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Malls witness faster recovery post the second pandemic wave

Meenakshi Verma Ambwani | | Updated on: Dec 09, 2021
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Expected to reach 75 per cent of pre-pandemic levels by fiscal-end

Swifter relaxations on Covid-induced restrictions has helped malls witness a faster recovery after the second pandemic wave, compared to the first wave. According to a report by ICRA, retail malls are expected to reach up to 75 per cent of the pre-pandemic levels by the end of this fiscal year

The credit rating agency said that recovery of retail trading values was pegged at 64 per cent of pre-Covid levels for ICRA’s sample in the second quarter of the current fiscal year. In the corresponding quarter in the previous fiscal, the recovery of malls was merely at 30 per cent post the first pandemic wave due to closure of retail malls for 3-5 months.

The report also noted that easing of restrictions and decline in the fresh Covid-19 infections had led to gradual improvement in operational metrics and rent income for mall operator, before the second wave hit the country. This led to closure of malls for only about two months.

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 the second half of FY22 driven by pent-up demand, high vaccination coverage, resumption of multiplexes which also coincided with the festive season.”

She said that while the footfalls remain significantly lower than the pre-Covid levels, the average spend per footfall improved drastically 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 per cent of pre-Covid levels for FY22, as compared to the recovery of 49 per cent witnessed during FY21,” Reddy said.

However, the agency warned that resurgence in fresh Covid-19 infections with any future waves leading to restrictions by State and Central governments could hinder the expected recovery.

Certain categories such as hypermarkets, electronics and fashion and beauty have done well with certain brands even exceeding the pre-Covid sales.

But department stores and food and beverage categories have seen moderate recovery in line with the improvement in footfalls. The hard-hit multiplexes industry are also expected to show steep recovery in the coming months, backed by release of big budget movies and improvement in footfalls, the report added.

Uneven recovery

The recovery post second wave remained uneven across geographies. The recovery was initially led by north India from June 2021 onwards and was visible across other regions in the country from end of July 2021.

“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 first half of FY22. With improvement in rental recoveries, there is no significant shortfall or major dependence on sponsors estimated in the second half of FY22,” Reddy added.

Published on December 09, 2021

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