Shares of PVR Ltd and Inox Leisure Ltd declined by around 5% each on the NSE in Monday’s opening trade. From their respective 52-week highs seen in January 2, these stocks are down by about 24%.
Sentiment for these stocks dampened after fresh restrictions were imposed on Sunday by the Maharashtra government across the state to check the second wave of the coronavirus pandemic. Rising caseloads are a big risk for multiplexes, posing a direct threat to occupancies. It should be noted that multiplex companies fetch around 30% of the total box office revenue from Maharashtra for Hindi films.
In a notification issued on Sunday, the government said all cinemas, theatres, malls, bars, gardens and playgrounds will remain closed. Furthermore, these restrictions will begin from 8pm on Monday and will be in force till 30 April, 2021.
“The current restrictions are likely to further weigh on sentiments towards both these stocks despite the strong content pipeline, including Salman Khan starrer ‘Radhe’, ‘Sooryavanshi’ and ’83’. Expectations of normalised occupancy could get delayed from 2HFY22, if these restrictions continue beyond April,” said an analyst with a domestic brokerage house requesting anonymity.
“With fresh restrictions, multiplexes are back to square one and this development is clearly negative for both the stocks. There is renewed uncertainty on rental and revenue sharing agreements of these multiplexes with mall owners. Between the two, since PVR recently raised funds, it seems to be in a better position than Inox, the latter will have to catch-up in terms of garnering funds of these restrictions are in place for a longer time,” said an analyst with a domestic brokerage house who did not want to be named.
Apart from this, increasing consumption of the over-the-top (OTT) content poses risk for these multiplex companies. According to analysts at Motilal Oswal Financial Securities Ltd, the contribution of theatres in the movie revenue pie has declined to 75% in India and around 40% globally. Analysts caution that over time, this could diminish the bargaining power of cinemas in India for exclusive screening windows. Live Mint