Multiplex revenues to shoot past pre-pandemic level but with lower margins

Multiplexes are likely to triple their revenue in the year ending March 31, 2023, buoyed by the low base effect of the last fiscal year and more moviegoers queuing up after the pandemic-forced hiatus. However, investors should brace up for lower margins from the top theatre chains: PVR and Inox.

“The multiplexes revenue is expected to rise to an all-time high of over Rs 6,000 crore, or 13-15% above the fiscal 2020 level. The sharp recovery in occupancy coupled with a troika of factors — increased average ticket prices, higher spend per head on food & beverages (F&B) and addition of screens — are expected to script the growth story,” according to rating and research firm CRISIL.

Higher ticket prices and F&B income are expected to support revenue growth. The average ticket price is expected to come at Rs 240-245, a fifth higher than the pre-pandemic level.

While occupancy was back to pre-pandemic levels in the first quarter, it could decline a bit for the full fiscal as multiplexes continue to feel the pressure from over-the-top (OTT) platforms such as Hotstar, Amazon Prime and Netflix. As a result, full recovery in operating margin is unlikely.

Multiplexes reported their highest-ever quarterly revenue and operating profit in the first quarter ended June 30 with occupancy returning to the pre-pandemic level of around 32%, riding on some big-banner releases.

While there have been a few headwinds in the past two months stemming from social media outrage and boycott calls, it has partly been neutralized with the robust show with Bollywood release Bramhastra. Other big releases are lined up over the next few weeks, which could further boost the numbers.

Overall, occupancy for the full year is expected to be around 30% this fiscal from 16% in FY22.

Lower occupancy impacts profitability of multiplexes because of high fixed costs. Therefore, even as operating profitability will likely rebound to 16-17% this fiscal after the losses of the last two fiscal years, it is expected to fall short of the pre-pandemic level of 18-19%.

Multiplexes are also expected to gain from the eight-week exclusivity window given to theatres for new Hindi movie releases with effect from August 1, 2022.