REVIVAL AND REIMAGINATION
FY 2020-21 was a challenging year for the entire world and being in a customer-centricindustry we travelled together with our patrons through the trough and crest of the year.As the year began we had a fair understanding that things would not be smooth sailingand the way the year panned out showed that our assessment had been right. We worked amidmany constraints restrictions and shutdowns. Despite all this our people came togetherto help us overcome these unprecedented times in what will forever remain one of the mostremarkable years in recent memory.
There were two things we turned our attention to during this time. One taking care ofour people and two managing the operational challenges. We created five task forces forliquidity management government relations the film industry customer engagement andoperations. Together with our partners we worked on cost optimisation measures while ourcorporate team and staff took a pay cut on their own volition to further bring downoperating costs. We were able to balance all fronts and were looking eagerly forresumption of the joy run even as second wave of the pandemic made its appearance.
As the vaccination drive in India picks up we are hopeful that this phase will soon bebehind us. We believe that India's robust film-making sector and pent-up customer demandwill bring back the audiences to the theatres sooner rather than later. In any case wewill find our way to continue delighting our patrons with best-in-class service and safetystandards.
Our priority right now is to safeguard our people and prepare for the impendingreopening of the theatres. PVR employs around 7763 (including off roll) people as of FY2020-21. As of July 31 2021 100% of our employees are vaccinated with at least a singledose of vaccination. During the year we set up a task force to take care of our employeesand their dependants who were impacted by COVID-19. We provided food transportationambulances medicines oxygen concentrators doctors on call and assistance on vaccinationto our staff.
PVR employees vaccinated
At the operational level our focus was on managing our fixed costs so that the cashburn is reduced. We were successfully able to reduce our fixed cost substantially to thetune of 63% in FY 2020-21 compared to the previous year. This was made possible due to thesupport from all our stakeholders including developers employees and vendors. Withouttheir belief and trust in the business we would not have been able to reduce our costs sosignificantly. Together with this we were able to maintain sufficient liquidity to coverall our obligations. The enormous confidence that our investors have in the PVR brand wasevidenced from the fact that we were able to successfully raise Rs 1800 Crores ofadditional liquidity (Rs 1100 Crores of equity and Rs 700 Crores of debt) during thepandemic. We also maintained a healthy market rating (CRISIL A1+) on the back of ourstrong market position and established brand healthy operating efficiency strongfinancial risk profile and ample liquidity.
KEY STRATEGIC INITIATIVES
We were in the rescue phase earlier; we are in the revival phase now; and then comesthe reimagination phase. In the reimagination phase we are looking at somediversification strategies which leverages our strengths of the core cinema business 100Million loyal customer base and the PVR brand. Gourmet Popcorn: We manufacture andsell gourmet popcorn in cinemas malls airlines railways and online through e-commerceplatforms. This year we also launched our own microwaveable popcorn brandPopmagic' the first of a slew of different products that we are conceptualising.Although the popcorn business outside of cinemas in India is still in its infancy we arelikely to get strong traction. We believe we have an excellent product in our premiumpopcorn with 100% organic premium quality imported corn specially curated flavours byCelebrity Chef Sarah Todd *100% vaccination includes all employees working for PVR as ondate who have taken atleast 1 dose of the vaccine. It excludes employees who areineligible to take any approved vaccine for any reason whatsoever a strong brand to backit up and our market entry has been at the most opportune time.
Online Food Delivery: We have been popular for its F&B offerings continuouslyevolving menu and innovative additions in cuisines and culinary techniques from time totime. We bring together some of the world's most renowned chefs and industry pioneershelping our food divisions to bring the finest quality in food to the movie lovers. Wehave tied up with Swiggy and Zomato so that our patrons can enjoy the same from thecomfort of their homes as well. We beta tested the same during H2 FY 2020-21 from ourselect cinema kitchens. We plan to launch the same in FY 2021-22 from ~90 cinema kitchensacross India once the pandemic subsides and cinemas are allowed to operate.
EXPERIMENTING WITH VIEWING FORMATS
As before we will keep up the momentum of expanding our presence in Tier 2 and Tier 3cities where cinema enthusiasts are growing in number. Rapid urbanisation growingaspirations and the need to seek out quality entertainment have made it a win-winsituation for both cine goers and multiplex owners in these regions. Although singlescreen cinemas are seen to be dying out we are employing our capabilities to revivethese. One such example is Deep Cinemas in Kanpur. Our design and project team hasextensive expertise in transforming old facilities giving them modern high-end interiorsthat reflect PVR's aspirations. We're willing to work with partners to revitalise theseproperties and support formats that will improve the customer experience and boosttraffic. After a lengthy hiatus PVR Sahu Lucknow's popular single-screen cinema wasrenovated and reopened as an exemplar of a modern movie theatre complete with new-ageamenities.
