Note ban poses similar challenges for PVR, Inox

Impact will hinge on incentives offered by these companies to combat currency swap

Demonetisation is impacting multiplexes such as PVR and Inox Leisure (Inox) in many ways. One, this process is pulling down the footfalls as well as ticket sales of multiplexes and other cinema exhibitors. Second, these companies' ad inventory too has come down from both national as well as regional advertisers. This means the three main revenue streams of multiplexes namely ticket sales, food and beverages sales and ad revenues are under pressure. This, in turn will have a bearing on their financial performance in the on-going quarter. The actual impact though will be contingent on multiple factors.

For instance, PVR is present prominently in the premium locations and is more dependent on national advertisers. Inox, on the other hand, had higher number of cash sales (about 60 per cent) before demonetisation as compared to PVR (40 per cent) and derives higher proportion of revenues from smaller cities. Cash transactions are more prominent in smaller cities and usage of payment wallets, debit/credit cards is higher in premium locations. In fact, in the September quarter, PVR had higher advertising revenues per screen than Inox. Does this mean that PVR will be lesser impacted from note-bandi than the latter? The answer to this is not straight forward.

Abneesh Roy of Edelweiss Securities, says, "Logically Inox should be more impacted than PVR which has more presence in the bigger cities. But Inox is giving customers facility to withdraw cash from their counters to attract more footfalls." PVR too has taken steps to counter the note ban driven slowdown by waiving off convenience fees if customers book tickets directly from the PVR website, giving discounts on F&B for tickets booked online, and so on.

"In the wake of the cash crunch environment, Inox witnessed 25-30 per cent lower footfalls in November," estimate analysts at domestic brokerage Sharekhan. The brokerage believes Inox will see a 6 per cent hit on its revenues this quarter due to the note ban. Motilal Oswal Securities has trimmed its FY17 earnings estimates for PVR by 37 per cent and for Inox by 34 per cent, which suggests that analysts are seeing similar earnings impact for the two companies.

The stock prices, too, have moved in tandem with these downgrades. PVR (down 14 per cent) and Inox (down 11 per cent) have lagged the S&P BSE Sensex, which has fallen 3 per cent since November 8. The stocks seem to be factoring in some of the negatives. Positively, some analysts like Roy believe the note ban pain will be over for multiplex companies by January end. While the lean period of school/colleges exam starts after that, a strong movie pipeline ("Dangal", "Passengers", "Raees", "Kaabil", "Rangoon", "Fifty Shades Darker" and "The Shack", amongst other) should support revenues.