PVR Inox re-release bet pays off in Q2, more in the pipeline

Multiplex chain PVR Inox Ltd saw footfalls and occupancy rise sequentially in the September quarter (Q2FY25) to 38.8 million and 25.7%. These were lower year-on-year as a high base was at play here. Even so, trends in PVR Inox’s footfalls and occupancy have been volatile lately, with the movie release calendar being a deciding factor.

To beat this, PVR Inox plans to double down on re-releases of popular old films to whet audiences’ appetite for “quality big screen experiences” during periods of uninspiring new releases. This is a strategic attempt to recover fixed costs during leaner periods and keep footfalls buoyant.

The management said in the earnings call on Tuesday that re-releases contributed to 6% of PVR Inox’s total footfalls in Q2FY25, and some re-releases have performed almost like a brand-new film. For instance, Tumbbad, the 2018 cult classic, earned around ₹38 crore nationwide, to which PVR contributed ₹19 crore—all of which was more than its initial earnings. The PVR management expects the trend of re-releases to sustain.

Also Read: Stree 2 rescues PVR Inox in an otherwise dull quarter

But…

That said, re-releases are not enough to increase and sustain footfalls in theatres. New films offering quality content, like Stree 2, are key drivers of higher occupancy levels. After all, despite a weak content pipeline in Q2, Stree 2's runaway success resulted in an upbeat sequential performance for PVR.

The management is confident that Q3FY25 will be the best quarter of FY25, led by a strong content line-up that should drive occupancy levels beyond 30%, which will be at pre-pandemic levels. It remains optimistic about the prospects for H2FY25. Singham Again, Bhool Bhulaiyaa 3, Pushpa 2, and Baby John are among the big releases slated for Q3.

Also Read: Can PVR Inox script a turnaround?

Meanwhile, in this calendar year so far, the PVR Inox stock is down 2.3%, significantly underperforming the Nifty500 index, which is up 22%. Despite the sequential improvement in some key parameters in Q2FY25 and cost optimization measures, a rapid earnings revival is unlikely, which is hurting investors' sentiment.

“Due to a soft H1FY25, we are cutting FY25E Ebitda/EPS by 4.2%/8%,” said a Nuvama Research report on Tuesday.

Also Read: How 2024 became the year of re-released films

PVR’s trajectory of earnings growth also hinges on factors including the pace of deleveraging via asset monetization. In H1FY25, net debt declined by ₹140 crore. Going ahead, PVR Inox is looking to open 80-120 screens per year and expects the franchise-owned company-operated/partnership models to contribute 15-35% to gross screen additions in FY26. This should help in keeping capital expenditure intensity in check, which bodes well for balance sheet strength.