CRISIL downgrades rating of PVR Ltd

CRISIL Ratings has downgraded its rating on the long-term bank facilities and non convertible debentures of PVR Ltd (PVR) to 'CRISIL AA-/Negative' from 'CRISIL AA/Negative'. The rating on the Rs 50 crore long-term principal-protected marketlinked debentures has been downgraded to 'CRISIL PPMLD AA- r /Negative' from 'CRISIL PPMLD AA r /Negative'. The rating on the short-term bank facility has been reaffirmed at 'CRISIL A1+'. Furthermore, the rating on the Rs 75 crore NCDs has been withdrawn as the instruments have been fully repaid. CRISIL Ratings has received confirmation of no dues pending against these NCDs. The withdrawal is in line with CRISIL Ratings' policy on withdrawal of NCDs.

The rating action reflects CRISIL Ratings' expectation of weakening of PVR'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. 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% occupancy in October-December 2020 quarter, as regional movies such as Master, Uppena, Roberrt, Pogaru saw strong box office performance. However, recent restrictions and increased fear of enclosed spaces might keep the moviegoers away for a while.

PVR had undertaken steps to reduce cost and augment liquidity over the past one year. It has negotiated with majority of mall developers for waiving off rentals for the entire period of closure of operations with revenue sharing arrangements from resumption of operations until March 31, 2021. In fact, rentals for the nine months ended fiscal 2021 was lowered by ~89% as compared to the corresponding period of the previous fiscal. Besides, the company has also conserved cash by reducing its workforce and deferring maintenance outlay and capital expenditure (capex).

In August 2020 and February 2021, the company raised Rs 300 crore (rights issue) and Rs 800 crore (qualified institutional placement [QIP]), respectively, which augmented liquidity. Cash and bank balance, undrawn committed bank lines and other liquid investments stood at above Rs 790 crore as on March 31, 2021, which should be adequate to cover operating costs and debt obligation for the next few months.

CRISIL Ratings believes the credit profile of multiplex operators, including PVR, may further weaken if the Covid-19 pandemic worsens. Moreover, multiplex operators will have to initiate fresh negotiations with mall owners, given new restrictions to contain the pandemic. Improvement in the current situation, leading to return of content and ramp-up in occupancies, while operators continue to contain operating costs and maintain liquidity, will remain a key monitorable.

The ratings continue to reflect the company's strong market position and established brand, healthy operating efficiency prior to the pandemic, strong financial risk profile and ample liquidity. These strengths are partially offset by exposure to risks inherent in the film exhibition business.

The ratings also factor in the moratorium availed by the company on its bank facilities in accordance with the relief measures provided by the Reserve Bank of India under the Covid-19 Regulatory Package as on March 27, 2020.

Shares of PVR LTD. was last trading in BSE at Rs.1051.7 as compared to the previous close of Rs. 1062.9. The total number of shares traded during the day was 196020 in over 8970 trades.

The stock hit an intraday high of Rs. 1068.15 and intraday low of 1030.15. The net turnover during the day was Rs. 204579751.

Source : Equity Bulls

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