Home >Markets >Mark To Market >Mutiplex firms still vulnerable to covid blow as they head into 2021

While many businesses were hit badly in 2020 owing to the pandemic, some were hit worse than others. Movie-exhibition companies, or multiplexes, are a case in point. First, multiplexes had to deal with the prolonged shutdown, as the sector was among the last to be allowed to resume operations. Second, after opening up, occupancy levels haven’t picked up, which is also partly due to unexciting movie releases.

As we enter another year, multiplexes remain comparatively more vulnerable than other sectors, as watching movies is far from being top on the list of activities for most people. In this backdrop, the key factor to watch out for in 2021 would be progress on the vaccination front.

“If the vaccine is delayed, FY22 could also be a washout like FY21. Postponing content releases remains a risk to footfall normalization, but impact on intrinsic value is less than 5%," analysts from JM Financial Institutional Securities Ltd said. “However, given that vaccination would largely be completed by end-FY22, normalcy would still return in FY23. In such a worst-case scenario, our workings on PVR Ltd indicate that overall cash losses would be about 400 crore in FY22, implying an intrinsic value impact of less than 5%," the broking firm added in a report on 23 December.

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Also, the release of new movie content will be important, as it will help move the needle for people who are sitting on the fence. Karan Taurani, analyst, Elara Securities (India) Pvt. Ltd, said: “For occupancies to improve in 2021, multiplexes need strong content. It could take just one good release to encourage audiences to visit the theatres. Occupancies could reach beyond pre-covid levels around next year Diwali led by pent-up demand and a healthy movie content pipeline."

Further, box-office success of movies may also prompt more movie releases and encourage the start of production of new movies, which bodes well for the content pipeline.

Understandably, financial year 2021 is expected to be a rough year. For the half year ended September, PVR and Inox reported consolidated profit after tax losses to the tune of 410 crore and 141 crore, respectively. Even so, these companies were able to raise funds during the year and that’s helpful to tide over the crisis. “It augurs well that both Inox and PVR have managed to raise funds in 2020 and that should offer liquidity cushion in 2021," added Taurani.

At one point in mid-2020, shares of PVR and Inox were down by about 60% of their pre-covid highs. They are now down 38% and 43%, respectively, suggesting that the fundraising and the reopening of cinema halls have improved sentiments.

If superior movie content makes its way to the box office, and the covid-19 vaccine rollout progresses smoothly, 2021 could be the year when the losses are completely erased.

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