PVR jumps 9% as its rights issue gets over-subscribed by 2.24 times

The rights issue received an application for 85.29 lakh shares, worth Rs 672 crore

Shares of PVR advanced up to 8.8 per cent on the BSE on Wednesday after the multiplex-chain owner's successfully raised Rs 300 crore via its right issue. The rights issue was over-subscribed by 2.24 times.

At 11:55 am, the stock was quoting at Rs 1,191 apiece on the BSE, up 6 per cent, as against 0.17 per cent decline in the Sensex. A combined 4 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

The rights issue had opened for subscription on July 17th and closed on July 31st. It received an application for 85.29 lakh shares, worth Rs 672 crore. The offer size was Rs 300 crore, an equivalent of 38.23 lakh shares at an issue price of Rs 784 per share.

"In a bid to cope with the current distress, PVR Cinemas issued a special rights offer that was oversubscribed. The company, which had debt of around Rs 780 crore as of FY 2020 (on revenues of Rs 3,452.23 crore) will now be able to tide over initial monthly losses of about Rs 40 crore for the next 12 months," says Ankur Periwal, senior analyst-media sector, Axis Capital.

“What we are witnessing now is a blip in the long-term structure growth story because of the under penetration. The structural propensity to consume is on the uptick,” he says. India has some 9,500 cinema screens but only 35 per cent of those are in the multiplex format, as opposed to upwards of 75 per cent in developed markets. In the US, for instance, there are close to 40,000 big screens, he says, and most of them in the multiplex mode.

Analysts at BOB Capital, meanwhile, believe that India’s multiplex industry is undergoing unprecedented hardships amid Covid-19 shutdowns. Though screen opening timelines remain uncertain, they believe movie halls will retain their appeal and attract patrons once pandemic concerns abate.

"We see long-term opportunities arising out of this tumultuous phase for the leaders. Liquidity pressure may compel some single screens or smaller multiplex chains to down shutters, ushering in a new wave of consolidation. Waning competitive intensity may also pave the way for industry leaders to have favourable rental negotiations with property owners," they said in a report dated August 7. They initiated call on PVRL with ADD and a Sep’21 TP of Rs 1,220, set at 13x Sep’22E TTM EBITDA. "Though we like PVRL for its premium locations and industry leadership, near-term upside seems to be limited," it cautioned.