Multiplex chain PVR planning rights issue; Warburg Pincus and Multiples PE may participate

India’s largest operator of multi-screen theatres, PVR Cinemas, is in fund-raising mode. The Ajay Bijli owned firm is looking to raise around Rs 300 crores via the rights issue route, at a time when the film exhibition business has been dealt a body blow due to the outbreak of Covid-19, multiple sources with knowledge of the matter told Moneycontrol.

“PVR Cinemas has appointed Axis Capital as the merchant banker for the proposed rights issue,” a source told Moneycontrol.

A second source said that the promoters of PVR Cinemas, along with the firm’s private equity investors Warburg Pincus and Multiples Alternate Asset Management are likely to participate in the issue. “The plan is to launch the rights issue in July,”  shared a third source familiar with the fund raising plans.

Based on PVR’s latest shareholding pattern, Warburg Pincus holds 12.74 percent stake and Multiples and its affliates hold 11.17 percent stake, while the promoters hold 18.54 percent stake.

In response to an email query from Moneycontrol.com, PVR Ltd, Axis Capital and Warburg Pincus declined to comment. Moneycontrol is awaiting responses from Multiples Private Equity and will update this article as soon as we hear from them.

PVR, which had 176 properties and a total of 845 screens across India as on March 16, 2020, had completed a Qualified Institutional Placement (QIP) in October 2019. The fund raising round led to an inflow of Rs 500 crore.

Movie theatres have been shut in India since mid-March due to the nationwide lockdown to prevent the spread of the coronavirus and the last flick to hit screens was Irrfan Khan-starrer Angrezi Medium. Revenues have dried up consequently and to make matters worse, multiplex chains are locked in a tussle with some filmmakers who have opted for a direct release on OTT platforms as compared to the traditional theatre debut. In a bid to protect its turf, PVR has decided not to screen any movie that is not exclusively released first in theatres.

The bleak scenario is reflected in the stock prices of two of the leading players in the industry. The PVR Ltd stock has slumped by 56.8 percent in the last three months, while rival Inox Leisure has seen a 55.4 percent fall during the same period. In an interview with CNBC TV-18, Ajay Bijli , Chairman, PVR Limited was optimistic that movie halls would re-open in India by mid-July and said business could pick up by mid-August.

According to a April 1, 2020 report by credit rating agency ICRA, PVR had adequate liquidity and a significant part of its QIP proceeds “were utilised towards prepayment of existing debt obligations thereby keeping the capital structure healthy.”

“Despite the reduction in debt levels on the back of QIP proceeds, the debt remained elevated at the end of February 2020 with total debt amounting to Rs. 1,011 crore. Further, the absolute repayment obligations scheduled over the next two fiscals are likely to remain high (Rs. 200 crore and Rs. 223 crore in FY2021 and FY2022, respectively),” the report said.

A rights issue is a mechanism for listed firms to raise additional capital by inviting existing shareholders to buy new shares proportionate to their existing holding at a discount to the prevailing market price. In recent weeks, Reliance Industries and Future Consumer have announced rights issues. In fact, the Rs 53,000 crore RIL rights issue is the biggest equity offering ever in the history of India Inc.

In January 2017, Warburg Pincus entered  PVR by picking up 14 percent stake from the promoters and existing investor Multiples PE  for Rs 820 crores. Earlier, Multiples PE had invested around Rs 153 crore in 2012 to buy a 15.8 percent stake in PVR. According to reports, in February 2016, it invested more along with existing investors to pick an additional 2.6 percent stake.