The Growth of Inox Leisure

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Indian Multiplex Market: The Growth of Inox Leisure.

Mr. Monojit Dutta1, Ms. Sayani Sen2

1Assistant Professor, Department of Commerce and Management, St Xavier’s University Kolkata, India Email id: [email protected] 2Independent Researcher, Kolkata, India, Email id: [email protected]

Abstract: Cinemas have always been an integral part of people’s life. As our society has progressed so has the cinema industry. Similarly, the medium of watching movies has also change with the introduction of new technologies. During the 70s and the 80s, there were mainly single screen movie theatres where people had to stand in long queue to buy tickets, whereas, now there are movie multiplexes, where it is no longer necessary to stand in queue to get a ticket, it can be done easily from the comforts of home through online tickets booking apps. In this paper, we have discussed about the different multiplexes in the Indian market, mainly emphasizing on the two main players of this industry i.e. PVR Ltd and INOX Leisure Limited. The paper mainly aims at showing how INOX inspite of not being in the market for as long as PVR is still giving PVR a tough competition on various aspects. It was rightly found that PVR Ltd holds the maximum share in the market but the growth of Inox Leisure Ltd is impeccable and in certain area; Inox outperforms PVR in terms of return on share, ticket prices and revenue. Keywords: Cinema, Inox Leisure, Multiplex, PVR Ltd.

INTRODUCTION India is a country of cinemas. It produces almost more than 2000 movies each year in various languages. Indian cinema is a global enterprise. However, currently it is going through an evolution where the movie industry is shifting from the single screen movie theatres to multiplex. Research has shown that from the 1970s cinemas were no longer attracting proper audience. The darkness of the movie theatres were becoming the perfect place for the gangs of young people for continuing there shady activities. Hence the movie halls were not seeing much of families or women as audience who are considered as a crucial part for maintaining cinema’s social legitimacy. During the 1980s the general middle class people were not at all seen in the theatres they preferred only those halls which were within their colonies. This downshifting trend of the movie industry which continued for almost two decades had led to the appearance of multiplex, which could provide a suitable environment for theatrical experience of the middle class people. The arrival of multiplex changed the way of watching movies. Now it has better sound, picture quality, seating arrangement, availability of good snacks and beverages, also the convenience of shopping in case of shopping mall multiplexes. Blooming of multiplex started during the 1990s in India. PVR was the first multiplex chain of India. Currently cinema chains like INOX, Carnival Cinemas, PVR, SPI Cinemas, Cinepolis and Big Cinemas are operating across the country. Mayajaal in Chennai is the largest multiplex in India with 16 screen megaplex and PVR is the largest multiplex chain in India.

PVR CINEMAS PVR Ltd. was incorporated on 26th April 1995. It was a partnership between Priya Exhibitors Ltd. which was a local family-run exhibition concern and Village Roadshow Ltd. which was a multinational concern based in Australia. The company launched its first movie multiplex in the Saket district of New Delhi in 1997. For their first site which was called the PVR Anupam, they remodeled a large old theatre into a multi-screen site and built it as per the international standards of a multiplex facility. They started the computerized box office operations by selling computerized tickets. In 2002 Village Roadshow Ltd. made a disinvestment and sold their entire shareholding to Priya Exhibitors Ltd. So, the company changed their name from Priya Village Roadshow Ltd. to PVR Ltd. with effect from 28th June 2002. In March 2003 ICICI Venture Funds Management Company Ltd. made an investment of 380 million rupees in the company and acquired 38.45% stake by way of

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

purchasing equity shares. In 2005 PVR Pictures Ltd. became a 100% subsidiary of the company and during the same year they made an IPO of 7700000 equity shares comprising a fresh issue of 5700000 equity shares by the company and an offer of sale for 2000000 equity shares by the Western India Trustee and Executor Company Ltd. On 4th January 2006 the company’s shares were listed on NSE and BSE. Not only movies PVR is also involved in setting up and running of bowling alleys, karaoke centres, ice skating rings and managing and operating restaurants, pubs, coffee shops etc. across India by setting up joint ventures with other companies. As on 31st March 2018 the company has three subsidiaries – PVR Pictures Ltd., PVR Lanka Ltd. and Zea Maize Private Limited. As of now PVR Ltd. is the largest and premium multiplex cinema exhibition company engaged in the business of movie exhibition, distribution and production which earns revenue from in-house advertisement, sale of food and beverage, gaming and restaurant business.

