Inox Leisure: Growth show set to begin

Inox Leisure

Initiating Coverage | Sector: Media

Inox Leisure

BSE Sensex

28,438

S&P CNX

8,633

CMP: INR181

TP: INR240 (+33%)

Buy

Growth show set to begin

Higher screen additions and ad revenue/screen to drive profitability

Stock Info

Bloomberg

Equity Shares (m)

M.Cap. (INR b) / (USD b)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val (INRm)/Vol ‘000

Free float (%)

INOL IN

96.2

17.4/0.3

197/104

0/-6/32

54/338

51.3

Financial Snapshot (INR Billion)

Y/E Mar

2015E 2016E 2017E

Sales

9.2 12.0 15.3

EBITDA

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

P/E (x)

P/BV (x)

EV/EBITDA (x)

1.3

0.2

1.7

71.0

2.8

8.3

108.5

2.5

14.4

1.9

0.6

7.0

77.6

8.9

11.5

25.8

2.3

10.0

2.6

1.1

12.0

71.9

89.0

13.7

17.7

15.0

2.0

7.0

-56.7 319.8

Indian cinema exhibition industry has 9,400 screens, of which 1,700 are in the

multiplex format. The multiplex industry is highly concentrated, with top four

players controlling 78% of the screens.

Inox Leisure (INOL) is the second-largest player with 365 screens, while PVR leads

with 462 screens. INOL has upped the ante for new screen additions, with ~55

annual additions planned, compared to 23 annual additions over last three years.

Recent acquisition of Satyam Cineplexes has established INOL’s strong presence in

North India, which is a higher ATP market compared to other regions.

INOL has significant room to improve its ad revenue/screen, which stood at

INR1.7m/screen versus PVR’s INR3.9m/screen in FY14. With concerted efforts, we

expect ad revenue/screen to improve to INR4m/screen, thus driving profitability.

We expect INOL to clock 29% revenue CAGR and 169% PAT CAGR over FY15E-17E

driven by margin expansion and reduction in interest costs.

The stock trades at a PE multiple of 25.8x and 15.0x FY16E and FY17E EPS

respectively. We value INOL at a PE multiple of 20x FY17E EPS (implied EV/EBITDA

multiple of 9x FY17E EV/EBITDA), arriving at a target price of INR240.

Formidable No. 2 player, aggressive expansion plans

Of the total 9,400 screens in India, 1,700 are in multiplex format and the rest

being single screens, which provides huge opportunity for multiplex players’

growth. India’s multiplex industry is highly concentrated with top four players --

PVR, INOL, Carnival and Cinepolis -- controlling 1,328 screens, 78% of the

market. With 365 screens currently, INOL is the second-largest player with 22%

share in multiplex screens, ~18% market share in Bollywood revenue and ~25-

30% market share in Hollywood revenue respectively. INOL plans to up the ante

for new screen additions, with a target to add ~55 screens/annum over the next

two years, compared to the addition of ~23 screens/annum over the past three

years. This will drive footfalls higher from 42m in FY15E to 59m in FY17E,

marking a CAGR of 18.8%.

Shareholding pattern (%)

As on

Dec-14 Sep-14 Dec-13

Promoter

48.7

DII

6.0

3.8

2.1

FII

14.0

8.9

0.0

Others

31.3

38.6

49.2

Note: FII Includes depository receipts

Satyam acquisition – right move to capture market share in North India

Stock Performance (1-year)

INOL traditionally was a strong player in East India (74% market share) and

South India (39% market share). West and North regions were dominated by

PVR with 43% and 52% market share respectively. With a view to expand its

presence in North India (a higher ATP and SPH market), in July 2014, INOL

acquired Satyam Cineplexes for a consideration of INR1.8b (EV of INR2.2b). We

believe Satyam will drive the following synergies for INOL: 1) improvement in

supply chain in F&B, 2) higher ad revenue growth and 3) lower overheads. The

INR1.8b acquisition was initially funded by debt, post which the company has

sold ~15m treasury shares amounting to INR2.6b to reduce debt on balance

sheet. INOL has 5m treasury shares worth INR0.9b outstanding, which can be

utilized to retire further debt (~INR1.8b outstanding for FY15E).

16 March 2015

Inox Leisure

Key metrics – ATP and SPH set to improve

ATP is largely driven by content and location of a property. We believe that with the

acquisition of Satyam, INOL has a better presence in North India, an higher ATP

market, which will have a positive effect on overall ATP. As of FY14, PVR’s ATP

(INR168) was higher by 7% compared to INOL (INR156), primarily due to higher

contribution from North and West India, higher content of 3D and higher share of

Hollywood, which commands a higher ATP. However, with INOL’s focus on

expanding its presence in North, we believe these differences will reduce going

forward thus driving 7% CAGR in ATP over FY15E-17E, from INR167 to INR189.

Similarly, INOL has taken various initiatives to improve its F&B revenue like changing

the menu based on the movie, larger menu spread and on-seat delivery. SPH is thus

expected to improve at 15% CAGR from INR53 in FY15E to INR69 in FY17E.

