Hope to clock Rs 1,000cr revenue in FY13: PVR

Multiplex chain operator PVR on Tuesday said it has completed acquisition of a controlling stake in Cinemax India for Rs 395 crore. In an interview to CNBC-TV18, Ajay Bijli, CMD of PVR talked about the operational synergies.  He said that as the final acquisition has happened, we are looking at getting lots of operational efficiencies.

He also added that Cinemax is about Rs 380 crore, so the combined revenues will turn out to be around Rs 1,000 crore.

Below is the edited transcript of his interview to CNBC-TV18

Q: Now that the acquisition is complete what kind of operational synergies can one expect? How much do you think you can improve upon the numbers?

A: The revenues of PVR would be Rs 675 odd crore this year ending March 2013. Cinemax is about Rs 380 crore so the combined revenues will be about Rs 1,000 crore of the combined entity. The earnings before interest, tax, depreciation, and amortisation (EBITDA) that is being generated by PVR is going to be about Rs 117 crore. If given the current run rate. Rs 85 crore roughly will be the EBITDA generated by Cinemax given the line up in the next two months and openings that are coming. So, about Rs 200 odd crore will be the EBITDA.

Yesterday the final acquisition has happened. We are looking at getting lots of operational efficiencies. As this is what we have been waiting for, since a very long time. To improve our EBITDA margins, profit after tax (PAT) margin even further and this scale allows us to do that line-by-line every single operating expenses (OPEX), capex item and also on the revenue side. On the marketing side there is a lot of scope for improvement of revenues of the combined entity. That is on the ticket prices, as well as on the Food and Beverage (F&B). We believe this is the opportunity to create an enterprise where you get all the synergy benefits.

Also read: Cinemax off 52-week high, PVR buys shares via block deals

Q: What would be your market share in Mumbai city itself in the exhibition business for the combined entity? Can you tell us the top few cities in which you would have improved your market share?

A: This business works is more on circuits. Like the one you have, your Delhi circuit, which covers the National Capital Region (NCR). The total screen count will be something like 94 in Delhi and which is a very large market leadership position.

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Q: That would be more than 50 percent or thereabouts?

A: Yes, because they are a lot of single screen. There are a lot of local players still. However, it is a significant increase and Mumbai will be about 92. This includes other cities in Maharashtra as well. So, these two pockets plus Bangalore and Hyderabad are very significant. There are also regions like Chennai. So, these are 4-6 top cities that generate maximum revenue for a film business.

Q: If you have to give us an average ticket price rate that you can work with? Can you give us any ballpark figure on what you guys are working with now?

A: We are still working on all the price matrixes. It is a very well spread out circuit in very different demographic areas. So, some properties can demand a high ticket price and get high occupancies. However, some markets are very price sensitive. Doing the flexi pricing will itself increase the footfalls and revenues.

Q: How much stress has this entire acquisition put on your balance sheet? Where does your debt stand at? How much has it risen by and how do you plan to service it?

A: Balance sheet is not stressed, I am stressed, just to make sure, so it gets pulled off well. There is no problem. We have done the numbers very carefully and it is the most profitable asset which was out there. It was completely synergistic and complementary to PVR’s own circuit. So we have raised debt, but we have also raised a lot of equity. Rs 260 crore of equity has been raised as well through multiples, L Capital and the promoters. So our debt-equity is still under 1. With such a heavy EBITDA that we are generating, there is no problem in terms of servicing the debt and the repayment schedules.

Q: Your customers and viewers are also stressed. You do not even allow them to take a water bottle inside your cinema halls. Don’t you come under Competition Commission of India (CCI)? You own more than 50 percent of the viewing screens. Doesn’t the CCI have a voice?

A: No, water bottles are still governed by MRP and that is on every establishment whether it is a five star hotel or anywhere. You need to make your revenues, but there is other water available, like filtered water. So people have the choice to have that.