PVR Inox needs more than just Kalki in a slow blockbuster year

The immediate worry is that the June quarter (the first quarter of fiscal year 2024-25) will likely to be another dull one for the multiplex company. 

Sure, there are big hopes riding the Deepika Padukone-starrer Kalki 2898 AD, with expectations that its release on Thursday, 28 June, will help boost box office collections. But by how much? 

“How Kalki 2898 AD performs in the last four days of Q1FY25 would play a decisive role in whether box office collections register an increase or decrease for the quarter," said Jinesh Joshi, analyst at Prabhudas Lilladher. 

“If we assume Kalki 2898 AD manages to garner net box office collection of about ₹300 crore in the first four days of its release, industry-wide collections will be at about ₹1,881 crore in Q1FY25, clocking a growth of 1% year-on-year," he said. 

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Nonetheless, expectations from PVR Inox’s first-quarter performance are running low, with the Indian Premier League 2024 and the general election weighing on the flow of new movie releases between April and June, and in turn footfalls. 

The second quarter is expected to be relatively better, led by the release of movies such as Despicable Me 4, Stree 2 and Sarfira. But year-on-year growth would take a beating owing to the lack of many large-ticket Hindi films and the high base as last year’s second quarter, which had hit movies such as Gadar 2, Rocky Aur Rani Kii Prem Kahani, and Jawan. 

Moreover, the release of Pushpa 2: The Rule, the sequel to the 2021 blockbuster Pushpa: The Rise, has been postponed to the third quarter (October-December). 

“The wait for occupancy revival may turn longer for PVR Inox," said Karan Taurani, analyst at Elara Capital (India). 

“We estimate occupancy levels will be in the range of 21-23% in H1FY25, which could accelerate to more than 35% in Q3FY25," he added. “Therefore, we do not expect any big negative impact in our revenue estimates currently, as we have factored in an occupancy of 25% in FY25."

In FY24, PVR’s occupancy rate stood at 25.6%. 

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To be sure, competition from OTT is another area of concern for multiplexes. Also, the quality of TV screens has been improving. “So, unless a movie has a lot of special effects that warrant a theatrical experience, there is no incentive for a family of four to spend ₹2,000 or more for a movie plus popcorn," said an analyst on condition of anonymity. 

Amid this, PVR Inox is taking many initiatives such as shutting down underperforming cinemas, screening of alternative content and renegotiating rentals. In FY25, it plans to shut down about 70 underperforming screens, after exiting 85 in FY24. Thus, net screen additions are expected to be 50 this year. 

The company is also considering adopting a capex light model and aims to reduce its capex by 25% year-on-year in FY25. Over the next 12-18 months, it is looking to reduce the debt on the balance sheet from free cash flows and monetizing real estate assets by at least 50%. 

As of March-end, PVR Inox had a net debt of ₹1,294 crore, down from ₹1,430 crore last year. Meanwhile, a large part of the PVR-Inox merger synergies was seen in FY24 and the company expects to realize further synergies in FY25, as well. 

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The company’s efforts can be expected to bear fruit over the medium-term. But in the interim, the underperformance in the PVR Inox stock may not reverse soon until meaningful signs of improvement in occupancy and footfalls emerge. 

“Despite near-term weakness, we remain confident of a sharp occupancy revival in FY26, led by the comeback of Hollywood and stability in the Hindi genre," said Taurani.