“Slowdown Helping Movies, People Want To Escape…”: PVR Boss

Cinemas are seeing brisk business even as economy slows to a six-year low and unemployment swells, according to PVR, the nation's largest operator of multi-screen theatres.

Ever since the box-office hit Kabir Singh released in June, even films with small budgets or less-recognizable actors are drawing the crowds, Kamal Gianchandani, chief executive officer at PVR Pictures, said in an interview this month. Results for July-September will "definitely surprise a lot of people," he said, declining to elaborate.

"I think the slowdown is helping the cinema business," Mr Gianchandani said. "There is negativity around and people want to escape it."

If Mr Gianchandani's prediction is correct, PVR would be defying a slump that has dented demand for almost everything from 7-cent cookies to cars. He joins the likes of Bollywood megastar Shahrukh Khan, who has in the past compared movies to lipstick, saying that both are immune to economic turmoil.

Seventeen of 26 analysts surveyed by Bloomberg have buy ratings on PVR stock, with eight holds and one sell. Similar numbers can be seen for smaller rival Inox Leisure. PVR will probably outperform Inox on spending per head, analysts led by Karan Taurani at Elara Securities said on October 4.

Sensing competition from the likes of Netflix and Reliance Industries' Jio service -- which allow people to watch movies from the comfort of their home -- PVR has partnered with Canadian motion technology player D-Box Technologies to design seats that sway and jerk in sync with the action on screen, offering a more immersive experience.

"Our strategy is to ensure we stay relevant in this age where every other day a new streaming service is being launched," Mr Gianchandani said. "Fortunately, customers are receptive."

Where PVR makes its money:

• 57.5% of revenue comes from ticket sales
• 27.5% from purchases of popcorn, soda and other food and drink
• 10% from advertising

PVR's business, which was hit by the cricket world cup in the April-June quarter, has revived since then, Mr Gianchandani said. Footfalls, which rose about 20% in the quarter, will "remain strong," though the economic slowdown may hurt advertising, according to a report by Edelweiss Securities Ltd. in August.

PVR is trading at an estimated price-to-earnings of 43.3 times, compared with about 21 for China's Wanda Film Holding Co.

"It is not just the content. There is something else at play that is aiding the film business," Mr Gianchandani said. "I won't say we are happy with the slowdown, but we have no complaints because the business is doing well."

Excerpts from the interview:

• "A combination of cheap broadband, streaming services is helping both content creators and producers to make bigger and better films, which augurs well for cinema"
• "There's a positive virtuous cycle at play between streaming services and theaters with content creators at the center benefiting from more money on the table"
• Tickets for new D-Box seats to cost 50%-100% more than the normal cost; will initially offer the product at 11 screens in Mumbai and Delhi
• On track to add 80 screens in FY20 as per guidance at the start of the year