Dear Shareholder
It is with immense pleasure that we present to you the first Annual
Report of the merged entity PVR INOX Limited. We are excited about the endless
possibilities that lay ahead of us, especially during a time when the industry is poised
for recovery and growth.
The Merger
As the cinema industry was emerging from the pandemic, we realised that
the changing media landscape and evolving consumer behaviour would make scale even more
relevant in times ahead. We were presented with a unique opportunity to merge two of the
strongest consumer brands in India and create the largest cinema exhibition chain. On
March 27, 2022, the Board of Directors of PVR Limited and INOX Leisure Limited approved an
all-stock amalgamation of INOX with PVR. During the year, after receiving all regulatory
and statutory approvals from the relevant authorities, the merger became effective from
February 6, 2023. Post the completion, we command an enviable portfolio of 1,697 screens*
across 360 cinemas in 114 cities of India and Sri Lanka.
Performance of the Year Gone By
India on the back of its sturdy domestic film industry was one of the
few markets in the world where box office collections recovered to almost 100% of the
pre-pandemic levels (Rs10,637 Crores in CY 2022 vs Rs10,948 Crores in CY 2019; Source:
Ormax Media).
It was a different story globally. The global box office, which had
managed to close at a record high of $42.3 Billion in CY 2019, managed to recover to $25.9
Billion in CY 2022, a recovery of ~61%.
Box office collections in USA and Canada also managed to recover to
~66% of prepandemic levels: $7.5 Billion in CY 2022 vs $11.4 Billion in CY2019.
(Source: Gower Street Analytics)
In India, although we were off to a great start with the first quarter,
subsequent quarters showed considerable volatility in terms of box office collections and
admissions. This has largely been on account of reduction in number of overall film
releases as shooting of films was impacted on account of the pandemic and underperformance
of Hindi language content which was released during the year. We believe this is a
temporary phenomenon, and as the supply of film slate increases over the next 12-18
months, the theatrical business will bounce back strongly.
Redefining the Moviewatching Experience
We are excited about the new beginnings, the prospects, the synergies
that come along, as we stand together. From here on, we see the cinema-viewing experience
only getting better. The new screens which will be added to our portfolio every year, will
be true symbols of the most contemporary, thought-out and well-appointed cinema-viewing
experiences. The brands have come together at a time when the cinema exhibition industry
has won a long hard battle and is ready to bask in full bloom.
We played the role of an anchor to the film exhibition industry's
initiative, 'National Cinema Day' on September 23, 2022.
During this event, we offered substantial discounts on movie tickets
and F&B products. The result was an astounding turnout, making it the second-most
attended day in our history, with an impressive occupancy rate of-80%.
Expanding our Footprint
During the year, PVR and INOX jointly opened 168 new screens across 30
cinemas, strategically expanding into Tier-2 and Tier-3 cities. We also shut down 34
screens across 12 properties where the leases had expired. We entered eight new cities
last year: Rourkela, Patiala, Yamunanagar, Armoor, Kalaburagi, Nizamabad, Srinagar and
Nalasopara. We marked PVR's debut in Jaipur with the launch of an 8-screen multiplex, the
largest in Rajasthan. In Kerala, we unveiled the largest 12-screen superplex, including
the first IMAX theatre at Lulu Mall in Thiruvananthapuram. In Bengaluru, we introduced the
first Director's Cut multiplex, catering to discerning moviegoers. In Chennai, we
inaugurated India's first
multiplex within an airport complex, featuring a 5-screen property at
PVR Aerohub. Additionally, we opened the city's biggest 11 -screen multiplex, including
the second IMAX theatre as a result of our acquisition of Jazz Cinemas. One of the
highlights of the year was the launch of our first multiplex in Srinagar, marking the
revival of cinema in Kashmir after 32 years.
Looking ahead, our focus remains on accelerating growth in underserved
markets. Given the significantly high movie consumption in South India and relative
underpenetration of multiplexes, as compared to the other parts of the country, the
Company's mid- to long-term focus would be to add more screens in South India. We expect
South India to contribute 40%-50% of overall screen additions by the Company.
Innovation in F&B
We have introduced fresh concepts and enticing offerings to our menu,
establishing new trends in the industry. In order to increase our strike rate, we
implemented initiatives like 'Unlimited Refills on Popcorn on Cola' on weekends and 'Best
Sellers @ 99' on weekdays. Our innovative additions encompassed various aspects.
We introduced the largest all-American hotdogs, along with Zero-Carb
Burgers, Immunity Booster Beverages, and a diverse Millets menu. Additionally, we launched
Bento Boxes at Luxe, accompanied by premium desserts, coffee, and the delectable Magic Wok
Pan-Asian cuisine meticulously curated by celebrity chef, Sarah Todd. All these continuous
innovations have helped us maintain and grow our F&B revenues and increase average
consumption and spending on F&B at our cinemas.
