| PVR Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has reaffirmed its rating on the long-term bank facilities and debt programmes of PVR Limited (PVR) at 'CRISIL AA/Negative'. CRISIL has also reaffirmed its 'CRISIL PP-MLD AAr/Negative' rating on the Rs 50 crore long-term principal-protected market-linked debentures. The short term rating has been assigned at 'CRISIL A1+'. Furthermore, CRISIL has withdrawn its rating on Rs 40 crore NCDs as the instruments have been fully repaid. CRISIL has received confirmation of no dues against these NCDs from the debenture trustee. The withdrawal is in line with CRISIL's policy on withdrawal of NCDs. |
| Analytical Approach |
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CRISIL 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. That's because all these entities, collectively referred to herein as PVR, are in the same business and have common promoters. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Strong market position and well-established brand PVR is the largest multiplex operator in India, with a strong brand equity. It had 835 screens with operations in 175 locations across 71 cities as on November 30, 2020, and has about 30% more screens than the second largest player. Addition of screens from SPI Cinemas Pvt Ltd (SPI) led to significant improvement in the market position in south India and has helped diversify content, as cinema from the region contributes over 40% to the overall box office collections. Any capex plan to add screens have been put on hold temporarily. Addition of new screens is expected to remain muted for some time and would depend upon the ramp-up in occupancy over the next 2-3 months. * Healthy operating efficiency before the lockdown Presence in prime locations in major cities helps command a higher average ticket price than peers. Moreover, contribution from the high-margin food and beverages segment and advertisement revenue (together comprising around 40% of the total income) remains high. The operating margin remained healthy at 17.6% in fiscal 2020 as compared with 19.0% and 17.2% in fiscals 2019 and 2018, respectively. That's despite the shutdown of operations in the latter half of March 2020 in-line with the orders of the government. Besides box-office collections, revenue contribution from other segments continued to be healthy. For instance, spend per head improved to Rs 99 in fiscal 2020 (Rs 91 in fiscal 2019; Rs 89 in fiscal 2018). Similarly, advertisement revenue increased to Rs 376 crore in fiscal 2020 (Rs 353 crore; Rs 297 crore). While operating performance would be impacted in fiscal 2021, the ability to sustain growth in occupancy leading to a healthy margin will remain critical. * Strong financial risk profile The financial risk profile has benefitted from strong operating efficiency and significantly enhanced scale of operations. Moreover, with the qualified institutional placement of Rs 500 crore in October 2019, debt protection metrics improved significantly. The gearing improved to 0.77 time and the net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio to 1.60 times as on March 31, 2020, from 1.29 times and 2.10 times, respectively, a year earlier. Despite the impact of the pandemic in fiscal 2021, the gearing should remain below 1 time due to the rights issue. However, if occupancy continues to be sub-optimal for a prolonged period, there could be an impact on the debt profile, with decline in cash accrual weakening the financial risk profile. Any sustained impact on operations and, subsequently, the financial risk profile will remain a key monitorable. Weakness: * Exposure to risks inherent in the film exhibition business Fluctuations in profitability, inherent in the film exhibition business, will continue to affect operations, though the impact should be cushioned marginally by the large scale and diversification of revenue sources. Multiplex players, given their high fixed costs, should remain dependent on occupancy, which is driven by the success of films (PVR's occupancy was 34.9% in fiscal 2020 as compared with 36.2% in fiscal 2019). Other forms of entertainment and new content distribution platforms, including over-the-top, will continue to expose the company to challenges of sustaining profitability and growth. |
| Liquidity Strong |
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Liquidity was more than Rs 500 crore as on November 20, 2020, including cash and bank balance, undrawn committed bank lines, and other liquid investments. Therefore, liquidity should be sufficient to manage total cash outflow, including fixed costs and debt servicing obligation over the rest of fiscal 2021. Turnaround in operations along with the ability to curtail operating costs while maintaining healthy liquidity over the near term will remain a key monitorable. |
| Outlook: Negative |
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CRISIL believes there could be weakening of the company's credit profile over the next 2-3 months if occupancy remains muted despite resumption of operations. |
| Rating Sensitivity factors |
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Upward factors * Significant reduction in debt and improvement in cash accrual, restricting the net debt to EBITDA ratio to below 1 time * Improvement in the EBITDA margin (ex-Ind AS-116 adjustment) to more than 25% Downward factors * Lower-than-expected ramp-up in occupancy after resumption of operations over the next 2-3 months, resulting in higher cash losses than expected * Weakening of the capital structure, with the net debt to EBITDA ratio sustaining at above 2 times |
| About the Company |
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PVR was established in 1995 as a 60:40 joint venture (JV) between Priya Exhibitors Pvt Ltd and Village Roadshow Ltd (VRL), a world leader in the multiplex business. In the same year, PVR took a single-screen cinema hall, Anupam, in Saket (Delhi) on lease and converted it into a four-screen multiplex. The cinema hall started operations in 1997 as PVR Anupam and was the first multi-screen cineplex in India. As part of its global business strategy, VRL exited the JV in 2002. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels. |
| Annexure - Details of Instrument(s) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| * Not yet issued ** Outstanding as of Nov'20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Rating Withdrawn | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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