PVR: transforming the stars

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: The success of Amir Khan directed and starred Tare Zameen Par will definitely further push his credential higher. It is also a major success for PVR Pictures, a 100% subsidiary of PVR, which is also co-producing the film.

This, analysts believe, is creating a re-rating scenario for PVR, which was till now seen more as a film exhibitor, by virtue of its multiplex and theatre businesses.

Even in the multiplex business profile, which uses the lease model of running its multiplexes and which requires the company to pay advances, and lock-in working capital, will change. This is due to the completion of its self-owned property at a prime location in Mumbai – Phoenix Mill, which has a capacity of 1,964 seats. This is expected to push its margins. In fact analysts believe that the margins would grow by 6% points from the 16% levels currently as there are other gains as well. The number of screens which would be exempt from entertainment tax will increase from the current 41 to 91 as its new properties come on stream. The number of screens is expected to reach 160 from the current 95 screen capacity. There are initiatives to reach out to the smaller cities through PVR Talkies, where the rates would be lower.

Analysts reckon that the margins would also improve as the consumer spend in the multiplexes is set to rise by around 25% as volumes improve and the company leverages better from its food and beverage contributions. It has signed up a joint venture to work on a food court concept; the pilot is being tested in Gurgaon, and this is expected to add to the margins as well. But the real exciting action lies in the film production and distribution business. The current year has seen PVR Pictures distribute around 100 Hollywood and Bollywood movies, many of which were resounding successes. It has managed to contribute approximately 11-13% of all-India box office collection in calendar year 2007. There are plans to produce around 7-10 movies every year. With all this, the current return on equity of around 4% could look more respectable, reckon analysts.