| PVR Limited | ||||||||||||
| Rating continues on 'Watch Positive’; 'CRISIL A1+' assigned to Commercial Paper; Rated amount enhanced for Bank Debt | ||||||||||||
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| 1 crore = 10 million | ||||||||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned ‘CRISIL A1+’ ratings to the commercial paper programme of the PVR Limited (PVR). The ratings on the long-term bank facilities and debt instruments continues to be on ‘Rating Watch with Positive Implications’.
The rating continues to reflect visibility of healthy operating performance in 2HFY23 (after a temporary blip seen over past 2 months because of weaker content and social media protests around some content). Strong content pipeline and festive season should support the healthy operating performance. This along with screen additions and sustained higher average ticket prices (ATP), spend per head (SPH) on food & beverages and recovery in advertising income should aid in revenue and operating profits surpassing pre-pandemic levels for the company during fiscal 2023. As a result, financial risk profile too is expected to see continued improvement, aided by strong cash accruals and maintenance of healthy liquidity.
The watch continuation factors in pending approvals for proposed merger of PVR and INOX Leisure Ltd. CRISIL Ratings believes that amalgamation of these entities would help the merged entity to lead the multiplex sector with a significant scale and market share. Moreover, expected revenue and cost synergies post-merger should benefit operating efficiencies in both operational as well as capital expenditure. As a result, the business as well as financial risk profiles of the merged entity is expected to improve significantly. CRISIL Ratings will continue to closely monitor the said transaction and will remove the ratings from watch and take a final rating action once the transaction is concluded.
The company’s liquidity benefitted significantly from the various equity raises undertaken over the past two years. Cash and bank balance and other liquid investments stood at above Rs 570 crore as on August 31, 2022. Healthy cash accruals along with strong liquidity position should sufficiently cover debt obligation and capital expenditure (capex) in fiscal 2023. Sustained improvement in revenue and operating margin, along with maintenance of healthy liquidity, will continue to be monitored.
The ratings continue to consider strong market position and established brand of PVR, 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. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of PVR; its subsidiaries, PVR Pictures Ltd, PVR Lanka Ltd, Zea Maize Pvt Ltd and the joint venture (JV), Vkaao Entertainment Pvt Ltd. The entities, collectively referred to herein as PVR, are in the same business and have common promoters.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths:
Moreover, key operating parameters such as ATP and spends per head SPH on food & beverages stood higher at Rs 250 and Rs 134 respectively, during the first quarter of fiscal 2023 as compared to Rs 204 and Rs 99 respectively, in fiscal 2020. Although the operating profits may be constrained during the second quarter of this fiscal due to weak content performance, however it is expected to be better than pre-pandemic levels for fiscal 2023 given the upcoming festive season, strong content pipeline and increase in overall operating screen portfolio. Sustenance of healthy operating performance during the rest of the year will remain a key monitorable.
Moreover, post-merger, expected synergies should also benefit operating efficiency of the merged entity.
Moreover, company has a strong ability to raise funds from capital markets as was exhibited through Rs 1,100 crore of equity raised during fiscal 2021 and 2022 when the operations were impacted by the pandemic.
Weakness:
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Liquidity: Strong Liquidity was more than Rs 570 crore as on June 30, 2022. Company also had Rs 150 crore of bank limits unutilized at June 2022. Moreover, cash accruals are expected to remain healthy at over Rs 550 crore for fiscal 2023. This should remain sufficient to service debt repayment obligation of Rs 385 crore during the balance part of the fiscal. Capex plans, estimated at Rs 400-450 crore for fiscal 2023 should be prudently funded through a mix of debt and internal accruals. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company PVR was established in 1995 as a 60:40 JV between Priya Exhibitors Pvt Ltd and Village Roadshow Ltd (VRL), a world leader in the multiplex business. In 1995, PVR took a single-screen cinema hall, Anupam, in Saket, Delhi, on lease and converted it into a four-screen multiplex. The hall started operations in 1997 as PVR Anupam and was the first multiscreen cineplex in India. As part of its global business strategy, VRL exited the JV in 2002.
In November 2012, PVR acquired Cinemax, strengthening its presence in west India. Cinemax operated in 39 locations with 138 screens. This acquisition made PVR the largest multiplex operator in India. In May 2016, it completed the acquisition of DT Cinemas' 32 screens (29 operational and three upcoming) for a consideration of Rs 433 crore. In January 2017, Warburg Pincus Llc acquired a 14% stake in the company, with 9% from its current shareholders (Multiples Private Equity Fund I Ltd) and 5% from the promoters. Thereafter, in August 2018, PVR acquired SPI Cinemas, which further added 76 screens to the company’s portfolio.
Net profit was Rs 53 crore on operating revenue of Rs 981 crore for the three months ended June 30, 2022, as compared to net loss of Rs 220 crore on operating revenue of Rs 59 crore in the corresponding period of the previous fiscal. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
*Not yet issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 06-Oct-2022 in line with the lender-wise facility details as on 06-Oct-2022 received from the rated entity.
Criteria Details
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