By Suhani Adilabadkar

It was ‘Total Dhamaal’ for Inox Leisure, when both ‘Gully Boy’ and ‘Simba’ rocked and ‘Uri’ became an unexpected running success during March quarter FY19. The company (which is in 19 stock screeners) is the second largest player in the multiplex film exhibition industry closed the year with the highest yearly PAT ever reported, along with strong March quarterly numbers. The runup in the stock prices of both major players, Inox Leisure and PVR, of 18% and 15% respectively over the past three months says it all. Both the stocks were in Trendlyne's top DVM Screeners since the beginning of February. 

Investors have been expecting a strong performance after GST reduction on movie tickets and strong box office collections. With the rest of the economy decelerating, the multiplex industry has offered a much needed respite amid a harsh summer for Indian corporates.

Quick Takes:

• Inox Leisure reported highest ever yearly Revenue, PAT, EBDITA and highest yearly footfalls of 6.25 cr in FY19.
• Inox has added 85 screens in FY19, highest ever new screen openings in the industry in a year.
• Occupancy metrics has improved from 26% in Q4 FY18 to 31% in March quarter FY19.
• Net debt equity ratio of 0.1 and its highest ATP (Average Ticket Price) ever of Rs. 197 in FY19.

Making Of Inox Leisure

 It’s a table for four in the multiplex industry, headed by PVR, second in line, Inox Leisure followed by Cinepolis and Carnival. Roughly 75-80% of total multiplex screens are controlled by these four players. Though Inox Leisure was ahead of PVR in 2012 with respect to total number of screens, PVR caught up by the end of the year by acquiring Cinemax’s 135 screens, kicking off a Merger & Acquisition phase in the Indian multiplex industry.

Inox Leisure, a subsidiary of Gujarat Fluorochemicals Ltd and part of the $3 billion INOX Group made its stock market debut in 2006. Through a judicious mix of organic and inorganic expansion, Inox leisure has maintained its position as one of the largest multiplex players with approximately 11% market share in domestic box office collections. Its acquisition phase started with Calcutta Cine Pvt. Ltd in 2007 followed by Fame India in 2013 and Satyam Cineplexes in August 2014. Currently, Inox Leisure boasts 141 properties, 583 screens and 137,365 seats across 67 cities and 19 states.

An Impressive March Quarter

Inox Leisure has achieved quite a few milestones in FY19, with the highest ever yearly Revenue, PAT, EBDITA and highest yearly footfalls of 6.25 cr in FY19. The firm reported yearly revenue of Rs. 1700 cr rising 25% and PAT growing 16% reported at Rs. 133 cr for the year ended March FY19.

EBDITA also moved north by a robust 47% jump with a yearly margin of 18% against 15% in previous year FY18. Moving on to Q4 FY19, quarterly performance has been nothing less than phenomenal with Revenue coming out at Rs. 479 cr against Rs. 324 cr same period previous year rising 48% in Q4 FY18. Operational performance also has been on equally strong footing more than doubling YoY from Rs. 42 cr to Rs. 97 cr in Q4 FY19. PAT excluding tax write backs has multiplied 11 times in March quarter.

Apart from these financial parameters, the company also boasts low net debt equity ratio of 0.1 and its highest ATP (Average Ticket Price) ever of Rs. 197 in FY19. Though ATP has declined 2% in Q4 FY19 compared to corresponding March quarter previous year, Mr Alok Tandon, CEO, Inox Leisure clarified, “There is no reduction in ATP, the company has passed on the GST reduction to patrons leading to fall this year”. Inspite of 2% fall in ATP, Net Box Office Collections (NBOC), major revenue driver in film exhibition business contributed 59% revenues for Inox in Q4 FY19 rising 50% YoY. 

Long Term Aggressive Expansion Plans

Known for its conservative approach especially vis-à-vis its dominant peer PVR, Inox Leisure seems to be humming to a different tune over the past few quarters. No doubt, the stock price has gained 63% from its 52-week lows exhibiting a change in investor sentiment as a strong focussed aggressive organic expansion strategy is being unfolded by Inox management.

The company added 48 screens in FY17 and just 24 in FY18, but FY19 seems to be playing a different story line altogether. September and March quarters added 28 screens each followed by June adding 12 screens and December increasing the total by another 17 screens, bringing the total screen number to 85 in FY19. This is the highest ever new screen openings in the industry in a year. Commenting on its expansion strategy, Mr Alok Tandon said, “We would like to add 80 screens every year”.

Apart from a strong expansion strategy, the management has focused on a robust revenue model evident from strong Advertisement and Food & Beverage revenue generation. With respect to strong advertisements revenue, Inox CEO commented, “Advertisement rates have gone up and our clear focus over the past few quarters has been connecting with advertisers which give us a good rate”. Ad revenues constituted 9% of total revenue share rising 29% YoY. But the real thrust came from Food & Beverage segment which has risen roughly 60% YoY comprising 26% of the total revenue basket.

The management has further indicated that this double digit run rate for the F&B segment would be maintained.  The company has also been working on its occupancy metrics which has improved from 26% in Q4 FY18 to 31% in March quarter FY19.

Content has been the major driving force ruling Indian masses which has one of the youngest demographics in the world. In addition to that, a rising affluent middle class, higher discretionary spend by households and multiplexes interweaving luxury, technology and comfort would drive higher occupancy rates, higher footfalls, stronger box office collections leading to rising advertisement and F&B revenues. In totality, it’s the content that rules the show.

Even in a seasonally weak Jan-March period, Inox Leisure reported strong numbers driven by a content line up throughout the quarter. And the pipeline seems to have enough of it for the coming months: Aladdin, Godzilla, Spiderman, Toy Story 4 and Lion King from Hollywood. In India, Salman Khan starrer ‘Bharat’, hit Telegu remake ‘Kabir Singh’, Prabhat starrer ‘Sahoo’, Kangana Ranaut’s ‘Mental Hai Kya’ and Akshay Kumar’s, ‘Mission Mangal’.

Two properties and 9 screens have been added since the beginning of FY20 and another 71 screens to go taking the total to 654 screens and 157 properties by the end of the fiscal year. Post FY20 target seems to be an addition of another 830 screens through 120 properties in the next few years. Alok Tandon says that the company's focus is to, “push the pedal hard and ensure that the growth momentum continues”.