Stock market update: INOX, PVR plunge as Maharashtra allows outside food in multiplexes

NEW DELHI: Shares of INOX Leisure (down 6.77 per cent) and PVR (down 3.28 per cent) came under strong selling pressure in Monday's trade after the Maharashtra government said there was no restriction on bringing and consuming food articles from outside in the multiplexes.

The state government on Friday said that strict action would be taken against any multiplex which prohibit people from bringing in food stuff from outside, ET reported.

The order can deal a great blow to the profitability of the industry, say experts.


"Food & beverage (F&B) segment contributes 28 to 32 per cent to PVR's gross profit. Maharashtra accounts for 25 per cent of PVR's screens. Maharashtra F&B segment would be 9 to 11 per cent of PVR's gross profit (KIE). Theoretically, allowance of outside food can impact volumes, pricing and profitability of PVR's F&B business significantly (presently, GM is 75 per cent). This matter pertains to Maharashtra but other states may follow the suit," a report from Kotak Institutional Equities said.

"I think, over 60 per cent profit is derived from the F&B on an average for these chains. And it will be extremely difficult for these companies to remain profitable if that segment gets hit in the manner which is being talked about or kind of suggested," said Sudip Bandyopadhyay of Inditrade Capital.

Moreover, Bank of America Merrill Lynch has downgraded PVR to 'Neutral' as the outside food order is implemented.

However, UBS has maintained a 'Buy' on PVR, setting the target price of Rs 1,770 per share, with a caveat that F&B overhang will remain until further clarity emerges.