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There has been no respite for multiplex chains such as PVR Ltd and Inox Leisure Ltd since the covid outbreak. For the June quarter (Q1FY22), both have reported losses at the earnings before interest, taxes, depreciation and amortization (Ebitda) level.

In Q1, losses sustained by PVR and Inox Leisure were 121 crore and 107 crore, respectively, at the Ebitda level, after adjusting for the impact of Indian Accounting Standard 116 (IND-AS 116). The two companies have now reported Ebitda losses for five quarters in a row on a pre-IND-AS 116 basis.

A tragic scene
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A tragic scene

Revenues of the two firms declined in the range of 67-75% compared to the March quarter. With the second covid-19 wave’s restrictions hurting revenues, the firms have had to keep a tight lid on costs to reduce cash burn.

For now, PVR and Inox Leisure have sufficient liquidity.

“Aided by the recent QIP, PVR is maintaining a high quantum of liquidity on the balance sheet ( 730 crore as at March 21) to tide over the near-term losses with limited debt repayments in the near term ( 200-300 crore)," JM Financial Institutional Securities Ltd’s analysts pointed out. QIP is qualified institutional placement.

“As per our workings, a gradual reopening leading to 20%+ occupancy in 2HFY22 could help PVR achieve near operational cash break-even in FY22," the broker said.

Inox’s liquidity position also looks good. The firm is net debt free and has nearly 400 crore, including an undrawn limit of 120 crore, as on 31 July. The liquidity position is comfortable for meeting the higher cash burn needed in the initial months after reopening, as per IIFL Securities Ltd.

Investors are likely to closely watch the performance of the movie Bell Bottom, which is releasing on 19 August. Moreover, film producers are keen to release movies earlier, unlike last year when there was a big lag after the lockdown restrictions had eased, according to PVR. “This time around, Hindi producers are very clear that they want to start releasing even if there is a 50% capacity cap as long as the major states have permitted theatres to open," PVR said in its earnings call.

Even so, for investors, it would largely be a wait-and-watch strategy. There are uncertainties such as the fear of the third covid wave. Besides, when reopening happens, investors will have to watch how occupancies shape up.

Investors are factoring in some of the negative news. After all, PVR and Inox Leisure’s shares are still trading around 37% each lower than their respective pre-covid highs seen in early 2020. However, the stocks aren’t exactly cheap.

“While valuations may seem attractive, these stocks are not screaming buys," said an analyst requesting anonymity.

If there are some big releases in the near future, it would certainly be a trigger for these stocks, where investors have had nothing to look forward to for months on end.

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