After a dull second quarter in FY23, multiplex operator PVR is betting big on upcoming content for a recovery in revenues. The company is counting on films like the Hollywood venture Avatar 2 which is directed by James Cameron, Ranveer Singh's Cirkus, and Shah Rukh Khan's Pathaan, among others.
"I am bullish that PVR will exceed pre-Covid levels in FY23. While it would be difficult for Q3 to be the same as Q1, October and November are looking very promising," said Ajay Bijli, Chairman and Managing Director, of PVR on the sidelines of the launch of a premium format called Director's Cut in Bengaluru.
Bounce back
Bijli said that after being shut for 18 months cinemas have been open for nine months now, so business is bound to bounce back. "Footfalls and occupancy will reach pre-Covid levels in FY23. Avatar 2 will be massive and emerge as one of the biggest films of this year after RRR and KGF 2. Plus, there are many films after Pongal," he said.
Multiplex industry revenues are estimated to exceed pre-pandemic levels (FY2020 revenues) by 6-8 percent in FY23 on the back of higher average ticket prices (ATP) expected and spend per head (SPH). The ATP is expected to increase by 10-15 percent, and the SPH by 30-35 percent compared to pre-Covid levels, according to brokerage firm ICRA.
“Given the healthy content pipeline in the coming months and encouraging consumer sentiment about watching movies in theatres, occupancy levels are expected to improve in H2 FY23. Occupancy will touch pre-Covid levels in the coming 12-month period," said Ritu Goswami, Sector Head, Corporate Ratings, ICRA, in a note.
Current occupancy levels of 27-29 percent are below pre-pandemic levels of 32-33 percent. "The industry had a good start to FY23 with occupancy levels of 32 percent in Q1. While occupancy decreased sequentially during Q2 due to a lackluster content line-up, occupancy is likely to rise in the coming quarters due to a solid content pipeline," Goswami said.
She expects overall revenues and operating margins for the multiplex industry to rise in H2 FY23 due to a recovery in the high-margin advertising business, which was down 35-40 percent in H1 FY23 compared to pre-pandemic levels.
Goswami added that the return of the windowing gap (the duration between theatrical and online release) to pre-pandemic levels of eight weeks, starting August 2022, is likely to be beneficial to exhibitors.
Bijli pointed out that Q1 content catered more to south Indian audiences, and Q2 was bad overall, but Q3 had movies like Drishyam 2 that fared well overall at the box office.
Ajay Devgn-starrer Drishyam 2, which was released on November 18, has collected close to Rs 160 crore in two weeks and continues to have a strong run.
The Hindi versions of Kantara and Uunchai have reported net box office revenues of Rs 80 crore and Rs 25 crore, respectively, which is healthy considering the films’ budgets, said an Elara Securities note. "Kantara, which is a Kannada-language film, has seen a big positive surprise in the Hindi-dubbed market," the note said.
It was a sub-par Diwali for Hindi film exhibitors as the lifetime box office revenue for Ram Setu and Thank God were 45 percent lower than the Rs 200 crore that pre-Covid Diwali releases usually clocked.
"However, Kantara was able to offset this with healthy collections. Made at a cost of Rs 15-20 crore, the small-budget film has reported domestic gross box office collections of Rs 360 crore. Footfalls for Kantara have been strong as it has almost breached 2.5 crore, which is half of what KGF 2 did despite the latter being a big-budget film, the Elara note said.
Yet, at Rs 850 crore, Hindi box office revenues in Q3 will be 25 percent lower than pre-Covid levels.
December is expected to offer some respite with big-ticket releases, including Avatar 2 and Cirkus. "The Hindi box office may see a 10 percent increase due to Avatar 2's strong performance, which is slated to release on December 16. Footfalls will recover 25-30 percent on a quarter-on-quarter (QoQ) basis in Q3. However, it will be 20 percent lower than pre-Covid levels due to weaker content," said Elara Securities.
With Rs 3,030 crore in Hindi box office collections thus far, revenues are expected to recover to 80-85 percent of pre-Covid levels in FY23, and fully recover by FY24.
On expansion, ICRA expects multiplex operators to continue undertaking capex to strengthen their screen portfolio and expand reach.
PVR, which launched Director's Cut in partnership with realty developer Prestige Group in Bengaluru at the location where the iconic single-screen Rex theatre existed before it shut shop in 2018, has spent around Rs 4-5 crore on this property.
Bijli said that PVR had built 75 screens in partnership with Prestige Group and expects the number to go up to 100 in FY23. The multiplex operator currently has a total of 884 screens.
Checkout Budget Highlights 2023
