Rating Rationale
December 26, 2017 | Mumbai
PVR Limited
'CRISIL AA-/Stable' assigned to NCD Programme
Rating Action
Total Bank Loan Facilities Rated Rs.348.33 Crore
Long Term Rating CRISIL AA-/Stable (Reaffirmed)
Rs.100 Crore Non Convertible Debentures Programme CRISIL AA-/Stable (Assigned)
Non-Convertible Debentures Aggregating Rs 585 Crore  CRISIL AA-/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL AA-/Stable' rating to the Rs 100 crore non-convertible debenture programme of PVR Ltd (PVR). The rating on the other debt instruments and bank facility has been reaffirmed at 'CRISIL AA-/Stable'.
The rating continues to reflect a strong market position and established brand, healthy operating efficiency, and a comfortable financial risk profile. These strengths are partially offset by exposure to risks inherent in the film exhibition business.

Analytical Approach

For arriving at the rating, CRISIL has combined the business and financial risk profiles of PVR and its subsidiaries. That is because these entities, collectively referred to as PVRL, are in related lines of business and have common promoters.

Key Rating Drivers & Detailed Description
* Strong market position and established brand: PVR is the largest multiplex operator in India, with a strong brand equity. It has 600 screens, and a presence in 131 locations and 51 cities across India, accounting for 24-25% and 38-40%, respectively, of the box office collections of Hindi and English films. Proposed addition of 50-60 screens per annum over the medium term should help maintain market leadership, and a healthy business risk profile.
* Healthy operating efficiency: Presence in prime locations in major Indian cities helps command a higher average ticket price than peers, and supports high-margin food and beverages, and advertisement revenue, which accounts for 35-37% of the total revenue. Operating efficiency is also supported by increasing scale of operations, which enables high bargaining power with advertisers and suppliers.
* Comfortable financial risk profile: PVRL has followed a prudent funding strategy for both organic and inorganic expansions. Hence, the gearing remains low and the debt protection metrics healthy, despite significant expansion in scale in recent years. Gearing was 0.97 time as on March 31, 2017, interest coverage and net cash accrual to total debt ratios were 4.6 times and 0.27 time, respectively, in fiscal 2017.
* Exposure to risks inherent in the film exhibition business: Volatility in profitability, inherent in the film exhibition business, will continue to impact PVRL, though this will be cushioned marginally by the large scale of operations. Multiplex players, given their high fixed costs, will remain dependent on occupancy, which is driven by success of films (occupancy was 32% and 34% in the half year ended September 30, 2017, and September 30, 2016, respectively). The availability of other forms of entertainment and new properties expose the company to challenges of sustaining profitability and growth.
Outlook: Stable

CRISIL believes PVRL will continue to benefit over the medium term from its dominant market position and strong brand equity. The outlook may be revised to 'Positive' if there is sustained improvement in operating profitability and scale of operations, while the financial risk profile remains strong. The outlook may be revised to 'Negative' if sizeable, debt-funded capital expenditure or acquisitions, or a weaker-than-expected operating performance impacts the financial risk profile.

About the Company

PVR was set up 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, at Saket in Delhi, on lease, and converted it into a four-screen multiplex. It 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.
PVRL has formed a 51:49 JV with Major Cineplex Group Public Co Ltd, one of the largest entertainment groups of Thailand. As part of the JV, PVRL launched one of India's largest bowling centres, with 24 lanes, in March 2009 in Gurgaon, Haryana, under the bluO brand. On August 8, 2017 PVRL announced that it has entered into definitive agreements with Smaash Entertainment Pvt Ltd for sale of 100% stake in bluO entertainment.
In November 2012, PVRL acquired Cinemax, strengthening its presence in western India. Cinemax operated in 39 locations with 138 screens. This acquisition made PVRL the largest multiplex operator in India. In May 2016, it completed the acquisition of DT Cinemas' 32 screens (29 operational and 3 upcoming) for a consideration of Rs 433 crore. PVRL had raised equity of Rs 350 crore in fiscal 2016 to part fund the acquisition. The balance was to be funded through debt and internal cash accrual. During January 2017, Warburg Pincus Llc acquired 14% stake in the company, 9% from its existing shareholders (Multiples Private Equity Fund I Ltd), and 5% from the promoters.

For the half year ended September 30, 2017, operating income was Rs 1192 crore and profit after tax (PAT) Rs 70 crore, against Rs 1106 crore and Rs 72 crore, respectively, for the corresponding period of the previous fiscal.

