PVR defers capex plans to control costs amid Covid-19 disruptions

Multiplex major PVR has deferred its capital expenditure plans in a bid to control costs as the company braces for a significant impact on its profitability in the current fiscal due to the ongoing COVID-19 pandemic.

Cinema halls in India have remained shut since March this year, after the government imposed nationwide lockdown to check the spread of COVID-19.

"We have temporarily deferred a substantial portion of our planned capital expenditures that we were undertaking, prior to the shutdown. All major capital expenditures will now be re-assessed once the shutdown is over," PVR Ltd Chief Operating Officer (CFO) Nitin Sood said in the company's Annual Reportfor 2019-20.

PVR owns a network of 845 screens across 176 properties in 71 cities in India and Sri Lanka.

In 2019-20, PVR added 87 screens to its portfolio.

PVR, in its annual report, said since cinema exhibition is its only business segment, the company is currently not generating any revenue from admissions, food and beverage sales or other revenue and cash-flow from operations.

The company said it upholds its cash outflow commitments, including employee salary pay-outs, other overheads, as well as payments for older working capital.

Shutdown of cinema halls has and will continue to have a significant negative impact on profitability and liquidity during the lockdown and even thereafter till business comes back to normalcy, PVRsaid.

PVR pointed out that even after cinema halls are re-opened, the company may not be able to run its establishments at normal capacity utilisation levels on account of social distancing measures that cinemas may be required to follow as well as health concerns that the patrons may have.

"Therefore, the company's revenue and cash flow generation may be impeded even once it is allowed to restart operations...Our operations for FY2020-21 will be significantly affected, as significant period of FY 2020-21 will be lost due to lockdown," it said.

For the fiscal year 2019-20, PVR's net profit was at Rs 26.85 crore. It was Rs 189.40 crore in 2018-19.

PVR said it is taking decisive actions to mitigate the impact of COVID-19 on its business and has implemented cost reduction strategies such as halting all non-essential operating and capital expenditures, implementing a daily CFO review and approval for all outgoing procurement and payment requests and significant payroll reduction for corporate employees.

PVR said it has reduced personnel cost through measures like layoffs/ retrenchments and reduction in salaries of employees during lockdown. The company said itreduced salary for senior management by 50 per cent and for other staff in the range of 20-35per cent.

The company, in its annual report, said it has written to developers for waiving rental and common area maintenance (CAM) charges for the lockdown period and is in discussion with developers for reducing rentals post re-opening.