Innovation in Advertising
To enhance the impact of on-screen advertising messages, we introduced
the pioneering concept of experiential cinema advertising in India. It expands the scope
for advertisers and amplifies the impact of the on-screen advertising message. We achieved
a significant milestone with our first client, Maruti Suzuki Brezza, by offering a
ground-breaking, 270-degree, immersive on-screen experience. Our technology partner,
XPERIA GROUP was recognised for this innovation by winning the Abby One Show Awards and
E4M Neon OOH awards. Furthermore, we expanded our range of experiential advertising
solutions by releasing the first-ever four-dimensional (4D) commercial for OnePlus in the
4DX format. This ground-breaking addition to our bouquet of media solutions garnered
praise and recognition, with our media agency, Khushi Advertising, receiving the esteemed
E4M Neon OOH Award.
Training and Development
Recognising the importance of staff development, we have made
significant investments in training. We have developed the Springboard LXP (Learning
Experience Platform) accessible via mobile and web, enabling our employees to engage in
continuous learning on the go. We also introduced the Prakhar programme, a competency and
skill-building development initiative in collaboration with Harappa, and the Parivartan
Programme, an innovative learning journey designed to empower and enhance the skills of
our duty managers.
Socially Responsible Approach
As a socially responsible corporate, we are actively taking concrete
steps to minimise our ecological impact and contribute to the decarbonisation of our
operations, aligning with the United Nations' Climate Action SDG goal. We entered into a
national partnership with the Save Soil movement and Cauvery Calling, spearheaded by
Sadhguru, pledging support towards the climate action programme of Isha Outreach. To
embrace sustainability in the digital cinema realm, we have chosen Qube Wire, an
environmentally friendly solution for electronic content delivery. Additionally, through
our expanded preferred partnership with Cinionic, the global leader in laser cinema
solutions, we have made a conscious decision towards transition to laser projectors. This
sustainable solution not only reduces power consumption but also eliminates the need for
lamps, their subsequent replacement, and disposal, while enhancing the viewing experience
for our customers. In our endeavour to adopt sustainable practices, we have made a switch
to recyclable uniforms crafted from 65% recycled polyester and 35% cotton, derived from
PET bottles. These eco-friendly uniforms are worn by 1,000 members of our staff.
Immediate Focus and Goals Post Merger
Our immediate focus post-merger is successful integration of both the
entities, realisation of synergies and also relooking the combined portfolio from the lens
of profitability and favourable unit economics. We reconstituted the Board of the company
by adding 50% of the independent directors from the Board of erstwhile Inox Leisure to the
Board of PVR INOX. We announced a Day 1 organisation structure as soon as the merger was
formalised. We expect to generate EBITDA level synergies of Rs2,250 Million over the next
12-24 months. We hope to realise a part of these synergies in FY 2023-24 itself, and the
remaining in FY 2024-25. Majority of these are revenue-linked synergies and will emanate
from efficient programming and ticket price optimisation, upgrading, standardising product
offerings, plugging product gaps in F&B, optimising advertising time and realisation
across both the entities.
On the cost side, synergies will emerge from integrating the supply
chain, leveraging the size and scale of the combined entity for volume discounts,
harmonisation of product and packaging standards and removal of redundant costs.
Optimistic about the Future
Despite the volatility experienced in the Indian box office, this year
has witnessed the highest-grossing movies across all major languages. Movies like KGF 2
(Kannada; Rs970 Crores), RRR (Telugu; Rs869 Crores), Avatar: Way of Water
(English; Rs471 Crores) and Pathaan (Hindi; Rs646 Crores) have resonated with
audiences and created multiple box office records. The theatrical window for Hindi films
has returned to its standard 8-week duration, attracting families back to cinemas. We are
highly optimistic about the resurgence of the big screen, driven by strong consumer
spending in the economy and a youthful population willing to invest in premium
experiences. An impressive lineup of upcoming movies further contributes to our positive
outlook.
Epilogue
We want to take this time and acknowledge that our achievements would
not have been possible without the dedication and hard work of our talented team. Their
passion for cinema and commitment to delivering exceptional experiences have been
instrumental in our success. We extend our heartfelt gratitude to every member of the PVR
INOX family for their contributions.
Lastly, we express our gratitude to our esteemed shareholders for their
unwavering support and belief in our vision. Your trust has been a driving force behind
our endeavours, and we remain committed to creating value and delivering sustainable
growth. Thank you once again for your continued support.