• 13 Jul 2023 04:41 PM
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GST clarity a breather for PVR Inox; content performance is key

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Multiplex operator PVR Inox Ltd got some respite after goods and services tax (GST) council said food items and beverages (F&B) consumed at cinema halls will be taxed at 5%. Pre-booked snacks will also be taxed at the same rate. This provides tax rate certainty.

Multiplex operator PVR Inox Ltd got some respite after goods and services tax (GST) council said food items and beverages (F&B) consumed at cinema halls will be taxed at 5%. Pre-booked snacks will also be taxed at the same rate. This provides tax rate certainty.

"In the last two years, various state governments/local bodies were lobbying to apply different GST rates on different food items in cinema halls (different for popcorn, ice cream, etc). This move will eliminate disparities and provide clarity by ensuring that all food products are subject to a 5% GST rate," Karan Taurani, analyst, Elara Securities (India), said. It is positive news since it will save time and effort for exhibitors in fighting litigations against states, he added.

To be sure, there is no impact on PVR Inox's financials owing to this move. This is because the company was already booking F&B GST at 5%, say analysts. Nonetheless, this clarification means that investors have one thing less to worry about.

But the serious issue of weak Bollywood movie content performances remains. This is despite movies with big budgets and star casts being released in recent quarters. "After a lackluster Q4FY23, Q1FY24 saw a few strong performers like The Kerala StoryZara Hatke, Zara BachkeFast X, etc. while anticipated blockbusters like Adipurush and Kisi Ka Bhai Kisi Ki Jaan disappointed at the box office. Adipurush was second-best box-office revenue generator in Q1FY24 despite a much weaker-than-expected showing," said a Nirmal Bang Institutional Equities report on 11 July. So, hopes are not too high from company's June quarter (Q1FY24) earnings performance.

Due to lingering concerns on subdued box office performance, the stock has taken a beating, underperforming the Nifty 500 index so far in 2023. Synergy benefits from the PVR and Inox Leisure merger are still some quarters away and cost control measures bode well for profitability outlook. For now, better content quality, especially from Bollywood, is key to improve footfalls and occupancies.

Expectations are that growth could pick from Q2FY24 with decent Bollywood and Hollywood movies like Gadar-2Oh My God-2JawanDream Girl-2MI-Dead Reckoning and Oppenheimer to be released. According to Nuvama Research, Q1FY24 will likely feature improvement in average ticket price/spending per head by 2.5%/5% sequentially. However, if good content, especially for Hindi movies takes centre stage, recovery in the industry is likely, it said in a report on 12 July. Investors will keenly watch the trends on this front.