INDIAN MEDIA INDUSTRY-

FILM EXHIBITORS
The buzz is back in show-biz;
Multiplexes look to surpass pre-
pandemic revenues in FY2023

NOVEMBER 2022
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Highlights
The film exhibition segment of the Indian media industry was the worst impacted by the pandemic.
However, it has seen a strong recovery since Q3FY2022. Occupancy at leading multiplexes almost
touched pre-pandemic levels in Q1 FY2023, led by positive consumer sentiments (regarding watching
movies in theatres) and strong content line-up.

Click to Provide Feedback ICRA analysis suggests that despite sharp rise in average ticker prices (ATP) due to premiumisation of
screens, decrease in supply due to closure of single-screen theaters (impacted by pandemic) and
inflation, consumer sentiments remain buoyant. Unlike earlier when Bollywood content was the key
revenue driver, regional cinema has gained consumer awareness and acceptance, in part due to the
Industry’s revenues expected to increased penetration of digital over-the-top (OTT) platforms during the pandemic.
surpass pre-Covid levels in FY2023,
Revenues from the sale of food and beverages (F&B) inside the theatre saw healthy traction in H1
supported by recovery in occupancy, FY2023 and surpassed pre-pandemic levels (in absolute terms). The healthy increase in spend per
screen additions, higher ATP and SPH head (SPH) is being driven by a mix of price hikes and wider (and gourmet) menu choices and
increase in points of sale.
Profitability recovery will lag revenues
as margin-accretive advertisement High rental and common area management (CAM) charges expected to constrain profitability
revenues yet to bounce back, while margins pending complete recovery in occupancy levels and ad revenues. Despite the increase in
ticket prices, the rebound in theatre occupancy in Q1 FY2023 highlights the continued popularity of
rental expenses revert to pre-pandemic
this medium and its ability to face competition from OTT platforms.
levels
ICRA expects the industry’s revenue to surpass pre-pandemic levels in FY2023; profitability margins
will lag given the lower occupancy, higher rentals and slower recovery in high-margin advertising
revenues. Nonetheless, the credit profile of multiplexes is expected to improve as they consolidate to
leverage their scale to gain market share at the expense of unorganised single-screen owners.

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Viewers crowd theatres after a pandemic-forced hiatus

Exhibit 1: Trend in annual occupancy of multiplexes Exhibit 2: Quarterly occupancy trend in leading multiplexes

40% 40% 35% 36% 36% Occupancy was nearly

33% 32% at pre-pandemic levels 34%
35% 31% 31% 29% 35% 31%
29% 30% in Q1FY23 29%
30% 26% 30%
24%
25% 21% 25%
20% 20% 17%
15% 9% 15%
10% 10%

35%
28%
33%

28%
33%

26%
31%

28%
36%

28%

10%

19%
22%

23%
29%
8%
5% 5%
0% 0%
FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 H1FY2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Inox PVR Weighted Average Occupancy - Inox Occupancy - PVR

Source: Company data; For weighted average, number of screens as weights Source: Company data

▪ Indian multiplex performance data indicate a strong comeback in YTD FY2023 after the pandemic set-back; occupancy almost touched pre-pandemic levels
(i.e., Q1 FY2020 levels) in Q1 FY2023, led by positive consumer sentiments and a strong content line-up. The trend saw some reversal in Q2 FY2023, as
Bollywood movies failed to excite consumers and Hollywood releases were also limited.
▪ Windowing gap (duration from theatre to OTT) reverted to pre-pandemic levels of eight weeks starting end of Q2 FY2023, which is a positive for increasing
occupancy. While the content slate for the near term is healthy, consumer acceptance remains a monitorable.

