The nationwide lockdowns and restrictions would lead to a 50% fall in the revenues of malls this fiscal according to an analysis of top 10 malls rated by Crisil.

These malls have total rated debt of ₹4,200 crore and cover 7.5 million square feet (msf), with pan-India presence. These have strong sponsors and high debt service coverage ratio (DSCR) of 1.5 times on average.

Hence, notwithstanding pressure on revenues, impact on credit quality of Crisil-rated malls is expected to be limited in near term, CRISIL Ratings said in a report.

Much of the impact on mall revenue would be because multiplexes, food courts, restaurants and gaming zones that have not yet opened in many locations as per government orders. These businesses, which contribute 22% to the total revenues, have borne the brunt of the impact on operations due to social distancing and are also expected to take the longest to recover.

As per the report for other categories such as apparels, cosmetics, electronics, and book stores, which contribute 75% of mall revenues, consumption has been low at 30-35% of previous years’ numbers in the first month of operations post re-opening.

With revenues dented, and recovery expected to be slow, these businesses have started renegotiating their contracts with mall owners for waivers in lease payments, or discounts over the period of lockdown and this would impact the revenues.

Sachin Gupta, senior director, Crisil Ratings, said, “We expect a 50-100% lease waiver for the period of lockdown, followed by a 30-50% concession in rentals in the current quarter and the next, which will reduce to 0-20% in the quarter to March.”

“A gradual build-up in revenue can be expected from the current quarter, though for the fiscal overall, a revenue loss of 45-50% appears to be in order. The loss would get bigger if the lockdowns are extended or are re-imposed,” he said.

Malls also face the risk of cannibalisation of revenue by online platforms. And this could lead to higher vacancies and pressure on rentals. Crisil said vacancies may inch up to over 10% over the next 12-18 months compared with 4% as of March 2020.

Mall owners may need to give deep concessions to keep their tenant profile intact and may even need to shift to a 100% revenue-sharing model, it said.

Despite the projected steep drop in revenue and its consequent impact on profitability, Crisil believes its rated mall portfolio would be able to withstand this stress in the near term due to the availability of three-month liquidity in the form of Debt Service Reserve Account.