Dear Shareholders,

On behalf of our Board of Directors, it is my great pleasure to share with you our FY2017 Annual Report. While navigating through a challenging business environment, our management delivered commendable results during the year.

India Economic Growth

India’s Gross Domestic Product (GDP) growth grew by 7.1% during FY2017. Growth was largely driven by Government spending and an improving agricultural economy. India remains the fastest growing major economy, placing us in a sweet spot within the global economic landscape.

With respect to consumer spending, the joint report, released by FICCI and PricewaterhouseCoopers, expects consumer spending to grow to US$ 3.6 trillion by 2020. India’s retail sector alone is expected to touch US$ 1 trillion, growing at a CAGR of 12%. The Government’s initiatives for relaxing FDI regulations in certain retail segments are providing further impetus for consumption growth. With increasing household incomes, consumer attitude towards discretionary spending is gradually shifting and consumers are increasingly vying for quality and premium products.

India today stands at an inflection point from where the retail consumption pie in the country is set to grow at almost twice the GDP growth rate for the next decade and our company is best equipped to tap this huge opportunity.

India’s growing economy, rising disposable incomes and growing aspirations are feeding the engine called “urban consumption”. Its retail infrastructure has come a long way and our Company is a responsible peer within it. Our malls are becoming more than just shopping destinations. They are now fully integrated recreational centers, in which the whole community feels a sense of belonging - a place where they all come to share and create happy memories.

Our Financial Performance

Our performance and prospects for future growth, are deeply rooted in a proven strategy focussed on creating long-term shareholder value. We delivered a strong set of results for FY2017. Our performance is the outcome of continuous operational improvements and our steadfast consistency in our strategies for profitable growth, innovation and efficiency. In FY2017, we reported excellent secular escalation on all fronts – in terms of retail consumption, rental income and earnings. Our standalone income from operations at ₹ 3,759 million grew by 6% over the previous financial year, while our standalone EBITDA rose from ₹ 2,391 million in FY2016, to ₹ 2,538 million in FY2017, up 6% year-on-year.

At a consolidated level, our Income from Operations grew from ₹ 17,795 million in FY2016 to ₹ 18,246 million. Profit After Tax at ₹ 1,679 million was up 29%. Our Retail Income from Operations and EBITDA have grown at a 6-year CAGR of 43% and 35%, respectively. Over the years, your Company has recorded superior year-on-year performance and managed to bring down the effective cost of debt from 12.3% in FY2014 to 10.16% on a blended basis by FY2017. We continue to re-finance our borrowings at attractive rates to further bring down the cost of debt. I am pleased to inform our shareholders that the Board has recommended a final dividend of ₹ 2.40 per equity share (120%) for the financial year 2016-17.

Propellant for Future Growth

In a landmark development in April 2017, our company joined hands with Canada Pension Plan Investment Board (CPPIB) to develop, own and operate retail led mixed-use developments across India. In CPPIB, we have found a like-minded partner who shares our vision of creating and managing world-class retail assets. Island Star Mall Developers Private Limited (ISMDPL), our 100% subsidiary that houses Phoenix MarketCity, Bengaluru, became the new investment platform in which CPPIB will be investing over ₹ 16 billion in multiple tranches for up to 49% stake in ISMDPL.

ISMDPL will develop, own and operate retail-led mixeduse assets across the key cities in India. Leveraging our operational excellence, growth pipeline and financial strength, we are now building greater scale, strength and market position in more cities. We expect to gain immensely from CPPIB’s experience of owning and managing Grade A retail assets across the globe.

I am pleased to inform you that consumption, trading density and rental income at our malls has been growing steadily year on year. Consolidated consumption at the malls came in at ₹ 58 billion for the year, up 7% yoy while rental income was ₹ 7.7 billion, up 9% year-on-year.

We are particularly excited about the progress at Phoenix MarketCity, Mumbai. Having commenced operations in 2011, the mall initially witnessed a slow start. However, thanks to the relentless efforts of our management, leasing and marketing teams, the asset is currently out-performing all our other malls in terms of year-on-year growth. During FY2017, Phoenix MarketCity, Mumbai reported a 17% increase in consumption and a 18% rise in its trading density making it the fastest growing amongst our MarketCity malls. We are yet to see the full potential of this location and we are confident that, over the next few years, this property will see continuous all-round improvements in consumption and rentals.

Residential Projects – Strengthening Free Cash Flows

PML is in advanced stages of developing and delivering premium residential projects in Bengaluru and Chennai. One Bangalore West at Bengaluru city is the Group’s flagship residential project. It has been established as “the best gated community in Bengaluru” with world-class facilities. Kessaku is also one-of-its-kind development, offering customers the convenience of a ‘gated community’ and luxurious single-level homes. During FY2017, we completed construction of Tower 1 to 5 at One Bangalore West and received Occupation Certificates (OCs) for the towers. The balance area, as and when sold, will keep generating substantial free cashflows for our company.

We are yet to see the full potential of Phoenix MarketCity, Mumbai and we are confident that, over the next few years, this property will see continuous all-round improvements in consumption and rentals.

Hospitality – Improving Occupancy and ARR

We own and operate two hotels namely The St. Regis, Mumbai and Courtyard by Marriott in Agra. The vertical contributed 17% to our total revenues in FY2017. During the year, the number of available rooms increased to 395 rooms from 335 rooms. Despite higher inventory, the property maintained an average annual occupancy of 72% with the Average Room Rate (ARR) of this property growing by 14% YoY. The Hotel reported a growth of 16% in revenue (₹ 2,520 million) and EBITDA (₹ 907 million). The Agra property reported a revenue of ₹ 323 million, with its occupancy improving to 57% during FY2017 from 45% in the previous year.

Finally, I would like to briefly touch upon our Food & Beverages vertical. As a part of our initiatives to increase the area dedicated for entertainment and leisure across all our malls, we have actively launched appealing and innovative dining concepts. At the end of the year under review, our F&B portfolio comprised of 7 F&B brand concepts spread across 13 stores at our malls. Gradually, we plan to extend these new proven concepts across all our existing and upcoming retail assets.

Commercial Projects – Rising Annuity income

Our commercial portfolio amounts to 1.42 million square feet in Pune and Mumbai. Of this, we have already sold about 0.45 million square feet. Of the remaining area available for leasing, we leased out 0.54 million square feet during the year. Art Guild House, spread across 0.76 million square feet, is the Company’s largest commercial project. It is a premium property offering opulent interiors with exquisite art installations. It showcases structural art infused within the infrastructure, and dynamic art amidst opulent business environments.

Leveraging our operational excellence, growth pipeline and financial strength, we are now building greater scale, strength and market position in more cities. We expect to gain immensely from CPPIB’s experience of owning and managing Grade A retail assets across the globe.

I feel privileged and proud of our management, leadership team and employees who keep giving their best every single day to take Brand Phoenix higher. On behalf of the management and the Board of Directors, we wish to thank all our staff, shareholders, business partners and associates for their continued commitment and support. We look forward to an exciting FY2018 as we commence our journey to consolidate our market position.

Sincerely,

ASHOKKUMAR RUIA

CHAIRMAN & MANAGING DIRECTOR