PVR, Inox Leisure skid up to 9% as Crisil downgrades long-term ratings

Continued restrictions for more than 3-4 months and lower-than-expected ramp-up in occupancy post lifting may result in higher-than-expected cash loss

Shares of multiplex operators PVR and Inox Leisure extended their fall on Monday, declining up to 9 per cent on the BSE in the intra-day trade, after rating agency CRISIL downgraded its rating on the bank facilities of these companies over likely delay in recovery of operating performance due to the recent spike in Covid-19 cases.

Among individual stocks, PVR slipped 9 per cent to Rs 961 while Inox Leisure (ILL) plunged 8 per cent to Rs 242, hitting over eight-month lows on the BSE in the intra-day trade today. In the past one month, PVR and Inox Leisure have tanked 30 per cent and 25 per cent, respectively. In comparison, the S&P BSE Sensex slipped 4.3 per cent during the same period.

CRISIL Ratings downgraded its long-term bank facilities and non convertible debentures of PVR to 'CRISIL AA-/Negative’ from 'CRISIL AA/Negative', while it downgraded its ratings on the bank facilities of INOX Leisure to ‘CRISIL A+/Negative/CRISIL A1’ from ‘CRISIL AA-/Negative/CRISIL A1+’.

"The rating action reflects CRISIL Ratings’ expectation of weakening of PVRs and ILL’s business risk profile over the medium term. It was earlier expected that with resumption of operations in October 2020, the occupancy will improve gradually with return of content to the multiplexes. However, with the recent spike in Covid-19 cases, recovery in operating performance of multiplexes will be delayed," it said in its rating rationale.

Many states have already announced localised lockdowns, night curfews and restrictions over occupancy levels in cinemas. These restrictions will also result in deferment of the release of strong content, which was earlier scheduled to be released in the first quarter of fiscal 2022, thereby impacting operations.

Multiplexes were witnessing gradual build-up in occupancy during January-March 2021 quarter, against 4-6 per cent occupancy in October-December 2020 quarter. Release of regional content was largely driving this improvement. However, recent restrictions and increased fear of enclosed spaces might keep the moviegoers away for a while, it said.

CRISIL Ratings believes that there could be weakening of these companies' credit profile over the next 3-4 months if local restrictions in various states continue to hinder operations on a pan-India basis or occupancies remain muted despite resumption of operations. CLICK HERE TO READ REPORT OF PVR, INOX LEISURE