flopped ~11% while INOX
slumped ~9% after media reports claimed that the Maharashtra government may allow people to bring their own food inside multiplexes from August 1 onwards.
Considering the high prices charged on food items inside movie halls, the Bombay High Court had, in April 2018, stated that food and beverages inside movie theatres should be sold at regular prices. In response to this, the Maharashtra government said that it would soon come out with a policy on the issue.
Earlier, in April 2018, one Jainendra Baxi had filed a Public Interest Litigation (PIL) against the prohibition of outside food in theatres. A division bench of justices SM Kemkar and MS Karnik was hearing the PIL.
There is no legal provision which prohibits outside food and water inside the theatres, the petitioner’s lawyer Aditya Pratap Singh told the court. "However, theatres not only prohibit outside food but also charge high prices on the food and beverages sold inside," he claimed.
Earlier, the court had opined that if outside food in multiplexes is prohibited, then multiplexes cannot have their own vendors selling food inside at a higher price either. Government pleader Purnima Kantharia also told the court that after taking into the consideration the suggestions by Multiplex Owners’ Association (MOA) and the petitioner, the state would soon frame a policy on the issue.
Maharashtra contributes ~30% of movie exhibition revenues for multiplex chains. Multiplex companies like PVR Ltd and Inox Leisure Ltd used to enjoy higher margins owing to the absence of any policy to regulate such higher prices. PVR and Inox’s ~27% and ~23% of FY18 revenue, respectively, was generated from their food and beverages business, which is very significant. PVR Ltd has ~625 screens at 134 locations spread across 51 cities, while Inox Leisure Ltd has ~492 screens across 60 cities. In Maharashtra, PVR has 157 screens, while Inox has 118 screens.
We expect that the formation of this policy will restrict these players to keep charging higher prices on foods and beverages. This will result in a reduction in the margins of their food and beverages segment, which will ultimately hinder the profitability of these companies.
PVR Ltd ended at Rs1,214.20 down by Rs183 or 13.1% from its previous closing of Rs1,397.20 on the BSE. Inox Leisure Ltd ended at Rs238.70 down by Rs13.7 or 5.43% from its previous closing of Rs252.40 on the BSE.