OFFICE Ms. Shweta Vyas State Bank of India Shree Laxmi Woollen Mills Estate, Independent Non-Executive Director Tata Capital Limited R. R. Hosiery Bldg, Saraswat Co-Operative Bank Limited Off. Dr. E. Moses Rd., COMPANY SECRETARY South Indian Bank Mahalaxmi, Ms. Puja Tandon Bank of Baroda Mumbai - 400 011. Spine to Adujsted by the Printer the by Adujsted to Spine Having perfected a unique retail-led mixed- use development model, we, at The Phoenix Mills Limited, are fully kitted to push the reset button for Phoenix 2.0. We are embarking on an exciting journey for creating a whole new cycle of asset growth based on new retail-led mixed use Greenfield and brownfield development assets. Supported by strong organic growth of our existing assets, we are entering a new growth phase in which we aspire to double our asset base within the next 5 years and establish our presence in the top 10 cities of India. “DON’T SETTLE DOWN We have undergone a transformational metamorphosis of becoming a top-notch, multi- AND SIT IN ONE PLACE. asset and pan-India retail led property company with more than 6.0 million sq. ft. under management by the end of FY2017. Starting with Phase I in 1999 MOVE AROUND, BE with just one mall - “High Street Phoenix” in Lower Parel, Mumbai, we moved on to Phase II in 2007 NOMADIC, MAKE EACH with the construction of “Phoenix MarketCity” malls DAY A NEW HORIZON.” and put into track our commercial and residential projects. Today the “Phoenix MarketCity” franchise has entrenched itself in key markets across India, – Jon Krakauer including Mumbai, Pune, Bengaluru and Chennai. The scale, size and multiplicity of our ambition for simultaneously building out these assets is unprecedented. We have proved our planning and execution mettle by successfully rolling such large iconic assets all within a short time frame from each other. Once built out and operational, the last couple of years have been about growing and maximising the consumption take-o across all our malls, while consolidating our ownership across all our SPVs. All this while, we have also steadily built and successfully delivered more than 6.0 million sq. ft. on our other asset classes – residential, commercial and hospitality. The central theme of our business model is pinned 2 STEADY Performance. PROGRESSIVE Thinking. GROWING Portfolio. on catering to India’s strong consumption story. We stages of completion, are well on course and have have been strengthening the “Phoenix Marketcity” witnessed high sales velocity and substantial price franchise in uncovering urban demand and creating appreciation since launch. In the hospitality portfolio, a superlative experience for shoppers. Our “cathedrals Hotel St. Regis at Mumbai and Courtyard by Marriott of consumption” are in the heart of bustling at Agra continue to experience a constant rise in neighbourhoods with an eclectic mix of international, occupancy. Our F&B business, across all our assets, national and local brands and well-loved dining have been doing exceedingly well, as we continue concepts. We have set a track record of creating to add more options on ne-dining restaurants. matured mall assets which are registering wholesome We continued to leverage our collective strengths growth in both consumption and rental incomes. in development, management and operations of Today, we are a classic case study for successfully our assets to elevate the overall experience of our implementing and creating alpha value from the customers and consumers. mixed-use framework within India’s fast evolving realty opportunity. Going forward, under Phase III of our development, we are laying the foundation for renewed growth as During FY2017, Phoenix MarketCity, Mumbai we enter a whole new cycle of fresh land acquisitions emerged as the fastest growing MarketCity project, and existing malls in the leading cities of India. To post revamp, with rise in consumption and footfalls this extent, we have signed a denitive deal with the and good brand churning. We continue to be upbeat Canadian Pension Plan Investment Board (CPPIB) to and focused on other development assets as well. In set in motion a new cycle of growth. The deal not our