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Foreign portfolio investors (FPIs) and domestic mutual funds are increasing their bet on multiplex stocks amid a steep drop in the number of fresh Covid cases, improving prospects for theatre reopening and a strong line up of contents including tentpole films waiting for a theatrical release.
According to latest shareholding data, FPI holding in Inox Leisure went up by 8.09 percentage points year-on-year to 16.44 per cent as of June 2021 from 9.53 per cent in the quarter last year. Mutual funds’ holding also went up to 23.09 per cent (from 19.72 per cent).
Similarly, MFs stake in India's largest multiplex operator PVR Cinemas went up to 18.19 per cent at the end of June 2021 from 14.91 per cent in the year-ago quarter; FPI holding went up to 38.19 per cent ( 36.99 per cent).
Markets at stiff valuation
“Markets are at record highs and stocks are overvalued in terms of matrices like a market cap to GDP, PE ratio, and price to book. But since markets are resilient and not expected to decline sharply immediately, institutions, particularly DIIs flush with funds, are forced to invest,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“Since stocks in the entertainment industry have been languishing due to lockdowns and restrictions, they were available at relatively attractive valuations.
Now with progressive unlocking of the economy institutional investors are playing an ‘unlock trade’ in these stocks,” he added.
Stocks recover 80%
Stocks of PVR and Inox have recovered over 80 per cent from the lows recorded in May 2020, when the first phase of nation-wide lockdown forced theatre shutdowns across the country. The rally came despite four quarters of consecutive losses posted by these two multiplex majors as the pandemic washed out theatrical business for most part of FY21.
Ajit Mishra, VP- Research, Religare Broking, attributes the rise in MF and FPI shareholding to the fresh issue of capital by both companies in the last one year.
In February, PVR raised ₹800 crore by issuing shares through qualified institutional placement (QIP) while Inox Leisure raised ₹250 crore in November 2020 and another ₹300 crore in June 2021 two rounds of QIP both of which saw enthusiastic participation from marquee Indian and global institutional investors.
“Global trends, where vaccination pace is higher, are suggesting that multiplexes still have demand which has led to increased investors’ interest. Going ahead, we feel the pandemic-led disruption can help both companies to further strengthen their market position at the hands of unorganised players,” Religare's Mishra said.
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