Crisil places Inox Leisure ratings on watch negative

Multiplex chain Inox Leisure Ltd (ILL) said on Tuesday that Crisil has placed its bank facilities of Rs 319.68 crore on rating watch with negative implications.

The rating action follows the closure of movie theatres across India by orders of state governments to contain the spread of novel coronavirus (COVID-19).

While the present closure is valid until March 31, it could be extended if the epidemic worsens. Prolonged closure may significantly impact credit profiles of the film exhibition industry including ILL, said Crisil.

ILL has been taking proactive steps to reduce its cost and augment liquidity. Lease is a major fixed cost for ILL and it has invoked the force majeure clause for lease agreements with mall developers.

It expects no payment of leases during the closure. ILL is also looking to conserve cash by reducing the workforce, deferring maintenance, and capital expenditure (capex) outlay.

Currently, ILL has liquidity (cash and bank balance, undrawn committed bank lines, treasury shares and other liquid investments) of more than Rs 240 crore, which should sufficiently cover its curtailed operating costs as well as debt servicing for the next few months.

ILL is looking to further augment its liquidity to enhance the cushion. ILL's total debt outstanding was around Rs 85 crore as on December 31 last year.

Crisil said it will continue to engage closely with ILL to ascertain that operations are being run at curtailed costs and will closely monitor its liquidity position.

It will remove the ratings from the watch and take a final rating action once there is clarity on the resumption of operations.

However, said Crisil, the ratings continue to reflect the company's established market position in the film exhibition business, healthy operating efficiency, strong financial risk profile, and high financial flexibility from being part of the Inox group.

But these strengths are partially offset by exposure to risks inherent in the film exhibition business.

ILL is among India's largest multiplex chains with 146 multiplexes and 614 screens in 68 cities.

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