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Is This The Moment To Take PVR Private And What Does It Take To Script PVR’s Turnaround?

By AltG Investment Research Lab On Behalf Of Poornima Vardhan & Taponeel Mukherjee

Photo of PVR INOX Stock Price

The Profit Pool Shift In PVR’s Business: From Cinema To Become An “Entertainment MICE” 

  • PVR Inox created an iconic brand and changed the cinema viewing experience for an entire generation of Indians in a post- liberalisation India. However, "change" is the only constant, and it's time for a massive shift in strategy.

  • However, the lagging share price has attracted attention from markets and experts. The discussion around PVR Inox centres around operational improvements, cost rationalisation to increase NOPAT, and improving the quality of the NOPAT by driving both stability and improvements in yield, or what we call occupancy.

  • But to drive share price growth, PVR Inox will have to compound capital at higher rates of return. The cinema business is relatively mature, though it does have space for growth, and faces intense competition from the digital media onslaught. Competing for both "attention" and "wallets" is a tricky business to be in.

  • So, what is PVR Inox's future path to creating value? The answer lies in PVR Inox realising that it isn't in the cinema business anymore but in the "events" business. The answer lies in moving from a cinema operator approach to adding "Capital allocation" as a core focus.

  • Entertainment is transforming with technology, and cinema chains must adapt or die. To go deep into the future, PVR Inox needs to leverage its three strengths: understanding the movie value chain, operating physical assets, and creating a stellar brand.

  • The question is, where is a Dollar Of Free Cash Flow mispriced in India? Given its above-mentioned expertise, where are the growth and cashflows that PVR Inox can tap into? The answer lies around Live Entertainment, Events, and venues.

  • The media world is increasingly divided into Digital and Physical Media, where the Physical Media space again ties in with the digital via licensing rights. While the digital media space gets a lot of attention via marquee names such as Netflix, Disney-Hotstar, and Formula 1, the Physical Media Space is growing at a breakneck speed in India. We estimate "Live Events" to be a $1 billion industry growing at a CAGR of 20%. 

  • When you look at deals such as Ironman's $730 Million sale or a Crossfit valuation at $4 Billion, you see the valuations that "Physical" Media Businesses can get.

  • As Indians consume and incomes rise, PVR Inox is uniquely placed to build an "Events" focused Media platform to focus on the intersection of Entertainment, sports, gaming, licensing rights, events, merchandising and retail that can unleash significant value for all.

  • PVR Inox must leverage the "physical" world to win the entertainment battle. 

Disclaimer: In the article "Is This The Moment To Take PVR Private And What Does It Take To Script PVR’s Turnaround?" above - Any views, comments or communication (above or in the past) should not be construed to be investment advice by Alternative Growth (hereafter referred to as “AltG”) in any form whatsoever. AltG does not make an offer to sell or solicit to buy any securities.


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