Covid-19 will direct the show of PVR, Inox in ’22

While Maharashtra has imposed a ban on group gatherings of more than five people from 9 pm to 6 am in public places, it has said theatres would continue to operate at 50% of the capacity. Maharashtra is the top market for multiplexes. Some analysts view the night restriction imposed has got negative sentiment for multiplexes. Rising cases will add to investor worries about subsequent shutdowns or restrictions. Needless to say, if that happens, then the anticipated recovery for multiplexes can get delayed.

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Unfortunately, in 2022 as well, the impact of the pandemic remains key to track. The multiplex sector has been painfully exposed to the ongoing crisis. Small wonder, PVR and Inox Leisure have incurred losses due to the pandemic. PVR and Inox’s consolidated net loss for the half-year ended September 2021 was about 373 crore and 210 crore, respectively.

Meanwhile, the saving grace is that the movie pipeline ahead remains encouraging. Plus, the recent box office performance of Spider-Man: No Way Home indicates that movies in the theatres can potentially make a strong comeback depending on the content. Regional movie Pushpa: The Rise is also seeing a good run at the box office. In short, pent-up demand appears strong. This also eases the concerns around over-the-top (OTT) platforms to some extent.

Some analysts reckon Inox is better placed due to more room for improvement in performance metrics. Plus, the balance sheet of Inox is relatively robust. As of 18 October, Inox was net debt-free. As of 30 September, PVR’s net debt stood at 914 crore. “We maintain our preference for Inox Leisure given its balance sheet strength. While PVR remains the leader in the space, we believe a discretionary business should be financed conservatively,” said analysts from JM Financial Institutional Securities after the September quarter results. To be sure, a strong recovery is possible for multiplexes once normalization sets in, which should also positively influence these stocks. As things stand, PVR and Inox Leisure shares are down about 38% and 26% from their respective pre-covid highs seen in early 2020. In 2022, the pandemic will test the pace of recovery for multiplexes.


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