PVR, Inox Leisure fall up to 8% as Maharashtra govt shuts cinema halls

The Maharashtra government has announced lockdowns during the weekends and fresh curbs on weekdays.

Shares of multiplex operators like PVR and Inox Leisure tumbled up to 8 per cent on the BSE in intra-day trade on Monday after the Maharashtra government ordered shutting down cinema halls, theatres and multiplexes for public access until further notice to bring the spread of Covid-19 under control.

Among individual stocks, Inox Leisure slipped 8 per cent to Rs 256.60 while PVR was down 6 per cent at Rs 1,160 on the BSE. In comparison, the S&P BSE Sensex lost 0.81 per cent to 49,627 around 09:45 am. Shares of discretionary retail players such as Trent, Aditya Birla Fashion and Retail (ABFRL) and Shoppers Stop were down between 2-3 per cent after the state government imposed strict lockdown-like curbs.

The Maharashtra government on Sunday decided to impose a complete lockdown on weekends and a night curfew in the state to control the spread of the novel coronavirus. The curbs will come into effect from Monday night. They were announced as Mumbai recorded over 11,000 Covid cases. The state posted over 57,000 cases on Sunday — the highest so far.

Malls and multiplexes will remain shut and all private offices, except those engaged in finance, insurance, banks, telecommunications, and essential services, will have to work from home. Attendance in government offices will be capped at 50 per cent, Business Standard reported. CLICK HERE TO READ FULL REPORT

ICICI Securities believes discretionary retail players would be impacted due to a fresh lockdown. While the retail sector was witnessing a gradual recovery in revenues (80 per cent of pre-Covid levels), rising Covid cases and fresh curbs in shopping malls would further derail the revenue recovery trajectory, the brokerage firm said in a note.

This is a negative development as multiplexes register higher footfalls on weekends. With restricted timings and occupancy, we expect deferral of release dates of movies in April, thereby pushing the recovery expectations further. Cash burn would also increase with less/no content release, the brokerage firm said.

Meanwhile, commenting on PVR stock, brokerage Motilal Oswal Financial Securities in a report said the company's recent sharp cost-cutting measures are commendable and underscores the management’s ability to manoeuvre costs and achieve breakeven at merely 18–20 per cent occupancy levels. Over the last five years, occupancies have improved given multiplexes’ better value proposition. 

"However, any substitution-led softening of occupancy could hurt business economics, the return profile, and earnings growth. As the business of multiplexes is inherently a fixed-cost business – nearly 60 per cent of the cost is fixed – it is highly sensitive to occupancy and heavily dependent on content pull and the potential threat from over-the-top (OTT)," analysts at the brokerage house added. 

In the past one month, the stock of PVR (down 18 per cent) and Inox Leisure (down 20 per cent) have underperformed the S&P BSE Sensex, which has shed 1.5 per cent during the period.