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Multiplexes to see recovery only in the next fiscal: CRISIL

Average occupancy of 10-12% is expected for multiplexes in the first half of this fiscal and 20-22% in the second half, when restrictions on occupancy and fears of infection will hopefully recede. A full recovery is seen only in fiscal 2023, CRISIL said. (HT)Premium
Average occupancy of 10-12% is expected for multiplexes in the first half of this fiscal and 20-22% in the second half, when restrictions on occupancy and fears of infection will hopefully recede. A full recovery is seen only in fiscal 2023, CRISIL said. (HT)

  • Localized lockdowns, night curfews and other restrictions to contain the resurgence of covid-19 infections will keep occupancies low for the next few months, according to the report

NEW DELHI : Multiplexes are set to log operating losses for the second straight fiscal as localized lockdowns, night curfews and other restrictions to contain the resurgence of covid-19 infections will keep occupancies low for the next few months, said domestic rating agency CRISIL.

Occupancy had started improving post-resumption of cinema operations, and was expected to reach 18-22%—the breakeven level in terms of operating profit—in the current quarter. Sequentially, occupancy doubled to 12-13% last quarter, and was seen climbing anew to 22-25% in south India, CRISIL said. However, the recent spike in covid-19 cases will send that estimate askew and defer recovery to the second half of this fiscal.

Average occupancy of 10-12% is expected in the first half of this fiscal and 20-22% in the second half, when restrictions on occupancy and fears of infection will hopefully recede. A full recovery is seen only in fiscal 2023.

“Temporary closures in many states, especially Maharashtra, would push back new film releases, at least the big-ticket ones, to the second quarter. Maharashtra is a crucial market for cinema, accounting for a fifth of the total screens in India," Nitesh Jain, director, CRISIL Ratings Ltd said in a statement. “The resurgence of pandemic has created many uncertainties, and restrictions could continue for longer, leading to deferment of film releases on big screens and continuation of cash burn for multiplexes," he added.

CRISIL-rated multiplex operators, which account for almost half the industry’s revenue, are expected to log cash losses this fiscal, too. They had lost Rs900 crore in fiscal 2021, compared with a cash profit of Rs785 crore in fiscal 2020, undertaking steep cost controls, including deferring maintenance and major capex outlays. They also raised Rs1,350 crore equity to fund losses and augment liquidity. The current liquidity could comfortably cover operating expenses and debt servicing of these players for the next four to six months, according to CRISIL.

“Lease rentals is the largest fixed cost and they could save 70-75% (Rs800 crore) from waiver of rentals in the last fiscal. Their ability to renegotiate rentals for the current fiscal will be crucial to contain the losses. Beside cost controls, the ability to raise funds in a timely manner will bear watching," Rakshit Kachhal, associate director, CRISIL Ratings Ltd said in a statement.

The spread of infections, the success of the vaccination drive, and the return of moviegoers—setting aside their fear of closed spaces, should be key factors to consider in the coming months as will be the players’ ability to raise funds in a timely manner.

“Having said that, as multiplexes are among the few out-of-home entertainment options in India, occupancy should bounce back once the fear of infection recedes and the pace of vaccination picks up. Besides, big-budget movies, which are temporarily being deferred, are unlikely to be released on over-the-top platforms, given that multiplexes contribute more than 50% of the total box office collection," Kachhal said, adding that exhibition of big-budget movies leading to recovery in occupancy should script the recovery for multiplexes, currently seen in second half of this fiscal.

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