INOX Leisure Ltd. INOX Leisure Ltd. was first incorporated as a public limited company in November 1999. It is a subsidiary of Gujarat Fluorochemicals Ltd. The company is diversified across industrial gases, engineering plastics, chemicals, renewable energy and the entertainment sector. The company is engaged in operating and managing of multiplexes and movie theatres across India. In 2002 the company commenced their operation by opening their first four screen multiplex at Pune and another four screen multiplex at Vadodara during the same year. in 2004 they commenced their operation in Kolkata, Goa and Mumbai. Gradually they also started operating in various other places of India like Bangalore, Jaipur, Indore, Darjeeling, Kota, Lucknow etc. over the period of years. At present INOX Leisure Ltd. is the second largest multiplex chain of India with 147 multiplexes and 626 screens in 68 cities of the country as of March 2020. INOX properties are known for their uniqueness with their own distinct architecture and aesthetics. Currently it is the only multiples operator with such a diverse PAN India presence.

Carnival Cinemas Carnival Cinemas is under the parent company Carnival Group which was founded by Dr. Shrikant Bhasi in 2010. Carnival Films Pvt. Ltd. operates this cinema chain. They first started operating within the southern states of India. They launched their first movie screen in Kerala. Gradually they have expanded their business and now they operate in various states like West Bengal, Maharashtra, Madhya Pradesh, Uttar Pradesh along with some other southern states like Karnataka, Tamil Nadu etc. Currently they have approximately 470 cinema screens across pan India. In 2016, Carnival Cinemas Ltd. acquired Big Cinemas which was under Reliance MediaWorks Ltd. led by Anil Ambani. Carnival has already established itself in movie production, exhibition and distribution along with food courts, events, IT parks etc.

Cinepolis India Cinepolis was founded in Mexico in 1971 and Cinepolis India is a wholly owned subsidiary of Cinepolis. Cinepolis India launched its first movie screen in Amritsar in 2009. It is the first international movie exhibitor of India. In 2014, they acquired Fun Cinemas, which was owned by Shubhash Chandra’s Essel Group. Currently the company has approximately 383 movie screens across pan India which operates under the brand names of Cinepolis, Cinepolis VIP and Fun Cinemas.

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

NUMBER OF CINEMA SCREENS

Cinepolis India 383

Carnival Cinemas 470

INOX Leisure 612

PVR Cinemas 846

0 100 200 300 400 500 600 700 800 900 Source: Annual Report Graph 1: Number of movie screens of major multiplex players across India till March 2020

REVIEW OF LITERATURE: Withey (1971) in this paper has stated that Asian theatre has never gotten much attention from scholarly point of view. Though some of the most talented people of this industry has come up from the Asian theatres, even the West has also adopted many of its innovative production techniques, make up styles and gestures, Asian theatre was neglected. The paper has given special emphasis on the works of the Indians in the field of classical drama and theatre. It has also talked about different forms of drama and folk theatre. Richmond (1973)in his paper has focused on how theater plays a political role in India. It has depicted that while theatre was used as a mode to reach the wider audience during the ancient period to spread the teachings of religions, gradually that purposehas evolved. During the pre-independence period many dramas were staged only with the purpose of making people aware of how the British were misusing their power. Over the period of time theatre has become a weapon to deal with the social evils. Many a times in history many political parties have used theatre to deliver their message to the public. Maejima et.al (2008) in their paper has discussed about a very new concept i.e. the Future Cast System. This system allows the visitors to be present as a cast member in a pre-recorded movie along with its all other cast members. This is done with the help of 3G technologies. This system was first exhibited at the 2005 World Exposition held at Mitsui – Toshiba pavilion in Aichi Japan. Thakur(2013) in this paper focuses on how theatre helps in developing communication. It deals with the history and origin of theatre at international as well as national level and also describes how theatre played a role in awakening people’s awareness against the exploitations of the British. The author has also focused on the leftist ideology followed in theatres and the anti-fascist theatrical movement. The paper also depicts how theatre plays a crucial role in creating public awareness related to various social issues. Theatre has also been used many times in history as mode of protest. Park and Ham (2015)in their paper has discussed about how the shape and architecture of a movie hall has a significant effect on the customer satisfaction and hence helps in their profitgeneration. The paper says that there is no particular definition of multiplex. Different countries have different concept of multiplex. The paper mainly deals with the different structures of multiplex and about their space management techniques. Ratanasawadwat (2016) in this paper has talked about how the Thailand movie theatre is now moving from offline to online ticket booking system. They are expanding their market via online methods like websites and mobile applications. The author has conducted a primary survey and has come up with some suggestions on how the multiplexes can improve customer satisfaction and can strengthen their customer loyalty. The survey was developed on some theoretical grounds like

