Average ticket prices for both PVR and INOX dropped in the financial year 2021 to Rs 180 and Rs 170 from Rs 204 and Rs 200 respectively in the previous year.
A stronger-than-expected box-office performance by SS Rajamouli’s multi-lingual RRR and Vivek Agnihotri’s The Kashmir Files has meant an uptick as well in the fortunes of multiplex chains PVR Ltd and INOX Leisure Ltd.
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Analysts who track multiplex operators have revised their estimates for the recovery of PVR and INOX to pre-pandemic levels in the fourth quarter of the financial year that ended in March.
Before the release of RRR and The Kashmir Files, the multiplex chains that recently announced plans to merge had been expected to recover in the last quarter of the financial year to 30-40 percent of the box-office revenue they did in the pre-COVID-19 days.
Analysts have now tweaked that estimate to around 70 percent of what they earned in the quarter ended March 2019. In the three months ended December 2021, recovery in box-office revenue was close to 60 percent.
"We expect these companies to clock the highest revenue in this quarter for FY22 and The Kashmir Files, RRR will improve the revenues for the two companies," said Santosh Meena, head of research at Swastika Investmart.
The Kashmir Files, a film on the exodus of Kashmiri Hindus from the Valley triggered by the Muslim separatist insurgency, which released in theatres on March 11, is nearing Rs 250 crore in box office revenue.
RRR, an action-adventure set in the British era starring Telugu movie actors NTR Jr and Ram Charan, which hit the theatres on March 25, has already crossed Rs 1,000 crore in worldwide collections.
On the day RRR released, shares of both PVR and INOX hit over 25-month highs on the BSE. INOX shares reached Rs 479, a level last seen on February 26, 2020. PVR shares rose to Rs 1,839, a level they last reached on February 28, 2020.
Shares of PVR, which opened at Rs 1,894 on April 12, closed the day at Rs 1,925. INOX shares opened at Rs 510 and closed at Rs 515.
"RRR has done well in the Hindi circuit. It was expected to do not more than Rs 100-150 crore and now it is nearing Rs 250 crore. Second, is The Kashmir Files, which was estimated to see a run-time of Rs 120-150 crore, but the film is almost reaching Rs 275 crore. Because of these films the recovery numbers have changed. Earlier, we were expecting March to see 10- 12 percent growth versus March 2019. But March has grown by 30 percent because of the two films," said Karan Taurani, senior vice-president of Elara Capital.
He added that March had been better than December 2021, which was the best performing month in COVID times for movie exhibitors.
"March 2022 is historically the best March ever, with box office revenue of around Rs 600 crore. On an average, Hindi box office collections in a month record around Rs 300-350 crore. Hence, March has emerged as one of the best performing months," Taurani added.
Impact of COVID
To be sure, restrictions imposed in January and February to curb the spread of the third wave of COVID-19 did set back the recovery process.
"While Q4 had strong releases like Gangubai Kathiawadi, The Kashmir files, RRR as well as regional films like Valimai, James, Bheemla Nayak, Bheeshma Parvam and Pawankhind, the loss of January and February will have a significant impact on the overall revenues of the exhibition industry. Q4 would have been a record quarter if not for the restrictions in those two months because all the tent-pole movies which were going to release in January were postponed to March," said Nitin Menon, co-founder of NV Capital, which runs a fund for the media and entertainment industry.
Sakshi Jain, analyst at CapitalVia Global Research, pointed out that footfalls were still 44 percent lower than pre-COVID levels.
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A rich pipeline of big-budget movies, however, will ensure that the growth momentum continues in the medium term, which will boost footfalls in cinemas, said Meena of Swastika Investmart.
Ticket prices to drop, ad revenue lags
Revenues of both PVR and INOX will grow but the two multiplex chains are expected to report a correction in the average ticket price (ATP) and spend per head (SPH).
"In the third quarter, INOX recorded its highest-ever quarterly ATP and per-head spending. PVR saw a 20 percent increase in ATP and a 22 percent increase in spends per person compared to pre-pandemic levels," Jain said.
Taurani said the jump in ATP and SPH in Q3 was mostly because of premium ticket prices that filmgoers paid for Spider-Man: No Way Home, which crossed Rs 200 crore at the Indian box office.
"English films see a premium. Also, despite RRR showcasing prominent ticket revenue, the SPH is not favourable for the film. So, on a quarter-on-quarter basis, there will be a decline. The growth in ATP and SPH will get arrested towards 12-14 percent and this is something one should see for FY23 outlook."
In addition, recovery in cinema advertising is expected to be slow. Ad revenue is estimated to decline 69 percent in Q4 versus pre-pandemic levels because of tepid sales in January and February.
"This segment will be the last one to recover due to high exposure towards retail and government advertising. Advertising spend will bounce back from Q1FY23E, with a strong content pipeline of big-budget releases," said Taurani.
