The stock of PVR, India’s largest multiplex company, has lost 11.6% so far this year compared with around a 6% drop in the S&P BSE Sensex.

The underperformance of the company is glaring because it is despite the successful release of Pathaan in January, which turned out to be the first blockbuster Hindi movie of 2023 and the recent merger with Inox Leisure.

The key concerns for investors then would be what triggered the lacklustre performance of the stock and what should be future investment strategy. A major reason for the stock’s fall can be attributed to the selling by foreign institutional investors (FIIs) who trimmed their holding in the company to 32% as of February 22 from 40% at the end of December last year.

“Given the unfavourable developments in global markets, FIIs have been selling their stake in PVR in recent months. Since they have a comparatively high stake in PVR, its share price fell,” said a sector analyst requesting anonymity.

Besides this, seasonal weakness in the fourth quarter due to school and college exams across the country also impacted the stock’s performance. Footfalls are relatively lower in the March quarter than in other quarters of a fiscal year. In addition, apart from Pathaan, no other releases have shown a similar momentum at the box office during the March quarter, which is expected to affect the performance of exhibitors including PVR.

Despite the short-term hiccups, analysts and trade experts continue to remain optimistic about PVR’s long-term earnings. “The merger of PVR with Inox Leisure is likely to create a pan-India player which will help the combined entity achieve high bargaining power with producers and distributors and advertisers in revenues and rates,” said Girish Johar, trade analyst and a producer.

The combined entity will have more than 1,650 screens across 110 cities in India. Given the benefits of the merger, analysts believe that the company is currently priced attractively. They estimate that in the next 12 months, the company’s share price can appreciate in the range of 15-20% to Rs. 1,800-1,900.