Multiplex chain operator PVR is currently evaluating a couple of F&B formats to launch more brands for expansion considering the Rs 100 crore business coming from the food and beverage section in its cinemas. Apart from cinema, the company plans to focus on the fashion and lifestyle concept pertained to food, beverages, and bowling.
Pramod Arora, Group President and CEO, PVR, said: “We realised that in our cinemas the major margin comes from the F&B segment, so that’s a business which naturally comes to us. One of the initiatives that we are looking at is having our own brand, basically a restaurant in our Director’s Cut Cinema, which we will be taking forward. We are evaluating options with international chains as well as other players in the market, though at this stage it’s difficult to say whether it will be restaurants, casual dining restaurants, or kiosks.”
To strengthen its presence in the leisure-entertainment category, PVR has already ventured into the bowling business with the launch of PVR bluO. Arora stated that the bowling business also has a 50 percent contribution coming from F&B and 50 percent from bowling.
He said that the area of the bowling alleys varies from 15,000 to 50,000 sq.ft. “When we initially started the bowling business, we thought about addressing the 12-34 age group, but we are currently catering to people in the age group of 12-56,” he added.
Arora further stated that an average of 24-lane bowling centre costs Rs 24 crore. PVR would be investing Rs 60 crore this fiscal to open about 100-120 lanes across 5 centres. In the current fiscal, the company has already opened a bowling centre at Vasant Kunj, Delhi. It will open two centres in Pune and one more in Bangalore this financial year. The centres will be around 40,000 sq.ft. Arora stated that having the right real estate at the right price is a must for the bowling business.
PVR plans to open 60 screens this fiscal with an investment of around Rs 100 crore. The company would stick to its plan of opening 50-60 screens for the next 3 years. Commenting on the revenue share model with malls, Arora said that PVR has a minimum guarantee and a percentage of turnover (whichever is higher) sort of a deal, so the percentage basically varies from 8 to 12.
Accessible real estate which is walkable for the common man is a primary concern for PVR multiplexes. “Preference always is malls, we get economies of scale which the developer gets and passes it on to us. The economies of scale happen to be the garnering support from malls and when we talk about stand-alones that is a thing of the past which we used to do when there were no malls. Now, you would not find us doing a multiplex as a stand-alone until and unless it’s something like Connaught Place in Delhi. Amongst the lot who own the single screen, intelligent ones are converting them into malls and giving a part of that to multiplexes. The real estate dynamics would pave the way for most of the single screens to get closed,” said Arora.
Almost 95 percent of PVR’s revenues are generated from PVR Premiere with the remaining 5 percent coming from PVR Talkies.
“Initially, tier 2 and 3 towns did not grow very fast because the infrastructure from the government was lacking and there were no economic drivers in these cities for us to decide how these would turn out in terms of consumer demography. For example, when opened a multiplex in Aurangabad some five years back, automaker Skoda also entered the city at the same time. Approx. 10 percent of consumers visiting our Aurangabad multiplex are coming in from the auto ancillary industry in the city which is an economic driver helping our business. So we basically look forward to an opportunity where the economic drivers get set-up in cities. In Latur, the strong agrarian economy is also an economic driver for us. These are some indices which help us put up our complexes in places wherein the consumer prosperity is touching new heights,” he admitted.
In his opinion, the Indian cinema industry has been witnessing a change on two fronts: software and quality. On the software front, India has shifted gears from commercial to non-commercial cinema. “So that basically changes the dimension for the whole Indian film industry wherein a lot of art software is now the commercial software. Also, the penetration of Hollywood still remains only 5 percent, though the Hollywood revenue in terms of numbers is going up every passing day.”
Arora confirmed that in places like Allahabad, Latur, or Aurangabad, there is a lot of unexpected consistent demand for Hollywood movies.
Elaborating on the cinema-quality aspect, he said that the demand for quality is now paving way for the new-aged multiplexes. Arora remarked that presently an average tier-3 customer looks forward to a multiplex which is hygienic, safe, and has some amount of frills attached to it.
As per him, the investment for setting up multiplexes in metros is 50 percent higher than small towns. “From our perspective, we have our concerns with our returns on capital incurred which remains consistent whether it is A, B, or C town. If all parameters change accordingly in terms of the ticket size, concession pricing, or real estate cost we pass on the benefit to the consumer as well. For eg., Aurangabad ticket is Rs 80 (starts from Rs 50 and goes up to Rs 100 or Rs 110 and average is around Rs 80), whereas the ticket in Delhi is Rs 225 on an average. The capital that you deploy, if your asset-to-turnover ratio and your margins remain consistent and you can maintain these two parameters, then it’s business sense to invest in small towns as well,” he stated.
He also said that the discretionary spend on entertainment has increased by 15 percent from last year. “The industry overall is doing reasonably well with most of the operators enjoying good margins. The sector is not really getting affected by the economic downturn,” Arora added.
According to him, digitisation of cinemas helps in two ways. Firstly, the operator is able to carpet down to small towns and release movies in a digital format. Secondly, it also kills piracy as the digital watermark helps the operator trace the city or the screen where piracy occurs. A single digital screen can cost up to Rs 30 lakh.
Commenting on screening regional movies in multiplexes, Arora said: “We always run regional movies and promote such cinema whether in Tamil Nadu, Karnataka, or Maharashtra. PVR feels it’s the right thing to do as it is the least we can give back to the industry in terms of being able to run the regional movies wherever we have multiplexes.”
He agreed with the recently launched concept of washroom advertising in multiplexes and said it is an effective method unlike TV where people have the option of swapping channels while advertisements appear. PVR’s advertising strategy targets the premium consumers in metros and smaller towns. The cinema exhibitor spends 4 percent of its total revenues on marketing and advertising.
Talking about the technology aspect in PVR Cinemas, Arora added: “On the technological front, PVR has a Network Operating Centre in its corporate office to control all the cinemas from one place. We would be deploying Robotech equipment in every cinema to reduce manpower cost and increase efficiency. For sound, we use 7.1 channel Dolby surround sound processor.”
The year-on-year growth rate of PVR stands at around 15 percent. In terms of percentage, the company expects a 25 percent revenue growth this fiscal.
