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Home >Markets >Mark To Market >Inox Leisure’s revenues disappear in Q1, and so do many of its outgoings
Inox made a loss of about  ₹36 crore at the earnings before interest, tax, depreciation and amortisation level.
Inox made a loss of about 36 crore at the earnings before interest, tax, depreciation and amortisation level.

Inox Leisure’s revenues disappear in Q1, and so do many of its outgoings

  • Inox's average monthly cash burn stood at about 12 crore during the June quarter
  • Inox has invoked the force majeure clause and maintains that rent is not payable during the covid-19 shutdown

With operations shut due to the covid-19 lockdown, June-quarter revenue evaporated for movie exhibition company Inox Leisure Ltd. Therefore, Inox had little option but to shift its focus on the other lever—costs.

In the March quarter, its operating expenses stood at around 340 crore. This was cut by nea-rly 90% to 38 crore in the June quarter. The monthly cash burn of around 12 crore was far lower than analysts’ expectations.

But there’s a catch. Inox has invoked the force majeure clause and says that rent and common area maintenance charges (CAM) are not payable to landlords during the shutdown period.

In Q1, these costs would normally have amounted to around 90 crore. Inox has provided for zero costs on this account. However, at least some landlords are likely to be saying, “Show me the money."

Indeed, Inox conceded in its investors’ presentation: “The amount of reduction in rent and CAM charges, which is yet to be confirmed in writing for the June quarter, is 86.02 crore."

In other words, the company has written confirmations for the rent waiver for only 5% of the total rental amount that would normally have been applicable.

Real estate analysts say mall owners and developers are providing large concessions to tenants, who have the upper hand during the lockdown. But taking a 100% concession for granted may be taking things too far.

Inox said once its operations restart, it is looking to negotiate a revenue-sharing model instead of fixed rents for the rest of FY21.

Another set of outgoings that vanished were towards agency manpower costs, or contract labour. Employee costs were cut by 26% on a sequential basis. And, with no operations, other overheads were about 90% lower as well. While these cost-cutting measures will provide some relief to investors, more written confirmations from landlords about rent waivers will provide further assurance.

Of course, the big unknown for investors is when operations will resume, and at what occupancy levels. While most sectors have opened up as the lockdown is gradually easing, there is no clarity on when multiplexes will be allowed to operate. And given the fear of contracting the virus, it may take a while for occupancies to improve.

“Weak occupancy and rising covid-19 cases would keep producers away from theatrical releases for some time, which would continue to impact multiplexes," Emkay Global Financial Services Ltd analysts said in a report on 5 August.

Not surprisingly, the Inox stock has declined a whopping 53% from its pre-covid highs in February. For investor sentiment to improve, Inox will need to start showing money on the revenue line, rather than its prowess at making it disappear in the expense line.

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