MUMBAI: During an earnings call with analysts to discuss the first quarter fiscal results PVR INOX MD Ajay Bijli said that it is looking at the circuit not just to be movies but also to be a destination for all sorts of out-of-home activities for people to step out for. “I think that’s a slight pivoting that we’re doing by having lots and lots of things, and I think we’ve paved the way now for sporting events, for musical events, for stand-up comedy shows, and it’s quite exciting.”
He noted that screening FIFA World Cup matches, was definitely not just a marketing spiel at all and it wasn’t filling up any lean period because it came while big films were already playing. “Yet we got 64,000 people only for the World Cup final. What is absolutely phenomenal about this is that the average ticket price was also reasonable. I think it was close to Rs. 380 or Rs. 400. Also there was a good SPH plus this happened at 12:30 A.M. 12:30 A.M. up to whatever, 2:00 o’clock, 3:00 o’clock, whichever time the match went. It’s really not just a lean period, it’s a closed period. Yet people came in. It added to our bottom line.”
In terms of the asset-light model the company has reached its growth and it has been able to de-leverage the balance sheet only because of the asset-light and FoCO model. “I think that we will continue to do because with the grace of God, we’ve got a brand now, and sweating of the brand is the ultimate testament to the quality of the brand, which is liked by developers. I think FoCO model and asset-light model definitely does not impede our growth.
“We are still going to be doing 100 screens. However, whichever pockets where we need to deploy capital, we will be deploying capital. Asset light and FOCO model will not come in on the way of growing by 100, 120 screens a year.
“Wherever there is a need to deploy capital, we’ll definitely do, but we don’t have to leverage and borrow for that. That’s one thing that I’ve addressed.” He went to on to explain that capital allocation priorities remain focussed on driving sustainable growth and the whole focus is on how improving ROCE and ROE. “Whatever is best to create long-term shareholder value is what we’ll be doing. Very appropriate capital allocation to improve these matrices is the most important focus of the company at the moment.”
CFO Gaurav Sharma addressed a question on CapEx. “I think we believe that with a very strong response from the market on capital light and FOCO, I think our CapEx will be slightly lower than the earlier expected number of Rs. 400 crores for the year. We feel that it will be in the range of around Rs. 350 crores. We are also prioritising renovation of a few of our high-value properties. Renovation CapEx share will be slightly higher this year. Overall, it will be in the ballpark of Rs. 350 crores for the year.”
He noted that in the last few years, the company has worked hard to bring down the debt levels and as a result it is now sitting at a debt-free balance sheet. Cash is a very strategic asset. The priority is to allocate capital towards growth.
The target is to improve return on capital and the business. The immediate target is to come back to the pre-COVID levels of ROC that the company used to operate at. At the same time revenue growth and margin expansion continues to be the focus. ROC expansion has to be driven up.
PVR INOX CEO Gautam Dutta noted that on the SPH side, the company has grown by about 9%, and it’s largely split between value and volume. Both he explains have grown. “We have a series of promotions run to increase the strike rate at our cinemas, along with the fact that we’ve taken a price hike for a few items. I would say the split would be more in the region of about 70/30, 70% on value and 30% on volume. That’s the way the SPH stacks up.”
Dutta added that on ATP there is dynamic pricing, and it has managed to now keep a very close eye on the sentiment of how the movie is performing. AI systems help a lot in this area. On the advertising front he noted that the company is making some fundamental changes within our offering, where it is getting more conversation with clients around eyeballs rather than film.
“This is a change that is augmented in the market and would take a few more quarters before media planners and buyers start to understand that vocabulary of media buying within cinema. By and large, I can tell you that cinema advertising, the way it’s jumped back, has got its mojo, and we are very certain that very soon this would be outperforming other parameters of the categories.”
Sharma said that the company is on track to add about 90 to 100 gross screens. “While in the first quarter we did not open any new screens because many of our screens which had completed fit-out were awaiting regulatory license, due to delay of the license receipt, we are expecting a bunched-up opening in quarter 2 and quarter 3. Based on the visibility of screens which are under fit-out, we believe that by end of this fiscal, in this financial year, 90 to 100 is pretty much possible.
“On the closures, the screens we have closed in the first quarter were all loss-making screens and they had been more than 18 to 20 years old. Bulk of our closures for this financial year have already been done in quarter 1. There will be very few closures for the rest of the year.”
Bijli noted that the company is looking at the tier 2, tier 3 markets now. More than 150,000 people need to be there and, there are other criteria to make sure that the demographic is correct and they have the spending power to come to our cinemas. He feels that there are still almost 300 cities in tier 2 and tier 3 markets which are still under-serviced.
