After a blockbuster Q1, Bollywood’s flop show to take away multiplexes’ shine in Q2

The closure of theatres due to the Coronavirus outbreak and the uncertainty around their opening in the last two years have led to a reduction of the OTT window from 8 to 4 weeks.

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Multiplex operators posted a robust recovery in the first three months of FY23 with Q1 turning out to be best ever performing quarter for PVR and INOX. But a string of damp squibs from Bollywood studios means the second quarter has all the makings of a flop show.

Falling audience numbers, the consequent drop in box office revenue and lower average ticket price (ATP) will impact Q2 FY23 business of PVR and INOX, said analysts.

Shares of PVR and INOX were trading 35 percent and 7 percent lower at Rs 1690 and Rs 496.40, respectively, on October 13 at 11.35 AM.

Footfalls in Q2 are estimated to be at the levels seen in Q4FY22, a quarter that was hit by the Omicron wave. In the July-August-September period, financial services firm Prabhudas Lilladher estimated audience numbers to be 30-40 percent lower over Q1FY23. PVR is expected to report 15 million footfalls in Q2 versus 25 million in Q1 and INOX to report 11 million in Q2 compared to 18 million in Q1.

“The spate of bigger flops like Laal Singh Chaddha, Shamshera, Raksha Bandhan, Liger, Ek Villain Returns as well as numerous smaller flops will have a substantial dent on the overall collections of the big exhibition chains. There was not a single big hit in this quarter except for Brahmastra,” said Nitin Menon, co-founder, NV Capital.

Box office business

Net box office collection (NBOC) for Bollywood and Hollywood is estimated at Rs 700 crore in Q2FY23 against Rs 1,130 crore in the previous quarter as there were only two movies that crossed the Rs 100-crore mark including Brahmastra (released on September 9) with collections at around Rs 245 crore and Thor: Love and Thunder (released on July 6) which earned Rs 102 crore.

Hindi box office revenue saw a decline of 47 percent versus pre-COVID levels in Q2FY23, according to Elara Capital. “Expect box office revenue to drop 41.5 percent and 42 percent sequentially and 35 percent and 34 percent versus pre-Covid levels (Q2FY20) for PVR and INOX respectively,” said analyst Karan Taurani.

“While content volatility is not new to multiplexes, it is more acute this time around. Only regional and English movies have fared well, suggesting that there has been no visible change in consumer behaviour,” said Jatin Damania, vice-president, fundamental research, Kotak Securities Ltd.

Impact on revenue

Failure of big-ticket Bollywood content will hit revenue growth for both the multiplex operators, said analysts.

“PVR’s revenue is expected to decline 30 percent, owing to a 25 percent fall in footfall. With Tamil movies doing better in the quarter, PVR’s stronger presence in the state has helped it avoid a sharper decline in footfall,” said Emkay Global Financial Services’ deputy head of research Naval Seth in a note. He added that Inox will see a 37 percent decline in footfall and a similar decline in revenue on a sequential basis.

Along with Bollywood, Southern movies, which had performed better in the previous quarter, saw a slowdown in the second half of Q2, noted Abhishek Jain, head, research, Arihant Capital.

The first quarter of FY23 had seen some of the biggest hits coming from the Kannada film industry including KGF: Chapter 2 and Telugu film RRR which recorded a lifetime collection of Rs 434 crore and Rs 274 crore, respectively. But Q2 had no such surprises from the regional segment.

PVR is estimated to report IND-AS EBITDA (earnings before interest, taxes, depreciation, and amortisation) losses of Rs 8.67 crore and INOX of Rs 5 crore, Prabhudas Lilladher said.

Other metrics

Due to higher promotional deals that PVR offered in the September quarter, the ATP is estimated to be Rs 221 versus Rs 250 in Q1 and spend per head (SPH) is expected to be at Rs 125 compared to Rs 134. ATP and SPH are expected to remain steady for INOX, said Seth.

Ad revenue, which remained under stress in Q1, is expected to be the last to improve and see a recovery to 60 percent of pre-COVID levels.

Multiplexes are likely to get some respite in the December quarter due to a string of holidays and strong content pipeline which includes releases like Ram Setu, Thank God, Cirkus, Black Panther and Avatar. “So far, the opening week of Q3FY23 has been decent as Vikram Vedha has clocked Rs 42.2 crore, while Ponniyin Selvan: I has crossed Rs 100 crore,” noted analysts.

However, Menon said that unless some of the new releases in Q3 turn out to be blockbusters, he is not very optimistic about the overall business of multiplexes. Taurani expects the Hindi box office to see a sharp revival only towards February-March 2023, when the content type may change.