Home >Markets >Mark To Market >Lockdown blues: Multiplexes may have to wait long to see a happy ending
PVR and Inox revenues dropped about 22% and 23% respectively in Q4. Photo: Priyanka Parashar/Mint
PVR and Inox revenues dropped about 22% and 23% respectively in Q4. Photo: Priyanka Parashar/Mint

Lockdown blues: Multiplexes may have to wait long to see a happy ending

  • While the first half is likely to see negligible revenues, depending on when the lockdown is reopened, the second half of FY21 is also like to face hurdles
  • Analysts expect in-house advertising to shrink in the second half, which would lead to multiplexes’ revenues contracting further

MUMBAI: It was an average show for multiplexes in the March quarter. But the impact this fiscal could be severe as multiplexes have not yet been permitted to open. Shares of multiplexes reflect these concerns, with PVR Ltd and Inox Leisure Ltd down 3% and 6% respectively in early trade on Tuesday.

Both PVR and Inox reported dip in revenues. But that was also due to the lack of blockbuster movies during the quarter. In the year-ago March quarter, some large films drove viewers to theatres. Analysts say that even without covid-19, Q4 figures would have been muted year-on-year. Hence, the fall in revenues of about 20% had been pencilled in during the quarter. PVR and Inox revenues dropped about 22% and 23% respectively.

Operating costs were higher and rising expenses for the quarter further ate into margins. Besides, companies had to write down the perishable inventory. The lockdown for most of March means that multiplexes had to incur costs for the full quarter. With the authorities shuttering movie theatres much earlier than the general lockdown, both companies declared losses, against profits in the year-ago quarter.

In the last week of March, multiplexes were reducing costs, some even invoking due to the mandatory shutdown the ‘force majeure’ clause regarding lease rentals. One worry is that mall developers may also contend this, with the result that savings on rentals may not be as much in the coming quarters.

While the first half of the year is likely to see negligible revenues, depending on when the lockdown is reopened, the second half of FY21 is also like to face hurdles. “Some categories of viewers are unlikely to flock to movie theatres immediately because the air-conditioned theatres are closed, leading to huge risk. Two, because this is a discretionary expense people will take time to patronise theatres. Besides, substitutes are many in other the top and other internet platforms," said an analyst at a brokerage house on condition of anonymity.

Hence, even with a gradual opening of multiplexes, occupancies will be below average during the second half of the year. This could then lower full-year occupancies. In addition, analysts expect in-house advertising to shrink in the second half, which would lead to multiplexes’ revenues contracting further. PVR is also raising funds through a rights issue in the coming weeks.

Nevertheless, a pick up will hinge heavily on how soon the pandemic is contained, and whether occupancies at the silver screen return to normal levels. For now, that has taken a backseat and will keep up pressure on the stock.

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