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As the number of people infected in Kerala due to COVID-19 rises to 17 (as of March 13, 2020), highest number of infections among the states, the State Government of Kerala, on March 10th, decided to close movie theatres along with schools, colleges, tuition and other classes, and other activities involving mass gathering of people, till March 31st.
Delhi Government too followed suit, on March 12th. It has decided to shut all cinema halls, schools and colleges, except those where exams are on, till March 31, to control the spread of the virus. Recently, Karnataka government too announced closure of cinema halls, pubs, malls, exhibitions and other camps to be closed to public for a week.
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While these steps are necessary to help contain the spread of infections, it can hurt the multiplex players; the stocks of PVR and Inox are down 18 per cent and 16 per cent respectively in the last week.
Impact on box office collection
Analysts expect the Indian film industry to delay the release of ‘big-ticket’ movies, if the spread of infection doesn’t ease. This could hurt box-office collections, major revenue source for multiplexes, in the next two-three months. PVR and Inox generate 55-57 per cent of revenue from box office collections and 26-27 per cent from F&B and 10-12 per cent from advertisement income.
Further, subdued performance of South-based movies (particularly in Tamil and Telugu languages) and tough macro-economic conditions had impacted the December quarter earnings of these multiplex players. If the movie release too postponed, it can dampen the revenue growth in the next quarter. PVR for instance, reported a single-digit revenue growth of about 8 per cent y-o-y to Rs 915 crore due to weak footfalls in theatres, in the recent December quarter. The profit grew 7 per cent to Rs 36 crore during the same period.
Screen presence
PVR, a market leader in the multiplex industry, has majority of its screens (about 34 per cent) located in the southern regions. With a shutdown in Kerala and Karnataka footfalls could further take a toll in the March quarter as well. With Delhi too deciding to close movie theatres, it can hurt the company's earnings.
The company has about 62 screens (16 cinemas) in Delhi, among the largest in the regions followed by Uttar Pradesh. In Kerala too the company has significant presence with about 15 screens. But it has highest screen presence in Karnataka (98 screens) and Tamil Nadu (83 screens).
PVR, as of December quarter, has 825 screens across the country, while Inox has 614 screens.
In Kerala, Inox has six screens and in Delhi it has about 16 screens across five properties. In Karnataka, the company has 49 screens, which could have a negative impact if the closure continues for a longer period.
If other states like Maharashtra and Uttar Pradesh close down as well, multiplex players are in for a rough ride.
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