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Mall revenues to be lower than pre-pandemic level in FY22: CRISIL

Published: Apr 15, 2021

MUMBAI, APR 15, 2021: AFTER seeing a decline of 45 per cent in 2020-21, the revenue of shopping malls will remain up to a fifth lower than the quantum seen in the pre-pandemic times, said the ratings agency CRISIL on Wednesday.

Shopping malls' revenue is foreseen to grow 45-55 per cent this fiscal. However, they will still remain around 15-20 per cent below the pre-pandemic levels because of continuing waivers for some underperforming retail segments and the possibility of fresh waivers across segments due to mobility curbs following the second wave of the COVID-19 pandemic, an analysis of India's top 14 malls rated by CRISIL showed.

While fresh restrictions to curb the second wave of infections will affect retail sales, CRISIL expects the debt-servicing ability of the malls to be largely intact in the near term because of strong sponsors and healthy liquidity. Their average debt service coverage ratio is expected to decline 10-15 per cent, but remain healthy.

"We foresee retail sales in malls declining significantly in the first quarter of this fiscal versus pre-pandemic levels because of fresh restrictions, and recovering gradually by the end of the first half," said its Senior Director Mr Anuj Sethi. Retail sales are expected to be 90 per cent of pre-pandemic levels for the second half of this fiscal, which may not warrant rental waivers.

"Accelerated vaccinations are crucial to retail sales revival, especially for non-essentials," he emphasised.

CRISIL said the recovery in retail sales will not be uniform as malls in Maharashtra, which account for 35-40 per cent of the revenue of the sample set, will be impacted the most because of the mini-lockdown currently imposed. How the affliction curves shape up in other areas would continue to have an effect.

Overall retail sales at malls declined 55 per cent last fiscal. Although closures in the first half had a significant impact, gradual recovery after reopening provided an offset in the second half. Footfalls remained considerably lower than pre-pandemic levels, but average spend per footfall darted up more than 25 per cent.

Recovery for most tenant categories, including apparels, cosmetics, electronics, luxury, and food and beverage, was above 70 per cent by the end of last fiscal versus pre-pandemic levels. Cinema and family entertainment centres, though, continued to lag, even as they contributed less 10 per cent of the aggregate revenue.

For mall owners, cost rationalisation lessened the impact on operating profitability, which is estimated to have contracted only 300 basis points to 65 per cent last fiscal on-year for the sample set despite a sharp drop in revenue.

They were also able to cut costs by 40 per cent, supported by lower utility expenses during lockdowns and optimisation of manpower, part of which might continue.

Additionally, strong sponsor support, liquidity in the form of debt service reserve account for few months, and the Reserve Bank of India's moratorium eased pressure on debt servicing obligations last fiscal.