September 24, 2024
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Stock Market

Can PVR Inox sustain itself amid the growing OTT trend?

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Stock Market

Can PVR Inox sustain itself amid the growing OTT trend?

Lights dim, but not in theaters. The glow of smartphones illuminates living rooms across India. This digital dawn marks a significant shift in the nation’s entertainment landscape. OTT platforms are rapidly gaining ground, challenging traditional viewing habits. More Indians now turn to streaming services for their daily entertainment fix. This change poses a formidable challenge to established movie screening companies.

PVR Inox and Cinepolis, once unchallenged giants, now face stiff competition from the comfort of people’s homes. As viewers embrace on-demand content, theaters must innovate to retain their audience. The pandemic accelerated this trend, driving more movie enthusiasts to digital platforms.

Now, as normalcy returns, theaters are striving to recapture their market. They’re enhancing their offerings and exploring new strategies to stay relevant. The future of Indian cinema viewing hangs in the balance as this contest between traditional and digital mediums unfolds. In this article, we will be analyzing how PVR Inox can perform in the future going forward.

Industry Overview

The global movie theater market is poised for steady growth, with projections showing an increase from $78.03 billion in 2024 to $102.79 billion by 2030. This represents a 4.7% compound annual growth rate. Despite challenges from streaming services, theaters are adapting to remain relevant.

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The Asia Pacific region leads in market share, followed by North America and Europe. Multiplexes dominate the landscape, but IMAX, drive-ins, and independent theaters also play important roles.

However, the rise of OTT (over-the-top) platforms has shaken up the industry. Streaming services now compete directly for viewers’ time and entertainment budgets. In response, theaters are enhancing the moviegoing experience. They’re upgrading technology, offering premium formats like 3D and IMAX, and improving food and beverage options.

Some are even experimenting with alternative content like live events and e-sports. The industry’s challenge will be to provide unique, immersive experiences that viewers can’t replicate at home. This may involve embracing new technologies or finding innovative ways to blend digital and physical entertainment.

Company Overview Of PVR Inox

PVR INOX, India’s largest multiplex chain, emerged from the landmark merger of PVR Cinemas and INOX Leisure in March 2023. This union created a cinema powerhouse with over 1,7000+ screens across 350+ properties in 109 cities. The company’s roots trace back to 1997 when PVR introduced multiplex cinema to India.

Headquartered in Gurugram, PVR INOX employs more than 10,000 people. The merger has strengthened its market position, allowing for expansion and innovation in the movie exhibition space. PVR INOX continues to evolve the cinematic experience, introducing premium formats like IMAX and 4DX.

Moreover, it’s exploring new revenue streams, including on-screen advertising and enhanced F&B offerings. Despite challenges from streaming platforms, PVR INOX remains focused on providing unparalleled big-screen entertainment to Indian audiences.

Merger and Acquisitons by PVR Cinemas

INOX Leisure (2023)

The merger of PVR and INOX, finalized in March 2023, marked a significant milestone in India’s cinema industry. This union combined two of the country’s largest multiplex chains, creating a formidable entity with over 1,700+ screens—the move aimed to strengthen its market position and enhance operational efficiencies.

By joining forces, PVR INOX can leverage combined resources to improve customer experiences, negotiate better with film distributors, and invest in cutting-edge technologies. However, the merger also raised concerns about potential monopolistic practices, prompting scrutiny from regulators and competitors alike.

SPI Cinemas (2018)

In 2018, PVR made another strategic acquisition by purchasing SPI Cinemas, a renowned Chennai-based chain, for ₹633 crore. Originally founded as Royal Theatre in 1974 and later known as Sathyam Cinemas, SPI Cinemas was a major player in the South Indian market. This acquisition further boosted PVR’s screen count and geographic reach.

DT Cinemas (2016)

In 2016, PVR Cinemas expanded by acquiring DT Cinemas from the DLF group for ₹433 crore. This move allowed PVR to rebrand the acquired properties and strengthen its presence in key urban centers, enhancing its portfolio and contributing to its rapid growth in the Indian multiplex market.

CineMAX (2012)

Before the PVR-INOX merger, PVR had already expanded its footprint through strategic acquisitions. Notably, in 2012, PVR acquired Cinemax India for approximately ₹395 crore. This acquisition added 138 screens to PVR’s portfolio, significantly boosting its presence in Western India.

The Cinemax deal was a turning point for PVR, propelling it to the top spot among multiplex operators in India. Furthermore, this acquisition set the stage for PVR’s aggressive expansion strategy, which ultimately culminated in the merger with INOX. The Cinemax takeover demonstrated PVR’s ambition and ability to grow through both organic and inorganic means.

Outcome of Synergy (PVR Limited and INOX Leisure)

The PVR INOX merger has yielded significant synergies. Box office revenues increased by INR 89-97 crore, while food and beverage sales grew by INR 34-40 crore. These improvements, realized within a year of the merger, have boosted the company’s financial performance. As occupancy rates are rising, the full impact of these synergies is expected to become even more apparent.

Box Office Performance

**Source: Company Investor Presentation**

PVR INOX’s box office performance fluctuated across quarters in FY’24. Q2 saw the highest collection at 1336.8 INR crore while Q4 saw the lowest collection standing at 759 crore INR. Hindi films consistently brought in the most revenue. Regional movies contributed significantly, especially in Q1 and Q2. English films showed steady performance throughout the year. Top performers included “Jawan,” “Animal,” and “Fighter” for Hindi cinema. “The Kerela Story” and “Gadar 2” were notable in Q1 & Q2. “Tiger 3” and “Salaar” stood out in Q3. The company showcased a diverse mix of languages and genres in its top releases.

Language Wise Mix

PVR INOX outperformed the overall Indian box office in FY’24. Their collections grew by 19% compared to 13% for the industry between FY’23 and FY’24. Hindi films dominated, increasing from 47% to 56% of PVR INOX’s revenue. English movies saw a decline in share from 20% to 18%.

Regional languages like Telugu and Tamil maintained steady contributions. Kannada films experienced a slight dip in percentage. The “Others” category remained steady at 12%. This data highlights PVR INOX‘s strong performance and the growing popularity of Hindi cinema in their theaters.

Financial Highlights Of PVR Inox

Revenue Mix

In FY’24, the revenue mix reveals significant growth in several areas compared to FY’23. Movie ticket sales rose by 19%, reaching ₹3,280 crore, while food and beverages surged by 21%, contributing ₹1,958 crore. Advertisement income grew 18%, hitting ₹452 crore.

However, convenience fees and other operating income declined by 12% and 11%, respectively. Total income saw a robust increase of 17%, standing at ₹6,204 crore, as opposed to ₹5,302 crore in FY’23. Overall, key areas exhibited growth, while a few showed slight declines.