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Premiumisation of screens, inflationary pressures drive ATP to all-time-high
levels; expansion in tier III/IV cities may cause some moderation
Exhibit 3: Annual trend in average ticket price (ATP) at Multiplexes

250 40%
31%
10% 2% 4%
200 1% -14% 30%
20%
150
10%
100
0%
50 -10%
180 142 187 144 202 158 202 161 201 168 177 144 227 189 230 192
0 -20%
FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 H1FY2023e

Gross ATP (Rs.) Net ATP (Rs.) Net ATP YoY%

Source: Weighted average data reported by Inox and PVR; ICRA Research

▪ Increasing percentage of premium/ luxury format screens, tie-ups for screening events (for e.g., T-20 world-cup etc.) which draw higher prices, coupled with
inflationary pressures have driven ATPs to all time highs in H1 FY2023. Also, with several single screen theatres closing permanently due to the pandemic, the
reduced supply has likely augmented the pricing power of multiplexes.
▪ Quality of content, theatre location, buzz around the content and advance bookings are a few key factors for setting the ticket price. Given the inflationary
pressures (development cost, rent, maintenance and operational costs etc. all escalating), industry is trying to balance occupancy and ticket prices.
▪ With multiplexes planning expansion in tier-III/IV cities, the ATP may decline (on a consolidated level) going forward, commensurate with lower
capex/operating costs in these locations.

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Regional films drive GBOC as Bollywood struggles to find its footing

Exhibit 4: Indian gross box office collections (GBOC) Exhibit 5: Language-wise mix of GBOC

12,000 10,948 80% 100% 100%

9,630 9,810
10,000 8,649 9,023
80% 44% 43% 48% 43% 41%
50% 52%
8,000 11% 12% 60%
4% 2% 60%
6,000 0% 11% 13% 12% 15%
11% 4%
-81% 3,701 40% 7%
4,000
2,056 -50% 45% 45%
20% 44% 41% 44% 44%
2,000 33%
- -100% 0%
CY2016 CY2017 CY2018 CY2019 CY2020 CY2021 10m CY2015 CY2016 CY2017 CY2018 CY2019 CY2020-21 10m CY2022
CY2022 (Cumulative)

Hindi Hollywood (incl all languages) Regional

Total GBOC (Rs. crore) YoY growth %

Source: Ormax Media Source: Ormax Media

▪ Rapid penetration of OTTs and exposure to varied content on it (in regional and foreign languages) during the pandemic has increased consumer awareness
and the acceptability of non-Bollywood content. Consequently, weak content has driven down the GBOC for Bollywood movies post pandemic and has
pushed viewers to other language and mediums of entertainment.
▪ The recent underperformance is in sharp contrast to the pre-Covid period when 30-40% of Bollywood movies were able to cover production costs from
theatrical releases. As per Ormax Media, 37% of Hindi box office collections in YTD 2022 have been generated through Hindi dubbed versions of Telugu, Tamil
& Kannada language films.
▪ Regional cinema has been supporting box-office collections following the pandemic. However, sustenance of such performance in Hindi speaking markets
remains to be seen; Bollywood’s ability to adapt to changing consumer preferences remains important.
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F&B revenues set to surpass pre-pandemic levels in FY2023; ad revenues to trail

Exhibit 6: Revenue mix for multiplexes over past 5 years Exhibit 7: Growth in revenue streams vis-à-vis FY2020 levels

100% 60%

24%
19%
8% 7% 8% 11% 8% 7%
12% 11% 11% 29% 5% 7% 8%
80%
10%
25% 27% 27% 5% 30% 32% 30%
60%

-4%
-10%
26%

-18%
-40%

-29%

-33%
-33%
-36%

-38%
40%
56% 55% 54% 54% 54% 56%

-66%

-67%
-90%

-70%
-75%
20% 40%

-85%

-86%
-90%

-94%
-94%
-95%
-95%
-97%
-97%

-98%
0% -140%
FY2018 FY2019 FY2020 FY2021 FY2022 H1 FY2023e Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY2023
FY2022 FY2023
Ticket Sales (NBOC) Net F&B Ad Income Other operating income NBOC growth % Net F&B growth % Ad income growth %

Source: ICRA Research; ICRA data for the industry consist of consolidated data for PVR and Inox

▪ Revenues from the sale of F&B inside the theatre saw healthy traction in H1 FY2023 and surpassed the pre-pandemic levels (in absolute terms). It contributed
to a third of the overall revenues, driven by a mix of price hikes, wider (gourmet and local) menu choices and higher points of sale.
▪ In the absence of a healthy content pipeline and uncertainty regarding footfalls (and likely shift of advertising budgets to other mediums – like OTTs etc.), in-
cinema advertising has seen the slowest recovery post pandemic vis-à-vis other revenue streams. Industry expects the same to touch 70-75% of pre-Covid
levels by the end of Q4 FY2023 as volumes recover (even as yields remain decent) and touch pre-pandemic levels in H1 FY2024.