commercial portfolio, Art Guild House, which was only provides us with long-term capital for growth, it completed and delivered the year before, is gaining also puts us in the league of leading mall developers incessant popularity for its signature boutique oces, in the U.S. and Europe. strategic location and vast choices for shopping and entertainment. Our luxury residential projects in Chennai and Bengaluru, which are under dierent The Phoenix Mills Limited Annual Report 2016-17 3 CONTENTS ABOUT US 06 Major Trends Impacting Our Markets 08 What Sets Us Apart 10 A Milestone Year 12 About Us 14 Trends in Consumption and Trading Density 16 Our Pan India Presence 17 Our Business Model 18 Asset Summary 20 The Phoenix Evolution 22 Board of Directors 24 Management Team 26 Key Financial Indicators 28 Message from the Chairman 32 Q&A with the Jt. Managing Director 4 MANAGEMENT’S 85 Information Technology DISCUSSION & ANALYSIS 85 Cautionary Statement 86 36 Economic Overview BOARD’S REPORT 40 Industry Overview 122 REPORT ON CORPORATE 48 Company Overview GOVERNANCE 50 Operational Review 141 BUSINESS Our Retail Portfolio RESPONSIBILITY REPORT 50 High Street Phoenix & Palladium, Mumbai 52 Phoenix MarketCity, Chennai FINANCIALS 54 Phoenix MarketCity, Bengaluru 149 Standalone Accounts 56 Phoenix MarketCity, Pune 205 Consolidated Accounts 58 Phoenix MarketCity, Mumbai 270 Notice 60 Phoenix United, Lucknow 61 Phoenix United, Bareilly 62 One Stop Shop for Premium International Retailers 64 Creating Concept Oriented F&B Spaces Our Hospitality Portfolio 66 The St. Regis, Mumbai 67 Courtyard by Marriott, Agra Our Commercial Portfolio 68 Art Guild House, Mumbai 69 Centrium, Phoenix Paragon Plaza & East Court Our Residential Portfolio 70 One Bangalore West & Kessaku, Bengaluru 72 The Crest, Chennai 74 Awards and Recognitions 76 Our Sustainability Strategy 78 Corporate Social Responsibility 80 Human Resource Management 84 Financial Overview 85 Risk Management and Internal Controls The Phoenix Mills Limited Annual Report 2016-17 5 MAJOR TRENDS IMPACTING OUR MARKETS Economic Growth India is the world’s 7th largest economy in terms of nominal GDP. Infrastructure investment from the Government and private sector is boosting GDP growth. The retail sector accounts for 22% of India’s GDP and contributes to 8% of the total employment. The country continues to be among the most attractive investment propositions for global retailers. It is one of the fastest growing India’s Demographic Divide Nearly 70% of consumption growth in the next 15 years is expected to come across the globe, seen from working population aged 15-59 years. Nearly 79% of growth will come from at US$ 1.3 trillion by increased per capita consumption. 2020, doubling from US$ 630 billion in 2015, according to a joint report by FICCI and PWC. The sector is projected to register a Compound Annual Growth Rate (CAGR) of 16.7% over 2015-20. Population Growth and Urbanisation Nearly 35% of the Indians are living in urban areas and there is a rapid rise in the number of nuclear families. 6 Rise in Consumer Spending Rising income levels and increasing saving rate is expected to lead to significant growth in private final consumption expenditure. 7.1% India Economic Growth in FY2017 1.7% Average WPI Inflation in FY2017 Growth in India Retail 35% Retail sector in India accounts for 22% of It’s GDP and contributes 8% of the total Indians living in Urban Areas employment. Increased participation from foreign and private players is boosting the retail industry. 22% Contribution of Retail Sector to India’s GDP 20% Projected Growth in Organised Retail Growth in Organised Retail US$ 630 Billion Organised retail, which amounts for 12% of the retail market, is projected to grow Size of India’s Retail Sector in 2015 by 20%. US$ 1.3 Trillion Projected Size of India’s Retail Sector by 2020 US$ 4 Trillion Projected Consumer Spending in India by 2025 The Phoenix Mills Limited Annual Report 2016-17 7 WHAT SETS US APART Our Business Model We seek to produce long-term returns for shareholders through capital 1 appreciation and income growth by developing and managing assets across retail, residential, commercial and hospitality.