PVR completes Rs 300 crore rights issue, to utilise proceeds for working capital and debt repayment

Multiplex operator PVR has completed its Rs 300 crore rights issue, which had opened for subscription on July 17.

The management said the rights issue received a strong response from shareholders, with the issue oversubscription 2.24 times.

When a company issues rights shares, it offers existing shareholders a chance to purchase additional equity at a discounted price.

PVR's rights issue, which had closed on July 31, garnered Rs 672 crore for 85 lakh shares. The offer size was Rs 300 crore, or about 38 lakh shares, at an issue price of Rs 784.

Talking to Moneycontrol, Nitin Sood, CFO, PVR, said, “The proceeds will be essentially used for meeting working capital needs (like cinema maintenance, electricity) and partly for debt repayment obligations. We have approximately Rs 150 crore of debt repayments due in FY21."

Analysts tracking the stock feel PVR will need capital to fund rental and other expenses once the Centre allows cinemas to open as occupancy will remain low initially.

Karan Taurani, Vice President, Elara Capital, estimates a cash burn of Rs 30-40 crore during the lockdown period for PVR and expects this to rise to Rs 60-70 crore when theatres reopen.

Theatres in India have been shut for over five months due to coronavirus-led lockdown. While cinemas were expected to open in Unlock 3.0, there has been no government order on their resumption.

While theatres still remain shut, PVR has prepared itself to welcome the audience back to theatres. It has invested Rs 6 crore across its properties on safety and hygiene measures.

On whether the sanitisation measure will make a dent in its business, especially after theatres restart operations, Sood said the investments that it will be making on new safety protocols after restarting will not be so significant that it will impact the business negatively.

However, when it comes to occupancy, which is likely to be 30 percent to adhere to social distancing norms, Sood feels the “first four to 12 weeks will be difficult. We see much lower occupancy in FY21 as compared to last year. It will take three-to-four months before occupancy starts returning. But with new films coming in from Diwali, I think the audience should start coming back.”

In FY20, PVR had not only crossed the 10 crore footfall mark, but had also made record screen additions by crossing the 800-screen target.

On the overall film business, Taurani said the performance was healthy in pre-COVID times backed by good content. "We were about to end FY20 with highest ever Hindi box office growth of 16 percent until COVID hit in March. In coming months, occupancy will be a challenge and we expect some respite only during Diwali if larger films like Sooryavanshi and 83 are launched," he added.

While there will not be significant screen additions this year due to the pandemic, PVR still has expansion plans.

“Bulk of new capex (capital expenditure) is suspended till the time business doesn’t return to normal. So, we will not be starting work around new screens. But we have a few projects that are 80-85 percent complete. We have five to six such properties, which are in advanced stages, and our primary focus this year will be to finish work on those projects and make them open to the public. Hence, there definitely will be some screen additions this year,” Sood said.