Significant room to improve ad revenue/screen

INOL’s ad revenue/screen has improved from INR1m/screen in FY11 to

INR1.7m/screen in FY14. However, it is significantly lower than PVR’s ad

revenue/screen of INR3.9m. INOL has taken various initiatives to monetize its on-

screen and off-screen ad revenue. It has started to hike the ad rates and focus on

high value and long term deals. Company has started to monetize the lobby area,

which resulted in 50% growth in ad revenue/screen in FY14, much higher than PVR.

It now follows a flexi pricing model, whereby it charges higher for ads before the

start of a movie and immediately after the interval, to increase its ad

revenue/screen. We believe these measures will improve its ad revenue/screen

from INR1.7m/screen in FY14 to INR4m/screen in FY17E.

GST – a possible game changer

High entertainment tax is a major impediment for exhibition industry’s growth. The

overall tax implication is as high as 40-50% in states like Maharashtra, Uttar Pradesh,

Bihar and Karnataka. However, post GST, the peak rate is likely to be ~16%, leading

to significant cost reduction. Also, input tax credit will be available for setoff against

the output tax liability (service tax paid presently on rent, electricity, security,

housekeeping etc is not available for setoff against output liability of entertainment

tax or VAT). We believe that GST’s implementation can drive 100-200bp margin

expansion for INOL.

Valuation and view

We believe that INOL is rightly-placed to enter the next phase of growth. With

Satyam’s acquisition, company has improved its presence in North India. This will

result in superior bargaining power with advertisers, leading to higher earnings

growth. We expect INOL’s revenue and PAT to post 29% and 169% CAGR over

FY15E-17E. We believe that an improvement in operating metrics will lead to better

return ratios, and RoCE and RoE are expected to improve from 8.3% to 17.7% and

2.8% to 13.7% respectively over FY15E-17E. Further, INOL owns six properties

valued at INR5b which can be monetized in the form of sale and leaseback

arrangements for acquisition purposes. The stock trades at a PE multiple of 25.8x

and 15.0x FY16E and FY17E EPS respectively. We value INOL at a PE multiple of 20x

FY17E EPS (implied EV/EBITDA multiple of 9x FY17E EV/EBITDA), arriving at a target

price of INR240. We initiate coverage on the stock with a

Buy

rating.

16 March 2015

Inox Leisure

Strengthening its leadership in exhibition business

On an aggressive expansion path

India’s cinema exhibition industry has 9,400 screens, of which 1,700 are in multiplex

format. PVR is the leader with 462 screens followed by INOL with 365.

Multiplex industry is highly concentrated with top four players controlling 1,328

screens (~78% of the market).

INOL has Bollywood and Hollywood market share of 18% and ~25-30%, against PVR’s

Bollywood and Hollywood market share of ~20-22% and 30-35% respectively.

Over the past three years, IONL added ~23 screens per annum, while PVR added ~51

screens per annum. However, going forward, IONL’s management is confident of

adding ~55 screens per annum which will reduce the screens gap with PVR.

Second-largest player in exhibition business

Indian exhibition industry has a total of 9,400 screens, of which just 1,700 are in

multiplex format. Of these, PVR is the leader with 462 screens followed by INOL with

365. INOL has Bollywood and Hollywood market share of 18% and ~25-30%,

compared to PVR’s Bollywood and Hollywood market share of ~20-22% and 30-35%

respectively. Multiplex industry is highly concentrated with top four players

controlling 1,328 screens (~78% of the market). With increased aggression, we

believe INOL is well positioned to gain further market share in exhibition business.

Exhibit 1: Multiplex screens in India

Total Number of Screens

454

361

308

366

193

Source: Company, MOSL

Exhibit 2: Comparison of key

metrics as of 3QFY15

Particulars

Properties

Screens

Seats

Cities

Total Revenues (m) – FY14

EBITDA (m) – FY14

EBITDA Margin (%)

PAT (m) – FY14

Admits (m) – FY 14

ATP (INR) - FY14

SPH (INR) – FY14

PVR

104

462

109,762

12,769

2,064

579

168

INOL

365

97,039

8,690

1,219

369

156

Source: Company, MOSL

16 March 2015

Inox Leisure

Aggressive screen additions to reduce gap with PVR

INOL has been aggressively adding screens to increase its presence across India.

Over the past three years, company added ~23 screens per annum on an average,

compared to its arch rival PVR which added ~51 screens per annum on an average.

However, going forward, INOL’s management is looking at increasing its aggression

in screen additions with annual new screen addition target of ~55 screens as against

23-25 screens in the past. In 9MFY15, INOL added ~55 screens (38 screens through

inorganic acquisition of Satyam and 17 screens through organic growth). We believe

increased aggression in screen additions will take INOL to a level playing field with

PVR and will drive better bargaining power with advertisers, thereby improving

advertising income and profitability.

