Mall development partners offered complete rent waiver for lockdown period for almost 60% cinemas, says Ajay Bijli, CMD, PVR Ltd

PVR Cinemas, which reported consolidated losses of Rs 184 crore for the July to September quarter of fiscal 2020-21, said that the company is in active discussions with mall developers to negotiate lease rentals and common area maintenance (CAM) charges. This was necessary due to the fact that all of PVR’s 831 screens continued to be non operational during the second quarter of the current fiscal i.e Q2 FY'21.

According to a top company executive, the company’s discussions (on lease rentals and CAM charges) with mall developers have been very successful. “We have been in active engagement with all our development partners for discussion on rent and CAM. So far settlements have been reached for almost 60% of cinemas (with mall developers / partners) offering complete rent waiver for lockdown period and significant discounts on rent post reopening,” said Ajay Bijli, chairman and managing director, PVR Ltd during an earnings call earlier today.

The multiplex chain operator also clarified that discounts on lease rentals and CAM charges, post reopening of cinemas, have been offered by mall developers / partners only till March 31, 2021. It is very likely that PVR management will have to engage in fresh discussion to negotiate lease rentals and CAM after taking into account the market situation at the end of this fiscal.     

 

Furthermore, discussions are on with remaining developers and the company management is expecting to close the negotiations successfully once cinemas are allowed to reopen in states that are yet to give it a go ahead. Towards September end, the Ministry of Home Affairs (MHA) had issued unlocked 5.0 guidelines allowing cinemas to reopen from October 15, 2020, onward, with 50% capacity. So far 16 states and Union Territories (UTs) where PVR has presence have permitted cinemas to restart operations.

 

“Of the total 831 PVR screens, 575 plus have received permissions to reopen. We are eagerly awaiting now for the reopening of other states specifically Maharashtra and Telangana so that business can gradually get back to normal. We're taking all possible precautions, so that both our customers and employees feel safe while visiting their favorite PVR cinema,” said Bijli.

On the overall liquidity part, the PVR management is quite confident and is using a judicious mix of debt and equity to meet its capital requirement. In fact, as of October 31, 2020, the company has over Rs 550 crore of liquidity available, which is sufficient to sustain its operation and meet all its obligations. 

In terms of strategies adopted by the multiplex chain operator to woo back patrons to its cinemas, the company management has rolled out several celebrity promotions and offers.

Among some of the measures being adopted to get back cinema goes to its properties include, opportunity for private screenings, film festivals and a fresh new menu to enhance the overall movie watching experience. “Many of our patrons have responded positively and we are fully prepared to give them the same immersive movie viewing experience the way we've done before,” said Bijli.

 

Talking about the company's Q2 FY'21 business performance, Bijli said, the cinema industry continued to remain shut throughout Q2 FY21 and the company’s results reflect the same. “PVR had almost nil revenue during the quarter from the core movie exhibition business and almost 100% revenue decline. The company reported losses in the second driven by the continuing fixed costs,” said Bijli.

On the personnel expenses front, the company management continued with manpower rationalisation measures wherein overall headcount was brought down to 6,241 on September 30, 2020 as against 11,073 on March 31, 2020. The company management doesn't intend to ramp up the headcount till the time the occupancy levels come back to pre-COVID levels and will continue to operate the business with the current employee base. PVR Cinemas also implemented temporary salary cuts of between 25% and 50% across the organisation.

During the first half of fiscal 2020-21, the company incurred one time expenses of Rs 8.6 crore on account of full and final settlement for employees who left the organisation.

Consolidated revenues of quarter ended September 30, 2020, declined almost 89% at Rs 111 crore, as against Rs 979 crore during the corresponding period last year. Consolidated earnings before interest, tax, depreciation and amortisation (ebitda) loss for the quarter was Rs 14 crore as against a positive ebitda of Rs 324 crore in Q2 FY'20. Consolidated loss, after tax for the quarter stood at Rs 184 crore as compared to a profit of Rs 48 crores during the corresponding period last year.

“After adjusting for impact of Ind AS 116, leases, revenue ebitda and PAT of the company would have been Rs 44 crore and Rs (81) crore and Rs 116 crore respectively,” said Bijli.

The company continued with a strategy of aggressively controlling costs, as well as augment liquidity. With these efforts PVR was able to reduce its fixed costs by over 70% in Q2 FY'21, as compared to Q2 FY'20 excluding rent and CAM charges. Monthly fixed costs, excluding rent and CAM dropped to Rs 24 crore in the quarter as against Rs 86 crore in Q2 FY'20.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)

eCommerce Push: Shoppers Stop connects four distribution centres with Amazon.in

Company will also open assortment from 50-odd stores gradually for shopping on Jeff Bezos owned eMarketplace. Management expects double-digit revenue contribution from online sales going forward

In its effort to push online sales as part of the company's omni-channel strategy, K Raheja Corp’s listed retail arm Shoppers Stop Ltd has connected all its distribution centres and 50-odd physical retail stores with the Indian arm of global eMarketplace operator Amazon, which is owned by Jeff Bezos. The company management has been talking about this approach for a while now however the COVID-19 induced lockdown and the ensuing business challenges ensured these plans were taken up on a war footing and fast tracked to hit the market at the earliest. 

B S Nagesh, chairman and non executive director, Shoppers Stop Ltd, said the move will help the company hit a double-digit figure in terms of revenue contribution from online sales. “We have been talking about our partnership with Amazon. It's been quite a struggle for us in the last few quarters. But now I'm happy to say that, we as an organisation now are fully connected,” he Nagesh during an earnings call earlier today.

As of last week, all four distribution centres of Shoppers Stop have been connected to Amazon. This apart, the retailer will, one by one, open up the assortment from its 50-odd physical stores that are connected to Amazon. “As of now we have just opened private brands, watches and a few other brands. Over the next three to four weeks, we will add up and open up the full assortment of what Shoppers Stop has across the country onto the Amazon site,” said Nagesh. 

The COVID-19 pandemic has created havoc on apparel and lifestyle retailers over the last couple of quarters in the current fiscal. And as brick and mortar retailers come to terms with the market situation post the unlock phases, industry players are going aggressive on strengthening their eCommerce sales channel(s). As a result, all efforts are being directed to ensure online sales set the cash registers ringing thereby helping retailers make up for the loss of business in the lockdown period.

Going forward, customers looking to shop from Shoppers Stop will be able to access the product(s) and get it delivered directly from the stores. “I think this will really enhance our capability of serving customers. Our eCommerce sales have grown by more than 50%. And our share of eCommerce has increased from 2% to 8% in this quarter. The way things have gone in the first two weeks, I'm very hopeful that we should be hitting a double digit figure very soon,” said Nagesh.

In May last year, Shoppers Stop had said that it will relist and sell its products on the e-marketplace operated by Amazon India. This was in response to the new rules for foreign direct investment (FDI) in e-commerce retail disallowing investee companies from selling on emarketplace(s) operated by the investor or subsidiary firms. In September 2017, an investment firm of the global e-retail giant Amazon.com NV Investment Holdings LLC acquired a minority stake of 5% in Shoppers Stop for Rs 179.26 crore. As the new rules kicked in, the fashion and lifestyle products retailer had to withdraw from Amazon.in, in February 2019. 

In another development, the company has appointed former chief executive officer of Tata Group’s retail arm Westside, Venugopal G Nair as managing director and chief executive officer, Shoppers Stop Ltd. Nair is expected to assume office in the first week of November 2020.

(The writer is a Mumbai-based independent business journalist and has extensively covered diversified consumer businesses over the last two decades. He can be reached at hello@ashishktiwari.com)