Theatres stare at another weak quarter, PVR Inox likely to report loss in Q4 due to dull content

The movie business starring big multiplex players like PVR Inox had a strong start in FY24 and kept the audience on the edge of their seats with thrilling content like Shah Rukh Khan's Jawan and Sunny Deol's Gadar 2 to name a couple, but in the second half it seems to have lost the plot.

If cricket played the antagonist in the December quarter, hero content that was expected to deliver big box office numbers for Hindi films turned out to be a disappointment in Q4. Hrithik Roshan and Deepika Padukone's Fighter was expected to fly high at the box office but the film landed with earnings of Rs 200 crore against a Rs 250-crore budget when the expectation was for the film to enter the Rs 300-crore club.

When the January 25 release Fighter underperformed, exhibitors had little to no expectations from the limited pipeline of marquee content in the March quarter and the lack of big-budget and star-led films affected the performance of theatre chains in Q4FY24.

One would think the extreme heat would have played spoilsport for the film business but analysts said that if there is a heat wave, people prefer going to air-conditioned cinema halls.

"Content not attracting the audience is the primary reason for the weak theatre business in the January to March period," said Girish Johar, a producer and film trade expert.

A marginal annual increase of 3 percent in industry-wide box office collections at Rs 1,930 crore is expected in Q4FY24, said Jinesh Joshi, research analyst at brokerage Prabhudas Lilladher.

It will be a weak quarter (Q4) for PVR Inox as no movie has managed to cross the Rs 250-crore mark in the three-month span, said Pulkit Chawla, research analyst at Emkay Global Financial Services.

"Only two Bollywood movies managed to breach the Rs 100-crore barrier including Fighter and Shaitaan, while the Hollywood pipeline was weak owing to limited releases due to the writers' strike," he said.

The fourth quarter of FY24 reported a decline of 25 percent year-on-year in Hindi box office takings, said an Elara Capital note.

In terms of regional films, three movies—HanuMan, Guntur Kaaram and Manjummel Boys—managed to garner more than Rs 100 crore at the box office.

"While the box office collection of regional movies was steady, due to PVR Inox’s lower market share in the South there may be no meaningful contribution to the company's business," Chawla pointed out.

How the largest player performed

PVR Inox is expected to report a loss of Rs 118 crore for the three months to March 2024. In the previous quarter,  the company's net profit had declined 20 percent to Rs 12.8 crore from Rs 16.1 crore a year earlier, because of fewer hits and a drop in theatrical box office revenue.

In Q4, PVR Inox is estimated to report a 22 percent quarter-on-quarter decline in revenue due to below-par performance of movies, said Emkay's Chawla. The multiplex chain is expected to report a revenue of Rs 1,206 crore versus Rs 1,545.9 crore in Q3.

While the third quarter had underperformed versus Q2 which PVR Inox had termed the best quarter of all time for the company, the October to December period still had big releases, like Animal starring Ranbir Kapoor that earned over Rs 400 crore on a budget of Rs 100 crore.

"Average ticket price (ATP) should sharply reduce to Rs 234 in Q4 from Rs 271 in Q3, driven by poor movie performance coupled with promotional offers for several movies. Spend per head (SPH) should decline slightly to Rs 128 in Q4 from Rs 132 in Q3," said Chawla.

Advertising revenue, which was showing an improvement, is expected to decline around 15 percent over the previous quarter, according to Elara Capital. In Q3 FY24, the Hindi box office had bounced back and with big December releases, advertising income had recovered 23 percent.

The brokerage estimates PVR Inox’s box office revenue and food and beverages (F&B) revenue to grow 13.3 percent and 20.8 percent on-year, respectively. Revenue from sale of F&B stood at Rs 476.3 crore in Q3, up 8 percent from Rs 439.1 crore in FY23.

PVR Inox’s share in industry-wide box office collections has been in the band of 32-37 percent, said Joshi. "If we take a 34 percent share in Q4 which is an average of the last four quarters—PVR Inox’s net box office collection (NBOC) for the reporting quarter could come in at Rs 657.4 crore out of the total industry-wide NBOC of an estimated Rs 1,933.8 crore in Q4," he said.

Lower footfall, occupancy

Total number of movie-goers (footfalls) for PVR Inox are expected to decline around 14 percent on a quarterly basis to 3.14 crore in Q4, the lowest in the fiscal year, given the lacklustre performance of movies, said Chawla. "The lack of big-budget movies in Bollywood and Hollywood, coupled with no sleeper hits, will result in sub-par occupancies in the quarter," he added.

Elara expects 24 percent occupancy due to muted footfall.

Total traffic in Q3 stood at Rs 3.65 crore while occupancy in PVR Inox cinemas was 25.2 percent.

Silver lining

While the big-banner releases underperformed in Q4, smaller films stepped up their performance. This was a positive surprise, as this was a segment that has been under pressure, not having mad a full recovery from the Covid hit.

"This is the first quarter post-Covid where smaller budget films such as HanuMan, Article 370, Teri Baaton Main Aisa Uljha Jiya and Crew have shown traction, increasing the share of such films in the overall box office collection to around 35 percent currently versus 10-12 percent in the post-Covid period. This also was helped by lower ticket prices and offers, but better content quality has led to the growth," said Elara Capital.

The brokerage firm expects audience numbers to improve if the growth in box office revenue for smaller films sustains, and make up the 25-30 percent gap to pre-Covid levels, the firm said.

June outlook

The pipeline for the first quarter of the current financial year is not that exciting, noted Prabhudas Lilladher's Joshi.

While exhibitors are counting on the next big release Kalki 2898 AD starring Telugu films' superstar Prabhas and Bollywood stars Deepika Padukone and Amitabh Bachchan, the film is likely to get pushed further and release in June. Its opening was scheduled for January but was moved to May 30, which was changed again after the dates for the Lok Sabha election were announced, with Telangana and Andhra Pradesh going to polls on May 13.

"The political scenario is one reason which is affecting the footfalls in theatres. Producers need to make noise for their films so there is awareness among audiences. However, it is difficult to cut through the political noise currently. To generate buzz currently, makers will have to spend more but aggressive marketing will be a costly affair and seeing the way the box office is behaving currently, producers do not want to spend more," Johar said.

He added that April has not started well and while business was expected to pick up with Eid releases including Akshay Kumar and Tiger Shroff starrer Bade Miyan Chote Miyan, earnings have been subdued.

"New releases have not done well. I foresee another below-par quarter (April-May-June). May has no big releases," Johar said.