The third wave is expected to push the recovery in multiplexes by up to five months as governments resort to the temporary closure of movie halls to contain the spread of the Covid wave.
Also, the full revenue recovery of the multiplexes will be pushed back to the second half of the next fiscal as against the first quarter earlier, according to a report by Crisil Ratings.
However, once the restrictions are lifted, the pace of recovery is expected to be sharp - as was witnessed after the second wave - and should limit further downside in the credit profiles of multiplex operators along with healthy balance sheets, experts believe.
"The temporary closure of operations in New Delhi/ National Capital Region, Bihar, Haryana, and restrictions in other key states, such as Maharashtra, will push back new film releases," said Nitesh Jain, Director, Crisil Ratings.
Stating that a few big-ticket films such as 'RRR' and 'Jersey' have already been postponed indefinitely, Jain said in his base case, he assumes the third wave to peak in February and bottom out by the end of March, which will mean the release of big-ticket content to resume in the first quarter of fiscal 2023.
In fact, occupancy doubled to 20 percent in December 2021 from 10 percent in September, indicating healthy demand, and could have improved to over 25 percent this quarter compared to 30 percent pre-pandemic as several big-ticket films were scheduled for release, the report further added.
Right now, there will be operating losses because of the third wave but healthy liquidity of Rs 880 crore as of September 2021 would comfortably cover operating expenses and debt obligations for the next 4-6 months, many experts believe.
"Theatre releases will also bolster revenue from the food and beverages (F&B) segment, which accounts for 25-30 percent of the topline of multiplex operators," said Rakshit Kachhal, Associate Director, Crisil Ratings.
Downside risks for the industry, which need to be watched include sustainability of cost-control measures and the prolonged impact of the pandemic.