Mumbai: Credit rating agency Crisil has downgraded PVR's long-term bank facilities and non convertible debentures (NCDs) to AA- from AA as the country's biggest multiplex chain operator's performance is likely to be impacted amid the surge in covid-19 cases.

"The rating action reflects CRISIL Ratings’ expectation of weakening of PVR’s business risk profile over the medium term. It was earlier expected that with resumption of operations in October 2020, the occupancy will improve gradually with return of content to the multiplexes. However, with the recent spike in Covid-19 cases, recovery in operating performance of multiplexes will be delayed," the rating agency said in a note. "Many states have already announced localised lockdowns, night curfews and restrictions over occupancy levels in cinemas. These restrictions will also result in deferment of the release of strong content, which was earlier scheduled to be released in the first quarter of fiscal 2022, thereby impacting operations."

The rating on the short-term bank facility was reaffirmed at ‘A1 ’.

"PVR had undertaken steps to reduce cost and augment liquidity over the past one year. It has negotiated with majority of mall developers for waiving off rentals for the entire period of closure of operations with revenue sharing arrangements from resumption of operations until March 31, 2021. In fact, rentals for the nine months ended fiscal 2021 was lowered by ~89% as compared to the corresponding period of the previous fiscal. Besides, the company has also conserved cash by reducing its workforce and deferring maintenance outlay and capital expenditure (capex)," the rating agency noted.

Despite the lockdowns and state caps on operating capacity for movie theatres, the company has managed to raise a significant amount of capital in the last nine months. In August 2020 and February 2021, the company raised Rs300 crore (rights issue) and Rs800 crore (qualified institutional placement), respectively, which augmented liquidity. Cash and bank balance, stood at above Rs790 crore as on March 31, 2021, as it is adequate to cover operating costs and debt obligation for the next few months, CRISIL said.

However, the rating agency believes the credit profile of multiplex operators, including PVR, may further weaken if the covid-19 pandemic worsens.

"Moreover, multiplex operators will have to initiate fresh negotiations with mall owners, given new restrictions to contain the pandemic. Prolonged closure may significantly impact credit profiles of the film exhibition industry, including PVR" it added.

PVR reported net loss of Rs49 crore for the quarter ended December as against net profit of Rs36 crore a year ago. Revenue from operations declined 95% to Rs45.4 crore as compared to Rs916 crore in year-ago period.