INOX (Source: Company Presentation)

Maharashtra Multiplexes Can’t Bar Outside Food Or Sell Over MRP

Food outlets in Maharashtra multiplexes won’t be allowed to charge more than the maximum retail price from August 1 and there will be no ban on taking eatables from outside.

The government will take strict action against erring multiplexes, State Food Minister Ravindra Chavan said today while replying to a query in the Legislative Council. The government is working on a resolution that is expected to come out in six weeks, he said.

The state had agreed to come out with a policy after a public interest litigation was filed in the Bombay High Court against the practice of not allowing outside food in multiplexes. The court had also expressed concern over “exorbitant” prices.

Shares of PVR Ltd. fell 13.2 percent while Inox Leisure Ltd. dropped 7.2 percent and Mukta Arts Ltd. declined over 8 percent before paring most of its losses. The decision could hurt revenues of multiplex owners. Food and beverages contributed 27 percent and 23 percent of the revenue for PVR, India’s largest multiplex chain, and INOX Ltd., respectively, according to their filings for the year ended March.

The move will have an impact on revenue of the multiplexes, said Edelweiss Securities in a note to clients. Food and beverages has gross margins of 75 percent, it said.

PVR, India’s largest multiplex chain, has about 28 percent of its 134 multiplexes in Maharashtra while second-placed INOX Ltd. operates about 22 percent of its 123 properties in the state.

Edelweiss quoted PVR as saying that it hasn’t received any notification yet from the government and “multiplexes do have a legal recourse”.

Average ticket price stood at Rs 209 for PVR and Rs 193 for INOX in the year ended March. “I believe ticket prices could go up to compensate for the loss of F&B business,” Avinash Gorakshakar, head of research at Joindre Capital Services, said. “If the MRP on food prices comes down from August 1 as stated by the MoS, Food of Maharashtra, then it will eat into the margins of the exhibitors.”

Will multiplex players fall in line? Watch this conversation with Aditya Pratap, Advocate in the Bombay High Court.