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Home >Markets >Mark To Market >Resurgence of covid emerges as a big risk for shares of PVR, Inox Leisure

Shares of multiplex companies PVR Ltd and Inox Leisure Ltd declined by around 6% each on Monday on the NSE. True, broader markets were weak as well, with the Nifty 50 index declining by 2%. Clearly, rising covid-19 cases are a big risk for multiplexes, posing a direct threat to occupancies. That’s the latest factor to weigh on the sentiments for these stocks even as most Indian states have now permitted 100% occupancy at theatres.

“More covid cases would mean normalcy gets delayed. Investors also start to worry about the effect of OTT (over-the-top or streaming) platforms and delay in movie releases," said an analyst, requesting anonymity.

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“After consistent reduction in new covid-19 cases in the last few months, states such as Maharashtra, Punjab, Kerala, Chhattisgarh and Madhya Pradesh have started seeing a resurgence in daily new cases," said analysts from Emkay Global Financial Services Ltd. Maharashtra is the top market for multiplexes.

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“We are of the view that there still remain two key risks: 1) resurgence of Covid-19 cases and 2) consumer behaviour toward out-of-home content consumption," said Emkay analysts in a report on 21 February.

The release of movies on OTT platforms remains a high risk. Last year, when cinemas were shut owing to the pandemic restrictions, quite a few films were released on such platforms.

The latest to join this bandwagon is southern superstar Mohanlal’s film, Drishyam 2: The Resumption, which was released on Amazon Prime Video last week.

Analysts from Motilal Oswal Financial Services Ltd said in a report on 18 February, “Occupancy rates are at risk of softening over time due to certain inevitable factors."

One factor, according to the broking firm is, “The contribution of movie theatres in the movie revenue pie has declined to 75% in India and about 40% globally. Over time this could diminish the bargaining power of cinemas in India for exclusive screening windows – this trend is already seen globally."

To be sure, the streaming trend hasn’t caught on in a big way, as far as big banner movie releases go. “Many direct-to-OTT movie releases in the last 6-8 months have not got a thumbs-up from audiences. Thus, content quality and public reviews will be at the forefront, as in the past subpar content has not received eyeballs, despite having prominent star cast," Emkay’s analysts added.

Be that as it may, as things stand, investors of multiplex companies PVR and Inox are on shaky ground and much depends on how covid-19 cases pan out in the coming months. Separately, big-star and big-budget movie releases will help in pulling audiences to the theatres and this remains a monitorable.

As such, after a near washout in 2020-21, all eyes are now on FY22 for recovery, but even that remains uncertain as of now.

Unsurprisingly, these concerns have meant stocks of Inox and PVR are languishing far below their pre-covid highs seen in early 2020. PVR and Inox shares are down 35-38% since then.

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