CRISIL removes rating watch for long-term facilities of PVR Ltd

CRISIL has removed its rating on the long-term bank facilities and non-convertible debentures of PVR Limited (PVR) from 'Rating Watch with Negative Implications' while reaffirming the rating at 'CRISIL AA' and assigning a 'Negative' outlook. CRISIL has also assigned its 'CRISIL PP-MLD AAr/Negative' rating to Rs.50 crore long-term principal protected market linked debentures (MLDs) of PVR.

The rating action follows the issuance of guidelines by the Ministry of Home Affairs on September 30, 2020 for Unlock 5.0 wherein cinemas are allowed to resume operations from October 15, 2020 with a cap of 50% occupancy outside containment zones. However, multiplex operators would need permission from State/ Union Territory governments to open cinemas in their respective regions, which would continue to be a monitorable.

On March 23, 2020, CRISIL had placed its 'CRISIL AA' ratings on the bank facilities and other debt instruments of PVR on watch with negative implications following the closure of cinemas across the country by the orders of the state government to contain the spread of Covid-19.

The reaffirmation of the rating on the debt instrument factors in strong liquidity profile maintained by the company supported by the rights issue and also the company's ability to curtail operating costs while its operations were shut.

At the same time, the negative outlook reflects CRISIL's expectation of the potential weakening of the company's credit profile over the next 3-4 months if local restrictions at various states hinder opening of operations on a pan-India basis or occupancies remain muted despite resumption of operations. Lower-than-expected ramp-up in occupancies, resulting in continued higher cash losses, would remain a key rating sensitivity factor.

PVR had undertaken steps to reduce its cost and augment liquidity since the operations were shut in March 2020. Lease is a major fixed cost for PVR, and it had invoked the force majeure clause for lease agreements with mall developers. It has not paid leases since the closure and is in discussions with mall developers for waiving off rentals for the entire period of closure of operations. PVR is also looking to conserve cash by reducing workforce, deferring maintenance, and capital expenditure (capex) outlay. The company's ability to contain operating costs even after resumption of operations will remain a key monitorable.

Furthermore, in August 2020, PVR raised Rs 300 crore through rights issue, which augmented liquidity. Consequently, net debt improved to about Rs 850 crore as of August 2020 from around Rs 977 crore as of March 2020. Company had liquidity (cash and bank balance, undrawn committed bank lines, and other liquid investments) of over Rs 450 crore as on September 30, 2020, which should remain adequate to meet operating costs and debt servicing for the next few months.

The ratings continue to reflect PVR's strong market position and well-established brand, healthy operating efficiency, and a significantly improved financial risk profile. These strengths are partially offset by exposure to risks inherent in the film exhibition business. The ratings also factor in the moratorium availed by PVR 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.1262.5 as compared to the previous close of Rs. 1275.1. The total number of shares traded during the day was 93328 in over 7499 trades.

The stock hit an intraday high of Rs. 1280 and intraday low of 1248.2. The net turnover during the day was Rs. 117448972.

Source : Equity Bulls

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