Analysis : How multiplexes got affected in Padmavati controversy?

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The most awaited and controversial movie titled ‘Padmavati‘ will be postponed from the original release date of the movie as the makers planned to postpone the plans to release the movie on December 1st. However, the new date of the movie has not been declared yet. There are possibilities that the movie will not be released later in this month either.

All this controversy which is going to the movie ‘Padmavati’ has also affected the multiplex companies-PVR Ltd and Inox Leisure Ltd also. However, the month of December is typically a stronger one for the multiplex companies and all thanks to the festive season and to the holidays which have encouraged the people to splurge on movies. The good content of a movie is very important and it is necessary also in a movie. The expectation is very high with the movie ‘Padmavati’ and the movie will probably like to the best at the Box Office on account of its big budget, a big director, and a star-studded cast. If the movie had released planned then it would likely to have contributed to multiplex revenues this quarter.

The Research Analyst at the Spark Capital Advisor Pvt Ltd, Gnanasundar says that it seems like that these companies will suffer from the loss because the movie got postponed. However, there are some of the comforting factors at play here if we assume that the movie ‘Padmavati’ does not release in the month of December then there would be a big impact. That is the reason that the December 2016 quarter had a lower base it did not blockbuster and there was also the adverse impact of demonetization to deal with it.

Earlier, there was a lot of expectation that December will be the better than the last year but now all that and all the feelings it could be similar as it was in the last quarter or the things would be even worse marginally. If all the controversy comes to an end in March 2018 and considering that the March 2017 year was a strong one helped by the release such as Dangal, Raees, and Badrinath Ki Dulhania.

The movie ‘Dangal’ which got released last week of December 2016 and the revenue of the movie split between the December 2016 and March 2017 quarter. The timing of the movie ‘Padmavati’ release can make assessing the impact somewhat tricky. The current quarter states that the performance of the movie ‘Tiger Zinda Hai’, which is all set to release on December 22, 2017, and that will be crucial. The movies ‘Golmaal Again’ and Varun Dhawan starrer ‘Judwaa 2’, which released on September 29. have done fairly well so far this quarter and that should offer some of the consolation.

However, the analyst expects a slight improvement in operating profit margin on account of the good and service tax roll-out. As far as the stocks are concerned the weaker content performance has weighed on the sentiments which will be based on the data from the Bloomberg and the shares of PVR and Inox Leisure trade at about 31 times and 24 times estimated earnings for the next fiscal year, respectively. Both of the stocks have underperformed the S&P BSE 500 index so far this fiscal year.