Key Financial Indicators
As on / for the period ended March 31   2017 2016
Revenue Rs crore 2,147 1,869
Profit after tax Rs crore 51 119
PAT margin % 2.4 6.4
Adjusted debt/adjusted networth Times 0.97 0.76
Interest coverage Times 4.61 4.28
These are CRISIL adjusted numbers and do not match directly with the numbers reported by the company

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size
(Rs. Cr)
Rating Assigned
with Outlook
INE191H07011 Debentures* 01-Jan-10 11.40% 01-Jan-17 2 CRISIL AA-/Stable
INE191H07029 Debentures 01-Jan-10 11.40% 01-Jan-18 2 CRISIL AA-/Stable
INE191H07037 Debentures 01-Jan-10 11.40% 01-Jan-19 3 CRISIL AA-/Stable
INE191H07045 Debentures 01-Jan-10 11.40% 01-Jan-20 3 CRISIL AA-/Stable
INE191H07060 Debentures 25-Feb-14 10.95% 25-Feb-19 50 CRISIL AA-/Stable
INE191H07078 Debentures 10-Jun-14 10.75% 10-Jun-19 50 CRISIL AA-/Stable
INE191H07128 Debentures 16-Oct-14 11.00% 16-Oct-18 25 CRISIL AA-/Stable
INE191H07136 Debentures 16-Oct-14 11.00% 16-Oct-19 25 CRISIL AA-/Stable
INE191H07144 Debentures 16-Oct-14 11.00% 16-Oct-20 25 CRISIL AA-/Stable
INE191H07151 Debentures 16-Oct-14 11.00% 16-Oct-21 25 CRISIL AA-/Stable
INE191H07169 Debentures 24-Nov-14 11.00% 24-Nov-19 15 CRISIL AA-/Stable
INE191H07177 Debentures 24-Nov-14 11.00% 24-Nov-20 15 CRISIL AA-/Stable
INE191H07185 Debentures 24-Nov-14 11.00% 24-Nov-21 20 CRISIL AA-/Stable
INE191H07193 Debentures 09-Jan-15 10.75% 08-Jan-21 50 CRISIL AA-/Stable
INE191H07201 Debentures 09-Jan-15 10.75% 07-Jan-22 50 CRISIL AA-/Stable
INE191H07219 Debentures* 29-Jul-16 8.90% 31-Jul-17 16.5 CRISIL AA-/Stable
INE191H07227 Debentures 29-Jul-16 8.90% 31-Jul-18 16.5 CRISIL AA-/Stable
INE191H07235 Debentures 29-Jul-16 8.90% 31-Jul-19 17 CRISIL AA-/Stable
INE191H07243 Debentures 12-Jan-17 7.84% 10-Jul-20 50 CRISIL AA-/Stable
INE191H07250 Debentures 03-Apr-17 8.05% 02-Apr-21 25 CRISIL AA-/Stable
INE191H07268 Debentures 03-Apr-17 8.15% 02-Apr-22 50 CRISIL AA-/Stable
INE191H07276 Debentures 18-Aug-17 7.85% 18-Aug-22 50 CRISIL AA-/Stable
NA Debentures** NA NA NA 100 CRISIL AA-/Stable
NA Long-term loan NA NA 31-May-23 100 CRISIL AA-/Stable
NA Long-term loan NA NA 30-Oct-18 76.32 CRISIL AA-/Stable
NA Long-term loan NA NA 30-Nov-19 99.63 CRISIL AA-/Stable
NA Long-term loan NA NA 30-Sep-19 72.38 CRISIL AA-/Stable
*Awaiting independent confirmation of redemption before withdrawing ratings on these instruments
** Yet not issued
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Non Convertible Debentures  LT  685  CRISIL AA-/Stable    No Rating Change  21-06-16  CRISIL AA-/Stable  22-07-15  CRISIL A+/Stable  14-02-14  CRISIL A+/Positive  CRISIL A+/Stable 
            22-01-16  CRISIL A+/Positive  11-06-15  CRISIL A+/Watch Developing       
                07-01-15  CRISIL A+/Stable       
Fund-based Bank Facilities  LT/ST  348.33  CRISIL AA-/Stable    No Rating Change  21-06-16  CRISIL AA-/Stable  22-07-15  CRISIL A+/Stable  14-02-14  CRISIL A+/Positive  CRISIL A+/Stable 
            22-01-16  CRISIL A+/Positive  11-06-15  CRISIL A+/Watch Developing       
                07-01-15  CRISIL A+/Stable       
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Long Term Loan 348.33 CRISIL AA-/Stable Long Term Loan 348.33 CRISIL AA-/Stable
Total 348.33 -- Total 348.33 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation

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