Exhibit 3: Total number of screens

Inox screens

PVR screens

481

375

541

425

596

480

Exhibit 4: Screen additions during the year

Inox screen additions

PVR screen additions

239

257

166

142

351

285

421

310

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

16 March 2015

Inox Leisure

Operating metrics set to improve

Expect ATP and SPH to improve going forward

INOL’s ATP is expected to post 7% CAGR over FY15E-17E driven by screen additions in

North and West of India, higher contribution from 3D movies and better content.

Company has taken various initiatives to improve its F&B revenue like changing the

menu based on the movie, a larger menu spread and on-seat delivery.

Ad revenue/screen is expected to improve at a faster pace than PVR, from INR1.7m in

FY14 to INR4m in FY17E, largely due to better bargaining power with advertisers and

better monetization of on-screen and off-screen advertising.

Number of INR1b movies has risen from one in FY09 to as high as eight in FY15. We

believe better content quality will drive an increase in movies in the INR1b movie club.

Higher ATP and SPH to drive growth

ATP is largely driven by content and location of property. We believe that with the

acquisition of Satyam, INOL has a better presence in North India which is a higher

ATP market, which will have a positive effect on overall ATP. As of FY14, PVR’s ATP

(INR168) was higher by 7% compared to INOL (INR156), primarily due to higher

contribution from North and West India, higher content of 3D and higher share of

Hollywood, which commands a higher ATP. However, with INOL’s focus on

expanding its presence in North, we believe these differences will reduce going

forward thus driving 7% CAGR in ATP over FY15E-17E from INR167 to INR189.

Similarly, INOL has taken various initiatives to improve its F&B revenue like changing

the menu based on the movie, larger menu spread and on-seat delivery. F&B is

~73% gross margin business and its contribution to total revenue is expected to

improve from 21% in FY15 to 23% in FY17E. SPH is expected to improve at a 15%

CAGR from INR53 in FY15E to INR69 in FY17E.

Exhibit 5: ATP gap to reduce with PVR

Inox ATP (INR)

PVR ATP (INR)

200

189

Exhibit 6: INOL’s SPH set to improve

Inox SPH (INR)

PVR SPH (INR)

162

156

160

163

152

156

178

179

189

168

156 167

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

16 March 2015

Inox Leisure

Exhibit 7: F&B revenue contribution to increase

Tickets Collection

F&B

Conducting Fees

Other Operating Income

16%

75%

17%

75%

19%

73%

19%

69%

21%

64%

23%

62%

10%

24%

61%

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 8: Hollywood movie contribution higher compared to industry

Hollywood Contribution

Bollywood Contribution

Regional Contribution

16%

66%

18%

FY11

17%

65%

19%

FY12

17%

67%

16%

FY13

16%

70%

44%

48%

15%

FY14

Industry

Source: Company, FICCI KPMG 2014, MOSL

Footfall growth to be driven by higher screen additions

In FY15, INOL is expected to add 65 screens, against ~23 added on an average over

the last three years. Going forward, company plans to add ~55 screens per annum,

which drive footfall growth. We expect footfalls to grow at 18.8% CAGR from 42m in

FY15E to 59m in FY17E.

Exhibit 9: Total number of screen additions

Inox screen additions

PVR screen additions

Exhibit 10: Footfalls to post steady growth

Inox footfalls (m)

PVR footfalls (m)

FY12

FY13

FY14

FY15E

FY16E

FY17E

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

16 March 2015

Inox Leisure

Occupancy rate to improve marginally

Post the acquisition of Fame in 2011, INOL’s occupancy rate has improved from 23%

in FY11 to 28% in FY14 (27% in FY11 to 31% in FY14 for PVR). Company has been

able to maintain a high occupancy rate despite higher screen additions. The gap

difference in occupancy rate between INOL and PVR is expected to reduce as the

former adds screens in premiere locations. With the length of movies reducing, the

number of shows exhibited has increased to five per day, thereby improving the

convenience for movie goers and also increasing the exhibitor’s capacity. We expect

the occupancy at INOL to improve marginally from 26.5% in FY15 to 27.5% in FY17E.

Exhibit 11: Gap in occupancy rate between two exhibitors reduces

Inox occupancy

40%

30%

20%

10%

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

PVR occupancy

Source: Company, MOSL

Significant room to expand Ad revenue/screen

Ad revenue/screen for INOL has improved from INR1m/screen in FY11 to

INR1.7m/screen in FY14. However, it is significantly lower than PVR’s ad

revenue/screen of INR3.9m. Post Satyam’s acquisition, INOL’s screen presence has

improved to 365 (against 462 for PVR) across India, which will give it higher

bargaining power with advertisers and thus drive higher ad revenue/screen. INOL

derives ~70% of ad revenue from on-screen and balance 30% from off-screen, in line

with PVR. Around 60% of PVR’s contracts with advertisers are annual ones,

compared to INOL’s of 65-70%.

INOL has taken various initiatives to monetize its on-screen and off-screen ad

revenue. INOL has started to hike ad rates and focus on high value and long term

deals. It has also started to monetize the lobby area, which resulted in 50% growth

in ad revenue/screen in FY14, much higher than PVR. It has focused on direct

dealing with the government for national advertisements. It follows a flexi pricing

model, whereby it charges higher for ads before the start of a movie and

immediately after the interval, to increase its ad revenue/screen. We believe these

measures will improve its ad revenue/screen from INR1.7m/screen in FY14 to

INR4m/screen in FY17E.

