Multiplex stocks climb as Maharashtra allows movie theatres to reopen

The state accounts for a fifth of the screens for PVR and Inox Leisure

Multiplex chain operators were among the biggest gainers on expectations that permissions to open theatres in key states would lead to a gradual uptick in revenues. While the stock of the country’s largest multiplex operator PVR was up 9.5 per cent, Inox Leisure registered a gain of 4.3 per cent. 

The key near term trigger for the two stocks has been the decision by the Maharashtra government to allow theatres to open from November 5 outside of the containment zones. The state accounts for 18 per cent of PVR’s total screens of 831 and 21 per cent of Inox’s 626 screens. Barring Telangana, Rajasthan, Kerala and Jharkhand most states have given permission to open theatres.

Analysts believe that approvals in key markets comes ahead of the Diwali season which could help improve footfalls especially on the back of new movies. While theatres expect an improvement in footfalls, they can only run shows with 50 per cent capacity. Multiplex operators are running attractive offers to improve occupancies to drive ticket and food and beverage sales. Further, private screenings have also been witnessing an uptick and are expected to increase going ahead. 

Multiplex operators, who depend on footfalls and occupancies to drive sales from tickets, food and beverage and advertising, have seen their revenues collapse for the second quarter in row as theatres remained shut. Reported loss for PVR in the first half of the financial year stood at Rs 409 crore on revenues of Rs 165 crore while that for Inox was Rs 145 crore on revenues of Rs 8 crore. 

Both operators have drastically cut down their fixed costs since the start of the lockdown by reducing headcount, negotiating with mall owners and developers for lower rentals and revenue share contracts instead of fixed lease payments. They have also received a waiver on rentals and common maintenance charges during the lockdown period.