The merged entity PVR Inox will be shutting down 50 screens in the next six months and has decided not to take fresh handover of new screens until there is stability in the box office business.
While the company is in the advanced stages of fit-out of 175 screens, it will wait for the box office to stabalise before taking over the next set of screens for fit-out.
Fit-out means taking the handover from a developer and starting the interior work.
"We want to manage our cash flows better, hence the decision to delay further handover. This could mean a possibility of opening slightly less number of screens in FY25 but it will be mostly just a change in opening time. In FY23, 50 percent of the total screens opened in Q4. FY25 looks like a similar situation if we delay the handover by 9-12 months," said Nitin Sood, Group chief financial officer (CFO), PVR Inox Limited during the company's Q4 FY23 earnings call.
He said that the company plans to open 175 screens in FY24 and will be shutting down 50 screens. So net addition will be 120-odd screens. Up to Rs 10 crore EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) impact will be suffered due to the shutting down of 50 screens.
"We have around 1,690 screens, so we will have around 1,825 screens roughly by the end of the next fiscal year (FY24). We are focused on profitability. The screens we are shutting down were built 10-15 years ago and in these locations, we have either already added a multiplex or coming up with one. They (50 screens) are loss making and impacting the earnings negatively and there's little hope for revival because people are moving to better quality cinema," Sood told Moneycontrol.
He added that between PVR and INOX, 50 screens were shut down in the last financial year. "We constantly look at our portfolio, sometimes a lease comes to an end, sometimes the screens have an end of their lifecycle. We constantly evaluate the screen portfolio."
The CFO said that the combined entity will be spending Rs 500-600 crore for adding new screens and including the maintenance cost, the capital expenditure will be around Rs 700 crore. "Between PVR and Inox, there are 700-1,000 screens which will come up in the next 5-7 years. Also, a large proportion of screen expansion will be focused on the South. Screens in southern India will vary between 40 percent and 50 percent of the company's total screen count," he added.
Focus on the South comes from the fact that while Bollywood underperformed, southern films surpassed pre-Covid level business. Belts primarily dependent on Hindi films, north and west, had a tough year. But South India had one of the best years as Kannada film industry had the highest box office of all times, Telugu and Tamil grew higher than pre-pandemic levels," said Sood.
Share of regional content in India's overall box office business increased to 54 percent in FY23 from 41 percent pre-pandemic while regional's share in PVR Inox's box office numbers increased to 33 percent in FY23 versus 23 percent pre-Covid. PVR Inox saw high volatility in the Hindi film business in FY23. Hindi box office earnings came down from Rs 531.4 crore in Q1 to Rs 392.6 crore in the fourth quarter of FY23. On the other hand, regional films dropped from Rs 365.1 crore in Q1 to Rs 229.3 crore in Q4. The regional box office has shown relative stability with low volatility, the company said.
"February and March were slow but May and June are looking better. It (content) will take off from Q2 (FY24) onwards. We have film releases every week and Hollywood is bouncing back in a big way. The number of films this year has gone up by 40 percent. From Q2 onwards things will get better but unsure if we can go back to pre-pandemic occupancy this year," Sood said.
Occupancy in PVR Inox cinemas was down by 21 percent versus pre-Covid levels at 25.2 percent in FY23 versus 31.8 percent in FY20. Admits are down 16 percent at 14 crore versus 16.8 crore in FY20.
Sood expects the Hindi box office to bounce back strongly this year. This will help in the recovery of ad business which has been lagging for long. "Post the merger we see big traction coming back in advertising and it will start showing in Q2 and Q3. So significant recovery in ad revenue is expected. The focus is to try to get back to where we were pre-pandemic. Q2 and Q3 will dictate how much recovery we can make," he said.
Ad incomeAdvertising income in FY23 stood at Rs 381.8 crore, down 31 percent from 554.9 crore in FY20.
"We normally play 19 minutes of advertising and currently we are doing about 12.5 minutes. This is expected to grow. We have to sell more advertising and get our rates up. We also plan to monetise off-screen spaces as well at cinemas. Our focus is to get the volume back and that will happen once all merger stability comes, which will be next year. This year we are focusing on volume," said Gautam Dutta, Co-CEO (North & South), during the earnings call.
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