INOX Leisure Limited Ratings downgraded to 'CRISIL A+/Negative/CRISIL A1'

CRISIL Ratings has downgraded its ratings on the bank facilities of INOX Leisure Limited (ILL) to 'CRISIL A+/Negative/CRISIL A1' from 'CRISIL AA-/Negative/CRISIL A1+'.

Total Bank Loan Facilities Rated - Rs.319.68 Crore

Long Term Rating - CRISIL A+/Negative (Downgraded from 'CRISIL AA-/Negative')

Short Term Rating - CRISIL A1 (Downgraded from 'CRISIL A1+')

The rating action reflects CRISIL Ratings' expectation of weakening of 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. 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. 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.

ILL 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. The company has also conserved cash by reducing its workforce and deferring maintenance outlay and capital expenditure (capex).

On August 11, 2020, ILL sold treasury shares for Rs 101.36 crore, which has augmented liquidity. Furthermore, ILL also raised Rs 250 crore equity in November 2020, as a result of which its net debt improved to around Rs 33 crore as of March 31, 2021, from around Rs 112 crore as of March 31, 2020.

ILL had liquidity (cash and bank balance, undrawn committed bank lines and other liquid investments) of around Rs 160 crore as on March 31, 2021, which should sufficiently cover its curtailed operating cost and debt obligation for the next 3-4 months. Furthermore, on April 6, 2021, ILL's board approved raising additional funds of up to Rs 300 crore through issue of securities, which could further augment liquidity.

CRISIL Ratings believes the credit profile of multiplex operators, including ILL, 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 also reflect the company's established market position in the film exhibition business, healthy operating efficiency, strong financial risk profile (before the pandemic) and high financial flexibility, being part of the INOX group. These strengths are partially offset by exposure to risks inherent in the film exhibition business.

Shares of INOX LEISURE LTD. was last trading in BSE at Rs.260.9 as compared to the previous close of Rs. 254.75. The total number of shares traded during the day was 82454 in over 3076 trades.

The stock hit an intraday high of Rs. 269.45 and intraday low of 248.25. The net turnover during the day was Rs. 20979794.

Source : Equity Bulls

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