Multiplex operators PVR and INOX will likely report slower growth in the December quarter because of Bollywood’s flop show compared to the first quarter of FY23 when the two cinema chains recorded their best performance ever.
After a weak September quarter due to the failure of tentpole Hindi films and limited Hollywood limited releases, multiplexes had been counting on Q3 for a strong recovery.
While Hollywood saved the day for theatres in Q3 with the release of James Cameron's Avatar 2 which earned over Rs 386 crore in India and has become the second highest-grossing Hollywood film in the country, many big Bollywood releases failed to impress audiences.
Unlike Q1 which turned out to be a blockbuster period for multiplexes with Hindi films like Gangubai Kathiawadi entering the Rs 100 crore club, Bollywood's star-studded ventures in Q3, including Ranveer Singh's Cirkus, Akshay Kumar's Ram Setu, Ajay Devgn-starrer Thank God and Varun Dhawan's Bhediya performed below expectations.
The festive season led to a healthy performance in Q3FY23 on a quarter-on-quarter basis; growth was subdued when compared to Q1 FY23, said an Elara Capital report.
The two multiplex chains on January 12 received the Mumbai bench of the National Company Law Tribunal's (NCLT) approval for their merger.
Shares of PVR were trading at Rs 1,676, up 0.17 percent, at 12:44 PM on January 18 while shares of INOX were trading at Rs 493, up 0.63 percent, on the BSE.
For both PVR and INOX, Q1 had become the best-performing quarter and the multiplexes had been expected to match June quarter numbers in the third quarter.
The cinema chains had bet big on Hindi films like Cirkus, directed by Rohit Shetty, which was made on a budget of Rs 150 crore and did a total business of around Rs 35 crore.
Bollywood bombs hurt box office
Box office revenues of PVR and INOX are expected to decline 15 percent each compared to pre-Covid levels (Q3FY20). Elara said this was because of the below-par performance of multiple large-budget Hindi films and small, medium-budget films continuing to struggle at the box office.
Overall, box office revenue is expected to recover to 85 percent of the pre-Covid level in Q3FY23.
Footfalls for PVR and INOX are expected to decline 34 percent and 27 percent, respectively, versus pre-Covid levels as Hindi content, failed to perform, Elara said.
On the other hand, securities firm Prabhudas Lilladher expects footfalls of PVR and INOX to be 17 percent and 9 percent lower than the pre-Covid base of Q3 FY20.
It also noted that there were four movies, including regional films, that crossed the Rs 100 crore mark in the December quarter which helped multiplexes perform better than they did in the September quarter.
Q-o-Q performance
According to ICICI Direct Research, on a Q-o-Q basis, multiplexes are expected to report 35-40 percent growth in box office revenue with a footfall recovery of 22-30 percent.
Other metrics like Spending Per Head (SPH) and Average Ticket Price (ATP) are expected to grow on the back of premium content like Avatar 2 performing well at the box office.
On a Q-o-Q basis, ATP is estimated to grow 12 percent and 6.5 percent for PVR and INOX, respectively. SPH is expected to grow in the range of 2-3 percent Q-o-Q for both multiplexes.
PVR is expected to report ATP of Rs 240 in Q3, up from Rs 224 in Q2, and overall footfalls of 22 million, up from 18 million in Q2.
INOX is expected to report ATP of Rs 231, up from Rs 215 in Q2, and footfalls of 15.1 million, up from 11.6 million.
Ad revenue recovery delayed
Recovery of advertising revenue for multiplexes continues to be slow and has been delayed by the weak performance of Hindi films, which drive a large portion of ad spends.
Analysts expect ad revenue to recover to 60 percent of pre-pandemic levels despite the festive season falling in Q3.
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