16 March 2015

Inox Leisure

Exhibit 12: Ad revenue comparison

Inox ad revenue (INR m)

PVR ad revenue (INR m)

2,146

1,511

992

531

172

FY11

178

FY12

654

324

495

1,786

1,280

856

1,810

2,501

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 13: Ad revenue/footfall trend

Ad revenue/footfall (INR)

61%

40%

21%

-13%

5.7

FY12

24%

59%

YoY Growth

Exhibit 14: Ad revenue per screen comparison

Inox ad revenue/screen (INR m)

4.0

4.2

3.8

3.9

PVR ad revenue/screen (INR m)

4.0

2.5

1.0

0.7

1.2

1.7

4.2

3.2

4.4

4.0

6.6

FY11

9.2

FY13

12.8

FY14

20.4

FY15E

24.7

FY16E

30.5

FY17E

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Exhibit 15: Key advertisers

Source: Company, MOSL

16 March 2015

Inox Leisure

Exhibit 16: Revenue mix

Tickets Collection

17%

74%

18%

73%

F&B

19%

73%

19%

69%

VPF Income

22%

65%

Other Operating Income

22%

65%

22%

66%

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

Higher share from 3D content, Hollywood movies to drive ATP growth

INOL derives 15% of its total revenue from Hollywood movies, against 8% for the

industry. Hollywood movies have a higher ATP, which drives overall ATP higher.

Apart from Hollywood movies, another driver for ATP growth is 3D movies – which

command 15-20% premium over regular movies due to higher content cost. Past

few years have seen significant increase in 3D content due to better technology and

higher demand for 3D movies by audience. Hence, more movies are being

developed in 3D format. In FY11, INOL derived ~5% of its ticket revenue from 3D

movies, which improved to 10% in FY14 (PVR contribution at 23%). We believe with

the growth in 3D movies and higher contribution of Hollywood movies, overall ATP

for INOL is expected to improve.

Exhibit 17: 3D movie revenue as a % of total ticket revenue

3D Content (%)

10%

FY11

FY12

FY13

FY14

Source: Company, MOSL

Improved content, wider screen releases result in higher INR1b club movies

In 2008,

Ghajini

became the first movie to cross INR1b collection at the box office,

setting a new benchmark for Bollywood. Post 2008, INR1b club movies have

increased significantly due to better content and wider releases. Number of INR1b

movies has risen from one in FY09 to as high as eight in FY15. Digitization enables

wider spread of releases, which results in increased number of screens per movie

over the period. For example,

Dabaang

was released in ~1,600 screens in 2010,

while

Kick

was released in ~3,400 screens. Since majority of the box office collection

happens in the opening week, wider screen releases attract higher footfalls. We

believe that going forward as content quality improves, the number of INR1b club

movies will grow significantly.

16 March 2015

Inox Leisure

Exhibit 18: Bollywood’s INR1b club

INR1b club movies' collections (INR b)

INR1b club movies (nos)

13.6

14.2

11.5

1.1

FY09

2.0

2.5

FY11

7.1

FY10

FY12

FY13

FY14

FY15

Source: Company, MOSL

Exhibit 19: INR1b club movies

Sr no

Movie

Happy New Year

Bang Bang

Singham Returns

Kick

Ek Villain

Holiday

2 States

Jai Ho

Dhoom 3

Ramleela

Krrish 3

Grand Masti

Chennai Express

Bhaag Milkha

Yeh Jawaani Hai

Deewani

Race 2

Dabangg 2

Jab Tak Hai Jaan

Son Of Sardaar

Barfi!

Ek Tha Tiger

Bol Bachchan

Rowdy Rathore

Housefull 2

Agneepath

Don 2

Ra.One

Bodyguard

Singham

Ready

Golmaal 3

Dabangg

3 Idiots

Ghajini

Release date Lead stars

19-Dec-14

24-Oct-14

2-Oct-14

15-Aug-14

25-Jul-14

27-Jun-14

6-Jun-14

18-Apr-14

24-Jan-14

20-Dec-13

15-Nov-13

1-Nov-13

Aamir Khan, Anushka Sharma, Sushant Singh Rajput

Shah Rukh Khan, Deepika Padukone, Abhishek Bachchan, Sonu Sood, Boman Irani,

Hrithik Roshan, Katrina Kaif

Ajay Devgn, Kareena Kapoor

Salman Khan, Jacqueline Fernandez

Sidharth Malhotra, Riteish Deshmukh, Shraddha Kapoor

Akshay Kumar, Sonakshi Sinha

Arjun Kapoor, Alia Bhatt

Salman Khan, Daisy Shah

Aamir Khan, Abhishek Bachchan, Uday Chopra, Katrina Kaif, Jackie Shroff

Ranveer Singh, Deepika Padukone

Hrithik Roshan, Priyanka Chopra, Kangana Ranaut, Vivek Oberoi

Vivek Oberoi, Riteish Deshmukh, Aftab Shivdasani, Kainaat Arora, Bruna Abdalah,

13-Sep-13

Maryam Zakaria, Manjari Fadnis, Sonalee Kulkarni, Karishma Tanna

8-Aug-13 Shah Rukh Khan, Deepika Padukone

12-Jul-13 Farhan Akhtar, Sonam Kapoor

Total Collecti

(INR b)

