Movies were his first love. Building multiplexes is his current love. India’s multiplex man, the debonair Ajay Bijli would make no mean hero if he were to star in a movie. He even spouts film dialogues, a la Deewar. “Hamare paas maa ka aashirwaad hain and har ek cinema theatre mein ek mandir hain (We have our mother’s blessings and a temple in each theatre),” says Ajay Bijli, chairman and managing director, PVR Ltd, when asked the reason behind the multiplex chain’s trailblazing growth. He has a brother, Sanjeev Kumar, just as the hero in the seventies box-office hit had – the only difference is the siblings are on the same side of the table. He even has a story to match. Starting with one multiplex in 1997 (it already had a single screen theatre in Delhi called Priya, the precursor to the multiplex business), the company today boasts 467 screens across 105 multiplexes in 43 cities.
PVR was in the news this month when it inked a deal to snap up DT Cinemas for Rs 500 crore. With this, PVR’s presence will extend to 44 cities with 115 multiplexes and 506 screens. PVR also gets the right of first refusal to be the multiplex partner in all upcoming DLF malls. But Bijli isn’t resting. His yardstick is China which has 20,000 screens against India’s 2000 screens which took 18 long years to happen.
PVR’s own story has been slow and torturous. After launching India’s first multiplex—PVR Anupam—in tony Saket in South Delhi, it took PVR another six years to see its second multiplex take off at MGF Mall, Gurgaon in 2003. Remembers Sanjeev Kumar, joint managing director, PVR, and Bijli’s younger brother: “There were no locations available. Despite consumer acceptance, we spent two years knocking on the doors of developers who were not convinced enough to build malls. So the two multiplexes that we launched in Delhi were single screens converted—Naraina and Vikaspuri.”
Bijli explains the reasons behind the slow growth in the multiplex business in India. “To begin with, India has a very high entertainment tax which varies from state to state. In Mumbai which is considered to be the capital of the entertainment industry, it is 45%, while in UP the tax rate is 60%. The second impediment has been the poor infrastructure growth. While China has really focused on developing infrastructure, India is taking its own time. Cinema piggybacks on development of malls, shopping districts, etc. Other regulatory factors such as foreign direct investment (FDI) in retail, etc., too are responsible. In India the industry should not dream of a similar growth rate like China,” he says.
But that is slowly changing. Movie exhibition companies are now on the fast track to expand their presence across the country. It all began last year with Kerela based Carnival Cinema’s entry into the big league through three major acquisitions—HDIL Broadway that brought it 10 screens, Reliance owned Big Cinemas with 252 screens, and Stargaze Entertainment from Network18 Media11 with 30 screens. Next, it was Inox Leisure Ltd that created a ripple in the market with its acquisition of Satyam Cinemas which gave the company access to 38 screens. Hot on the heels was Mexico based Cinepolis acquiring Fun Cinemas with 83 screens.
So the stage was set for PVR to maintain its edge through the DT Cinemas acquisitions, even as it focussed on organic growth. “I think it is really a case of focusing on one thing and doing it well,” says Kumar. “As for others, these are huge business houses with multiple businesses and movie exhibition was just a small piece of the entire portfolio. Also, I think somewhere down the line they made a decision to stick to business that they are good at, just like we did. They did not start as a cinema exhibition company that branched out to several businesses.”
DLF Ltd, the parent company of DT Cinemas, echoed Kumar’s sentiments when contacted. Saurabh Chawla, senior executive director, DLF Ltd said, “The deal is in line with our strategy to focus on our core business and divest non-core businesses or assets. It shall provide the management a more focused approach for enhancing value especially in our retail mall business.”
However, this is not the first time that the Bijli brothers tried to buy the movie exhibition business from DLF. In November 2009, DLF had signed an agreement with PVR to sell DT Cinemas, but the deal fell through in February 2010.
