How many times in a year does one visit a theatre or treat one's family to a multiplex experience, would be a pertinent question to ask before picking up a stock from an array of movie industry shares listed on bourses.
Pyramid Saimira Theatre Ltd and Shree Ashtavinayak Cine Vision are two entertainment stocks that have become multi-baggers backed by tremendous trading activity.
From the issue price of Rs 100 and a listing price of Rs 140 Pyramid, which operates chain of theatres across the country galloped, hit the top circuit on several trading days to touch a high of Rs 487.20. Shree Ashtavinayak, a cine production, distribution firm that got listed at around the same time moved from the issue price of Rs 160 to a high of Rs 383. Both the stocks reversed their gains on Thursday hitting the lower circuit and closed at Rs 441 and Rs 343 respectively.
Analysts are positive on the industry outlook and say that one should not bank on the current price earnings multiple buy by the promised expansion of movie chains and the spending power of Indians. Pyramid listing followed series of announcements from the company and the significant one was a joint venture with a Malaysian company, to set up multiplexes there. "First it should concentrate on India, prove its business plans and potential before going abroad," says an analyst.
There is a primary risk of time overruns in getting the properties up and running in time as far as multiplex are concerned. Other set of issues relate to the ability of producers to procure certain titles and in the case production and distribution firms, the success rate of films that hit the theatres every year. INOX Leisure and PVR Ltd, two significant theatre chains listed on stock exchanges are witnessing subdued trading while Pyramid and Shree Ashtavinayak were clocking average volumes over two week period.
Though the business model and future earnings potential of both companies might be convincing, the way prices have run up combined with the volumes they clock have raised warnings from traders.
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