After the Maharashtra government minister Ravindra Chavan announced on Friday that there will be no ban on patrons carrying outside food in multiplexes while watching a movie, share values of several multiplexes organisations have dropped. If the law gets implemented, it will severely hit cinema theatre operators, as sales of food and beverages contribute a lot to their revenues and profits.
As per the reports, shares of PVR and Inox Leisure plunged 13.1per cent and 5.43 per cent, respectively, on the BSE. The share price of Subhash Ghai’s Mukta Arts, which runs the Mukta A2 chain of multiplexes, also fell but recovered later to end the day with a 1.26 per cent gain. The state government will also meet multiplex owners soon on the reduction of food prices sold on their premises and bringing them at par with market rates.
Last week, the Multiplex association had filed an affidavit in the high court on why outside food and beverages should not be allowed in theatres. As per the statement,
If an order allowing outside food in multiplexes is passed, it would have an impact on the earnings of multiplexes. Food and beverage (F&B) revenues accounted for nearly 27 per cent of the top line in the case of PVR and 22 per cent for Inox in 2017-18. It is also the second-fastest growing revenue stream after advertising, at 10 per cent year-on-year (y-o-y) for PVR and 7.7 per cent y-o-y for Inox. A lot of the growth has come from the average spend per head (SPH) for both chains. In FY18, spends per head grew 10 per cent in the case of PVR and 7.3 per cent for Inox. Almost 35-40 per cent of revenue is generated by the F&B segment for multiplexes. Hence, it is a high margin business for the industry. For a company like Mukta A2 Cinemas, 25-30 per cent of sales are contributed by the F&B sector. As the final verdict is yet to be made by the court, the government must engage with multiplexes before passing any statement on this issue,” said Rahul Puri, MD, Mukta A2 Cinemas.’
Maharashtra is one of the biggest markets for movies and the home of Hindi cinema. Maharashtra accounts for 20-25 per cent of revenues for multiplex chains.
In regards to the decision made by the Maharashtra government, Multiplex Association of India released a statement to media affirming, “We wish to clarify that none of the multiplex cinema theatres operated by any of our members have received any order, notification or communication to this effect from the Government of Maharashtra or any other regulatory authority. Hence we are not aware of any decision to this effect is taken by the Government.
A PIL (L) No. 82 of 2017 (Jainendra Baxi vs. the State of Maharashtra) on a similar matter has been filed before the Honorable Bombay High Court in which the Multiplex Association of India (MAI) has been joined in as a party. At the last hearing, the Hon’ble Bombay High Court granted the Government Pleader further time to seek instructions and file an affidavit regarding its stand on the matter. The above-mentioned petition is pending and is scheduled to be heard on 25 July 2018.”
Adding further Deepak Asher, President of Multiplex Association of India asserted,
Since the matter is currently sub-judice, and since we have no other formal communication from any regulatory authority, we would not like to comment any further on the matter.”
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