Inox Joins PVR To Invoke Force Majeure
After India’s largest multiplex chain, second-placed Inox Leisure Ltd. decided to invoke ‘force majeure’, or unforeseen conditions, to not pay rentals to landlords after the nation went into the world’s biggest lockdown to contain the coronavirus pandemic.
“Rentals are one of the biggest line item on the profit and loss statement. We have written letters to our landlords saying that there is zero income and so we are not in a position to pay rent,” Alok Tandon, chief executive officer at Inox, told BloombergQuint in an interview. “We have invoked force majeure.” While the company is awaiting response from landlords, Tandon expects it to be positive.
Force majeure is a provision that allows to not honour contracts in case of unforeseen or extraordinary circumstances. Cinemas have temporarily shut down in India as all services, barring essentials, have come to a halt amid a three-week lockdown to curb spreading of the highly contagious pathogen. Inox’s bigger peer PVR Ltd., according to a PTI report on April 4, said “this is the first time its revenues have completely dried up” as the pandemic sweeps the globe with more than a million cases.
“Even after lockdown is lifted, there will be recuperating period in terms of the content to come in and fear psychosis to be out of people’s mind,” Tandon said. “Big marquee names [film releases] have been deferred.”
Also, occupancy rate is expected to go down from the current national average of 32 percent, he said, though the fall won’t be “dramatic”. And while Tandon finds it difficult to analyse the fourth quarter results as yet, he said numbers had taken a beating and this would impact FY20 results.
Inox has 626 screens across 68 cities in India. Its occupancy rate stood at 29 percent as of December 2019.
Tandon expects normalcy to return in a couple of months and said the company’s expansion remained intact. “We have signed for opening more than 1,000 screens,” he said. “There could be a delay in opening screens where the work is going on and properties where we were supposed to get a handover has come to a stop, this could be a phenomenon for a quarter or two, but Inox’s expansion plans are well on track.”
Watch the full interview here: