PVR INOX to close 70 underperforming screens, focusing on real estate monetization

According to its most recent annual report, leading multiplex operator PVR INOX intends to close 70 underperforming screens in fiscal year 2025 and explore the potential monetization of non-core real estate assets in prime cities such as Mumbai, Pune, and Vadodara.

Though the company plans to install 120 new screens in FY25, it will also close almost 60-70 underperforming screens as it strives for profitable growth. South India will account for roughly 40% of new screen additions, with a "strategic focus" on this underserved region as part of its medium to long-term goal.

Furthermore, PVR INOX is redefining its growth approach by shifting to a capital-light growth model, which will lower capex on new screen additions by 25 to 30% in the current fiscal year.

PVR INOX will now work with developers to jointly invest in new screen capex by transitioning to a franchise-owned and company-operated (FOCO) model. It is also considering the monetization of held real estate assets, as the leading cinema exhibitor aspires to become a "net-debt free" corporation in the near future. "This involves the potential monetization of our non-core real estate assets in prime locations such as Mumbai, Pune, and Vadodara," said Managing Director Ajay Kumar Bijli and Executive Director Sanjeev Kumar when addressing the company's shareholders.

In terms of growth, they stated that the goal is to accelerate expansion in underrepresented markets. "Our company's medium to long-term strategy will include increasing the number of screens in South India due to the region's high demand for films and relatively low number of multiplexes in contrast to other regions.

"We estimate that South India will account for about 40% of our total screen additions," they stated. PVR INOX opened 130 new screens across 25 cinemas this year while also closing 85 underperforming screens across 24 cinemas, in accordance with its profitable growth strategy.

"This rationalization is part of our ongoing efforts to improve the portfolio. "The number of closures appears high because we are doing it for the first time as a combined entity," Bijli explained. PVR INOX's net debt for fiscal year 2024 was Rs 1,294 crore.

According to CFO Gaurav Sharma, the company lowered its net debt by Rs 136.4 crore last fiscal year. "Although we are reducing capital spending, we are not sacrificing growth and plan to open around 110-120 screens in fiscal year 2025. At the same time, while remaining committed to our aim of profitable growth, we will eliminate over 60-70 screens that are underperforming and a burden on profitability," he stated.

In fiscal year 2024, PVR's revenue was Rs 6,203.7 crore, with a loss of Rs 114.3 crore. This was the first full year of operation for the amalgamated firm PVR INOX. Bijli stated that "80-90% of the targeted synergies was achieved in 2023-24" regarding merger integration efforts. PVR INOX experienced a "higher-than-normal" 10% increase in ticket pricing and 11% increase in F&B spending per person in fiscal year 24.

Sharma explained that this was mostly due to merger synergies resulting from the amalgamation of PVR and INOX. "Going forward, the increase in ticket prices and food and beverage spending per head will be more in line with the long-term historical growth rates," according to him.

PVR INOX intends to recover pre-pandemic operational margins, improve return on capital, and generate free cash flow. "We aim to boost revenue by increasing footfalls through innovative customer acquisition and retention," adds Sharma. "We are also driving cost efficiencies by renegotiating rental contracts, closing under-performing screens, adopting a leaner organizational structure, and controlling overhead costs."