Analysts call it a season of mergers and acquisitions in the movie exhibition business and say more such deals are on the anvil. According to the 2015 Ficci KPMG report, compared with the US which has 125 screens per million people, there are just seven screens per million people in India. “The industry might witness another round of consolidation soon with the major multiplex chains acquiring smaller regional chains. Not to forget success in this business depends on scale which can be obtained either organically or inorganically,” added Jehil Thakkar, partner and head, media and entertainment, KPMG in India.
Panoramic View
For PVR, the game has just begun. “For the longest time, home grown retail brands in India have remained regional brands. As we continue to enter new markets we would like to remove this perception that we are a northern India brand,” says Bijli.
Determined to shake off the North India tag, in FY16 PVR is set to own 10 new properties with 60 screens across the country. The multiplexes will be coming up in cities such as Chennai and Bangalore and also smaller cities including Baroda, Ahmedabad, Kolhapur, Baroda, Kota and Mysore. “Three or four films get released every week including regional movies. So a minimum four-plex with 1000-seat capacity is a must for the business in tier 2 and 3 cities.
Also, these markets are continuously evolving. Today there may be zero scope in one market but that may completely change tomorrow with developers building two-three malls,” says Kumar.
A lot of homework is done before selecting a city. From the city to the shopping mall and its location, every aspect is considered before taking the plunge. Bijli explains that apart from meeting the developer and visiting the place, the duo also stay in the city for two-three days to get a feel of the place. “We drive around the location at night to identify the kind of crowd that hangs around the place.
We try to gauge the mood of the city by analyzing how people like to spend their time with family and friends,” he adds. PVR usually inks long-term deals of 25-30 years at an early stage, preferably at the stage of inception
of a mall, after ticking all the checkboxes.
PVR is not the only one chasing the small town dream. Its rivals too are readying for a tough fight. Carnival Films is investing Rs 500 crore in setting up 500 screens in Madhya Pradesh. It runs a project called Jalsa, under which the company inks a long-term property lease with local land owners and then join hands to build a mini-shopping centre comprising a hyper-retail player, a multiplex and a food court. “The idea is to grow organically by building these mini shopping centers in small cities in the state of Chattisgarh, Bihar and Madhya Pradesh,” says Shrikant Basi, chairman, Carnival Cinemas.
Expansion, organic or inorganic, requires its share of funds. PVR, which went for an initial public offer (IPO) in 2006, raises additional funds through private equity firms. After its first tryst with ICICI Securities in 2003, the company currently has L Capital Asia, the private equity arm of Louis Vuitton Moët Hennessy (LVMH) and Renuka Ramnath’s private equity firm Multiples Alternate Asset Management as its investors. The company recently raised R350 crore from Multiples for the DT Cinemas deal. Bijli says an investor’s role is also to add fuel to ambition. “We had a private equity investor investing at a very early stage. The investor also pushes you to go full steam in the market to obtain a certain scale. Then in 2006 we listed the company and once you list a company you’re living on ‘Kyamat se kayamat tak’ (from one precipice to the next) basis,” he says, in classic Bollywood style.
For the record, L Capital owns 15% stake in the company while Multiples owns close to 20%. Ramnath, who first interacted with the company in 2003 as the CEO of ICICI Ventures, continues her ties through her private equity firm Multiples. The fact that brand PVR has a cult following in the country, repeat footfalls and is a trusted brand makes it a great investment, she says. “The other factor that has worked in their favour is that they treat investment firms as genuine partners who are consulted at crucial junctures,” she adds.
The movie exhibition industry’s fortunes depend on how well a movie does at the box office. With very few hits in 2014, PVR ended FY15 with its profit after tax at Rs 13.6 crore from a high of R57.8 crore in FY14. This was compounded by no big releases during the last quarter of FY15 with the ICC World Cup being played out. “There have been cases when a film has performed beyond expectations and we had to increase the number of screens. The opposite too has happened. For example, there was no action in Action Jackson. In case of Bombay Velvet a lot of shows were allocated but it did not do well,” says Bijli. The company generates most of its revenue from markets such as Delhi, Gurgaon, Mumbai, Bangalore and Hyderabad.