3.40

2.03

1.81

1.41

2.33

1.06

1.13

1.04

1.11

2.80

1.10

2.41

1.03

2.27

1.04

1.90

31-May-13 Ranbir Kapoor, Deepika Padukone

25-Jan-13

21-Dec-12

13-Nov-12

14-Sep-12

15-Aug-12

6-Jul-12

1-Jun-12

5-Apr-12

26-Jan-12

23-Dec-11

26-Oct-11

31-Aug-11

25-Jul-11

3-Jun-11

5-Nov-10

10-Sep-10

25-Dec-09

25-Dec-08

Saif Ali Khan, Deepika Padukone, John Abraham

1.02

Salman Khan, Sonakshi Sinha

1.59

Shah Rukh Khan, Katrina Kaif, Anushka Sharma

1.21

Ajay Devgn, Sonakshi Sinha, Sanjay Dutt

1.05

Ranbir Kapoor, Priyanka Chopra, Ileana D’Cruz

1.20

Salman Khan, Katrina Kaif

1.98

Ajay Devgn, Abhishek Bachchan, Asin, Prachi Desai

1.02

Akshay Kumar, Sonakshi Sinha

1.31

Akshay Kumar, Asin, Zarine Khan, John Abraham, Jacqueline Fernandez, Shreyas

1.14

Hrithik Roshan, Priyanka Chopra, Sanjay Dutt

1.23

Shah Rukh Khan, Priyanka Chopra

1.06

Shah Rukh Khan, Kareena Kapoor, Arjun Rampal

1.15

Salman Khan, Kareena Kapoor

1.42

Ajay Devgn, Kajal Aggarwal, Prakash Raj

1.00

Salman Khan, Asin

1.20

Ajay Devgn, Kareena Kapoor, Arshad Warsi, Tusshar Kapoor, Shreyas Talpade, Kunal

1.07

Salman Khan, Sonakshi Sinha

1.45

Aamir Khan, Kareena Kapoor, Sharman Joshi, R. Madhavan

2.02

Aamir Khan, Asin

1.14

Source: Company, MOSL

16 March 2015

Inox Leisure

Exhibit 20: Number of screen releases increased significantly over the years

Number of screen release

3,359

3,446

3,014

2,638

2,101

2,065

1,598

Kick (2014)

Dhoom 3

(2013)

Chennai

Express

(2013)

Dabaang 2

(2012)

Ek Tha Tiger Bodyguard

(2012)

(2011)

Dabaang

(2010)

Source: Company, MOSL

GST – a possible game changer

High entertainment tax is a major impediment for exhibition industry’s growth. The

overall tax implication is as high as 40-50% in states like Maharashtra, Uttar Pradesh,

Bihar and Karnataka. However, post GST, the peak rate is likely to be ~16%, leading

to significant cost reduction. Also, input tax credit will be available for setoff against

the output tax liability (service tax paid presently on rent, electricity, security,

housekeeping etc is not available for setoff against output liability of entertainment

tax or VAT). We believe that GST’s implementation will result in 100-200bp margin

expansion for INOL.

16 March 2015

Inox Leisure

Acquisition of Satyam – a strategic move

Makes INOL a stronger pan India player

In July 2014, INOL acquired 100% equity stake in Satyam Cineplexes for a

consideration of INR1.8b.

Satyam has 38 screens spread across Amritsar, Mysore, Rohtak, Aurangabad, Jodhpur,

Indore and New Delhi.

Post acquisition, INOL’s screen presence has improved to 79 in North (PVR has 138

screens) and 130 screens in West (PVR has 207).

In our view, increased presence in North and West regions of India will improve ATP,

SPH and ad revenue/screen for INOL.

Satyam’s acquisition improves presence in North

In July 2014, INOL acquired Satyam Cineplexes for a consideration of INR1.8b (EV of

INR2.2b). Satyam has a total of 38 screens operating in Amritsar, Mysore, Rohtak,

Aurangabad, Jodhpur, Indore and New Delhi. Thus, INOL has improved its presence

significantly in North India, which is a higher ATP region. Post acquisition, INOL has

79 screens (PVR 138) in North and 130 screens (PVR 207) in West region. We believe

a stronger presence in West and North regions mainly drove PVR’s ATP, SPH and ad

revenue/screen higher, compared to INOL. However, with Satyam’s acquisition,

INOL increased its pan India presence, and the gap versus PVR is expected to reduce

over the long term.

