Multiplex cinema stocks ebbed on Monday as sentiment turned bearish amid Delhi and Haryana imposing curbs to contain fast spreading omicron variant of COVID-19. The uncertainty took a toll on the stock prices of PVR and Inox Leisure as other states also mull more restrictions just months after reopening of theatres.

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The Inox Leisure share price opened in the red on Monday and slipped to day’s low of Rs 344.85 apiece, down 2.4 percent from its previous close on the Bombay Stock Exchange (BSE). The shares of PVR Ltd too started the day on a negative note and declined 3.2 percent to the day’s low of Rs 1,255.90 per share.

Karan Taurani of Elara Securities last week told CNBC-TV18 that if Maharashtra were to announce a complete shutdown, the potential downside would remain at 15 percent and that is where the cinema stocks could bottom out.

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“Maharashtra is 25-30 percent circuit contribution in terms of box office, if it is to announce night curfew then producers would panic and delay the releases, which would be good for the stocks to correct 10 percent from here on,” he said on December 29.

The cinema stocks, however, haven’t bottomed out yet. The shares of both Inox Leisure and PVR began to recover from initial losses in afternoon deals. While Inox Leisure stock rallied almost 1 percent to its day’s high of Rs 356.75 per share on the BSE, the shares of PVR traded more than 3 percent higher, at the time of writing, from the previous close.

However, in the past one month, PVR Ltd shares have witnessed profit-booking and slipped over 7 percent, whereas Inox went down a little less than a percent against the benchmark index BSE Sensex’s rise of 2.65 percent during the period.

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According to Dr. VK Vijaykumar, Chief Investment Strategist at Geojit Financial Services, the Delhi government's decision to shut down theatres and multiplexes will certainly hit the revenues of these businesses.

“The hit to the revenues of multiplexes is reflected in the reaction of stock prices. Both PVR and Inox Leisure are around 30 percent off their November highs,” he told CNBCTV18.com.

He, however, suggested that the view that the Omicron variant is less virulent, though fast-spreading, is gaining ground. And this may be an indication of the imminent end of the pandemic, he said, adding that if such happens to be the case, the closure of theatres and multiplexes may be short-lived and stock prices will bounce back.

“Multiplex stocks were seeing signs of recovery after 18 months of the gap as vaccination picked-up pace, COVID-19 cases declined and the economy reopened,” Ajit Mishra, VP - Research, Religare Broking said.

The brokerage is of the view that the new restrictions due to Omicron strain will soon be lifted, considering the new variant is less impactful.

“Though it would dent the revenue for the multiplexes in the near term, the long-term growth prospects are still promising. Besides, we expect further consolidation in the industry that would help the big players to strengthen their positioning. Investors may consider accumulating multiple stocks on dips with the long-term view,” Mishra told CNBCTV18.com.

Meanwhile, Elara Securities’ Taurani believes consolidation will happen in single-screen because they are struggling the most in terms of the lock-unlock phase. “Definitely, PVR and INOX would be eying smaller multiplex chains but some steady business has to happen for 3-6 months for mergers and acquisitions to happen,” he said.

So far, apart from Delhi, cinema halls have been ordered shut in the Gurugram, Faridabad, Ambala, Panchkula, and Sonipat districts of neighbouring Haryana until January 12. Cinema owners and even filmmaker Karan Johar’s pleas to reopen theatres with partial restrictions have gone unheard until now. In fact, Twitter users slammed the director-producer for being ‘inconsiderate.’

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First Published:Jan 3, 2022 3:23 PM IST