NEW DELHI: Although multiplexes have been among the worst hit businesses ever since Covid hit India in March 2020, yet stocks of both and have shot up by around 50 per cent in a year.

That’s even when Inox reported a 92 per cent plunge in annual revenue and a Rs 338 crore loss for FY21. Due to a higher cost structure and a large debt pile, the loss is expected to be deeper in the case of PVR. The near-term outlook, too, is depressing for both the companies amid lockdowns and Covid-related restrictions.

Unlike hotels and resorts, where people will flock once again after vaccinations, Covid may have made a behavioural shift among cinema goers in favour of OTT platforms.

So at a time when the past (FY21), present and future look bleak, why are investors going gaga over multiplex stocks? Is it just the liquidity doing the trick or retail investors getting fooled?

Amid all the gloom and doom, analysts believe the market share of multiplexes will increase as scores of single-screen theatres are getting shut across India. According to the Ficci-EY Media and Entertainment Report 2020, the number of single screens in India has been steadily declining from 7,031 in 2016 to 6,327 in 2019 and further to about 5,077 in 2020. INOX, on the other hand, added 22 screens in FY21 and plans to add 49 screens this fiscal year.

In 2020, single-screens accounted for 61 per cent of the market in terms of total screens in India.

Absence of revenue for seven months and dearth of content and footfalls thereafter contributed to the shrinkage in screen count by about 1,000-1,500 in 2020, says brokerage firm Anand Rathi, which has a target of Rs 340 on Inox.

Brokerage firm Emkay Global believes limited out-of-home entertainment choices for Indians along with the shutdown of about 10% of single screens in the country should keep growth prospects of multiplexes intact in the medium term.

For most money managers, recovery or the unlock theme is the latest buzzword as they are betting on revenge consumption in the post-Covid era.

“PVR and Inox are deep value stocks relative to the valuations in the market today. We are buying these stocks on every dip. As the vaccine starts having an impact and as the economy opens up, people will go out for entertainment and holidays. In the next 1-2 years, many of these stocks will be substantially higher from where they are currently,” says investment adviser Sandip Sabharwal.

Hemang Jani of Motilal Oswal Financial Services said there was a similar hope last year as well, but the cash burn has been quite staggering for almost about a year.

“No doubt the management has done its bit in terms of managing costs and raising money, but you need to wait to see how the situation evolves,” he told ET Now when asked to comment on PVR.

ICICI Securities, which has maintained a ‘buy’ rating on Inox, believes that the first half of FY22 will be a washout for the company and losses may continue.

“But the company plans to raise equity of Rs 3 billion, which should ease its balance sheet pressure. Rent renegotiation holds key in curtailing cash losses,” it said.

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