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Screen additions, improving occupancy and SPH to drive revenue growth

Exhibit 8: Trend in number of screens operated by leading multiplexes Exhibit 9: Trend in spent per head (SPH) on F&B at multiplexes

1000 1% 13% 25% 140 16%

3% 13%
20% 9% 12% 14%
120
Number of screens

800 7% 20% 9%
100 9% 12%
11% 9%
600 15% 8% 10%
80
8%
400 10% 60
6%
40 4%
200 5%
420
524

468
579

492
625

574
771

626
845

643
842

675
854

755
970

117
100

113
105

112
20 2%

66
59

73
64

79
70

83
79

90
85

93
0 0% 0 0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23e FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1FY23e

Inox PVR YoY growth in Total Inox+PVR Gross SPH (Rs.) Net SHP (Rs.) NSPH YoY%

Source: Company data, ICRA Research; gross and Net SPH data is weighted average for Inox and PVR

▪ India lags other mature markets in the number of screens available (~8,500 screens in India vis-à-vis ~75,000 in China and ~45,000 in USA). Given the
underpenetrated market, multiplexes are expected to keep investing in network expansion, especially in tier-II and tier-III markets.
▪ SPH has witnessed ~9-12% YoY growth over the last five years and crossed the Rs. 100-mark in FY2022. In YTD FY2023, inflation-led price hikes, creative
marketing initiatives by the exhibitors, introduction of season-special items and interactive culinary sessions across India with chefs etc. contributed to the
improvement. ICRA expects that a steady 3-5% growth in SPH will continue to support industry revenues.

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High rental expenses, pending recovery in occupancy and ad revenues to keep
margins constrained
Exhibit 10: Comparison of property rent and common area management (CAM) expenses for multiplexes

-18%
2.06
1.70
-42% +9% -44% -800 bps +600 bps

0.40 0.43 0.40 35%

0.19 0.23 26% 19% 25%
0.11

REVENUES/SCREEN (RS. AD-REVENUE/SCREEN RENT & CAM EXPENSES OPBDITA/SCREEN (RS. OCCUPANCY % RENT & CAM AS % OF
CRORE) P.A. (RS. CRORE) P.A. /SCREEN (RS. CRORE CRORE) REVENUES
P.A.)
H1 FY2020 H1FY2023
Source: ICRA Research; Calculations are as per ICRA; data consist of consolidation of PVR and Inox performance

▪ Between Sep 2020 and Sep 2022, the screen count for the two leading multiplexes grew 12%. The fight for premium location presence led to higher rentals.
▪ During the initial Covid wave, the exhibitors invoked the force majeure clauses in their lease agreements (given the forced closure) and rent payments were
suspended for 1-2 quarters. However, by the end of FY2022, the rent and CAM cost escalations kicked in as per agreements.
▪ With occupancy still below the optimal levels and ad revenues lower by 30-40%, the rent and CAM costs as a proportion of total revenues remain much higher
than the pre-pandemic levels. With limited flexibility to increase ATP and SPH, the profit margins are expected to remain sub-pre-pandemic levels (18-19%)
over the next few quarters.

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Industry consolidation to continue; Inox-PVR merger set to create largest
multiplex chain in India
Exhibit 11: Major multiplex M&A over the past decade in India Exhibit 12: Indian film exhibition segment – Key players (end of 2021)