This is also the reason why each movie is not released on a large scale. PVR has a distribution department in Mumbai headed by Kamal Gianchandani, CEO of PVR Pictures, which works with producers and distributors to understand the requirement for each movie. “While the intent is to play all kinds of movies everywhere, the scheduling is done on the basis of catchment area. India is a very disparate market and every demographic behaves differently. We constantly get feedback from the cinema manager of every area on the kind of movies that have generated high or average footfall or even less. There should be a minimum consumer base within that catchment for a particular genre,” says Bijli. For instance, Hindi films such as Piku and Tan Weds Manu Returns were released at a mass level while Dil Dhadhake Do, a movie meant more for urban population, was only released in the metros and mini-metros.
“Similarly, English movies such as The Avengers, Jurassic World and The Fast And The Furious were released everywhere while for Birdman that requires a very discerning taste, we did not release more than 30 prints. We have to be very careful where we play what,” he adds.
PVR has a series of sub-brands catering to different segments of the market. While PVR Director’s Cut located at Ambience Mall at Vasant Kunj, Delhi is a luxury offering from the company, PVR Premiere is a premium chain of 70 screens with 701 Dolby surround system and 4k digital projection with 3D screens. The company also run PVR Cinemas targeted at the middle class and PVR Talkies in tier 2 and 3 cities. And that’s not all, each multiplex is designed keeping in mind the vicinity. Calling PVR a collection of cinemas, Bijli says one need to respond to the demographic and the geography. “For example, Sanjeev designed two cinemas recently- one in Udaipur and the other in Mysore. The theatre in Mysore is located right next to the palace while Udaipur is a city of palaces, so it was important for our theatres to respond to the way the surroundings have been designed. We are about to open a new cinema in a tech savvy suburb of Bangalore, Whitefield. That cinema looks very futuristic and speaks a different language,” explains Bijli.
In addition to the ambience, food and beverage plays a big role in getting the customer to dig deeper into her wallet.
In fact, PVR has been one of the few players to woo the otherwise frugal Indian consumer with its menu. For Kumar it is the constant experiment with food and drinks that has helped in keeping the mojo alive, though he admits that the company does not always get it right. “In addition to experimenting with flavours of food and drinks, we customise the food according to the taste preferences of the people in a city. But then there are times when it takes some time to get it right. For example, in Kochi it took us close to six months to get the menu right. We kept on wondering what was wrong with it until we realised people there are avid non vegetarians. Everything fell into place the moment we introduced a lot of non-vegetarian food in the menu. On the other hand our multiplexes in Gujarat
only serve vegetarian food items,” he adds.
According to Ficci KPMG 2015 report, the domestic theatre industry was worth R126.4 billion in 2014. The gross box office collections of top 10 Hindi films in 2014 grew by 2.4% over 2013 collections and 11.7% over 2012 collections.
The domestic theatrical segment is expected to touch R204 billion by end of 2019 and grow at a CAGR of 10% from 2014-2019.
After the urban markets, it is now the turn of tier 2 and 3 cities to see a surge in the number of theatres. “Mumbai and Delhi and National Capital Region (NCR) together constitute about 60% of the total box office collections for most Hindi films. With only 25% of the malls located in tier 2 and tier 3 cities, the next level of growth is expected to come from these markets. In fact, we have already reached a stage where we can see theatre companies making a dash for the small towns,” says KPMG’s Thakkar.
For PVR, these are interesting times. While the company still has a few single screens left in its kitty, these are mainly heritage properties located in the heart of cities such as Mumbai and Delhi. “We are completely out of the single screen game and totally focused on building as many multiplexes as possible across the country. With rising aspirations, people in tier 2 and 3 cities too now want a better movie viewing experience and this is what we will be providing,” says Bijli.
