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PVR INOX MD Ajay Bijli: Implementing asset-light growth strategy for optimal returns

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In Short:

PVR INOX is focusing on reducing debt, improving EBITDA margins, and strengthening its balance sheet by adopting a franchise-owned and company operated model for future cinemas. They are also implementing a leaner organizational structure and looking to divest their land bank. The company aims to enhance ROCE and generate positive cash flow to reduce debt while strategically adding new screens for growth. Footfall is expected to improve with strong movie offerings despite initial challenges.

Revamping Strategy for Growth

Great news! The leading multiplex player, PVR INOX, is all set to revamp its strategy to reduce debt, boost EBITDA margins, and strengthen its balance sheet. In a recent interaction with businessline, Ajay Bijli, MD of PVR INOX, shared the exciting new direction the company is taking in the upcoming fiscal year.

Focus on Capital Deployment

Starting this financial year, the company is shifting its focus towards maximizing returns on capital deployment. The aim is to get back to pre-Covid EBITDA margins and ROCE levels. By adopting an ‘asset-light’ and ‘asset-right’ approach, PVR INOX plans to implement the Franchise-owned and Company Operated (FOCO) model. This model, widely used in retail and hospitality sectors, will enable a more cautious capital deployment strategy. Additionally, the company is streamlining its organization structure and looking to divest its land bank, ultimately aiming to reduce debt and fortify its balance sheet.

Adopting the FOCO Model

The FOCO model will help PVR INOX reduce capital expenditure on new screens by partnering with developers and shifting a significant portion of the build capex to them. This new capital-efficient growth model is expected to enhance ROCE and generate sustainable positive cash flow, which will be utilized to reduce debt. The company aims to close the deal with developers for about 5-7 projects, transitioning from fixed rentals to revenue share agreements. With the already established strong brand and scale of 1741 screens, PVR INOX is well-positioned to adopt the FOCO model.

Leaner Organizational Structure

Effective April 1, PVR INOX has implemented organizational structural adjustments to enhance integration efforts, align processes, and improve decision-making agility. The company has adopted a leaner structure, realigning leadership and support roles. The new lineup includes Gautam Dutta as CEO-Revenue and Operations, Pramod Arora as CEO-Growth & Investment, and Alok Tandon as Strategic Business Advisor to MD & ED, among others.

Strategic Screen Additions

Despite aiming to add around 100 new screens this year, PVR INOX is adopting a cautious approach. Last year, the company added 135 screens while closing 82, and a similar trend is expected this year. The focus is on opening value-accretive screens while shutting down EBITDA-negative ones to ensure optimal growth and results in the coming quarters.

Bright Outlook for Movie Consumption

Looking ahead, the future looks promising for movie consumption. The overall enthusiasm for watching movies in cinemas remains strong, especially with a good movie lineup. The company is optimistic about the future, noting a significant rise in movie flow since January. Initiatives such as the Rs 349 passport program are expected to boost both volume and value growth, setting the stage for a successful future.

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