Recovery on track for Indian malls as 2nd COVID wave subsides: CRISIL

Rental revenue for mall owners is seen clawing back to 80-85 per cent of pre-pandemic levels this fiscal, compared with 55-60 per cent last fiscal. Also, while their liquidity may erode this fiscal as well, strong sponsor support and fund-raising initiatives will support credit profiles, an analysis of India’s top 14 malls rated by CRISIL Ratings shows.

"Malls in tier-I cities—except Mumbai and Pune—have reopened faster after the second wave. The median closure period for the top eight cities was seven to eight weeks compared with 13-14 weeks during the first wave. Further, retail sales in malls have already reached 55-60 per cent of pre-pandemic run rate in the first month after reopening—a level that took four to five months to reach after the first wave. Improving consumer sentiment driven by faster vaccinations, pent-up demand and discount sales by major retailers have contributed to the recovery," said CRISIL Ratings director Anand Kulkarni in a press release.

An intense third wave leading to closure of malls is a downside risk to these estimates. Retail sales and consequently rental revenue of mall owners could shrink up to 10 per cent if the third wave affects the festival season in the third quarter, which is generally the most productive period for malls.

Recovery for most tenant categories like apparels, cosmetics, electronics and luxury, which account for 75-80 per cent of the revenue of mall owners, was more than 70 per cent of the pre-pandemic level by the end of last fiscal. These categories should see faster recovery owing to pent-up demand, which will reduce the burden on mall owners because of lesser rental waivers.

The cadence of recovery will vary for other segments, which contribute the balance revenues. The pace of recovery will be mixed across geographies, too, depending on the knock-on effect of the pandemic: malls in the southern states and Maharashtra would take longer to recover compared with those in the north.

While the rental income of mall owners is likely to be better than last fiscal on the back of likely strong recovery in the second half, the complete recovery to pre-pandemic levels may happen only next fiscal, CRISIL said in a press release.

While the performance of malls may remain subdued in the near term, investor confidence seems to have improved, as reflected in equity investments, funding for asset development, and outright asset purchases. This reinforces healthy long-term prospects, with malls remaining the 'go-to-destination' for entertainment, it added.

Fibre2Fashion News Desk (DS)