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Home >Markets >Mark To Market >PVR manages to contain costs, but its revenue outlook remains grim

Though multiplex chain PVR Ltd faced a blank screen in the September quarter, its stock perked up a shade on hopes that more states are allowing cinemas to re-open. Of course, investors must watch occupancies in theatres after re-openings, which after a long intermission, could still remain tepid. The PVR stock, a big beneficiary of the ‘unlock’ trades in August, has fallen about 23% from its highs in end-August.

With revenues being blank in Q2, cost cuts were the prime focus. On that front, PVR seems to have done well. The firm brought down costs further sequentially. As a result, operating losses were lower at 81 crore, compared to losses of 124 crore in the June quarter.

PVR said it received complete rent waiver in the lockdown period on 60% of its screens and significant discounts on reopening. “Employee headcount reduced from 11,000 in March 2020 to 6,200 in September. Temporary salary cut of 25-50% was implemented across the organization. Overheads were down 76% (v/s Q1FY20), due to cost control initiatives, which includes 90% drop in electricity charges," analysts at Motilal Oswal Securitas Ltd said in a note.

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Of course, analysts note that footfalls in cinemas post-reopening will be key. Notably key movie markets such as Maharashtra have allowed cinemas to re-open outside of containment zones.

Nevertheless, analysts say that occupancies in film theatres will depend greatly on the type of movie releases, which could be low initially. “How fast people come to theatres is not easy to predict because there is a bit of a chicken-and-egg situation as people come to theatres only when there are good releases. Producers, meanwhile, would like to wait to gauge the confidence that people will be in theatres before they release films. It remains to be seen how this plays out," said an analyst on condition of anonymity.

For now, PVR has permission to re-open about 70% of its screens at 50% capacity. In some states where cinemas are allowed to operate, the management said that occupancies were nearly at the 50% permitted level, which is encouraging.

However, spends per head were considerably lower than earlier. Besides, the movies released were low-budget. And PVR has started private screenings for small gatherings, which could aid the company’s topline.

Meanwhile, PVR has raised sufficient liquidity in these times and has about 550 crore available, which should suffice for it to tide the coming quarters.

In the longer run, however, the return on equity could contract on account of mounting debt and lower occupancies. Further, a second wave of covid-19 cases could be a deterrent to moviegoers.

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