PVR Inox shares reached a 44-month low of ₹1,201.55, dropping by 4% in intra-day trading on January 7, 2025. The stock has fallen 26% from its peak of ₹1,620, which was recorded on December 5, 2024. This decline has caused the stock to fall below its previous low of ₹1,203.70 on June 4, 2024. Currently, it is trading at its lowest level since May 2021.
The sharp drop in PVR Inox’s stock comes amidst concerns over the spread of Human Metapneumovirus (hMPV) in India. The virus, which causes respiratory illness, was recently detected in several states, including Karnataka, Tamil Nadu, and Gujarat. It has caused concern due to its presence in children. Additionally, the virus has been recently identified in China and Malaysia, further fueling anxiety about its potential impact on consumer behaviour.
PVR Inox, the market leader in India’s multiplex industry, operates 1,747 screens across 111 cities in India and Sri Lanka. The company derives its revenue primarily from box office ticket sales, high-margin food and beverage sales, on-screen advertising, and convenience fees from online bookings. However, in recent years, PVR Inox has faced several challenges:
The COVID-19 pandemic led to prolonged closures of cinemas, which severely impacted revenue. Even after cinemas reopened, footfalls remained low due to ongoing health concerns and the increasing preference for at-home entertainment. The recovery from the pandemic has been slower than expected, with many moviegoers permanently shifting to digital platforms.
With the rise in popularity of streaming services like Netflix and Disney+ Hotstar, there is an increasing shift towards at-home entertainment, further reducing cinema attendance. This shift in consumer behaviour poses a significant challenge for traditional multiplex operators like PVR Inox.
PVR’s merger with Inox aimed to create scale benefits and operational synergies, but the integration of 2 large entities has proven to be complex. Aligning operations, cultures, and management practices has delayed realising anticipated benefits.
Independent and regional single-screen cinemas, which offer cheaper tickets and concessions, have been gaining market share, particularly in Tier II and Tier III cities. The high prices of tickets and food and beverage items at multiplexes have deterred middle-class consumers, particularly during non-peak screenings.
In the first half of FY25 (April to September), PVR Inox reported a consolidated loss of ₹114 crore, a significant decline from the profit of ₹163.3 crore during the same period last fiscal. The total income for the period dropped by 14.76% year-on-year, falling from ₹3,340 crore in H1 FY24 to ₹2,850.50 crore in H1 FY25. EBITDA also fell by 53% year-on-year, down to ₹206.90 crore. As a result, the EBITDA margin contracted to 12.6% from 22.1% in the same period last year.
Despite the challenges, the management of PVR Inox remains confident that the third quarter of FY25 will be the company’s best quarter, driven by a strong content pipeline. There is significant potential for growth in occupancy levels, and the management believes that the company can improve its EBITDA margins by increasing occupancy levels and leveraging operating efficiencies. The company is also taking proactive measures to control fixed costs, particularly rental expenses, and is renegotiating rental agreements for underperforming malls.
PVR Inox is focused on reducing its debt and plans to use the free cash flow generated from operations to retire its debt by FY29. By FY27, the company expects its ROE and return on invested capital (ROIC) to improve significantly, reaching 1.8% and 27.2%, respectively.
PVR INOX Limited is an Indian movie theatre chain created in 2023 after PVR Cinemas and INOX Leisure Limited merged. PVR played a key role in transforming cinema in India by opening the country’s first multiplex in 1997 at Vasant Vihar, New Delhi.
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Published on: Jan 7, 2025, 11:19 AM IST
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