Shares of cinema theatre operators extended decline to a near 10-month low. PVR Ltd and INOX Leisure Ltd slumped as much as 3.6 per cent and 9.2 per cent, respectively.

The Maharashtra Food and Civil Supplies Minister, Ravindra Chavan, had on Friday announced that food items from outside will be allowed in multiplexes from August 1.

The announcement was made in the Legislative Council when Opposition members drew the government’s attention to ‘exorbitant prices’ charged by multiplexes for food and beverages.

The decision, which will be enforced on August 1, will hit the revenues of multiplex operators. IDBI Capital analysts write they believe bringing such regulations significantly impacts the business model of multiplexes and would be a disincentive for running a multiplex business.

The news flow is negative for multiplex stocks as food & beverage has a significant revenue share for PVR and Inox Leisure with a gross margin of 74-75 per cent, IDBI Capital says.

It adds that analysis suggests every 1 per cent decrease in F&B revenue impacts its FY19E EPS by about 3.6 per cent for PVR and about 3.2 per cent for INOX. Both stocks had touched their lowest levels since September 2017.

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