Moneycontrol Pro Panorama | PVR-Inox: The show opens, investors queue up to book ticket

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CODA has won the Best Picture award at the 94^th Academy Awards, and the award for the best silver screen marriage goes to…

…if there were such a category, probably to the PVR and Inox Leisure union. Investors are quite gung-ho about it. The PVR stock is up 4.3 percent and Inox 12.9 percent at one point today.

After a torrid two years when the pandemic-led shutdowns laid waste to the film exhibition business, things are looking up for the likes of PVR and Inox. With 1,500 screens, the merged entity will own around half the multiplex screens in India and account for 40 percent of box office collections.

What the two companies are hoping is to gain advantages from economies of scale in this business. That could mean anything from getting better rates on food and beverages sourcing to more bargaining power with movie producers and mall owners.

For those new to the Bollywood business, here is a primer we published quite some time ago, but still relevant today. Essentially, it says high marketing costs for movies and excessive money paid to A-list stars makes tickets and popcorn costlier at theatres and putting their occupancy at risk. At the same time, it is not as if exhibitors are making money hand over fist as their returns on equity show.

“As alternative means of affordable and convenient entertainment make surprisingly fast inroads in India, if movie-going has to remain relevant, entire cost structures have to deflate and ultimately lead to a lower cost to consumers and higher footfalls,” the piece concludes.

During the pandemic, these alternative means of affordable and convenient entertainment — streaming platforms — have already made huge inroads. (CODA is the first streaming platform movie to win the Best Picture Oscar).

Note that exhibition is an industry which has seen multiple consolidations over the past few years as a result of players struggling to boost profits.

Sure, theatre going will remain an experience for consumers. Watching a movie is, after all, not just about content consumption. Innovations and changes -- the rise of multiplexes itself was a huge one -- will mean that the future of cinemas is not at stake.

Profitability, however, remains a key question. Our in-house research team believes that “the dominant player in this space would deliver better performance with a re-rating potential”. You can read that analysis here. Another piece on the same topic wonders if the deal structure could work in the long run, with two co-promoters on board, or if there's a sequel to the deal in the making.

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Technical Picks: Hikal, Piramal Enterprises, EIH, SBI, USD-INR and Silver mini (These are published every trading day before markets open and can be read on the app)
Ravi Krishnan
Moneycontrol Pro