Exhibit 21: Region-wise revenue contribution

East

West

North

South

35%

39%

19%

FY12

35%

38%

18%

FY13

32%

10%

40%

18%

FY14

Source: Company, MOSL

Exhibit 22: City-wise

contribution

(3QFY15)

Exhibit 23: Geographical contribution of properties (3QFY15)

Cities

South

20%

North

29%

South, 21

Properties

North, 23

East, 18

West

33%

East

18%

West, 32

Source: Company, MOSL

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Inox Leisure

Exhibit 24: Screen presence geography-wise (3QFY15)

Exhibit 25: Seats presence geography-wise (3QFY15)

Screens

South, 86

North, 79

South,

18,320

Seats

East,

18,631

East, 70

West, 130

Source: Company, MOSL

North,

12,041

West,

33,817

Source: Company, MOSL

Exhibit 26: Dominates East with 74% market share (FY14)

Exhibit 27: Market share distribution in West (FY14)

PVR

20%

East

BIG

31%

West

Inox

26%

Inox

74%

Source: Company, MOSL

PVR

43%

Source: Company, MOSL

Exhibit 28: Market share distribution in North (FY14)

Exhibit 29: Market share distribution in South (FY14)

North

BIG

29%

Inox

19%

BIG

22%

South

Inox

39%

PVR

52%

PVR

39%

Source: Company, MOSL

Exhibit 30: Properties distribution comparison (3QFY15)

Inox Locations

PVR Locations

North

East

West

South

Source: Company, MOSL

Exhibit 31: Screen distribution comparison (3QFY15)

Inox Screens

PVR Screens

207

138

North

East

West

South

Source: Company, MOSL

130

16 March 2015

Inox Leisure

Exhibit 32: Seats distribution comparison (3QFY15)

Inox Seats

PVR Seats

52,372

31,164

20,192

18,631

5,014

North

East

West

South

Source: Company, MOSL

North

37,252

21,212

20,964

East

West

South

Source: Company, MOSL

Exhibit 33: Presence across cities (3QFY15)

Inox - number of cities

PVR - number of cities

16 March 2015

Inox Leisure

Valuation and view

Growth show set to begin

With recent Satyam acquisition, INOL has improved its presence in North India. This

will result in superior bargaining power with advertisers, leading to higher earnings.

We expect INOL’s revenue and PAT to post 29% and 169% CAGR over FY15E-17E.

We believe that an improvement in operating metrics will lead to better return ratios,

and RoCE and RoE are expected to improve from 8.3% to 17.7% and 2.8% to 13.7%

respectively over FY15E-17E.

The stock trades at a PE multiple of 25.8x and 15.0x FY16 and FY17 EPS respectively.

We value the stock at a PE multiple of 20x FY17 EPS (implied EV/EBITDA multiple of 9x

FY17 EV/EBITDA) arriving at a target price of INR240. Initiate coverage with Buy.

We value INOL at 20x FY17 EPS of INR12 (implied 9x FY17E EV/EBITDA (10% discount

to PVRL target multiple of 10x) with a target price of INR240 justified by:

Leadership in film exhibition business in India, being the No. 2 player with a

Bollywood market share of ~18% and Hollywood market share of ~25-30%.

Aggressive screen additions pipeline with addition of ~55 screens per annum.

Strong improvement in ATP and SPH (7% and 15% CAGR respectively) led by

higher contribution from North and West regions.

Higher ad revenue growth (45% CAGR over FY15-17) led by better monetization.

GST rollout which can result in 100-200bp margin expansion.

Opportunity for acquisition without leveraging balance sheet, through sale and

leaseback arrangements of owned properties which result in cash flow of INR5b.

We believe the following factors pose risks to our assumptions:

Weaker content which can impact footfall growth.

Escalating rental costs which can put pressure on margins.

Exhibit 34: Price to earnings (one year forward)

P/E (x)

5 Yrs Avg(x)

Exhibit 35: Price to book (One year forward)

6.0

4.5

3.0

2.3

1.4

P/B (x)

5 Yrs Avg(x)

26.0

25.2

1.5

0.0

Source: MOSL, Bloomberg

Exhibit 36: Comparative valuations

Company

FY15E

108.5

INOL

77.4

PVRL

Regal Entertainment Group 18.8

20.3

Major Cineplex Group PCL

18.4

Cineworld Group PLC

48.7

Average

P/E (x)

P/B (x)

EV/EBITDA (x)

FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E

2.5

2.3

2.0

14.4

7.0

25.8

15.0

35.6

24.0

6.6

5.7

4.8

14.2

10.7

8.2

9.2

9.0

8.5

18.2

17.3

4.0

3.8

3.6

11.7

10.0

9.3

17.5

15.5

4.7

4.3

4.0

10.4

9.6

8.9

16.7

15.8

4.4

4.0

3.6

12.0

9.9

8.4

22.8

17.5

Source: MOSL

16 March 2015

Inox Leisure

Industry overview

Indians romance with movies and cine stars – an age old tradition

Indian M&E industry on a growth trajectory

The size of India’s M&E (Media and Entertainment) industry expanded from

INR820b in CY11 to INR918b in CY13, registering an overall growth of 11.9%. Given

the impetus provided by digitization, continued growth of regional media, elections

coverage in India, strength in the film sector and fast growing new media

businesses, the industry was estimated to grow 13% in CY14 to INR1.03t. The

Government’s recent policy measures should pave the way for a gradual recovery of

Indian economy, and thus the Indian M&E industry should post a healthy CAGR of

14.2% to reach INR1.8t by CY18. The film industry recorded a double digit growth in

CY13, albeit slower that CY12, with multiple movies scoring big in box office

collections. Around 90-95% movie screens are digitized in the country, with a shift in

focus to tier 2 and 3 cities. The global M&E market has witnessed signs of steady

growth over the past three to five years and is expected to cross USD2t in CY18, at a

CAGR of 6% from CY13 to CY18.

