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THE WACHOWSKI DILEMMA
Ajay Bijli takes over DT Cinemas in his attempts to take PVR to the number one position in India – but is it a job being half done at half speed? By Pallavi Srivastava
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 Andy and Larry Wachowski – the makers of the iconic Matrix series – once upon a time used to own a company called Village Roadshow, at a time when Priya Cinemas was simply Priya Cinemas, run by a trucking company which had won the theatre in a court litigation. And then 1995 happened, when the son of the trucking company’s owner convinced the legendary Village Roadshow to set up a joint venture with his one theatre. That was when Priya Village Roadshow was born, run by the family scion Ajay Bijli. Interestingly, the Wachowski brothers pulled out of the JV in 2003 (leading to the company being renamed PVR) and later out of Village Roadshow, to focus more on their core competence of film making rather than distributing/screening. At the same time, Ajay, now the Chairman and Managing Director of PVR Ltd, has gone against the well tested model and has now increasingly attempted to increase not only his group’s exposure to the film making business (Khosla Ka Ghosla et al), but also to the screening business – his latest takeover of DLF’s multiplex branch, DT Cinemas, an evident example. But with both legs in different boats, isn’t Ajay pushing the envelope too fine with respect to both finances and management focus?
First an analysis of his latest takeover. PVR will be paying DLF Rs. 20 crore in cash and will also issue 25.57 lakh shares to DLF (which will translate in a 9% stake for DLF in PVR Ltd) for acquiring DT Cinemas. Ajay Bijli, said, “The industry is undergoing a paradigm shift. We foresee an opportunity for growth in the film and exhibition space and we want to be prepared to meet the challenges.”
How well is this move going to help him? Being fair, the answer is considerably. PVR currently has 108 screens in the country with a capacity of 27,827 seats. With the acquisition of DT, it will get additional 29 screens (26 operational and 3 others to start operations in next three months period) with a current capacity of about 5,300 seats. That means that post DT’s acquisition, PVR’s number of screen will directly shot up by 26% and the capacity will go up by 19%. In fact, post the acquisition, PVR’s market share in the Delhi NCR region (which is a very important market for multiplexes) will reach between 60-70%.
Analysts from Religare forecast that the acquisition will also have a positive impact on PVR’s top lines, giving it a boost of 16% on an annual basis. Encouragingly, the agreement also provides PVR with the right to open multiplexes in all the upcoming malls of DLF. Ajay Bijli says, “This will further strengthen PVR’s position as one of the largest multiplex player in India.” Ajay is looking at adding an additional 200 screens in the next year’s time keeping in mind the scope of growth in the business.
But would he be able to keep up the investments to match his objectives? Would Ajay Bijli again turn back to ICICI – his original funding partners who helped him out when Village Roadshow withdrew in 2003 – for additional funding? It’s quite clear that even Ajay Bijli has a tactical flag active on this question – one giveaway being the very closely timed 10% equity sale offer to Thailand’s largest entertainment group Major Cineplex Group Plc. Major Cineplex will invest Rs. 420 million in PVR and will get 25.57 lakh shares in return. Major has 350 multiplex screens, as well as 500 bowling lanes, 300 karaoke rooms and 2 ice skating rinks. Why does that matter? It matters because PVR is already getting into or thinking of getting into similar value adds in their major multiplexes and is looking at leveraging from Major Cineplex’s expertise and experience in the entertainment industry.
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 Bijli comments, “This move is both imperative and rudimentary to help transform PVR into an integrated retail entertainment company over the next few years.” Vicha Poolvaraluck, Chairman and CEO of Major Cineplex Group Plc., adds, “We see the Indian entertainment sector growing by leaps and bounds in the coming years. We sincerely hope that we would be able to add strategic inputs to the company, which will help PVR enhance its unique positioning.”
With due respect to Ajay’s expansion plans, the fact is that PVR still has a very long way to go before thinking of becoming a market leader. The fact is, they’re not even half the size of the market leader, Big Cinemas, which has 240 screens in India and a smashing 500 aggregate globally.
Undoubtedly, a wider range of retail entertainment portfolio will give PVR a tactical edge over Big Cinemas. But as far as expansion is considered, PVR has actually been very selective in terms of entering new markets. Big Cinemas, on the other hand, has been correctly playing the volume game. Not only this, Big Cinemas also has a much stronger backward integration with its production house Big Motion Pictures, which is producing and distributing movies on a very large scale.
Add to that Big Cinema’s purported big buck deals with various Hollywood production houses, and you have the better known PVR, which obviously has a better brand positioning, grudgingly being forced to accept a follower position in the industry. This is not to say that doesn’t have a strong movie distribution arm, but despite that, PVR’s movie production division is far behind the churn rate of Big Motion Pictures. And if Ajay Bijli continues to invest in film making the way he has in the past, there is no guarantee of how much returns (or losses) he would end up getting – PVR’s most recent movie was a brilliantly forgettable Mere Khwabon Mein Jo Aaye – a flop. PVR’s last gold was the cult hit Taare Zameen Pe.
Without doubt, the question Ajay has to answer – and truthfully – is whether his group really has the management and financial wherewithal to take on bigger competitors (and even foreign behemoths ready to enter India) in all segments, or whether he would be actually better off being a niche player in one core segment, in our interpretation, the screening business. Well, the Wachowski brothers answered this question long back...
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Pallavi Srivastava
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