Multiplexes take a hit as coronavirus spreads

The Covid-19 coronavirus outbreak, which has disrupted various sectors like aviation, travel, manufacturing, and others is also taking down the film industry, as ticket sales fall and fewer people go to the movies. The number of coronavirus cases in India has risen to 62 and people have been advised to keep away from crowded places. Union health minister Harsh Vardhan warned people against participating in public gatherings last week. Many states and union territories have implemented a ban on public gatherings.

Kerala chief minister Pinarayi Vijayan on Tuesday announced that all movie theaters in the state will remain shut till March 31. Producers and distributors have agreed to a shutdown starting Wednesday. This is likely to impact big-budget ensemble releases like producer and director Priyadarshan and Malayalam actor Mohanlal’s Marakkar Lion of the Arabian Sea and Tovino Thomas’ Malayalam film Kilometers And Kilometers; the release of both movies has been postponed.

Theatres in Jammu will also remain closed till April 3.

Meanwhile, the release of the latest James Bond flick No Time to Die has been moved to November from April. Sony Pictures has also pushed back Peter Rabbit 2: The Runaway to August. “In case the situation worsens in India, big-budget Bollywood movies could be postponed, thereby postponing multiplexes’ business to later quarters,” an Edelweiss report said.

Edelweiss estimates a 7-8% dip in footfall at multiplexes such as INOX Leisure and PVR Cinemas in FY21. “Amidst the ongoing coronavirus scare, we expect footfalls at multiplexes to be impacted in the near term. We foresee risks to FY21E footfalls primarily due to the battering that could take in Q1FY21, assuming the contagion risk gradually increases in ensuing weeks," it said.

The country’s second-largest multiplex chain INOX Leisure said that it will follow all government advisories at the local, state or national levels. “Giving a safe and hygienic cinema experience remains our topmost priority till the prevailing concerns subside, and we are up to the task. We have increased the frequency of our hygiene routines, deep-cleaning routines, and disinfecting routines, in all areas, whether customer-facing or back offices,” an INOX spokesperson told Fortune India.

“Considering an upcoming big release, we are prepared to receive our guests in the safest possible cinema environment,” the spokesperson added.

According to Karan Taurani, vice president, Elara Capital, coronavirus will have a “huge negative impact” on cinema footfall, if it goes beyond control. With big Bollywood releases like Baaghi-3, Sooryavanshi, and Angrezi Medium in March, the quarter is likely to be impacted negatively.

“Some of the large releases may also get postponed going ahead in case cinemas call for a closure in the coming months. As per out sensitivity, in a worst-case scenario, even if the cinemas were to shut for almost eight weeks and some large releases get postponed, it would result in an EBITDA downgrade of almost 12%-14% for Inox/PVR (only based on lower footfall and lower F&B/SPH revenue),” Taurani said.

He sees a negative impact of about 20% on the box office as of now. However, he says, “the south industry will have a bigger negative impact due to more cases there. [It means] a bigger negative for PVR due to their SPI acquisition”.

The share prices of the two major multiplex chains, PVR and INOX have taken a hit as well. In the last one month, PVR has witnessed a share price correction of over ₹549 a share (-26.63%), as its share price fell from ₹2,064.95 on Feb 12 to of 1,515.1 a share on March 11. In the same period, Inox Leisure also saw a correction of 23.88%, as prices fell over ₹110 to ₹352.75 a share.

Globally, too, the film industry has been impacted due to the outbreak of coronavirus. Box Office collection in Italy plunged 25% year-on-year in February. March is expected to see over 50% decline after the entire country has been put on lockdown. In Japan and Korea, too, footfall has been rapidly falling after a temporary closure of about two weeks was imposed.

Public congregation spots like amusement parks have also been shut. Wonderla Amusement Park, owned by Wonderla Holidays, in Kochi, will be closed between March 11 to March 20. “Retailers are at risk in the near term especially multiplex, amusement parks and eventually all retailers,” Abneesh Roy, analyst, Edelweiss Securities.