Theatres and movie halls across India have been closed since April this year.
Following the development, shares of Inox Leisure soared 17.83 per cent to hit a high of Rs 412.20 on BSE. PVR climbed 10 per cent to hit a high of Rs 1,662.20.
Analysts noted that except a few states, including Maharashtra and Kerala, many others have already permitted resumption of operations in cinema halls from July 30.
Post Maharashtra, it is expected that other states would lift capacity restrictions in the absence of a third wave of Covid-19. Maharashtra, based on industry estimates, contributes 25-30 per cent of multiplex revenues in a normal year.
Nirmal Bang Institutional Equities said the Indian film exhibition sector is on the road to a strong recovery.
“Hindi film producers are ready to release fresh big budget content. They were reluctant to release them when screens opened up in November 2020 after the first wave. Hindi content in a typical year delivers 60-70 per cent of multiplex revenues. Disney in early September 2021 announced that all new movie releases in 2021 — no commitments beyond 2021– would go to the theatres first and then to other distribution platforms after a window of 30-45 days or more. This should assuage concerns around OTT eating into the theatrical business,” Nirmal Bang said.
That said, the brokerage has lowered its estimates for FY22, as opening up of theatres has been delayed from its earlier expectations, leading to likely weaker-than-expected December quarter.
“The target price for PVR has been raised from Rs 1,561 to Rs 1,934 and now has a 12-month upside of 28 per cent. Inox Leisure’s target price has been raised from Rs 381 to Rs 492 and now has 12-month upside of 41 per cent. If the second half 3QFY22 sees solid recovery, we expect cash bleed of both the companies to come to a halt,” Nirmal bang said.
Sharekhan expects a sharp increase in movie releases by large movie studios. “Given the huge content line-up, we believe PVR is well-placed to capitalise on the strong pent-up demand and is expected to report strong revenue growth for FY2023E,” it said.
The decision to allow reopening of the movie halls comes nearly two weeks after the Multiplex Association of India (MAI), along with leading cinema chains, PVR and INOX, urged the Maharashtra government to reopen theatres in the state on a “urgent basis”, claiming that the exhibition industry has suffered losses to the tune of Rs 4,800 crore.
Nirmal Bang said Inox, despite some cash losses in the September quarter and part of December quarter should still be net cash positive. It sees the net debt levels of PVR rising from Rs 750 crore as on July 31, but “this should stabilise towards the end of December.”
