CRISIL reaffirms rating of PVR Ltd

CRISIL has reaffirmed its rating on the long-term bank facilities and debt programmes of PVR Limited (PVR) at 'CRISIL AA/Negative'. CRISIL has also reaffirmed its 'CRISIL PP-MLD AAr/Negative' rating on the Rs 50 crore long-term principal-protected market-linked debentures. The short term rating has been assigned at 'CRISIL A1+'. Furthermore, CRISIL has withdrawn its rating on Rs 40 crore NCDs as the instruments have been fully repaid. CRISIL has received confirmation of no dues against these NCDs from the debenture trustee. The withdrawal is in line with CRISIL's policy on withdrawal of NCDs.

The rating on the debt instruments continues to factor in strong liquidity supported by the rights issue and also the ability to curtail operating costs while operations were shut.

The negative outlook reflects CRISIL's expectation of the potential weakening of the credit profile over the next 2-3 months if occupancy remain muted despite resumption of operations. Lower-than-expected ramp-up in occupancy, resulting in continued high cash losses, would remain a key rating sensitivity factor.

On March 23, 2020, CRISIL had placed its 'CRISIL AA' rating on the bank facilities and other debt instruments 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 the Covid-19 pandemic.

Later, on October 6, 2020, CRISIL had removed the ratings from watch and assigned a negative outlook on the long-term rating following the issuance of guidelines by the Ministry of Home Affairs on September 30, 2020, for Unlock 5.0, wherein cinemas were allowed to resume operations from October 15, 2020, with a cap of 50% occupancy outside containment zones.

The company had undertaken steps to reduce cost and augment liquidity since the operations were shut in March 2020. Lease is a major fixed cost, 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. The company is also looking to conserve cash by reducing workforce, and deferring maintenance outlay and capital expenditure (capex).

Furthermore, in August 2020, the company raised Rs 300 crore through a rights issue, which augmented liquidity. Liquidity (cash and bank balance, undrawn committed bank lines, and other liquid investments) was over Rs 500 crore as on November 20, 2020, which should remain adequate to meet operating costs and debt servicing for the next few months.

The ratings continue to reflect a strong market position and well-established brand, healthy operating efficiency before the lockdown, and a strong financial risk profile with 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.1386.95 as compared to the previous close of Rs. 1345.25. The total number of shares traded during the day was 141116 in over 5037 trades.

The stock hit an intraday high of Rs. 1402.95 and intraday low of 1335. The net turnover during the day was Rs. 194472409.

Source : Equity Bulls

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