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Technology Acceptance Model (TAM), e-SERVQUAL and the Kano’s Model of Customer Satisfaction were applied. Ross (2017) in her article has taken up the mobile theatres of Assam and has shown how the contemporary theatres are surviving and are trying to hold their position while competing with our traditional film industry. In India where Bollywood and other regional film industry tends to dominate the market of the middle and upper-middle class people, these theatres are providing entertainment for the rural people. Not only the source of entertainment but according to the author in our north-east state of Assam, mobile theatres are more of a social event which are culturally rich and are very relevant to their traditional village life. It is also helping in making their community stronger. Akiner and Bykov (2018) for their paper conducted a survey on some Turkish and Russian elderly moviegoers to study how their taste and preference has gradually changed along with the transition currently occurring in the movie industry i.e. moving from single screen to multiplex. However, the study concluded that these elderly persons are more keen on sticking with the single screen movie halls as they are a part of the memories of their old days. They are emotionally related to these halls. They don’t even like the usual popcorn and coke which we call the movie snack, as they think that multiplexes are using them to dominate their culture. Irfan and Patel (2019) in their paper they conducted a study on the behavior of the consumers towards Miraj Cinema in the Vadodara city of Indiabased on certain factors set by the researchers. It was a survey done based on the primary data collected by them. The investigation was mainly focused on how much Miraj Cinema is recognized in the city and how it is competing with some of the biggest players on this field like PVR Cinemas, INOX Leisure Ltd. etc. The paper has concluded that with the magnetic effect of the multiplex, the average movie goers tend to visit multiplexes much more than the single screens. Gowri and Sreeya (2019)conducted a survey to study what are the factors that are influencing people to watch movies in multiplexes than in single screen movie halls. Their study has shown that people mostly prefer to watch movies in malls rather than drive-ins, multiplex theatre or local theatre. It has concluded that the malls are most preferred majorly for the convenience of shopping and also due to the presence of hangout spots and the food courts. They had also tested a hypothesis on whether these preference changes due to the change in people’s marital status.

Objective:  To study the entertainment sector in India by focusing on the leading players i.e. PVR Ltd. and INOX Leisure.  To analyze the rise of INOX Leisure in respect to PVR Ltd.

Methodology: INOX Leisure and PVR Ltd financial performance is analyzed for the financial year 2012-13 to 2018- 19 and 2018-19 (all four quarters) for other aspects like revenue, ticket price and ARPU are collected from the annual reports of the respective companies. The comparison is not only done on the basis of the financial performance but also on the other revenue model of these companies. The data has been presented with the help of simple charts and graphs.

Analysis:

Return on shares on monthly basis: In the financial year 2019-20(Graph 2) it was found that Inox Leisure Ltd performed better then PVR Ltd on the basis of month on month return calculated on the closing price of shares, but the opposite was noticed in financial year 2018-19 depicted in Graph3.

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

FY: 2019-20 0.6

0.4

0.2

0 PVR -0.2 INOX

Monthly Return Return Monthly -0.4

-0.6

-0.8

Source: National Stock Exchange Graph 2: Return on shares on monthly basis

FY 2018-19 0.6

0.4

0.2 PVR 0 INOX

-0.2 Monthly Return Monthly -0.4

-0.6

Source: National Stock Exchange Graph 3: Return on shares on monthly basis

Source of revenue: Both PVR and INOX earn their major revenue from movie tickets and food and beverages. Although advertisements also contribute to a great extent. However, for PVR the percentage of revenue earned from selling tickets is less than that of INOX as shown in Graph 4 and Graph 5.

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Revenue Inox FY: 2018-19

Net Box office 10% 7%

Net F & B 26% 57%

Other

Source: Annual Report Graph 4: Sources of revenue for INOX

Revenue PVR FY: 2018-19

9% Net Box office 12%

52% Net F & B

27% Advertisement

Other

Source: Annual Report Graph 5: Sources of revenue for INOX SPEND AND ARPU: The spends per head increased for both the company considerably, but the gap between the average revenue per user i.e. a combination of average ticket price and spends per head reduced between Inox Leisure Ltd and PVR Ltd financial year 2018-19.

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Spend Per Head

100

60 INOX 40 PVR

20 Spend Per Head(Rs) Per Spend 0 Q1 Q2 Q3 Q4 FY: 2018-19

Source: Annual Report Graph 6: Spend Per Head

Avg. Revenue Per User 320 310 300 290 280 270 INOX 260 PVR 250

Avg. Revenue Per User Per Revenue Avg. 240 230 Q1 Q2 Q3 Q4 FY: 2018-19

Source: Annual Report Graph 7: Average Revenue Per User

Inox Leisure Ltd outperforms PVR Ltd in F&B: Food and beverages cover for more than a 25% of the revenue for multiplex operators. It is clear from Graph that Inox Leisure Ltd has been aggressive in promoting its F&B segment to catch up with PVR. The F&B growth of both the companies will be aided by increasing footfalls and higher-priced premium offerings to its customers.

