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Multiplex revenue to triple this fiscal, occupancies to fall short: Crisil

NEW DELHI: Multiplex chains in India are set to triple their revenue this fiscal, helped by the low-base of last financial year and more and more people queuing up to watch movies after the easing of pandemic-forced curbs, according to a report by ratings, research and policy advisory Crisil. Their revenue is seen rising to an all-time high of over 6,000 crore, or 13-15% above levels seen in fiscal 2020, Crisil said.

A sharp recovery in occupancy coupled with a combination of factors–increased average ticket prices, higher spend per head on food and beverages (F&B) and addition of screens–are expected to script the growth story.

While occupancy was back to pre-pandemic levels in the first quarter, it might drop a bit for the full fiscal as multiplexes continue to feel the heat from over-the-top (OTT) streaming platforms, the report said. A full recovery in operating margin is therefore unlikely. But robust operating profit and balance sheets augur well for credit profiles of large multiplex operators.

“Multiplexes have rebounded well from the pandemic setback and reported their highest-ever quarterly revenue and operating profit in the first quarter this fiscal. Occupancy has returned to the pre-pandemic level of 32%, riding on some big-banner releases. While there have been headwinds in the past two months stemming from social media outrage and boycott calls, the scene may change in the coming months aided by the festive season and a strong content pipeline. That should improve occupancy to 30% this fiscal from 16% in the last,” Naveen Vaidyanathan, director, CRISIL Ratings said in a statement.

Higher ticket prices and F&B income will also support revenue growth. The average ticket price is expected to be 240-245, which is 20% higher than pre-pandemic level. Operators have been steadily raising prices amid high inflation. Spend per head is expected to be 115-120, up nearly a third from before the pandemic, driven by a mix of price hikes and a wider menu of choices on offer for movie goers.

“Lower occupancy impacts profitability of multiplexes because of high fixed costs. Hence, while operating profitability will likely rebound to 16-17% this fiscal after the losses of the past two fiscals, it will fall short of the pre-pandemic level of 18-19%. Movies that leverage the multiplex experience will be crucial for operators to achieve a full recovery in occupancy and operating margin,” Rakshit Kachhal, associate director, CRISIL Ratings, said in a statement.

The past couple of years have seen OTT gain significant traction, especially after theatres were hit by the pandemic-induced lockdowns. But multiplexes should gain from the eight-week exclusivity window given to theatres for new Hindi movie releases with effect from 1 August, CRISIL said.

Besides, theatres still account for over half of a film’s collections, underscoring the significance of this medium to movie producers and distributors. Multiplex operators are expected to undertake sizeable annual capital expenditure of 600 crore to 800 crore over the medium term to bolster their screen portfolio which would be funded largely through internal accruals.

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