In terms of box office collections, footfalls and occupancies Q4FY19 was a stupendous quarter for multiplexes, helping PVR and INOX close FY19 strongly.

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Unexpectedly, small budget movies registered good traction on bigger screens. Films like Uri: The Surgical Strike, Kesari and Gully Boy helped theatres register high footfalls and occupancies during the last quarter of FY19.

But some headwinds still remain a concern for FY20. However, the first quarter of FY20 started on a strong note with the biggest blockbuster of the year so far — Avengers: Endgame. Nevertheless, the Indian Premier League (IPL), which ran from March 23 to May 12 , the ongoing Cricket World Cup and the failure of Salman Khan-starrer Bharat can dampen performance in Q1FY20.

According to reports by financial services provider Emkay, the combined Hollywood and Bollywood collections for Q1FY20 remained flat.

Regional films like Lucifer (Malayalam) and Maharshi (Telugu) performed quite well in in the first quarter of FY20. The upcoming releases in the next two quarters need a strong showing to beat the high base.

Small budget Bollywood movies have been a revelation in terms of strong collections over the last two years. Their success can be attributed to compelling storylines and the rise of new-age star cast.

While Avengers: Endgame saved the day in the June quarter of FY20, the outlook for the second quarter looks weak, especially with the possibility of the Cricket World Cup forcing a delay in release of some films.

There is a strong lineup of Bollywood movies in the September quarter with Super 30, Mental Hai Kya, Batla House, Mission Mangal, and Made in China slated for release. From the Hollywood stable, The Lion King and the next flick in The Fast and The Furious franchise have raised expectations from the second quarter.

Accounting changes are also likely to affect the theatres' bottomlines with IND AS 116 coming in effect from April 1, 2019. The new system will treat all the leases as financial leases where ownership and risks are transferred to the lessee. The new standard requires lessees to recognise long-term leases on balance sheets. Larger impact will be seen on the balance sheet side as assets and liabilities on the balance sheet will increase, impacting return on capital employed (RoCE) and return on equity (RoE).

In addition, on the profit and loss side, depreciation will increase along with interest expenses, leading to lower profits. However, cash profits will not be impacted.

Recently, the goods and services tax (GST) council made e-tickets compulsory in cinema halls. However, it won’t make a significant difference as almost 100 percent of the booking is now done electronically.

Alok Tondon, CEO of INOX Leisure Limited, on Monday downplayed the impact of the GST Council's diktat as well as the accounting standard change on the multiplex chain.

He said the e-ticketing won't have a big impact, while 135 of the 141 multiplexes operated by INOX are leased, minimising the impact of the new accounting standard. He added that Q1FY20 sales are in line with expectations.

Emkay's report on PVR and INOX notes that audience are preferring strong content rather than star cast while their movie decisions are based on review on social media platforms.

"After a strong FY19, Q1FY20 did not see unexpected strong performance by any Bollywood movie. Content preference for audiences continue to tilt toward strong content rather than star cast and they are swayed by independent reviews available on social media platforms," the report said.

The report is hopeful of some unexpected blockbusters offsetting the high base of the first quarter and prefers INOX over PVR.

"We are hoping for some unexpected blockbusters in FY20E, which should offset the high base of last fiscal. However, the lack of it will have negative impact on footfalls and operating leverage, in our view. Q2FY20 content performance will be key to footfall growth as H2FY19 footfall base is extremely high (+23 percent for Inox and +34 percent for PVR- ex SPI) and will require robust box office performance.

"We remain conservative and factor in footfall growth of 6 percent each for PVR and INOX for FY20E. We continue to maintain our preference for Inox over PVR."

First Published:Jun 27, 2019 3:02 PM IST