• The footfalls remain significantly lower than the pre-Covid levels, however, the average spend per footfall improved drastically since Covid-19 pandemic indicating that only serious buyers are visiting the malls now
• Store categories such as hypermarkets, electronics and fashion and beauty have done extremely well with certain brands even exceeding the pre-Covid sales

Retail malls have witnessed a faster recovery after the second wave, compared to the first wave (Q1-Q2FY2021) of Covid-19 pandemic, driven by faster relaxation in the restrictions and improved vaccination coverage. The recovery of retail trading values was at 64% of pre-Covid levels for ICRA’s sample in Q2 FY2022 as against the recovery of 30% witnessed post the first wave in Q2 FY2021 which had resulted in closure of retail malls for between three to five months. However, with the easing of restrictions along with a decline in the fresh Covid-19 infections, there was gradual improvement in operational metrics and rent income for mall operators in H2FY2021, before the second wave in April-May 2021 again led to closure of malls for about two months due to state wise restrictions.

Commenting on the rental recoveries, Ms. Anupama Reddy, Assistant Vice President & Sector Head, Corporate Ratings, ICRA, says, ‘‘The recovery for the retail malls was sharper since August 2021 and the trajectory is expected to sustain in H2FY2022 driven by pent-up demand, high vaccination coverage, resumption of multiplexes which also coincided with the festive season. While the footfalls remain significantly lower than the pre-Covid levels, the average spend per footfall improved drastically since Covid-19 pandemic indicating the fact that only serious buyers are visiting the malls now. In ICRA’s base case, the rental recovery of sample is expected to be up to 75% of pre-Covid levels for FY2022, as compared to the recovery of 49% witnessed during FY2021. However, resurgence in fresh Covid-19 infections with any future waves leading to restrictions by state and central governments could hinder the expected recovery.”

Store categories such as hypermarkets, electronics and fashion and beauty have done extremely well with certain brands even exceeding the pre-Covid sales. Recovery in the fashion and accessories category has been aided by the pent-up demand, which is reflected in the performance trends of large fashion retail chains.  Store segments such as department stores and food and beverage are observed to have moderate recovery in line with the improvement in footfalls. As the footfall numbers continue to increase, aided by the festive season and recovery in multiplex operations in Q3FY2022, these categories are also expected to show further improvement.

Multiplexes have been among the most impacted segments due to tighter restrictions on their operations as well as lean content release in H1FY2022. However, with relaxation in permitted occupancies of multiplexes and release of multiple big budget films, the segment is expected to show steep recovery from November 2021 onwards. Overall, majority of the categories are expected to reach near-normalcy by Q4FY2022 with variance depending on the mall or brand specific factors.

The recovery post second wave remained uneven across geographies. The recovery was initially led by north India from June 2021 onwards, where the bounce back was swift due to faster easing of restrictions. The recovery was visible across other regions in the country from end of July 2021.

Commenting on debt coverage metrics, Ms. Reddy added, “Weaker H1FY2022 due to second wave of pandemic is expected to impact the full year FY2022 estimates with the projected DSCR estimated to be in the range of 0.80-0.85 times. The support from sponsors, debt service reserve and undrawn credit lines (for few issuers) have helped ICRA rated malls in meeting their obligations during the H1FY2022. With improvement in rental recoveries, there is no significant shortfall or major dependence on sponsors estimated in H2FY2022.”