How manufacturing evolved as a key investment theme
films either excel or falter. While the financial third quarter (October-December) saw significant audience turnout driven by films such as and the final quarter experienced a subdued performance as films across
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
While India’s benchmark indices have hogged the headlines for scaling new peaks, and small- and mid-cap indices for their frothy valuations, one segment of the market has quietly outshone them all—manufacturing.
The sector, in fact, is thriving, bolstered by increased investments and the Union government’s push for indigenous production with its ‘Make in India’ drive and productionlinked incentive schemes.
This has borne out in the stock markets as well. The Nifty India Manufacturing index has surged an impressive 14% so far this year, eclipsing the benchmark Nifty 50 and broader market indices. The Nifty Midcap 100 and the Nifty Smallcap 250 have risen by about 8% each this year, while the Nifty 50 has gained 4-5%.
The outperformance not only alludes to the growing recognition among investors of manufacturing as a key theme, but also points to early evidence of India developing into a global manufacturing hub. While the country has outshone in the services sector, especially in information technology, India’s manufacturing industry has lagged thus far.
India aims to raise its share of manufacturing to 25% of GDP by 2047, from about 17% currently. Manufacturing exports hit a record high of $447.46 billion in FY23, a 6.03% increase from $422 billion in FY22, reflecting the underlying momentum.
Vipul Bhowar, director, listed investments, Waterfield Advisors, said initiatives such as ‘Make in India’ and PLIs have played a crucial role in fostering a favourable business environment, encouraging investments, and promoting indigenous manufacturing.
“The sector’s growth is evident, focusing on key industries such as chemicals, pharmaceuticals, electronics, automotive, industrial machinery, and textiles,” Bhowar said.
In the interim Union budget for 2024-25, the government increased the allocation for production-linked incentive schemes to ₹6,200 crore from ₹4,645 crore in 2023-24 (budget estimate).
Similarly, the allocation for the Modified Programme for Development of Semiconductors and display manufacturing ecosystem was more than doubled to ₹6,903 crore for 2024-25 (BE) from ₹3,000 crore in 2023-24 (BE). Other schemes such as solar power (grid) and national green hydrogen mission also received significantly higher budgetary allocations. A focus on policy continuity following the general election in April-May would bolster economic and business sentiment and buttress a much-anticipated recovery in private capital expenditure on infrastructure and manufacturing, say experts.
Besides, the industry also expects further progress in supply-side reforms, including clean energy transition, increased focus on local manufacturing, and targeted policies for youth, the poor, women, and farmers.
“During a potential third term for (Prime Minister Narendra) Modi, we would expect further progress towards digitalisation and continued policy push toward manufacturing/ exports, given India’s increasing footprint in global value chains,” analysts of UBS Securities India said in a report dated 18 March.
All said, manufacturing relies heavily on wellfunctioning infrastructure, and to ramp up activity in the sector India will need to focus on increasing productivity by scaling up infrastructure, ensuring fewer power outages, and avoiding belowpar transport infrastructure.
“This (poor infrastructure) has kept the size of the manufacturing firms small, making it difficult to exploit economies of scale,” Bhowar pointed out. “Land acquisition is also a challenge.”
The sector is thriving, bolstered by increased investments and the govt’s push for Make in India