Our focus is to expand in South India, says Ajay Bijli, MD PVR Inox

Just after its launch in the IT city, PVR Inox managing director Ajay Bijli spoke on the company's screen additions, investment strategy, and growth plans

This report has been updated

India’s leading multiplex operator, PVR Inox, is expanding its footprint in South India. Last week, it opened a 14-screen megaplex in Bengaluru and a 9-screen multiplex in Kochi. The Rs 3,559 crore (FY23 revenues) firm is also unrolling an ‘asset light’ model to boost its operating margins. Just after its launch in the IT city, PVR Inox managing director Ajay Bijli spoke to Vanita Kohli-Khandekar in a video interview on the company's screen additions, investment strategy, and growth plans.  Edited excerpts

You seem to be augmenting your footprint in the South.

Bengaluru has the highest movie consumption in the country. This is our 172nd screen in the city. (Of PVR Inox’s 1,741 screens, about 572 are in the South). Our focus is to expand in South India where multiplex penetration is low. Going forward, 35-40 per cent of the new screens will be opened in South India.

You mentioned some pivoting.

Now that one year of the merger (with Inox) is over, two years of Covid are over; we have taken a little pivot. We have gone for a much leaner organisation structure. Earlier, we had four CEOs. India ‘A’ was with one person, India ‘B’ was with another person. And, I felt after one year of operating that consistency in experience wasn’t there. We wanted to ensure that. Now, Gautam Datta is the CEO only looking at the revenue side – tickets, F&B (food and beverages), ad sales. Pramod Arora has been made the CEO for growth, investment and disinvestment. Also, we are going to be brutal about where we invest now.

Could you elaborate on that?

In this merger and post-Covid, some of the metrics on which we are measured by investors and markets went off track. We were always looking at Ebitda (earnings before interest, taxes, depreciation and amortisation) margins but going forward, we are looking at where and how we want to deploy capex (capital expenditure). There are three ways in which we are doing this. One, we are taking inspiration from certain retail companies that have done very well in creating FOCO – Franchise Owned, Company Operated - or asset-light models like hotels do. We want to make sure that our capex is used sparingly in projects, cities and demographics that are value accretive, which is the South basically. But North, West, and East where we open is going to be on the FOCO model where the developer invests. He gets some return over and above on the rentals we agree. And the rental will be on revenue share.

Two, we are taking a look at value-destructive or Ebitda-negative properties. There are properties that are 15-20 years old. Some malls have lived their life, the escalators and elevators are not working. So, 100-odd screens will be closed down this year because they are depleting Ebitda. And, if some of those properties are new and their lock-in periods are over, we are going back to the developer and asking for a reset of the rentals so that every property becomes profitable. The whole focus is on Roce (Return on Capital Employed) and Ebitda.

We are still at 1,741 screens. We opened 135 last year but we closed 82. We are opening another 120-odd this year but closing another 100. But the 120, we are opening are value accretive and the 100 we are shutting are value destructive. We have 14 million square feet under our management; that is a lot. We can make much better use of it by making sure the deployment of capex and occupancy costs (rent and CAM or common area maintenance) are reset. Earlier, in that competitive intensity, the rent-to-revenue ratio went high. We have to bring that down.

Three, we also have a large land bank in this merged entity. We have hired an IPC (international property consultant) to dispose of that and pare down our debt.

What immediate impact will this have in the next few quarters and over the long term?

Improving our Ebitda margins, and getting them back to pre-Covid levels is my immediate focus. Once we get Ebitda to 19-20 per cent, all the other metrics fall into place. This should take about 4-5 quarters.

How much of this is coming from the pressure on the theatrical business? 2023 has been a great year for cinema but is there a sense of wanting to prep for the future.

We had 300 million people coming to our theatres over the last two years. More and more people are going to come. A certain segment has taken time because things were closed for 2 years. The 2025-26 Hollywood slate is phenomenal from every single studio. In India, this year Shah Rukh (Khan) doesn’t have a movie, Aamir (Khan) has just one movie. Next year is crazy again. But I still want to be conservative. My thinking is let’s peg our costs 140 million (that is the number of tickets PVR sold last year). I am being cautiously optimistic.