PVR Inox scripts a new show with revamped biz strategy
MD Ajay Bijli says the focus is on improving operational performance, optimizing expenses
One year after the merger of India’s top two multiplex players, PVR Inox Ltd is embarking on a strategic shift towards enhancing greater operational flexibility, and reining in expenses and debt.
Ajay Bijli, managing director of PVR Inox, outlined the company's roadmap for the next 12-18 months in an interview with Mint. The firms seeks to increase focus on operational performance, debt reduction, and transition towards an asset-light model, he said.
With a gross debt of ₹1,725 crore as of FY24, PVR Inox—the world’s eighth largest multiplex chain—is prioritising initiatives aimed at improving return on capital employed, and Ebitda margins. Bijli’s grand plan involves closing under performing screens, renegotiating the rental contracts, and optimizing capital expenditure to generate positive free cash flow.
“We are completely pivoting towards an asset-light and asset-right model, which means that we are telling all the developers who want us in their properties now that it will be like a Foco model, which is franchise-owned and company-operated,” Bijli told Mint.
Since completing the merger in February 2023, PVR Inox emerged as India’s largest exhibitor by a significant margin. Experts suggest that the company, benefiting from its scale, can afford to make bold moves, such as shutting underperforming screens, without fearing a negative impact on footfalls.
PVR Inox’s measures seem necessary at a time the movie industry is grappling with a dearth of quality films. Audiences have become increasingly discerning in their movie-going choices, leading to a stark divide in box-office performance—
Animal, Salaar, Dunki, Bahadur,
THE plan is to shut non-performing screens, renegotiate rental contracts, and optimize capex
Sam
PVR Inox’s measures seem necessary since the movie industry is facing a dearth of good films
languages struggled at the Indian box office. According to Mint’s estimate, domestic box-office revenue dropped 20-30% year-on-year in the three months ended 31 March.
For PVR Inox, despite a robust 64% surge in revenue from operations during the third quarter, consolidated net profit declined 20% to ₹12.8 crore from ₹16 crore in the corresponding year-ago period. So far this year, PVR Inox’s shares have lost nearly 15% on NSE, contrasting sharply with the benchmark Nifty 50’s 3.6% gain.
Facing an unpromising slate for the
DOMESTIC box-office revenue dropped 20-30% y-o-y in three months ended 31 March assets more effectively. This includes entering into partnerships with landlords or real estate developers for investment purposes, repurposing certain properties, and renegotiating rental agreements to drive value-creation.
Bijli said the company has identified around 125 non-performing screens, which it plans either to shut or to renegotiate rental contracts wherever the lock-in period is over.
“If there are screens which are valuedestructive, we are going back to the developers and asking them to renegotiate or reset the rentals, especially where lock-ins are over,” he said.
“We will make sure that most of the deals, going forward, are on a revenuesharing basis, and if there is an MG (minimum guarantee) proportion, it is ‘minimum’ as per the definition of MG.”
The company aims to reduce the rental cost to pre-covid levels (16-17% of revenue) from the current 19-20%.
PVR Inox has over 1,741 screens in India across 361 properties in 113 cities. The company added 97 screens in the first nine months of FY24 while exiting 62 underperforming screens.
“We are still expanding. We will still be opening 100 odd screens per year, but we’ll be prudent in terms of how much we spend and how much contribution we get,” Bijli said. “I’m bullish on the cinema business and I know that the industry is going to bounce back. Just that… I would err on the side of caution and make sure that we get much better margins.” The company wants to reduce its capex by 30-40% to ₹ 400-450 crore by entering into partnerships with landlords for investment purposes. On plans to be a net-debt-free company in 2-3 years, Bijli said debt-reduction is a key priority for PVR Inox, with efforts underway to monetise real estate assets inherited from the Inox merger in prime locations such as Mumbai, Pune, and Vadodara.
BIJLI said the company has identified around 125 non-performing screens
first half of the fiscal year, experts advocate for PVR Inox adopting a conservative spending approach and prioritizing return on investment.
For its business revamp, PVR Inox is drawing inspiration from successful retail brands in India and identifying opportunities to leverage its real estate