Leading multiplex player, PVR INOX is taking several steps to pare down debt, grow EBITDA margins and have a stronger balance sheet. It has decided to adopt “Franchise-owned and company operated “ model for future cinemas in a bid to pare down debt. The company is also adopting a more ‘leaner’ structure and looking to divest its land bank. In an interaction with businessline, Ajay Bijli, MD, PVR INOX, he elaborated on the strategic direction the company is taking in the new fiscal year.


With the start of the new fiscal, what is going to be the company’s future strategy ?

We are taking a new strategic direction from this financial year onwards. We will focus on deploying our capital in a manner that we get maximum returns. Our focus will be to get back to the pre-Covid metrics in terms of EBITDA margins and ROCE. We will adopt the ‘asset-light’ and ‘asset-right’ model as a growth strategy. So in line with this, we will look at adopting the Franchise-owned and Company Operated (FOCO) model, which is prevalent in the retail and hospitality sectors. So we will adopt a more cautious approach in how we deploy our capital. Post the integration, we have also sharply focused on implementing a leaner organisation structure. We also have a large land bank, which we will look to divest. So all these measures will help us in paring debt and focus on a stronger balance sheet.


How will the FOCO model be executed and what factors have been the key trigger for you to adopt this model at this stage? What are your targets on debt reduction ?

Through the FOCO model we want to reduce capex intensity on new screen additions by leveraging our brand with developers and shift 50-60 per cent of the new build capex to developers. We are already working on 5-7 such projects. We believe that our new capital efficient growth model will enhance ROCE and generate sustainably positive free cash flow over the long term, which will be used to pare down debt. Our current gross debt is at Rs 1725 crore. Instead of fixed rentals and minimum guarantees, we will look at revenue share deals with developers going forward. We already have about 1741 screens and hence we have established a strong brand and scale giving us the ability to adopt the FOCO model. . 


Could you elaborate on the strategy to adopt a leaner structure in the organisation ?

From April 1, we have made some organizational structural adjustments, furthering our integration efforts with a focus on aligning processes and enhancing agility in decision-making. We had hired Korn Ferry for this purpose. We now. have a leaner organizational structure which includes realigning our leadership and support structure. Under the new structure, Gautam Dutta has assumed the role of CEO-Revenue and Operations, Pramod Arora as CEO-Growth & Investment and Alok Tandon as Strategic Business Advisor to MD & ED, Kamal Gianchandani as Chief Business Planning & Strategy and CEO-PVR INOX Pictures, Nitin Sood as Chief Financial Officer and Sunil Kumar as the Chief Human Resources Officer.


What are your plans for addition of new screens ? Will you adopt a cautious approach ?

Last year we added about 135 screens. This year too we are looking to add close to 100 additional screens. But as we added 135 new screens last year, we also closed 82 screens. Similarly, this year we will close another 90 screens. The new screens that we are opening are all value accretive and the ones that we are closing were EBITDA negative. So I think in the next three to four quarters, you will see the results of this strategy. So we’re not slowing down on growth, we are just making sure that we are getting the biggest bang for our buck. 


What is your view on the overall macro-economic perspective about movie consumption ? The footfalls continue to be below pre-Covid levels.

The debate over whether people will go out to watch movies in post-Covid times is now over.  overall appetite for people to go watch movies at the cinemas continues to be strong when the movie flow is good. I am very optimistic about the future. The third quarter did see the impact of the World Cup despite the release of key movies. But January onwards the movie flow has been strong. Last year the value growth was more than the volume growth. But going forward, I think both volume and value growth will be the strong. If you look at our initiatives ,such as the Rs 349 passport program that we have launched, will provide a boost to the volumes