My views on PVR:
Positives
- Huge scale - Over many years, PVR has build formidable scale in movie exhibition industry. With 40% market share, its extremely difficult to replicate the scale by new player.
- Negotiating terms with content producers - Scale gives it distinct advantage to negotiate well with content producers. The unlimited content supply from Bollywood / Tollywood / Hollywood has to pass through PVR to reach the audience, and PVR may dictate the economics of the deal here
- Negotiating terms with Mall Owners PVR is the poster boy of any successful mall, it is the anchor tenent, who mall owner may like to have first before anyone else, the rental deal probably will be favourable for PVR most of the time.
- Merger Synergy may play out - Merger of PVR INOX reduced the competitive intensity and created opportunity for synergy to play out. PVR may close non performing, competing screens of INOX and PVR once their lease priod ends, this may improve profitibility, which may play out in next few years.
- Change in Business DNA - PVR had been growing in asset heavy manner since last many years, which has changed now. The focus today for PVR is on
a) Asset Light Growth - They are building new screens on revenue sharing basis, where developer is taking majority of capex.
b**) Debt Reduction and Cash Generation** - has become a priority , and its visible in their execution. The net Debt is down to Rs 600 Cr as of Sep 2025 - Customer experience - Going to movie for stress buster / social interaction, is in the blood of indian public, and old habits die hard. While most people are busy in their mobiles today, still theaters provide unique experience, which is hard to replicate.
- High Operating leverage - PVR is majorly a fixed cost business, and operating leverage can product disproportionate impact on bottomline once critical mass is achieved. As of now, PVR occupancy ratio is 24%, and it just breaks even. Every 1% increase in occupancy ratio can add massively to profits.
Negatives
- Never profitable ever - So if every thing is so good about the company, why their’s hardly any profits that company generated in its history. You can justify with reasons like asset heavy explosive growth with back ended profitibilily which did not materialized, and Covid impact that reduced the visitation, but the fact remains, profitibility is hard to see in company’s history.
- Rentals 25% of Revenues- Despite all positive commentary about negotiating power of PVR with developers as anchor tenent, that I mentioned above, its worth pondering, why rentals are more than 25% of its revenues? Why rentals are still major component of cost? Why the operating leverage never kicked in, and why as a investor you think it will kick in now?
- Dependent on quality content - PVR is part of cyclical industry where people go to movies when quality content / read “super hit movies” are there for consumption. And this may happen/ not happen in a particular year.
- Victim of OTT Disruption - Today most movies come to OTT within 6 weeks of release. Its pretty small window where movies are available for theaterical exhibition. This may cause big disruption in bollywood, and on vaibility of movie production. It raises serious questions on revenue visibiity of Movie exhibition business in particular.
- Digitial India- Mobile in hand of Indians has given them enough resources for entertainment (read “wasting time”) in form of Facebook / Instagram / Whatsapp and many other apps. While theaterical experience was a special experience in the past, that stand is changing now.
- Popcorns- In the past, PVR had been in bad books of Indian public by charging extraordinarily high for food and beverages.
- Regulatory risk - Karnataka Govt trying to cap prices of movie tickets, and similar incidents in the future may be a big negative for the company
Valuations - Valued today at 10,000 Cr on Revenues of 6,000 Cr, and 0 accounting profits, its upto the investor to think what they are willing to pay for the optionality of operating leverage to play out in the future.
A quiet good , well written blog on PVR may help you gain better understanding about the company - https://dhruva.substack.com/p/pvr-inox-ltd-a-case-for-contrarian
Disclosure - No position, studying the company
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