Retail sales in shopping malls recover after COVID-19 2nd wave: CRISIL

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    Shopping malls have recovered faster after the second wave of COVID-19 compared to the first. According to an analysis of India’s 14 best shopping malls, rated by CRISIL Ratings, rental income for shopping center owners has risen again this fiscal year to 80-85% of pre-pandemic levels, compared to 55-60% last fiscal year.

    “Improvements in consumer sentiment through faster vaccinations, catch-up demand and discount sales by major retailers have contributed to the recovery,” said Anand Kulkarni, director, CRISIL Ratings.

    Investor confidence in shopping malls appears to have improved, which is reflected in equity investments, asset development financing, and direct asset purchases, the CRISIL report said.

    However, an intense third wave could shrink rental income for shopping center owners by 10% if it impacts the upcoming Christmas season.

    Categories such as clothing, cosmetics, electronics and luxury are likely to recover more quickly due to the pent-up demand, which will relieve the burden on mall owners through lower rent waivers.

    The recovery will vary for other segments. Food and beverage, cinema, and family entertainment centers are expected to recover only gradually. The recovery of shopping malls in the southern states and Maharashtra would take longer compared to those in the north due to the impact of the pandemic.

    While shopping center owners’ rental income in FY22 would be better than last fiscal year, a full recovery to pre-pandemic levels is unlikely to come until next fiscal year.

    “The debt service coverage ratio (DSCR) will continue to be below 1X for most mall owners this fiscal year, indicating a decline in their base case liquidity reserves,” said Kshitij Jain, associate director, CRISIL Ratings.

    Even if liquidity erodes, strong sponsorship and fundraising initiatives will support the credit profiles of the malls being assessed.

    Also Read: Another Mall Closure In Maharashtra Big Blow To Business, Employment: RAI

    Also read: CRISIL raises India Inc’s FY22 credit outlook to positive

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