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For PVR, adjusted Ebitda margins during the March quarter dropped to 9% compared to 20% in the December quarter. ( Pradeep Gaur/Mint)
For PVR, adjusted Ebitda margins during the March quarter dropped to 9% compared to 20% in the December quarter. ( Pradeep Gaur/Mint)

Lockdown batters multiplex revenues, all hopes pinned on second-half show

  • In-house advertising may shrink, which would lead to multiplexes’ revenues dipping further
  • With occupancy rates expected to be far lower even when operations resume, profits can be expected to be under pressure this year

Before announcing the March quarter results, shares of PVR Ltd and Inox Leisure Ltd had risen 56% and 71%, respectively, from their lows in mid-May. The Q4 results has brought some form of reality check, with the two stocks sliding 7% and 10%, respectively, on Tuesday.

Revenues of PVR and Inox dropped 23% and 22%, respectively, last quarter, owing to social distancing rules and lockdowns in March. And, with revenues drying up, profit margins took a severe beating. In fact, if Q4 margins were any indication, the outlook for profit looks bleak, even assuming operations resume in the September quarter.

For PVR, adjusted Ebitda margins in the March quarter dropped to 9% from 20% in the December quarter. Inox’s margins also saw a compression from 21% in Q3 to 11% in Q4. Of course, these companies have cut costs since then, and the Q4 numbers were also impacted because of write-offs of perishable inventory.

But with occupancy rates expected to be far lower even when operations resume, profits can be expected to be under pressure this year. “Earlier multiplexes were likely to open in mid-June, but that is now pushed to August. F&B and advertising will get impacted. Big releases won’t happen until big cities come under control.

Graphic: Satish Kumar/Mint
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Graphic: Satish Kumar/Mint


Looking at things right now, normal occupancy won’t happen before November-December. Dates are only getting pushed. The larger films won’t get released until the major circuits of Mumbai and Delhi see some kind of plateauing of cases," said Karan Taurani, analyst, Elara Capital.

Since the last week of March, multiplexes have been trying hard to reduce costs, some even invoking the “force majeure" clause for lease rentals due to the mandatory shutdown. One worry is that mall developers may also contend this, and savings on rentals may not be much in the coming quarters.

Another recent worry for multiplexes is whether producers will release films directly to over-the-top platforms.

But multiplex managements are confident that more than 90% of the films released will take the theatrical route instead of digital platforms.

Analysts said the fiscal first half is likely to see negligible revenues, depending on when the lockdown is reopened, as general occupancies dip due to social distancing norms. In addition, analysts expect in-house advertising to shrink in the second half, which would lead to revenues contracting further. In this backdrop, any revival in multiplex stocks will depend on how soon the pandemic is contained, and whether occupancies at the silver screen return soon enough.

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