PVR: Take a break

Multiplex operator PVR had a difficult start to 2008-09 with the IPL cricket tournament keeping people away from the theatres.

The year didn’t really end on a very happy note either because while revenues up a reasonably good 32 per cent at Rs 352 crore, the operating profit margins were down sharply by 500 basis points resulting in a near 60 per cent fall in net profit.

Occupancies during the year came off by just under 20 per cent and footfalls for comparable properties weren’t very encouraging.

The March 2009 quarter saw very few films doing really well — collections from the top performing films were down to a third of the levels seen in the December 2008 quarter.

While PVR did well to maintain its share of the box office collections, the average ticket prices for comparable properties were more or less flat. As a result, stand-alone revenues in the March 2009 quarter were up just 6 per cent and the company posted a marginal loss.

Of course the company has made investments in new properties and a bowling alley which should pay off later. However, it’s worrying that PVR Pictures, a subsidiary that produces films, has posted an operating loss, indicating how risky the business can be.

PVR plans to roll out 42 screens in the current year—-it currently operates around 108 screens. While footfalls and occupancies should start looking up in the next few months, with several big releases scheduled.

However, the tussle between multiplex operators and film producers over the ratio for revenue sharing will hurt the company’s numbers for the June 2009 quarter.

PVR’s business model — exhibition, production and distribution of films and retail entertainment — has tremendous potential in a country like India where disposable incomes and aspirations are growing.

However, analysts believe that earnings growth this year will be helped more by the lower depreciation charges rather than any strong rise in the top line.