PVR Ltd.'s Growth and Future Prospects

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Case Details:

Case Code : MKTG127
Case Length : 20 Pages
Period : 1995-2005
Organization : -
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Industry : Film Exhibition Industry

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"The multiplex business is growing and we plan to increase the total number of screens that we operate to 75 by the end of this fiscal and 200 in the next two-and-a-half years." ¹

- Sanjeev Kumar Bijli, Executive Director, PVR Ltd, in February 2006.

"The only reason why single screen cinemas in the places I am targeting are not doing well is that people even in small towns no longer want to make do with torn seats, dirty bathrooms, candy bars which serve nothing, and bad projection; these towns have paying capacity, and they will pay for comfort levels." ²

- Ginni Chaddha, Director, Wave Cinemas,³ in February 2003.

Introduction

On February 24, 2006, PVR Ltd. (PVR), India's largest cinema exhibitor group, inaugurated PVR Rivoli, a new multiplex in New Delhi. With this, the company, which introduced the concept of multiplexes⁴ in India, had a total of 51 screens in different Indian cities. Earlier, on February 01, 2006, PVR had launched a five-screen multiplex in Hyderabad.⁵ In the fiscal year 2004-2005, PVR attracted 4.9 million movie-goers, while the figure was 6.47 million for the nine months ended December 31, 2005. The company started its operations in Delhi in 1996-97 and initially concentrated its efforts on the National Capital Region (NCR).⁶ However, its aim was to have a pan-India presence and it later ventured into the southern part of the country setting up an 11-screen multiplex in Bangalore, Karnataka, in 2004.

PVR's expansion plans included B and C grade cities like Indore (Madhya Pradesh), Lucknow (Uttar Pradesh), Visakhapatnam (Andhra Pradesh), Aurangabad (Maharashtra), and Latur (Maharashtra).

It planned to increase the total number of screens to 75 by the end of the fiscal 2005-06 and to 200 by 2008. The expansion would require an investment of about Rs 4 billion. PVR raised Rs 1.5 billion through a public issue of its shares in December 2005 and the remaining Rs 2.5 billion was to be funded through internal accruals.

PVR was credited with bringing about a major change in the cinema viewing experience for the Indian public with the provision of comfortable seating, state-of-the-art screens and projection systems and audio visual systems.⁷ As of 2005, Indians were spending about US$2 billion per year on movie tickets. This was expected to grow by 30% over the next five years.⁸

This potential in the cinema exhibition business had attracted many big players from other sectors like real estate, construction, and media. Companies like Adlabs, Satyam, Prasads, Funcinema, Wave Cinemas, Inox, Shringar, etc. had already started their operations in the multiplex business and were making huge investments in expansion. Their expansion plans were expected to pose a serious challenge to PVR.

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1] “PVR to invest Rs. 400 crore,” www.businessstandard.com, February 03, 2006.

2] Shubhra Gupta, “Show biz gets really tough,” www.businessline.com, February 24, 2003.

3] Wave Cinemas of Chadha group runs multiplexes in places like Noida, Lucknow.

4] Multiplex is a cinema complex with three or more screens and includes several amenities like stadium-like seating, contemporary design, etc. which are often not found in ordinary cinema theatres.

5] Initially, the multiplex at Hyderabad started with three screens. PVR was to add two more screens to make it a five screen multiplex.

6] National Capital Region is a broad area consisting of the Union Territory of Delhi and a few ring towns around it falling under states like Haryana (4 districts), Rajasthan (1 district) and Uttar Pradesh (4 districts). The objective was to develop the NCR into a metropolitan region to reduce the population pressure on Delhi.

7] Multiplexes use xenon lamps in projectors as opposed to the carbon arc lamps used in traditional theaters. Xenon lamps help project a cool picture of adequate brightness on the medium-sized screens in multiplexes.

8] “Cinemagoing India,” www.dodona.co.uk, November, 2005.


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