However, once the restrictions are lifted, the pace of recovery is expected to be sharp — as was witnessed after the second wave — and should limit further downside in the credit profiles of multiplex operators along with healthy balance sheets, it said.
“The temporary closure of operations in New Delhi/National Capital Region, Bihar, Haryana and restrictions in other key states, such as Maharashtra, will push back new film releases,” its director Nitesh Jain said.
Stating that a few big-ticket films such as ‘RRR’ and ‘Jersey’ have already been postponed indefinitely, Jain said in his base case, he assumes the third wave to peak in February and bottom out by the end of March, which will mean the release of big-ticket content to resume in the first quarter of fiscal 2023.
Occupancy doubled to 20 per cent in December 2021 from 10 per cent in September, indicating healthy demand, and could have improved to over 25 per cent this quarter compared to 30 per cent pre-pandemic as several big-ticket films were scheduled for release, it said.
Multiplex operators could increase occupancy despite having increased average ticket prices last quarter by 10-15 per cent from their pre-COVID levels, it said, adding that movies such as ‘Sooryavanshi’ and ‘Spider-Man: No Way Home’ collected Rs 200 crore each at the box office, which is comparable to the collections made by big-ticket films in a normal year.
“The swift recovery shows the relevance of multiplexes despite the plethora of over-the-top (OTT) platforms, and reinforces our view that OTT platforms are not a threat to multiplexes — the two can co-exist — and that the current disruption is temporary,” the rating agency said.
Crisil, which rates half of the multiplex industry by revenue, said such operators are expected to have clocked a profit of Rs 40-60 crore in the third quarter of the fiscal, following losses of Rs 625 crore in FY21 and Rs 360 crore in the April-September 2021 period.
There will be operating losses because of the third wave but healthy liquidity of Rs 880 crore as of September 2021 would comfortably cover operating expenses and debt obligations for the next 4-6 months, it said.
“Theatre releases will also bolster revenue from the food and beverages (F&B) segment, which accounts for 25-30 per cent of the topline of multiplex operators,” its associate director Rakshit Kachhal said.
Downside risks for the industry, which need to be watched include sustainability of cost-control measures and the prolonged impact of the pandemic.