Bollywood needs a superhero to rescue it; revenue still 38% down

The Hindi film industry and the companies that get their revenue from Bollywood are yet to fully recover from the Covid-19 shock, even as rest of India Inc reported record revenues and profits in the post-pandemic period.

The annualised revenue of listed movie exhibitors, distributors, and producers is 38 per cent below the pre-Covid high reported in third quarter (Q3) of 2019-20 (FY20). In the same period, India Inc’s combined net sales was up 30 per cent.

The analysis is based on the quarterly consolidated profit and loss of five Bollywood-related listed companies — PVR, Inox Leisure, Eros International Media, Shemaroo Entertainment, and Mukta Arts.

The five listed companies that largely depend on Bollywood movies for a bulk of their revenue reported combined net sales of Rs 4,452.7 crore during the trailing 12-months (TTM) ended June, against a pre-pandemic high of Rs 7,192.4 crore during TTM ended December 2019 (Q3FY20).

These five entertainment companies reported a combined net loss of Rs 256.5 crore in the 12 months ended June this year, compared with a net loss of Rs 481.6 crore during TTM ended Q3FY20. With this, these five companies have cumulatively lost Rs 13,785.4 crore in their operations in the past 10 quarters, starting March 2020 (fourth quarter of FY20).

By comparison, the 2,471 listed companies, excluding banks, non-banking financial companies, insurance, and stock brokerages (banking, financial services, and insurance, or BFSI) reported combined net sales of Rs 90 trillion during the TTM ended June this year, up from revenue of Rs 58.62 trillion in Q3FY20. The combined net profit of these non-BFSI companies doubled during the period, from Rs 3.02 trillion TTM ended December 2019 to Rs 7.17 trillion TTM ended June this year.

Analysts blame industry woes on lockdowns, lack of new content, and growing competition from streaming and over-the-top platforms.

The near-term industry outlook for the industry doesn’t look bright either.

“Bollywood box-office (BO) performance has further deteriorated over the past two months. Poor content performance is largely underscored by deprecatory critics’ reviews and social media influence,” write analysts Naval Seth and Pulkit Chawla of Emkay Global Financial Services in their recent report on the industry.

According to them, after a successful first quarter (Q1) of 2022-23 (FY23), the overall BO collections have meaningfully tapered off, with mega-budget movies performing poorly in the second quarter of FY23 owing to weak content. This has hit the revenue and earnings of cinema exhibitors such as PVR and Inox Leisure.

The brokerage has cut the FY23 revenue estimates for PVR and Inox Leisure by 11-12 per cent, but has maintained the forward estimate for 2023-24 and 2024-25 estimates in the hope of a trend-reversal in Bollywood content delivery.

The industry also faces challenges from a rise in its indebtedness during the pandemic, resulting in a sharp rise in interest burden. The five companies in the Business Standard sample spent Rs 845.8 crore on interest payments during the TTM ended June this year — up 23.4 per cent to Rs 685.6 crore TTM ended Q3FY20. As a result, there has been a sharp decline in the company’s interest coverage ratio that worsened from 3x in Q3FY20 to 1.8X in Q1FY23.

Now all eyes are on the festival season ahead that is expected to see the release of blockbuster movies bringing in newer viewers and pushing up BO collections.