PVR: An average hit

First it was the IPL Twenty20 matches in April, thereafter a poor crop of films. Multiplex operators haven’t had it easy this year though the storyline could change over the next few months with some big production houses releasing their films. A glance at PVR’s September 2008 quarter shows that occupancies came off by 18 per cent to 36.7 per cent over the comparable period in the previous year.

That’s because there were just about half a dozen films that pulled in audiences. In fact, PVR was fortunate to have released one of its home productions and the film did well at the box office. But despite that footfalls at properties that existed in both years were lower by 14 per cent. What helped the multiplex operator grow revenues by 26 per cent (stand-alone) during the quarter was the higher average ticket prices — it remains to be seen though whether consumers will continue to shell out more for tickets at a time when the economy in slowing.

PVR now has a 101 screens and continues to expand but the costs are hurting — the operating profit margin came off by 250 basis points during the quarter. In fact, it was lower taxes that helped the company post a net profit rise of 27 per cent. While PVR will continue to produce films, it will be largely dependent on other producers for content and although exhibitors are able to negotiate good terms, they do lose out sometimes. The fall in real estate prices should help but higher costs on rolling out properties could continue to pressure the margins in the near term.

PVR has a good business model that includes production, distribution an exhibition. Its foray into retail entertainment should complement its film business nicely. The firm is expected to end the current year with revenues of Rs 350 crore, a growth of about 30 per cent over last year. However thanks to higher costs, the net profit is expected to grow only marginally.