IIPM: “Becoming a Fortune 500 company will take time”

He joined the company in 2001 when it was poised for the typical big leap. Today, PVR Cinemas is one of the largest cinema chains in India, yet not the largest. Nitin Sood, CFO, PVR Cinemas tells B&E, what it took to reach here and what it would be like ten years later by Amir Moin

When it started in 1997 as a joint venture between the Bijli brothers’ Priya Exhibitors Private Ltd and Wachowski brothers’ Village Roadshow Limited, the intent was clearly to be one of India’s largest cinema chains. Though achievements have come a dozen, so have the hits, literally speaking. After incurring a net loss of `12.62 crores an year ago, the giant is back on track with net profits of `5.56 crores for the quarter ending June 30, 2010. Nitin Sood, the financial whiz behind PVR Cinemas, shares his future agenda in this exclusive interaction with B&E :

B&E: Your performance this quarter has been quite well as compared to the same quarter last year. What are your projections for the next quarter?
Nitin Sood (NS): I wouldn’t be able to talk specific numbers but I think from our exhibition business, we should be able to do a topline of `400 crores. As we add on more screens, the numbers would probably increase. Hopefully, we’ll stabilise between 18-20% operating margins, which again would be a very good recovery from where we ended up last year.

B&E: According to Ajay Bijli, PVR’s PAT will go up to 10-12% from the current 5-5.5%. How do you think this is going to happen?
NS: Right now, our business model is such that we incur a lot of cost on the infrastructure. Again, the real cost is also due to the screens that we are periodically adding. These costs are driving down our bottom lines. Some of the new screens that are opening take anywhere between 6, 8 or even 12 months to stabilise in operations, depending upon the location. As the cost gets fractionalised over a larger number of properties, the operating margins would start looking much better. Secondly, we are also considering the sale and lease-back of the real estate that we own because honestly, we are not in the business of owning real estate. So that will further improve the margins.

B&E: What is the concept of PVR film cities?
NS: The concept of entertainment city is that we’ll be doing an integrated retail entertainment format. We are trying to partner with mall developers and where they give a portion of the mall to us and we come up with a full fledged entertainment complex. We are planning to come up with a bowling alley, ice skating ring, food court and a large multiplex.

B&E: Don’t you think that in these ‘entertainment cities’, there already is and would further be a lot of saturation? So what are your expectations in terms of ROI?
NS: I think it’s quiet the opposite because the number of visitations will increase by more than two times as the amount of footfalls that you attract to such a place would be more than the crowd that you would attract when you are running a stand alone multiplex. If we take the example of Ambience mall in Gurgaon, we have our own food court, multiplex and bowling alley. Our learning from our Ambience mall experience is that if you give consumers a bouquet of offerings, then the number of consumers who come to that place is much more than what would normally turn up at a standalone recreational outlet. In fact, a majority of the people coming there don’t just watch a movie but also go for bowling and lunch. Right now, we are coming up with only one entertainment city in Noida in association with Logix Park. But in the future, we definitely have plans to come up with more such entertainment cities.

Friday, August 31, 2012

“Becoming a Fortune 500 company will take time”