Inox Leisure- A faster running horse?

Selective disclosure by company for opening new Commencement Of Commercial Operations Of Multiplex Cinema Theatre Taken On Leave & License Basis, Located At INOX Leisure Limited, 3Rd Floor, Phoenix Palassio Mall, Plot No. 1, Sector No. 7, Gomti Nagar Extension, Amar Shaheed Path, Lucknow - 226010

But no word on closure in Maharashtra!

One thing to note is that great content ( No Time to Die, Sooryavanshi etc) have been postponed. So the impact is not bad as these movies would be played in coming quarters. Also much of the short term issues has been priced in the stock. One the positive side Inox has been able to keep up with its new screen opening target.
At the end of the day, the business is worth its future cash flows discounted today. 1 or 2 quarters of low FCFE hardly make any change to the value of the business today as a large weight of the value is determined by the terminal value.

Disc- Invested, (have added recently)

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With my limited knowledge I recon with usual interest & deprecation booked every quarter, even if 30% reduction in sales would see marginal negative bottom line. Not sure how market will react the same.
Disc: No holding and waiting to add on lower levels

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Alok is more confident on future growth

Hi @Akshada_Deo, @gurjota

I was going through Annual report of INOX and PVR find some glitches in lease in both, even I see Inox paying more on lease. Even PVR has higher screen than Inox they have lesser lease for five year.

Do you know any resson on this?

Disc: not invested, but interested.

ILL has been taking proactive steps to reduce its cost and augment liquidity. Lease is a major fixed cost for ILL, and it has
invoked the force majeure clause for lease agreements with mall developers. It expects no payment of leases during the
closure. ILL is also looking to conserve cash by reducing workforce, deferring maintenance, and capital expenditure (capex)

Rating Watch with Negative :

They still have to service their debt + working capital. Also as per there AR they have subsidiaries ( SWANSTON MULTIPLEX CINEMAS , SHOURI PROPERTIES) in multiplex leasing business. Also bollywood is also expecting huge impact going ahead in terms of releases (international travel is a big question now). So content could be an issue in medium term.

The company has more or less negligible debt. The credit rating watch to negative also says so. So there are going to be fixed costs as loss for next few months.
Also I was checking screener for inox and there is considerable rise in fixed assets to 2772 Cr and how come the interest cost is being shown as 230 Cr for results ending 9 months.
Can someone throw any light on the same

Hello all.
The promoters of the group were given preferential allotment in Nov 2018 for 250 rs. The total amount of shares which the company alloted were 64,00,000.
2. They have around 600 plus screens now.
3. The promoters infused liquidity and alloted the above shares before the blockbuster performance year of 2019. So can it be assumed they knew how the future might unfold.
4. As per their q3 presentation they have certain fixed costs per screen ( 6 Lacs employees, 13 lakhs rent and prop , 10 Lacs power fuel CAM and R&M) , 12.5 Lacs other overheads. So when the business is normal the fixed cost per screen is around 42 Lacs per quarter. I am assuming in case of a washed out quarter there still will be employee costs ( little less) , rent mostly taken care by force majeure clause and so goes for power. So in all the fixed costs should come down to 10-15 lacs per screen per in all around 60-90 Cr approx.
5. So in case of two poor quarters we can assume 100 Cr loss ( assuming second quarter has business crawling a bit).
6. Coming to the entertainment industry , we all know that cinema industry is a industry of consolidation. From Satyam , cinepolis, etc now only two are there …pvr and inox. China had around 9000 screens in 2011 and now has around 60000 screens. No advent of online content , streaming or mobile revolution brought the growth down there.
7. The industry dynamics have changed with the approach of food and beverages and restaurant kind of approach in near future. This adds to the possibility of improving margins and revenue both.
8. So can inox bear two quarters of losses and again resume normal , possibly yes. The losses can be spread over a longer period by smart management.
9. How does the virus change the consumption pattern for our crowded bustling cities and the small towns where the trend is catching on fastly. I am yet to find a convincing arguement for the same.
Please do comment on what you feel on how my assumptions are incorrect or grossly out.
Disc : invested and willing to add more


Why did you assume rent will be taken care by force majeure clause? My understanding is the rental property owner will still be required to pay the interest to banks for these months with a moratorium. Why will the rental property owners not pass on these costs to Inox? Same for the power bills. My assumption will be the fixed costs will still incur but they may have a moratorium on payments.
Also, the risk of long term effects of this virus should be considered. Will new movies find an alternative avenue to release such as online streaming as that will be cost effective for both consumers and content creators. The fear of virus may linger on for a few more quarter until a vaccine is found and as a result the occupancy rate could be low for another 2 years.

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They have invoked the clause for rentals …and till the month of may… Also if the screens are going to be closed during the lockdown …why will there be any power consumption.
Coming to the fear of virus …it’s anybody’s guess as of now. That’s why the assumption of a complete washed out quarter and a crawling next one.
Let’s see how it pans out .

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Also the industry has shown it’s resilience. Growth in collections were mainly due to regular supply of varied content. If the content provided by the movie makers is appealing enough , the industry has the muscle to do good even in a not so good economic environment.
Now since there are travel bans and anxiety for future travel plans. One can safely assume that content production might see a bump , but the industry must be working with some lag. What I mean is that the cinema industry would have enough movies to be screened for next few months atleast.

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The article mentioned that renters have requested for this clause to apply. This need not be the end result. A force majeure clause in a contract is quiet technical. Unless it is clearly defined and pandemic is included as one of the events, one cannot right away rely on that. Your assumption may be correct assuming all of inox’s Contracts have such a clause. But this may not be the case. So, as a worst case we need to consider the entire rent being payable with a lag similar to a loan moratorium. Power costs may be halved as one still needs to pay for the line costs and maintenance. There could be an increase in legal fees considering all employment and corporate issues that could crop up. So my assumption is they will be deep in red for a couple of quarters at least.

Recent interview of Inox leisure management with BQ. In the Interview he mentions that they have requested the Owners of properties for application of force majeure clause. He expects that the Property owners will accept the demand.


A very interesting report by Prabhudas Lilladher
Single screen vs Multiplex in post-COVID.pdf (543.9 KB)


So far even in green zones malls and multiplexes are not given permission to open and in metros like Mumbai things will take even more time. Q12020 earnings will be an indicator to see the destruction in business and estimate the impact of prolonged lockdown.
A general comment, many businesses are estimating reopening without factoring customer & employee willingness and scientific studies.
For example (1) A metro customer going to an multiplex could be more rational and would not like to risk his health for movie experience.
(2) Also watched a news on how film industry will react to romantic scenes for next few years knowing there is no remedy for COVID 19.
This could severely impact the business projections and more so our investment objectives.


I doubt that multiplexes will open in Q12020 and even if they, occupancy would be very low and opex could be much higher on account of health related precautions.

There is a high possibility there are zero revenues for Q12020.


Inox leisure.docx (866.3 KB) Hello all
Attached please find my template for inox leisure. Apart from any suggestions or queries on the idea, I would be glad if people can give inputs for the way the template has been made. This is my first attempt and I need to work on how to understand on the cash flows , related party transactions and the lease agreements as well.
Regards divyansh


These are expenses figures for FY19-20. Fixed cost is around 620 Cr. To come to 200 Cr level they have to get 1) full rent waiver 2) not pay for Housekeeping, Security and other contract employees.