Night curfew in multiple states to impact the film industry

Multiple states and local governments have imposed night curfews owing to increased COVID-19 infections, just as crowds are returning to theatres and new films getting released, putting the cinema exhibition sector at risk once more. Some of the states who contribute almost 65% of the Hindi Box Office are Karnataka, Maharashtra  (only public places), Delhi, Haryana, Gujrat (8 cities), Uttar Pradesh, and Madhya Pradesh. 

The imposition of night curfew in certain states will have a negative impact on consumer sentiments, according to analyst Karan Taurani, Senior Vice President, Elara Capital.

“We believe the above will have a big negative impact on consumer sentiment and adverse reaction for cinema/dine-in based players as they see the highest occupancy during the night, especially during festive (NyE and Christmas). This will create panic within the producers who will decide to yet again delay their release dates given the uncertainty on timings/restrictions. The situation is indeed dynamic as a film like Spider-Man did compelling numbers and a decent film like 83 has reported poor collections, as the sentiment took a big hit in the last 10 days,” added Karan.

He believes this will have an adverse impact on;

1. Windowing terms (4 weeks currently and was supposed to come back to 6-8 weeks by Mar’22).
2. Distributor share arrangements.
3. Consumer sentiment to step into cinemas (footfalls for larger/small films were anyways down in the range of 30-60% vs pre-Covid.

About cinemas being shut down, he said: “The above will basically delay the recovery path for exhibitors; we believe even if one state were to shut down cinemas, it will be a big negative as this is unlike a restaurant wherein few outlets can be open; and revenue loss for a particular state is a permanent loss, we saw that in the case of Bell Bottom which was not able to pick up even after releasing in May later. 

“We don’t expect valuations to breach or go below Mar’20 levels as the situation may be able to reverse also sharply; just as we have seen unlock post wave two was much faster as compared to wave one and given the low severity of the variant, for now, similar could be the case for exhibitors. Exhibitors also have a healthy cash balance post the capital raise rounds last year, can sustain for the next 6M even if there is a complete shut down for cinemas for the next 2-3M (highly unlikely for now), he added.

Adding more on bottom pricings, he said: “We thereby believe that PVR and Inox May bottom at a price point of 25-30% above their Mar’20 bottom (PVR/Inox at INR 1,100 and INR 280 respectively), if the third wave is not expected to be as severe and dreadful; nonetheless, recovery path remains delayed as it’s again a state subject, to revive occupancy cap and restrictions.”