PVR Ltd.- Play on increasing disposable income

Yes.Thanks for pointing that , Didn’t realize the D/E ratio gone up for 4 days since i last looked at it in 2017-18

I agree to your point. Business is going to be disrupted for as long as the covid19 fear stays in the air. As far as govt is considered , the business would be in the last of pecking order , when lockdown is going to be lifted. Now PVR along with inox has invoked force majeure to not pay rentals. Once they open the Multiplexes they will have to start paying rent and on top of that work at lower capacities. I feel demand from consumers will also be lower. For instance , I would myself prefer to be staying @ home rather than take the risk to go out and watch a movie. I think even the producers and distributors may not be very eager to release the movie immediately after the lockdown. So there will be a drag on revenues due to that too. But I don’t see any reason for the business not to bounce back to the normal levels once the covid crisis is over. But that may take atleast a quarter or more. But will the stock be available at these valuations then, is something we need to think about

Most of tenants like Starbucks ,Oyo have sought refusal to pay rentals under force majored conditions but most agreements may not have this clause for the purpose of rental waiver as it’s a Black swan event and could not be anticipated by anyone, though not sure if PVR has this clause in their agreements. Its also true that the property owners or landlords would definitely have the burden of paying EMI,interest,principal etc towards the property. Its therefore is a chain and is not going to stop and would land in courts. Therefore to accept that PVR or other tenants would get the relief on asking may not come about.

Multiplexes like PVR serve as anchor tenants in indian malls . They drive considerable footfalls ,which helps other businesses in the mall . So they may be able to strike a better bargain with mall owners than say a starbucks or other retail shops . No large mall would want to lose a multiplex as the hit to the footfalls could be considerable.


PVR also seems to be offering forward booking to raise cash.

Both Inox and PVR breakout after this news.

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There are two things to consider while investing in PVR currently.

  1. Occupancy levels - Occupancy levels for pan india players like PVR is around 30-35% on an annualized basis and this is directly related to releases of big budget movies where the occupancy levels are around 90-95% for 1 week. In every quarter there is atleast 2 big budget movies that releases which preps up this occupancy rate. Given that even movie production is halted and sentiment is low, big budget movies are unlikely to release until Q3/ Q4 of 2020-21. Even if it releases occupancy rates are unlikely to be at historic levels until Q1 of 2021-22.

As a movie-goer i would prefer not to go to movies even if its from my favourite star. Given that scenario for star driven movies, this essentially rules out all the small budget movies which are sleeper hits for the next 6-9 months. This will have a cascading effect on producers since the industry is dominated by only 10-15 top producers. Since they simultaneously produce big and small budget movies, new production ventures will not be undertaken for next 9-12 months.

  1. F&B revenues - F&B revenues of multiplexes would be around 15-20% of revenues and would contribute margins of around 60%. With the low occupancy levels and change in consumer behavior, this will also go for a toss.

The pain for this industry is just too big to imagine and comprehend currently. I would wait and see for 2-3 quarters and then take a call on investing.


Could this be the beginning of a new trend setting in Online vs Theatrical Release argument

This online vs theatrical release debate is a very interesting one indeed. I was speaking to a industry veteran in this industry and he opined that the industry dynamics of both these segments are different. It is also very difficult for a movie which is produced targeting a theatrical release to be profitable if it has only a digital release.

The cost structure for a digital release has to be planned considering the revenue stream from that source. Also, take an example of a movie like Baahubali or Avatar which is largely a visual experience. The amount of spending on VFX would be astronomical and covering the same through digital release only will be very difficult. However, content driven movies driven more by tighter screenplay and dialogues, produced on an optimal budget should be profitable in the digital medium.

In summary, I feel there will be a sea change in the type of content being produced for both the mediums. The different strategies that the theatres adopt to pull the crowd back to theatrical releases will be interesting to observe. Normalcy is unlikely to resume for this industry unless some out of box thinking emerges.


Yes there is a reason sanguine in indian markets because indian markets are still at naïve stage as compared to US’s Multiplexes markets. To compare, AMC theatres have 8200 screens where as PVR has just about above 700 screens.
There are also new developments happening AMC Theatres that amazon might do a takeover of the AMC, and if this done there is going to be re rating across of theatres across globe

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Direct release on OTT gaining ground

If most movies release on OTT now, whenever the theatres open there won’t be fresh content available for sometime. Looks like long wait for multiplexes

Disc. Not invested. Tracking

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Keeping long term view, PVR will bounce back. OTT cannot replace the multiplex . Two major reasons as per me - 1) Sound and picture quality. Dolby atmos, large screen, 3D. 2) Watching a movie in multiplex gives much higher feeling of being entertained. Especially in metros with malls and multiplexes as entertainment zones.

Now the key question is what is the right price range to enter given current lockdown situation keeping global view.
Would like to have views on this aspect.

My views are as under:
1.The viewership will remain blow for the next at least 6months at least while PVR /Inox would have to foot the fixed cost. They don’t have forced majeore clause in their agreements and therefore which way it will land is not known.
2.This is a discretionary expenditure and a no of job losses will definitely impact the industry.
3.The film producers HV started looking for OTT and if they find it lucrative, they may change the way , they do business.
4. The cost of visiting multiplexes for entertainment is definitely much higher that OTT and there is a threshold or break even for multiplex operation and if the viewership which is already low,any further reduction along with reduced expenditure on F&B would definitely impact the multiplexes for long times to come.

Disc:watching but no investment currently

Surprised to see that they don’t have force majeore clause. I was of the view that they will invoke such a clause. If they are not able to invoke the clause, the business will surely take a bigger hit.

Is there any source of info. that they dont have force majeore in their clauses? I read the inox concall and they said they have this clause and they are already speaking to the landlords for rent negotiations for future as well.
Can you share the source of this info.?

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I don’t have specific info about PVR. But I have never heard till date about any rent/lease agreement not paying rent because of a forced majeore clause as the landlords would themselves must have raised funds for the property being rented.For such a clause to be included, the risk premium would be added to the fair value of the rent prevailing at that time. Let us understand that it’s an unimaginable situation (like 9/11 leading to fall of twin structure) .For that matter, even Starbucks and all major tenant companies would approach their landlords for partial/full waiver and it would also give rise to claims/ counter claims , bankruptcies etc. ultimately falling in courts.

They do have this clause in their contract.

You need to read the fine print of agreement to Know exactly how forced majeore has been covered in the clause. Whether it covers a pandemic or not. I know for sure that every builder keeps in agreement and tries to cover himself under it but loses in most cases.
It also depends upon the courts as to how they accept it. U may be aware that honorable SC has struck down the govt order of payment of wages during lockdown on the plea of the companies that they themselves HV not done any business and therefore were unable to pay wages.