In the coming days we expect the premium format to gain traction delivering a uniquemovie-going experience to consumers in theatres equipped with the necessary technology.Even with premium formats going to the movies will continue to be the most affordableform of entertainment when compared to other leisure activities. We also expect luxuryformats to expand in Tier 2 and Tier 3 cities due to increased consumerism brandawareness higher discretionary incomes and limited out-of-home entertainment options.Our aim is to grow our screen network even further with an emphasis on diversifying ourportfolio's premium offerings.
DIGITAL ENGAGEMENT WITH OUR CUSTOMERS
We want to enhance our engagement with our costumer through the Digital universe andthat would be a core part of our growth strategy. We will continue investing in PVRPrivilege our loyalty programme which had a fantastic response so far and ourinvestments in digital and omni-channel technologies to engage our customers better andwiden our access. We already partner with Google Home allowing Android users a seamlesspre-visit experience. This experience is also available to Apple watch users. We are onthe lookout for more such technology partnerships that enhance customer convenience.
CO_EXISTING WITH OTT
OTT has been around for a long time. In the US OTT and cinemas have co-existed foralmost 10 years and in this period Box Office ticket sales have only increased. ComparingOTT platforms to closed theatres in our opinion is unfair and similar to comparing aninjured player to a healthy one.
India as a market leader releases the highest number of movies globally. It's aheterogeneous disparate and volume driven market and the majority of ticket sales aregenerated from Bollywood and regional content and is not solely dependant on Hollywoodcontent.
The growing popularity of OTT in India and globally has often been seen as acounterproductive development for cinema halls. However we do not see it that way. Ifanything OTT has furthered the cause of entertainment and its growth is not inverselyproportional to that of the cinemas as is commonly believed. There is no denying that thepandemic has had a huge role to play in the proliferation of OTT in India. But rememberwe have weathered several developments in the home entertainment industry fromtelevision to satellite VCRs DVDs and now streaming. Since both OTTs and movie hallsdeliver differentiated experiences and sometimes diverse content they are not mutuallyexclusive. People will throng the cinemas for that bigger-than-life experience while OTTwill hold its attraction with its offer of long-form series. The pandemic has seen anumber of movies being released on OTT platforms. This trend might continue even when thecinemas open. But film producers will continue to prefer a theatrical release for theirfilms. A release in the theatres has its own attraction. For one better earnings at thebox office compared to the one-time payment of a fixed fee paid. There is again theattraction of creating a visual feast for cinema-goers or the mega optics generating moreenthusiasm or talking points and grabbing more attention that a theatre release invariablypromises. That these 2 medium of cinema exhibition will co-exist is also evident from thesuccess of regional movies like Master Uppena and Jathi Ratnalu released in Q4 FY2020-21. China managed to control the pandemic early and saw phenomenal numbers at the BoxOffice. Chinese New Year brought an all-time high of $ 1.2 billion with a staggering 160Million viewers. Also it is the first time that the Chinese Box Office has earned morethan $ 155 Million for 5 straight days. Detective China Town 3' scored the largestopening day and weekend gross of any movie in any single market anywhere overtakingAvengers End Game'. It earned a record-breaking $ 393 Million which is thehighest-ever opening weekend earned by a film in a single market topping the $ 356Million earned by Avengers Endgame' in US on its opening weekend in 2019. HiMom' surpassed Detective China Town 3 as far as Opening Day gross is concerned (grossed $195 Million on its opening weekend). Demon Slayer: Mugen Train' the Japanese animefilm has become the all-time biggest Japanese film with $ 368 Million Box Officecollections in Japan. In addition we can look at box office collections of Hollywoodtentpoles like F9:The Fast Saga ($ 620 Million) A Quiet Place 2 ($ 290 Million+)Conjuring: The Devil made me do it ($ 190 Million+) and we can be rest assured that thegrowth prospects of the cinema exhibition industry remain intact.
Undoubtedly this has been a devastating time for cinema exhibitors more so for singlescreen owners. We believe that once the pandemic subsides single screens will make wayfor larger and stronger multiplex players which will lead to market share gains andopportunities for inorganic expansion for the well capitalised players. Of ~9500 screensin India 3200 are multiplex screens and the remaining are single screens. We believesome screens may not open post pandemic and will provide greater market share to us asindustry leaders.
We look forward to the joyous return of our patrons to the movie hall. We assure themcomplete safety under our SOPs which have been drawn up keeping international guidelinesin mind. Our staff is fully vaccinated to serve and we will continue to prioritise thehealth concerns of cine goers without compromising on the viewing experience. We have beenfortunate to have investors who trust our capabilities. We have superb employees whounderstand their responsibilities to ensure people's faith in our brand. We hope that ourpatrons employees partners and all our stakeholders will continue to retain theirconfidence in us.
|Ajay Bijli |
|Chairman and Managing Director |
|Sanjeev Kumar |
|Joint Managing Director |