Firstly you are raising Rs 1400 crore as the fresh issue so what are the plans to increase the assets that you have with this money and will you have to take some more debt to fund your asset expansion plans?
We have as you said 17 malls across the country and our ambition is really to grow this platform. We are very high conviction believers on the Indian consumption story and therefore we will look to aggressively sort of build this out. What do we think we can sort of grow this to, I do think we can double this portfolio in the next three to five years.
And how do we fund this? I think the REITs are a great vehicle for these acquisitions. It allows investors to efficiently swap in for units. It allows us to pay for cash.
And just given our balance sheet today, we are only about 17% odd levered. It really gives you a lot of headway to take debt. What we really want to do in terms of these acquisitions is look at the highest pockets of consumption to acquire these assets.
So these would be the large metro cities, some of the large mini metros where we are seeing large pockets of consumption. And in terms of acquisition strategy, really try and see if we can acquire these at NAV and DPU accretive values that has really been the strength. The other unique thing for us has been Nexus, our dedicated platform that we built to manage all of these assets. It really sets us apart from single, standalone mall owners in terms of our ability to sort of leverage scale, leverage relationships and that is really what we want to do as we build this out.
Congratulations for your listing on the bourses. If you talk about the pre-COVID levels, the company was growing at about 10 to 12%, whereas post-COVID the sales growth has been actually 30%. But that could be due to pent up demand is not it or is this growth number of 30% is likely to sustain going ahead? What sort of guidance can you offer when it comes to this particular domain?
I do not think the company will sustain 30% growth. But can it achieve what it has achieved in the past between 11 and 12%? I think that is very highly achievable just given the lease structures that we have, where we not only have base protection on rents but also participate in sales as they keep increasing.
So 30% obviously is a function of some pent up demand, inflation in prices sort of catching up. But the way we have thought about this conservatively is in our projections of sales growth being like 8.5%.
I think we can significantly overachieve on that number and it can easily be early double digits as we have seen in the past.
Now let us talk about your yields because just wanted to know that what is the yield that you generate on your assets that you hold? Since it is retail, it would be a percent or two higher than the office and the commercial leases?
It is about where we are currently sort of listing. It is at about an 8.25% yield compared to the office REITS that are prevailing in the market today. They probably broadly trade in around the seven zip code today so pretty healthy spread in terms of the yield that we are offering.
Also if you compare this to any other fixed income product today, on a post-tax basis very-very advantageous for most investors. The 8.25% essentially translates to like a 7.1% post tax. If you compare that to even FDs or any corporate bonds, you essentially have taxed the marginal tax rate for most investors. So really on a post-tax basis very-very efficient and a very good yielding product for most of our investors.
Lastly, Nexus portfolio includes 17 malls and 14 cities. If you could tell us what are the plans for expansion? Are you planning on adding some more malls going forward?
Definitely. As we speak, we are in advanced conversations with many mall owners. The Indian mall industry is pretty fragmented. Other than Phoenix, a couple more large owners, it is really owned between ones and two with large developers who for many of them, this is non-core.
That is really how we have sort of built this portfolio. And that is what we want to try and focus on. We will keep acquiring assets from some of these large developers funds and or just single asset owners.
I think the REIT, just to add, also gives you a very efficient structure, compared to a normal company to just swap in for units, which is very tax efficient for the seller.
So all in all like I mentioned before, we really want to try and scale this up very-very quickly.