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Food & Beverage Revenue(Y on Y %) 70 60 50 40 30 INOX 20 PVR 10

Revenue(Y on Y%) on Revenue(Y 0 Q1 Q2 Q3 Q4 FY: 2018-19

Source: Annual Report Graph 8: Food and Beverage Revenue Advertising Income: PVR Ltd draws more advertising revenue (Graph 9) as compared to Inox Leisure Ltd despite the fact that Inox is spending hugely in developing the brand Inox Insignia. Advertising Revenue 120 100 80 60 INOX 40 20 PVR

Revenue (Rs Crore) (Rs Revenue 0 Q1 Q2 Q3 Q4 FY: 2018-19

Source: Annual Report Graph 9: Advertising Revenue Average ticket price of PVR and Inox: Average ticket price of PVR is always higher than INOX throughout all the quarters of FY 2018-19. However, during the 3rd and 4th quarters the ticket price was almost same for both PVR and INOX. Average Ticket Price 220 210 200 190 INOX 180 PVR Ticket Price(Rs) Ticket 170 Q1 Q2 Q3 Q4 FY: 2018-19

Source: Annual Report Graph 10: Average Ticket Price Price to earnings multiple from FY 2019-20 to FY 2012-22:

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Price to earnings ratio is always higher for PVR in comparison to INOX, which is beneficial for the investors of PVR. Moreover, PVR persists to have a better price to earning multiple not only in the current financial year but also in the coming years as depicted in Graph 11.

Price to Earning Multiple 40 35 30 25 20 INOX 15 PVR

Price toearning Price 10 5 0 2019-20 2020-21 2021-22 Financial Year

Source: Annual Report Graph 10: Average Ticket Price

Revenue of PVR and INOX from FY 2012-13 to FY 2018-19: PVR Cinemas has always been the major player among the multiplexes in India. However, INOX Leisure Ltd. is not far behind. Though its revenue did not exceed PVR in any financial years as shown in the graph but it has always given a tough competition and we can even say that in the Indian multiplex market INOX holds the 2nd position just after PVR. Revenue (Rs. in crore) 3500.00 3118.7 3000.00

2500.00 2365.45 2181.68 2000.00 1897.09 1707.1 1485.98 1500.00 1358.83 1337.01 1362.58 1229.83 1025.08

1000.00 814.38798.91 877.78 Revenue (Rs. incrore) (Rs. Revenue

500.00

0.00 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 PVR Cinemas INOX Leisure Limited Source: Annual Report Graph 12: Revenue of PVR Cinemas and INOX Leisure Limited from FY 2012-13 to FY 2018-19

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Profit before tax of PVR and INOX: In this case for the first three years PVR Cinemas and INOX Leisure Ltd. has given cut throat competition to each other in terms of profit, ever INOX earning a greater profit during the FY 2014- 15. However, in the later years the difference in their profit has increased, once again making PVR the leader in the market. Profit Before Tax (Rs. in crore) 350 299.03 300

250 194.46 199.1 200 142.48 152.84 150 97.64 100 84.57 52.3152.19 44.63 50 31.9429.36 16

Profit Before Tax (Rs. in crore) (Rs. Tax Before Profit 12.45 0 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 PVR Cinemas INOX Leisure Limited Source: Annual Report Graph 13: Profit before tax of PVR Cinemas and INOX Leisure Limited from FY 2012-13 to FY 2018-19

Earnings per share of PVR and INOX: As usual in this case also PVR Cinemas is earning the most. Apart from the FY 2014-15 when the amount of earning per share was almost the same for both the companies, PVR has always been able to hold its position as the highest earner in the market. Earning Per Share (in Rs.) 45 39.29 40 35 30 26.34 26.68 25 20.18 20 14.95 13.72 14.2 15 12.49 10 8.44 4.85

5 1.92 3.09 2.18 3.33 Earning Per Share (in Rs.) (in Share Per Earning 0 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 PVR Cinemas INOX Leisure Limited Source: Annual Report Graph 14: Earning per share of PVR Cinemas and INOX Leisure Limited from FY 2012-13 to FY 2018-19

International Journal of Grid and Distributed Computing Vol. 13, No. 1s, (2020), pp. 298-308

Conclusion: After studying the financial and the investing aspects of Inox Leisure Ltd and PVR Ltd it can be inferred that Inox Leisure Ltd is not too far behind from the No.1 multiplex operator PVR Ltd in India. There has been a pullback in Inox shares since March 2019; India’s second-largest operator of cinema screens has returned 33% increase in the last 12 months compared with PVR Ltd 8%.The growth rate of Inox Leisure Ltd is higher thanthe PVR Ltd. PVR Ltd has superior metrics but Inox Ltd is quick in taking corrective measure, which is noticed how Inox narrowed the gap in ticket prices and food and beverages since it is the two largest sources of revenue for multiplex companies. PVR Ltd is better off to Inox Leisure because of better operating metrics like average ticket price, spend per head and ARPU. However, as per estimated calculation the valuation of Inox Leisure Ltd is going to narrow the gap with PVR Ltd due to its expansion plan.

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