Exhibit 37: Industry size and projection

Overall industry

size (INR b)

Films

Radio

Music

OOH

Animation and VFX

Gaming

Digital Advertising

Total

2009

257.0

175.2

89.3

8.3

7.8

13.7

20.1

8.0

587.4

2010

297.0

192.9

83.3

10.0

8.6

16.5

23.7

10.0

652.0

2011

329.0

208.8

92.9

11.5

9.0

17.8

31.0

13.0

15.4

728.4

2012

370.1

224.1

112.4

12.7

10.6

18.2

35.3

15.3

21.7

820.4

2013

417.2

243.1

125.3

14.6

9.6

19.3

39.7

19.2

30.1

918.1

Gr. in 2013

2014E

over 2012

12.7%

8.5%

11.5%

15.0%

-9.9%

5.9%

12.5%

25.5%

38.7%

11.9%

478.9

264.0

138.0

16.6

10.1

21.2

45.0

23.5

41.2

2015E

567.4

287.0

158.3

19.0

11.3

23.1

51.7

28.0

55.1

2016E

672.4

313.0

181.3

23.0

13.2

25.2

60.0

32.3

69.7

1,390.1

2017E

771.9

343.0

200.0

27.8

15.1

27.5

70.2

36.1

88.1

1,579.7

2018E

885.0

374.0

219.8

33.6

17.8

30.0

82.9

40.6

102.2

1,785.9

CAGR

(2013-18)

16.2%

9.0%

11.9%

18.1%

13.2%

9.2%

15.9%

16.2%

27.7%

14.2%

1,038.5 1,200.9

Source: FICCI-KPMG 2014, MOSL

Domestic theatricals contribute ~75% of total film industry’s revenue

Growth of differentiated content, wider releases and aggressive promotions led to

significant growth of Indian film industry. Of the total industry size of ~INR125b in

CY13, domestic theatricals alone contributed INR93b (75%). Factors such as rapid

urbanization, penetration of multiplex in tier 2 and 3 cities, increasing sophistication

in production and marketing of films and audience’s receptivity to differentiated

content together will assist the industry to post 11.9% CAGR to reach INR219b by

CY18E. Domestic theatricals revenue is expected to clock 11.4% CAGR to reach

INR160b by CY18E.

16 March 2015

Inox Leisure

Exhibit 38: Film industry’s performance

Revenue (INR b)

Domestic Theatrical

Overseas Theatrical

Home Video

Cable & Satellite Rights

Ancillary Revenue Streams

Total

2009

68.5

6.8

4.3

6.3

3.5

89.4

2010

6.6

2.3

8.3

4.1

83.3

2011

68.8

6.9

10.5

4.7

92.9

2012

85.1

7.6

1.7

12.6

5.4

112.4

2013

93.4

8.3

1.4

15.1

125.2

2014E

102.2

9.4

1.2

16.1

9.1

138

2015E

116.9

10.3

18.4

11.7

158.3

2016E

133.3

11.4

0.9

20.9

14.7

181.2

2017E

146.3

0.8

17.8

199.9

2018E

160.2

12.7

0.7

25.2

219.8

2012-13 CAGR

(YoY gr.) 2013-18

9.80%

9.40%

20.20%

29.30%

11.50%

11.40%

8.90%

10.70%

24.70%

11.90%

-18.00% -13.00%

Source: FICCI-KPMG 2014, MOSL

Exhibit 39: Domestic theatricals contribute maximum in films revenue

Domestic Theatrical

Cable & Satellite Rights

Overseas Theatrical

Ancillary Revenue Streams

Home Video

77%

74%

76%

75%

74%

73%

2009

2010

2011

2012

2013

2014E

2015E

2016E

2017E

2018E

Source: Company, MOSL

Industry ATP, occupancy rate on the rise

Consolidation in the industry led to significant improvement in the bargaining power

of most exhibitors. Another round of consolidation is expected in the next five years.

Improvement in occupancy rate and ATP led to significant growth in the domestic

industry. Occupancy levels for major multiplex players increased from ~23-27% in

CY11 to more than 30% in CY13. Theatres have adopted differential pricing policy for

weekdays and weekends, thus optimizing footfalls across the week. Multiplexes

have also seen an increase in ATP. Ticket prices rose from INR150-160 in CY11 to

INR168-175 in CY13, marking a CAGR of 5.8%. The gap between high-end

multiplexes and regular multiplexes is more than the gap between regular

multiplexes and regular single screens. 3D movies continue to be priced at a

premium of 15-20% over regular movies.

