Why was the stock of PVR down on Friday 24 September? Will the opening up of multiplexes in Maharashtra help the stock?
Answer
Answer
There were two opposing sets of news flows on the stock of PVR. On Friday, the stock of PVR was down by 4% in the midst of a bullish market after rating agency CRISIL downgraded the ratings on PVR’s bank facilities and debt.
CRISIL has raised some serious concerns over cash flows and the ability of the company to service debt in the midst of this prolonged segment. According to CRISIL, prolonged restrictions on operations led to huge losses casting serious doubts over its debt servicing capability and its ability to recoup losses.
This had also slowed down the pace of movie releases. Ironically, a day after the CRISIL downgrade, Maharashtra state government announced that multiplexes could open with adequate controls on safety and social distancing protocols. That is at least a start point towards getting back to normalcy.
The Maharashtra region including Mumbai, accounts for nearly 35% of the total revenues for the multiplex segment and continued flow of revenue from this state is the key to profitability for these multiplex stocks.