Home / Markets / Mark To Market /  PVR has liquidity cushion, but the picture remains uncertain for Street

Ever since the pandemic began, multiplex companies have been sailing in choppy waters. To their credit though, firms have put up a brave front by controlling what they can on the costs front, given that revenues were evaporating owing to covid disruptions.

Still, it’s not as if that has brought significant respite. Take the case of PVR Ltd, for instance. The firm announced its fiscal fourth-quarter and full-year earnings on Wednesday and has reported a consolidated net loss of almost 748 crore for the fiscal. While not comparable, just for perspective, it had reported a net profit of 27 crore for FY20.

Salvaging what it can
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Salvaging what it can

The sharp contrast in performance is understandable. Over the last fiscal, theatre operations were severely impacted because of covid-induced lockdowns, staggered reopenings, social-distancing rules, slower movie content flow and a drop in consumer confidence. The upshot: “During FY21, PVR saw 860 crore negative free cash flow, which was funded through 1,100 crore equity raise," said analysts from IIFL Securities Ltd in a report on 2 June. PVR has also raised 500 crore through debt.

It’s worth mentioning here that PVR undertook various cost-containment measures during the year, which enabled it to reduce its fixed expenses by 63% in FY21 versus FY20.

As such, performance for the March quarter, too, is nothing to write home about. Ebitda loss after removing the impact of Indian Accounting Standard 116 stood at 128 crore last quarter. Ebitda is earnings before interest, tax, depreciation and amortization. During the quarter, there were no big Bollywood or Hollywood releases, although the southern film industry saw good recovery helped by new releases.

So, after an extremely challenging year, where do investors go from here? Yet again, the resurgence in covid cases poses a risk. In its latest investor presentation, PVR said all its screens are shut down as of date owing to the second covid wave. “PVR’s Q4FY21 results were supposed to provide a glimmer of hope for a healthy content pipeline over the coming quarters, but the resurgence of the pandemic implies that the larger focus over the next two quarters is going to be on cost and liquidity management," said analysts from JM Financial Institutional Securities Ltd in a report on 2 June.

“On the earnings call, the management reiterated its focus on cost control and was confident of significant relief on rent concessions from mall operators," IIFL’s analysts said.

Nevertheless, the current circumstances mean the recovery, which was anticipated before the second wave hit, would be delayed. Hereon, a lot would depend on the timing of reopening, the pace of vaccinations and the kind of movie content releases that will happen eventually.

As such, in the short run, profitability can be expected to be muted.

There are some offsetting factors, however. One is PVR’s liquidity position. As of 30 April, PVR had liquidity in excess of 750 crore, which should keep it comfortable from a near-to-medium term perspective. Secondly, robust box-office collections in countries where theatres have been allowed to reopen suggest that the demand post opening up is strong for the theatrical exhibition of movies.

To be sure, investors have taken note of the rough business conditions for multiplexes. Small wonder, shares of PVR and Inox Leisure Ltd are still around 35% lower each from their respective pre-covid highs seen in January-February 2020.

ABOUT THE AUTHOR

Pallavi Pengonda

Pallavi Pengonda is a financial journalist producing cutting edge commentary and analysis on companies, economy and market trends. Over her journalism career spanning more than 14 years, she has covered topics across sectors such as oil & gas, consumer, aviation and new age tech companies. She heads the Mark to Market team and joined Mint in June 2010. She lives in Bengaluru. She is an art enthusiast and likes to paint in her leisure time.
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