Shares of multiplexing firms PVR Ltd and Inox Leisure Ltd were down about 6% each on Monday on the NSE. It is true that the wider markets were also weak, with the Nifty 50 index falling by 2%. Obviously, the increase in covid-19 cases represents a significant risk to multiplexes, posing a direct threat to occupations. This is the final factor weighing on feelings about these actions, even as most states in India now allow 100% occupation of theaters.
“More cases of covid would mean that normality would be delayed. Investors are also starting to worry about the effect of OTT (over-the-top or streaming) platforms and delays in film releases, ”one analyst said, requesting anonymity.
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“After a steady reduction in new cases of covid-19 in recent months, states such as Maharashtra, Punjab, Kerala, Chhattisgarh and Madhya Pradesh have started to see a resurgence of new cases every day,” said said analysts at Emkay Global Financial Services Ltd. Maharashtra is the number one market for multiplexes.
“We believe that there are still two major risks: 1) the resurgence of Covid-19 cases and 2) consumer behavior towards out-of-home content consumption,” Emkay analysts said in a report. February 21 report.
Releasing films on OTT platforms remains a high risk. Last year, when theaters were closed due to pandemic restrictions, a fair number of films were shown on these platforms.
The latest to join this movement is southern superstar Mohanlal’s film, Drishyam 2: The Resumption, which released on Amazon Prime Video last week.
Analysts from Motilal Oswal Financial Services Ltd said in a February 18 report: “Occupancy rates may decline over time due to certain unavoidable factors.
One factor, according to the brokerage firm, is that “the contribution of theaters to the movie revenue pie has fallen to 75% in India and to around 40% globally. Over time, this could decrease the bargaining power of cinemas in India for exclusive screening windows – this trend is already being seen around the world. “
To be sure, the streaming trend hasn’t picked up any momentum, when it comes to big banner releases. “Many movie releases direct to OTT over the past 6-8 months have not been approved by audiences. Thus, the quality of the content and the public reviews will be in the foreground, because in the past mediocre content has not received eyeballs, despite a top star cast, ”added Emkay analysts.
Regardless, as it stands, investors in multiplex companies PVR and Inox are on shaky ground and largely depend on how covid-19 cases evolve in the coming months. Separately, big-star and big-budget movie releases will help draw audiences to theaters and that remains controllable.
As such, after a near wash in 2020-2021, all eyes are now on FY22 for the recovery, but even that remains uncertain for now.
Unsurprisingly, these concerns have meant that Inox and PVR shares are languishing well below their pre-covid highs seen in early 2020. PVR and Inox shares have been down 35-38% since then. .