PVR Stands To Make Most Of Bollywood’s Real-Life Inspired Drama Spree

India’s biggest movie stars just delivered duds as Netflix-loving viewers demand better quality. Bollywood will hope that The Accidental Prime Minister and a string of real life-inspired drama and action films pull crowds in the new year.

The nation’s largest multiplex chain stands to make the most of it. PVR Ltd. fills a higher proportion of seats and earns more by selling corn to colas than second-placed Inox Leisure Ltd. It also bought SPI Cinemas to extend its reach in the movie-crazy south—the biggest contributor to the world’s No. 1 film-producing industry.

Shares of PVR, which mostly traded in tandem or lower than the second-placed Inox Leisure Ltd. historically, broke away to gain 10 percent in the last one year compared with an equivalent decline for its rival.

Yet, movies face a bigger challenge from videostreaming services like Netflix and Amazon Prime that have hooked viewers to overseas web-television shows like Narcos to Hindi internet series such as The Sacred Games and Mirzapur. By 2020, according to EY India and FICCI estimates in March last year, digital media will topple the film industry by revenue. While subscription-driven content still comprises a fraction, viewers are becoming demanding.

Proliferation of content through streaming platforms has made the audience more critical of quality, Edelweiss Securities said in a note. Salman Khan’s Race 3, Aamir Khan and Amitabh Bachchan-starrer Thugs of Hindostan and Shah Rukh Khan’s ZERO failed to pull crowds in the quarter ended December and were rescued by opening collections, according to the brokerage. By contrast, small-budget movies with less-popular actors such as Andhadhun, Tumbbad, Raazi, Stree and Badhaai Ho were appreciated.

The industry’s race for eyeballs seems to have gotten even more competitive, Edelweiss Securities said, adding that moviegoers have started giving more weight to the story, direction and other elements, apart from actors and the typical fanfare.

The new year offers hope as cinema lovers will have a variety to choose from. The Accidental Prime Minister, which has already taken political overtones after the ruling Bharatiya Janata Party backed it, is based on media adviser Sanjay Baru’s eponymous book on former Prime Minister Manmohan Singh. The Anupam Kher and Akshaye Khanna-starrer releases on Jan. 11.

Uri, a fictionalised portrayal of Indian Army’s action to destroy terror camps on Pakistani soil, hits the screens the same day. Thackeray, a biopic on Shiv Sena founder the late Bal Thackeray, hits the screens on Jan. 23. Others including Cheat India, Super 30, Gully Boy, Manikarnika, and Kesari are also inspired by real-life events. Hollywood’s Ad Astra, XMen: Dark Phoenix and Captain Marvel too are expected to be crowd-pullers.

PVR’s Bigger Reach

Edelweiss Securities expects these films to attract higher footfalls in the January-March quarter, helping PVR that has 711 screens compared with Inox’s 547. Crowds in multiplexes are likely to sustain and more people could watch movies in tier 2 and 3 cities as a reduction in tax rate lowered ticket prices, the brokerage said maintaining its ‘Buy’ call on the stock. The launch of 4K LED Onyx screen cinemas and the option of cancelling advance bookings will help, it said.

Better Margin

PVR earns a higher margin and also has a better realisation record. It gets Rs 52.6 lakh from every screen against Inox’s Rs 38.1 lakh. Consumers spend more at PVR even though its ticket prices are higher.

Domination In South

With the acquisition of 71.7 percent stake in SPI Cinemas, PVR added 76 screens in the south—that produces the bulk of he movies in India. PVR now has 246 screens in the region compared with Inox’s 118, according to their exchange filings. SPI Cinemas, acquired in August, contributed around 8 percent to PVR’s total revenue in the quarter ended September.

PVR has a far better deal with Paytm and Bookmyshow than Inox and the growing share of premium properties will improve operational metrics, Rohit Dokania, senior vice-president (research) at IDFC Securities, wrote in a note. The SPI deal will only aid its earnings, it said.

PVR’s better run than its peer is yet to reflect in analysts calls. About 92 percent have a ‘Buy’ recommendation on Inox compared with 73 percent for PVR, according to the average of estimates compiled by Bloomberg. Still, they expect PVR to gain 12 percent in the next 12 months against a 5.5 percent upside potential for its peer.