INOX Leisure rating outlook revised to 'Stable'; Ratings reaffirmed

24 Mar 2022 , 03:42 PM

CRISIL Ratings has revised its rating outlook on the long-term bank facilities of INOX Leisure Limited (ILL) to ‘Stable’ from ‘Negative’ and has reaffirmed its ‘CRISIL A+’ rating. The short-term rating has been reaffirmed at ‘CRISIL A1.

Inox Leisure Ltd stock trade ended at Rs444 per piece down by Rs5.05 or 1.12% from its previous closing of Rs449.05 per piece on the BSE.

“CRISIL Ratings has revised its rating outlook on the long-term bank facilities of INOX Leisure Ltd (ILL) to ‘Stable’ from ‘Negative’ and has reaffirmed its ‘CRISIL A+’ rating. The short-term rating has been reaffirmed at ‘CRISIL A1’,” company said in a filing on Wednesday.

The revision in outlook reflects a strong rebound in the operating performance of ILL during the third quarter of fiscal 2022. While the third wave of the Covid-19 pandemic did marginally impact operations in January 2022, recovery began from February onwards.

Besides improvement in occupancy, average ticket prices (ATP) and spend per head (SPH) on food & beverages have sustained at levels higher that those prior to the pandemic. Moreover, movies released since last week of February reported strong performance at the box office. Business should continue to boost in the coming quarters, supported by uplifting of pandemic-related restrictions and strong content line up ready to be released over the next few months. The operating margin may also benefit from some of the cost-control measures undertaken over the last two years, which are expected to sustain longer.

The company’s liquidity benefitted significantly from the equity raise undertaken over the past two years, which has resulted in net cash position of ~Rs73 crore as on January 31, 2022, against net debt of around Rs27 crore as on March 31, 2021.

Cash and bank balance, undrawn committed bank lines, and other liquid investments stood at ~Rs281 crore as on January 31, 2022, which should sufficiently cover the debt obligation and capital expenditure (capex) in fiscal 2023.

Sustained improvement in revenue and operating margin, along with maintenance of healthy liquidity, will remain key monitorables.

The ratings reflect the company’s established market position in the film exhibition business, improving operating efficiency, strong financial risk profile and high financial flexibility, being part of the INOX group. These strengths are partially offset by exposure to risks inherent in the film exhibition business.