Maharashtra Food Rule Can Chew Rs100 crore Off Multiplex Profits

The operating profit of the Indian multiplex industry could go down by 200 basis points (bps), or by Rs100 crore, if half of the moviegoers to multiplexes in Maharashtra carry their own food & beverages (F&B) inside, an analysis by CRISIL Ratings shows.

Maharashtra accounts for roughly a quarter of the revenues of multiplex operators. Non-ticket segments comprising F&B and advertising are highly profitable and subsidise losses on ticket sales.

Sachin Gupta, Senior Director of CRISIL Ratings says, “The gross profit margin of multiplexes in the F&B segment is about 75%, and in the advertising segment over 80%. In fiscal 2018, leading multiplexes reported an operating profit (EBITDA) of Rs58 lakh per screen. Of this, the gross profit generated by the F&B segment was Rs61 lakh per screen, while advertisements reeled in Rs33 lakh per screen. Put another way, these multiplexes would have bled if their only source of revenue was ticket sales.”

Earlier in July, Maharashtra’s Minister of State for Food and Civil Supplies Ravindra Chavan had told the Legislative Assembly that movie-goers can carry their own food inside multiplexes from 1 August 2018. A public interest litigation (PIL) on this is pending before the Bombay High Court. In June this year, the High Court had asked the State government why it could not regulate prices of food and beverages sold inside multiplexes. Hearing a petition filed by social activist Jainendra Baxi, the Court observed that in many instances, the foodstuffs were priced even higher than the entry ticket rates.

Apart from being highly profitable, non-ticket revenues are growing twice as fast as ticket sales. The compound annual growth rate for non-ticket revenues was 29% in the past five fiscals compared with 15% for ticket revenues. As a result, the share of non-ticket revenues has increased to about 43% in fiscal 2018 compared with around 30% in fiscal 2013.

CRISIL estimates that multiplexes in Maharashtra will be required to hike ticket prices by Rs70 to offset the impact on the F&B division. However, such a sharp increase may not go well with moviegoers.

Nitesh Jain, Director of CRISIL Ratings says, “Today, multiplexes account for half of the box-office collections despite having only a fourth of the total movie screens in India. They are also the main attraction at shopping malls. Therefore, any disruption in multiplex operations will, apart from having a cascading impact on the film industry, will affect footfalls at malls, too.”

CRISIL says it monitors the outcome of the PIL and progress on the decision by the government of Maharashtra, as well as its domino effect on other states.

Source:-https://www.moneylife.in/article/maharashtra-food-rule-can-chew-rs100-crore-off-multiplex-profits/54868.html

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