Rating Rationale
January 08, 2019 | Mumbai
PVR Limited
Rated amount enhanced
Rating Action
Total Bank Loan Facilities Rated Rs.648.33 Crore (Enhanced from Rs.448.33 Crore)
Long Term Rating CRISIL AA-/Stable (Reaffirmed)
Non-Convertible Debentures Aggregating Rs.685 Crore CRISIL AA-/Stable (Reaffirmed) 
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AA-/Stable' rating on the non-convertible debentures and long-term bank facilities of PVR Ltd (PVR).

The rating continues to reflect PVR's 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 ratings, CRISIL has combined the business and financial risk profiles of PVR, its subsidiaries, PVR Pictures Ltd, SPI Cinemas Pvt Ltd (SPI), P V R Lanka Ltd, Zea Maize Pvt Ltd, and its joint ventures, Vkaao Entertainment Pvt Ltd and PVT Pictures International Pte Ltd. This is because all these entities, collectively referred to as PVR group, are in the same business and have common promoters.

Please refer Annexure - Details of consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

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 748 screens and presence in over 161 locations and 64 cities as on December 31, 2018 Addition of SPI screens has led to significant improvement in market position in South India and help diversify content as Tamil, Telugu, and Kannada languages account for 37% of total box office collection in India. With plans to add 80-90 screens annually, PVR should be able to maintain a healthy market position.

* Healthy operating efficiency: Presence in prime locations in major cities helps command a higher average ticket price than peers. Moreover, high-margin food and beverages revenue and advertisement revenue (together contribute 37-39% of the total income) remain high. Operating efficiency should improve, too, as SPI had a high occupancy of 58% in fiscal 2018. Increasing scale of operations should result in higher bargaining power with advertisers and suppliers, which will further support operating efficiencies.

* Comfortable financial risk profile: PVR has followed a prudent funding strategy for both organic and inorganic expansions. Hence, gearing remains healthy and debt protection metrics comfortable, despite significant expansion in scale in the recent years. While debt has increased to Rs 1,336 crore at November 2018, cash accrual should remain healthy thereby supporting the financial risk profile. Gearing is expected to remain around 1 time, while interest coverage and net cash accrual to total debt ratios are estimated to remain above 5 times and 0.3 time, respectively, over medium term. Debt to earnings before interest tax and depreciation and amortisation (EBITDA) ratio is expected to remain below 2 times over medium term after one-time peaking at 2.5 times, expected for March 2019. Furthermore, expansion plans, their funding, and consequent impact on debt and financial risk profiles need to be closely monitored.

* Exposure to risks inherent in the film exhibition business: Volatility in profitability, inherent in the film exhibition business, will continue to impact PVR, though will be cushioned marginally by 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 33% and 30% in the quarter ended September 30, 2018, and September 30, 2017, respectively). Other forms of entertainment and new properties expose the company to challenges of sustaining profitability and growth.
Outlook: Stable

CRISIL believes PVR will continue to benefit from its dominant market position and strong brand equity.

Upside scenario
* Sustained improvement in operating profitability and scale of operations
* Significant reduction in debt, leading to steadily stronger financial risk profile

Downside scenario
* Sizeable, debt-funded capital expenditure or acquisitions, weakening financial risk profile
* Weaker-than-expected operating performance.

PVR has ample liquidity, driven by expected cash accrual of more than Rs 360 crore and Rs 450 crore in fiscal 2019 and 2020, respectively, and cash and cash equivalents above Rs 100 crore as on September 30, 2018. The company has long-term debt repayment obligation of around Rs 170 crore annually in fiscal 2019 and 2020 with capex of around Rs 450 crore per annum. CRISIL believes the company has sufficient accrual and cash and cash equivalents to meet its debt obligation and partly finance its capex requirements. Furthermore, strong established brand provides the company access to debt markets and banks to raise additional debt for its capex as demonstrated in the past.

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.

In November 2012, PVR acquired Cinemax, strengthening its presence in western 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 3 upcoming) for a consideration of Rs 433 crore. PVR 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 promoters.

For the six months ended September 30, 2018, operating income was Rs 1337 crore and profit after tax (PAT) Rs 81 crore, against Rs 1153 crore and Rs 65 crore, respectively, for the corresponding period of the previous fiscal.

Key Financial Indicators
As on/for the period ended March 31 Unit 2018 2017
Revenue Rs crore 2,334 2,119
Profit After Tax (PAT) Rs crore 125 96
PAT Margin % 5.4 4.5
Adjusted debt/adjusted networth Times 0.91 0.97
Interest coverage Times 5.13 4.61
Numbers as 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
INE191H07284 Debentures 16-Apr-18 8.72% 16-Apr-21 10 CRISIL AA-/Stable
INE191H07292 Debentures 16-Apr-18 8.72% 15-Apr-22 20 CRISIL AA-/Stable
INE191H07300 Debentures 16-Apr-18 8.72% 14-Apr-23 20 CRISIL AA-/Stable
NA Debentures** NA NA NA 50 CRISIL AA-/Stable
NA Long-term loan NA NA Sep-2019 25.73 CRISIL AA-/Stable
NA Long-term loan NA NA May-2024 170.4 CRISIL AA-/Stable
NA Long-term loan NA NA May-2025 127.2 CRISIL AA-/Stable
NA Long-term loan NA NA Sep-2025 100 CRISIL AA-/Stable
NA Long-term loan NA NA Nov-2025 100 CRISIL AA-/Stable
NA Long-term loan NA NA Dec-2025 100 CRISIL AA-/Stable
NA Working Capital Facility NA NA NA 25.00 CRISIL AA-/Stable
*CRISIL is awaiting independent confirmation of redemption before withdrawing ratings on these instruments
**Yet not issued
Annexure - Details of Consolidation
PVR Pictures Ltd
SPI Cinemas Pvt Ltd (SPI)
P V R Lanka Ltd
Zea Maize Pvt Ltd
Joint Ventures
Vkaao Entertainment Pvt Ltd
PVT Pictures International Pte Ltd
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Non Convertible Debentures  LT  570.00
CRISIL AA-/Stable      06-11-18  CRISIL AA-/Stable  26-12-17  CRISIL AA-/Stable  21-07-16  CRISIL AA-/Stable  CRISIL A+/Stable 
            17-08-18  CRISIL AA-/Stable  10-08-17  CRISIL AA-/Stable  21-06-16  CRISIL AA-/Stable   
                24-03-17  CRISIL AA-/Stable  22-01-16  CRISIL A+/Positive   
                06-01-17  CRISIL AA-/Stable       
Fund-based Bank Facilities  LT/ST  648.33  CRISIL AA-/Stable      06-11-18  CRISIL AA-/Stable  26-12-17  CRISIL AA-/Stable  21-07-16  CRISIL AA-/Stable  CRISIL A+/Stable 
            17-08-18  CRISIL AA-/Stable  10-08-17  CRISIL AA-/Stable  21-06-16  CRISIL AA-/Stable   
                24-03-17  CRISIL AA-/Stable  22-01-16  CRISIL A+/Positive   
                06-01-17  CRISIL AA-/Stable       
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Long Term Loan 623.33 CRISIL AA-/Stable Long Term Loan 423.33 CRISIL AA-/Stable
Working Capital Facility 25 CRISIL AA-/Stable Working Capital Facility 25 CRISIL AA-/Stable
Total 648.33 -- Total 448.33 --
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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