CRISIL updates on ratings of PVR Ltd

CRISIL Ratings has removed its ratings on the bank facilities of PVR Ltd (PVR) from 'Rating Watch with Positive Implications' and has reaffirmed the rating at 'CRISIL AA-/CRISIL PPMLD AA-/CRISIL A1+' while assigning a 'Positive' outlook on the long term ratings and debt instruments and assigned its 'CRISIL A1+' rating to the short term rating transferred from the erstwhile INOX Leisure Ltd (INOX) to PVR Ltd.

The removal of ratings from 'Watch with Positive Implications' follows the consummation of the merger of INOX with PVR, pursuant to which, INOX has ceased to exist.

The 'Positive' outlook indicates the credit risk profile of PVR may benefit from increased scale of operations once more contemporary content is released on multiplexes leading to stability in occupancy levels.

PVR, post the merger of INOX, is the largest multiplex chain in India with presence in 115 cities across the country and a collective screen-count of 1,680. PVR will have market share of 18%, based on number of screens (43% share in multiplexes), and will account for around 30% of total box office collections.

Fiscal 2023 saw a significant variability in the operating performance of multiplex operators due to polarization of some of the Bollywood content as well as fewer Hollywood releases. Moreover, majority of the content released over the past 12 months was conceptualized before or during the pandemic and needed a refresh to meet changing viewer preferences. However, a fresh content pipeline slated for release during fiscal 2024 and increased Hollywood content should help address the variability in occupancy, though it will remain a key monitorable.

The merged entity has a healthy balance sheet with proforma adjusted tangible networth of Rs 2,089 crore as on September 30, 2022. The management has indicated addition of 180-200 screens every year which will entail capital expenditure (capex) of Rs 750-850 crore annually (including maintenance capex). Given the large scale of operations, the capex will likely be funded through internal accrual and debt such that overall debt does not increase materially from that at March 2023.

The merger also enables synergies on revenue through synchronization of ticket and food menu as INOX had lower food and ticket prices compared with PVR and bridging ad revenues per screen as INOX had lower ad revenue per screen compared with PVR.

Liquidity remains healthy backed by cash and bank balance and other liquid investments of around Rs 400 crore (including unutilized OD lines) as on March 31, 2023. Sustained increase in revenue and operating margin, along with maintenance of healthy liquidity, will remain monitorable.

The ratings continue to reflect the strong market position and established brand value of PVR-INOX, improving operating efficiency, and healthy financial risk profile and liquidity. These strengths are partially offset by exposure to risks inherent in the film exhibition business.

Shares of PVR Limited was last trading in BSE at Rs. 1527.80 as compared to the previous close of Rs. 1538.70. The total number of shares traded during the day was 10795 in over 1152 trades.

The stock hit an intraday high of Rs. 1548.00 and intraday low of 1519.65. The net turnover during the day was Rs. 16545701.00.

Source : Equity Bulls

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PVR INE191H01014 Multiplex RatingUpdate