CRISIL upgrades long-term rating of PVR Inox; short-term rating reaffirmed

PVR Inox said that CRISIL Ratings has upgraded its ratings on the long-term bank debt instruments of the company to 'CRISIL AA/CRISIL PPMLD AA/Stable' from 'CRISIL AA-/CRISIL PPMLD AA-/Positive'.

The agency has reaffirmed its 'CRISIL A1+ rating on the short term debt instruments of PVR Inox.

CRISIL Ratings said that the rating upgrade reflects the strong market position of PVRNOX (largest multiplex operator with nearly four times the screens vis-vis its nearest competitor), improving operating efficiency aided by synergy benefits and premiumisation, and healthy financial risk profile. These strengths are partially offset by exposure to risks inherent in the film exhibition business.

A refreshed content pipeline helped increase footfall during the first nine months of fiscal 2024 on an expanded screen base and improved occupancy to 26.6% (26.2% for the corresponding period of the previous fiscal).

The company reported its best-quarter-ever in terms of box-office collections (BOC) during the second quarter of fiscal 2024. It reported operating profit of Rs 711 crore (operating margin of 14.6%) during the first nine months of fiscal 2024 against Rs 516 crore (proforma PVR INOX combined margin of 13.0%) for the corresponding period the previous fiscal.

Healthy cash accrual on account of strong operating performance helped the company prepay some of its debt, with net debt falling to Rs 1,212 crore as on 31 December 2023, from Rs 1,430 crore as on 31 March 2023. The company had cash and equivalents of Rs 396 crore against external debt of Rs 1,608 crore as on 31 December 2023.

CRISIL Ratings expects net addition of 100-120 screens every year, which, along with maintenance-related capital expenditure (capex), will entail total annual capex of Rs 650-750 crore. This is expected to be funded largely through internal accrual and prudent use of debt.

The agency further added that sustained increase in occupancy leading to higher revenue with ebitda margin sustaining above 17-18% and sustained improvement in the financial risk profile could lead to rating upgrade.

However, weakening capital structure, with net debt to ebtida ratio above 2.0 times and sustained impact on occupancy leading to lower revenue and profitability could trigger a possible rating downgrade.

PVR Inox is the largest multiplex operator in India, with 1,708 screens as on 31 December 2023.

The scrip shed 0.39% to currently trade at Rs 1378.05 on the BSE.

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