PVR INOX Ltd. may face a fresh cost headwind in Mumbai if the city's proposed theatre tax hike is approved, but Elara Capital believes the impact on the multiplex operator's earnings should remain manageable. The Brihanmumbai Municipal Corporation has proposed raising the entertainment tax for air-conditioned cinemas and multiplexes to Rs 400 per show from Rs 60 currently. The proposal is still awaiting approval from Maharashtra's Urban Development Department, meaning the existing rates remain in force for now.
Karan Taurani, Executive Vice President at Elara Capital, estimates that even if PVR INOX absorbs the entire increase, the annualised EBITDA impact would be around Rs 7.4 crore, or about 0.8% of Elara's FY27 EBITDA estimate. If implemented from October, the FY27 impact would be around Rs 3.7 crore, or 0.4% of estimated EBITDA.
That relatively limited earnings impact leaves Elara focused on the larger operating recovery story. Here are four factors underpinning its positive view:
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1. Occupancy is recovering
PVR INOX's occupancy has improved to around 26% from roughly 24% in the preceding period. Elara expects further recovery, with occupancy potentially moving towards 28-29% in the second half, although Taurani does not expect a return to pre-Covid levels of above 30% in the near term.
2. A stronger film slate could drive footfalls
Elara sees an improving content pipeline as a key catalyst for the exhibition industry. A stronger mix of franchise films, Hindi releases and regional content should support admissions and premium-screen utilisation.
PVR INOX has also been positioning its network around premium formats and alternate programming as it looks to capture stronger demand when content improves.
3. There is room to improve revenue per customer
The recovery is not solely dependent on higher footfalls. Ticket pricing, premium formats and food-and-beverage offerings give PVR INOX multiple avenues to improve monetisation per patron.
The company has also been pushing owned F&B brands, bundles and digital-led offers to support revenue and profitability.
4. Cost and capital efficiency can support profitability
Elara expects PVR INOX to benefit from cost optimisation and a more capital-efficient expansion strategy. The company has been focusing on lower-capex formats, including FOCO and asset-light models, while continuing to expand its screen network. Elara says the next leg of the recovery will require not just higher admissions, but better conversion of revenue growth into EBITDA.
For Elara, the more important issue is the re-emergence of local taxes across states and municipalities, rather than the immediate earnings impact from Mumbai alone. Taurani said exhibitors are still evaluating whether such costs would be absorbed or passed on to consumers.
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