PVR has closed a deal to acquire DLF’s cinema exhibition business, DT Cinemas, for ₹433 crore, adding 32 screens to its portfolio from June 1.
Speaking to Bloomberg TV India , PVR Chief Financial Officer Nitin Sood says the company will focus on organic growth but will keep an eye out for good quality assets. With almost 40 per cent of revenues coming from food and beverages and advertising, the non-box office revenues are “extremely critical” he said.
This is an acquisition of 32 screens, which are part of the DLF portfolio. They decided as a core strategy to get out of the non-core assets. We have bought 32 screens for ₹433 crore. We completed the transaction on Tuesday and we can take charge from Wednesday, which will now add to our screen portfolio and take our total screen count to about 553.
You have excluded seven screens from the earlier deal terms. Why?
We signed the deal almost a year ago. And then under the existing guidelines, we had to file with the Competition Commission of India (CCI) to get the deal cleared. And based on the negotiations that we had with the competition regulators, they asked us to exclude certain screens.
Since the take-over is from today and it will reflect on the Q1 numbers as well, what kind of revenue will the DT screen generate for you on a quarterly or annual basis?
The overall asset will start delivering its full synergies from the next financial year. In the first 8-10 months of operations, it will deliver us about ₹150 crore to the top-line. And effectively once we realise full synergies and when one of the properties at Chanakyapuri in Delhi, which is supposed to open later this year, comes into full stream, the revenue number would be around ₹200 crore in the next fiscal.
Can we expect more acquisitions this year?
Not really, because our focus is to look at good-quality assets. So the first acquisition that we made in 2012 was Cinemax. We waited for a long time and we really wanted to buy a good-quality asset, and DT was that. This year, we are opening about 60-65 screens organically. So the focus will be to grow organically.
PVR posted good earnings in Q4 as well as FY16. The balance-sheet is not too leveraged. Can we expect this kind of performance to continue?
We think so, because the movie-going momentum is extremely strong. We believe India is really short on entertainment options. The screen density in India needs to go up dramatically from where it is. And PVR has really positioned itself as a premium entertainment destination in most of the cities where it is present. Indians love to go and watch films, with regional films doing exceedingly well and Hollywood chipping in. The local content is looking extremely well this year. We think the momentum will continue.
You talked about organic growth and the push on that front. What does this mean in terms of deals?
We are expanding our presence in new markets. We opened a cinema hall in Panvel last week. We opened a superplex in Noida in March. We are opening more screens in different parts of the country later this year.
We are adding another superplex in Bengaluru by the end of this fiscal. So the idea is to increase the presence in the market and explore new markets. Approximately 65 new screens are expected to come on board this year. Our annual capex is about ₹200-225 crore on rolling out new screens and improving the experience around the existing screens.
Can you shed some light on the revenue matrix with regard to advertising, sponsorship, distribution and movie production?
If you look at our overall revenue pie, the bulk of revenue comes from exhibition. Movie distribution is a very small piece in our overall business. But within cinemas, now we have almost 55 per cent of the total revenue coming from box office and 45 per cent comes from non-box office. Food and beverages is a big driver as it contributes about 26-27 per cent of our total revenue. Advertising contributes 12-13 per cent. Non-box office revenues are extremely critical. Last year, our same-store growth across all the three streams on an average was in the range of 18-20 per cent. Last year has been one of the best and we think that the growth momentum will continue as the movies are looking extremely good this year as well.