COVID-19 interrupts the Capex waiver Strategy for PVR

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One of India’s famous and large multiplexes, PVR has been facing issues with sustaining its current fiscal profitability by managing the expense of deferring their capital expenditure plans, all of which have occurred as a result of the ongoing outbreak of COVID-19.

As a result of this current pandemic, the Indian cinema halls have been shut down from March this year based on the government’s announcement to the nationwide lockdown, to monitor the spread of the disease. But Nitin Sood, the CFO of PVR, said, in the company’s annual report of 2019-20, that their big capital expenditure can be reassessed once the lockdown is over. He also added that they are capable of postponing some of the expected capital investments which were already determined before the lockdown.

However, PVR owns a network of 845 screens and also 176 properties in 71 cities in India and Sri Lanka. It is reported in their annual report, that they are only part of the cinema exhibition as a business segment and are currently unable to produce any revenue from the sale of food, admissions, and drinks, or any other cash flow from operations.

However, they manage their cash outflow through certain obligations that include pay-outs for workers, other overheads, as well as other work capital payments. The continuous shutdown surely has a major negative effect on the profitability and competitiveness of the company and will continue until the conditions get back to normal.

Also, after the lockout got lifted, they have decided to take care of safety precautions for running any show, by abiding by all the norms of social distancing. The company’s sales and cash flow are also at a temporary stake, which will have an effect on the activity for the year 2020-21 as a result of this lockdown.

The net profit of the PVR for the fiscal year 2019-20 was Rs 26.85 crore, given that the profit for the previous year was Rs 189.40 crore. Cost-reduction measures such as cutting down on non-essential operating and capital expenses have been designed to rebound from this hard time. They have lowered payroll expenses by reducing the wage during this lockdown. As a result, about 50 per cent of the salary of senior management and 20-35% of the salary of the other employees were cut down.

The company officials state that they have written and requested the developers for the cancellation of the renting as well as the maintenance of the common area during this pandemic period which is still under discussion with the developers and yet to be decided.

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