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Shares of India’s largest multiplex player PVR Ltd. declined 4.6 percent on Monday after brokerage firm Kotak Securities Ltd. downgraded the stock to ‘Add’ from ‘Buy’.

Kotak Securities cut the stock’s fair value by 16 percent to Rs 1,850, implying a valuation of 12 times EV/EBITDA for 2023-24. EV refers to enterprise value, while EBITDA stands for earnings before interest, tax, depreciation, and amortisation.

On Monday, PVR shares touched an intra-day low of Rs 1,673.75 apiece. Notably, the company is also set to announce its earnings for the December quarter this week on January 19.

Kotak Securities said that though the National Company Law Tribunal’s (NCLT’s) recent approval for the merger of PVR-INOX would create a multiplex behemoth with better bargaining power, the unabated weakness in Bollywood box office collections post-pandemic suggests a structural change in consumer behaviour.

The brokerage firm pointed out that the total number of Hindi films crossing Rs 100 crore of box office collections fell to 7 in the calendar year 2022 from 17 in 2019. Also, the total number of Hindi films crossing Rs 200 crore of box office collections fell to 5 in 2022 from 7 in 2019.

“We are seeing low tolerance for mediocre Bollywood films… there is a paradigm shift induced by OTT platforms that is weighing on occupancy,” Kotak said in its report.

Last week, PVR and INOX received approval from NCLT’s Mumbai bench for their merger. The merged entity, to be called PVR-INOX, will become the largest film exhibition company in India, operating 1,546 screens across 341 properties in 109 cities, according to the merger announcement on March 27, 2022.

Shares of PVR are down 4.04 percent at Rs 1,683.20.

(Edited by : Rukmani Krishna)