Third wave to push back recovery for multiplexes to Q1 FY23: Report

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The ongoing third wave of COVID-19 pandemic and the restrictions imposed by the government on multiplex operations will push the recovery for the film exhibition sector to Q1 FY2023, credit rating agency ICRA said in a note.

According to a report in exchange4media, as movie releases get deferred due to restrictions on malls and cinema across India, the occupancy for Q4 FY2022 will be impacted and revenues for the quarter will be sequentially lower than Q3 FY2022.

“The industry participants were pinning recovery hopes on the festive season in Q3 FY2022 with the strong content pipeline, increased pace of vaccination and relaxations in key markets like Maharashtra adding to the optimism. In Q3 FY2022, supported by increase in occupancy (60-65% of pre-Covid levels), higher average ticket prices and spend per head, the multiplex operators are expected to report their highest revenues (since Q4 FY2020) and turn EBITDA positive," noted ICRA VP & Sector Head, Corporate Sector Ratings Jay Sheth.

The industry expert further claimed that multiplex operators in Q3 had a strong performance overall, despite some restriction on occupancies in key states like Gujarat (60% cap) and Maharashtra (50% cap) and restrictions on consumption of food and beverages inside cinema halls (a high-margin segment) in states like Maharashtra.

"Furthermore, as occupancy remained sub-optimal, contribution from another high-margin revenue source viz. advertising income (comprising 10-11% of overall revenues) also remained low,” Sheth added.

In 2020, while in other states, while only packaged food and beverages (F&B) were allowed inside movie halls as a precautionary measure, in Maharashtra, even packaged F&B was not allowed inside auditoriums.

However Sheth believes that with several large-budget movies ready for release the industry is expected to show swift recovery post easing of curbs.

"However, on the positive side, unlike in the past, several large-budget movies are now ready for release – content line-up remains robust and hence recovery, post easing of restrictions, is expected to be stronger and much faster. Nevertheless, ICRA continues to maintain a negative outlook on the sector until it achieves a full and sustainable recovery. The current adequate liquidity profile of the incumbents is expected to help them navigate short-term headwinds on profitability,” Sheth concluded.

According to the Union Health Ministry data updated on January 23, India had logged 3,33,533 new COVID-19 infections, taking the total tally of COVID-19 cases to 3,92,37,264.