▪ PVR acquired DT Cinemas

(32 screens) 2012 PVR acquired Cinemax (138
screens)
▪ Inox acquired Satyam 8%

2014-15
Cineplex (38 screens) 10%
▪ Carnival Cinemas acquired 62% 38% 5%
Big Cinemas (242 screens) ▪ Inox acquired Swanston
▪ 5%
2018
Cinepolis acquired Fun Multiplex 9%
Cinemas (83 screens) ▪ PVR acquired SPI
Cinemas (76 screens)
▪ Inox acquiring Luxe Cinemas
(11 screens) 2022-23 Single screens Other Multiplexes PVR
▪ PVR and Inox head for merger Inox Carnival Cinemas Cinepolis India
Source: ICRA Research; Screen count was estimated at ~9,425 in 2021 although industry believes
that around 1,000 screens, which were open intermittently during the year, may not reopen
Source: ICRA Research; Note that the above M&A list is indicative, not exhaustive. again. Hence, ICRA assumes total screens around 8,500 for above calculations

▪ Multiplexes accounted for ~40% of the total screens in India as of 2021-end. This segment is oligopolistic in nature with the top four players – PVR, Inox,
Carnival Cinemas and Cinepolis – accounting for 75% of the total screens.
▪ As the segment was one of the worst impacted by the pandemic, creating scale to achieve efficiencies has become critical for the long-term viability of the
business and to mitigate any threat from digital OTT platforms. As such, the multiplex space is expected to see further consolidation over the medium term.

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Industry outlook revised to Stable given signs of a sustainable recovery

Exhibit 13: Industry revenue and profit margins growth trend (Actual and ICRA estimated)

8,000 100%
7,000 31% 30% 30-32% 32-34%
13% 16% 19% 9% 50%
6,000 17%
5,000 19% 0%
13% 16% 12% 14-16% 16-18%
4,000 -17% -50%
3,000 -133% -100%
2,000
1,000 -182% -150%
0 -200%
FY17 FY18 FY19 FY20 FY21 FY22 H1FY23 FY23e FY24e

Operating income (Rs. Crore) OPM % (Adjusted for AS 116) OPBITDA% (Unadjusted)

Source: ICRA Research; ICRA data for the industry consist of consolidated data for PVR and Inox; Ind-AS 116 standards applied w.e.f. FY2020. The adjusted operating profit margins (OPM) depicted above
are excluding the impact of Ind AS 116 – ‘Leases’ and are calculated as reported operating profits less rental expenses divided by operating revenues

▪ ICRA expects the industry’s revenues to surpass pre-Covid levels in FY2023 (6-8% higher than FY2020 levels).
▪ Profitability for exhibitors expected to trail pre-pandemic levels over the next 12-15 months despite cost curtailment measures on account of, inter alia, lower
occupancy (27-29% in FY23e and 29-32% in FY24e), increasing rental expenses and a gradual recovery in high-margin advertisement revenues.
▪ Industry consolidation is expected to significantly increase the bargaining power of multiplexes vis-à-vis content producers, mall owners, advertisers and
consumers, augmenting their pricing power in tickets, F&B and advertising rates. Thus, the credit profile of multiplexes is expected to strengthen compared to
single screen owners over the medium term.

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 Key takeaways I Prevailing and emerging trends

Regional films gaining OTTs gaining business Revenue diversification High rental and
popularity. However, share. However, beyond GBOC; F&B to maintenance
Volatility in content Bollywood likely to global data indicate it see growth, led by expenses will Industry
acceptability remains a remain the main can successfully changing consumer continue to constrain consolidation to
key risk – ‘star power’ driver of GBOC, coexist with other preferences, enhanced profitability margins accelerate;
no longer enough; backed by a large formats – like menu options, market multiplexes will
social media influence Hindi speaking theatres initiatives and continue gaining at
on consumer behaviour populace innovations the expense of
likely to persist single screens

Source: ICRA Research

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 Analytical Contact Details

Rajeshwar Burla Ashish Modani Ritu Goswami

Group Head & Co-Group Head & Sector Head &
Vice-President Vice-President Assistant Vice-President

rajeshwar.burla@icraindia.com ashish.modani@icraindia.com ritu.goswami@icraindia.com

+91 40 4067 527 +91 22 6114 3414 +91 124 4545 826

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 Business Development/Media Contact Details

L. Shivakumar Jayanta Chatterjee Naznin Prodhani

Executive Vice-President Executive Vice-President Head Media & Communications

shivakumar@icraindia.com jayantac@icraindia.com communications@icraindia.com

022 - 6114 3406 080 - 4332 6401 0124 - 4545 860

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