Exhibit 40: ATP across types of screens

ATP (INR)

239

127

High-end

Multiplex

Single Screen

Low-end

Single Screen

Source: Company, MOSL

16 March 2015

Inox Leisure

Significant increase in screens over the years

Theatricals continue to be the main source of revenue for the industry, contributing

INR93.4b to the INR125.3b film revenue. Growth in digital technology has led to cost

efficiency and curbs on piracy to a great extent. Presently, 80-100% of films are

distributed digitally, compared to 50% two years ago. Wider reach and coordinated

release of movies has been a key revenue driver for the industry. Digital prints cost

one-fifth compared to analogs. Swift distribution across the country at a lesser price

resulted in more screens in which a movie can be released simultaneously.

Exhibit 41: Increase in screens over the years

Number of screens

4500

3000

500

Hum Aapke hai kaun

(1994)

1000

3 Idiots (2010)

Ek Tha Tiger (2012)

Dhoom 3 (2013)

Source: Company, MOSL

Huge growth opportunity

India has a population of ~1.2b, growing at 1.3% per year. Demographics are

favorable, with 35% of the population in the working age. Watching movies in a

theater is the prime entertainment option for people in India, the world’s largest

film entertainment market (1,000 movie releases and over 3b movie-goers

annually). India has a total of 9,100 screens, of which just 1,400 are multiplexes. The

average ticket price is ~USD1 for a single screen and USD2.6 for a multiplex. The

multiplex segment is highly organized and largely dominated by five key players

(1,028

screens YTD).

Bollywood (Hindi) movies account for ~45% of the film industry

revenue, followed by Tamil (18%) and Telugu (16%). Hollywood movies contribute

~8% of the Indian film industry revenue. While the industry is likely to see further

consolidation, it needs at least 30,000 screens. Given the low screen density in India

(8 per million), compared with Indonesia (141 per million), US (125 per million),

China (31 per million) and Brazil (10 per million), the growth opportunity is huge.

Exhibit 42: Number of screens per million is lowest in India

No of screens per million

India

China

Germany

Ireland

Denmark

France

USA

117

100

150

Exhibit 43: PVR and INOL control ~70% of the multiplex

market

Source: Company, MOSL

16 March 2015

Inox Leisure

Single screens face challenging times

Single screens are facing challenging times with ~97 being shut down in CY12. The

year also saw single screen theatres making efforts to reinvent themselves. They are

focusing on upgrading their existing infrastructure to provide enhanced movie

watching/going experience. Several players have invested in (a) improving picture

quality, (b) surround sound systems, (c) air conditioning, (d) creating/improving

parking spaces and (e) improving the quality of food and beverages. Some players

have introduced online ticketing to enhance consumer convenience and curb black

marketing.

Exhibit 44: Multiplexes presence increases

Single Screen

Multiplexes

Exhibit 45: Single screens still share the larger pie

Type of screen in 2013

Multiplexes

18%

888

8700

960

8600

1104

8100

1400

7700

1700

7700

Single

Screen

82%

2009

2010

2011

2012

2013

Source: Company, MOSL

Hollywood movies popularity on the rise

Until a few years ago, Hollywood was considered an urban phenomenon and the

movies were released for English speaking audience. However, over the past few

years, the trend has changed significantly. New Hollywood movies are getting wide

acknowledgement from various audiences.

Iron Man 3

was released across more

than 1,000 screens (in four languages), in comparison to historical average of 250-

300 screens. Though the share of Hollywood is small in the overall domestic

theatricals market, players are not complaining as movies continue to draw footfalls.

During the year,

Oblivion

had an occupancy of 25-35%,

The Great Gatsby

in 3D had

30-40%, while for the best performing movies such as

Gravity

and

The Conjuring,

occupancy level rose to 50-60%.

Exhibit 46: Revenue split of regional market for Hollywood films

Source: Company, MOSL

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Inox Leisure

Exhibit 47: Top Hollywood films released in India in CY13

Titles

Iron Man 3

Fast & Furious 6

Man of Steel

Gravity

The Wolverine

G.I.Joe: Retaliation

Thor 2: The Dark World

The Conjuring

World War Z

A Good Day to Die Hard

Release Date

26-Apr-13

24-May-13

14-Jun-13

11-Oct-13

26-Jul-13

29-Mar-13

8-Nov-13

2-Aug-13

21-Jun-13

22-Feb-13

Genre

Action/Sci-Fi/Thriller

Action/Crime/Thriller

Action/Adventure/Fantasy

Drama/Sci-Fi/Thriller

Action/Adventure/Fantasy

Action/Adventure/Sci-Fi

Action/Adventure/Fantasy

Horror/Thriller

Action/Drama/Horror

Action/Crime/Thriller

Screens Total GBO* (INR m)

1054

828

706

195

710

528

600

128

570

678

667

573

370

363

281

230

227

222

177

124

Source: Company, MOSL

Megaplexes – next game changer event for industry

In CY97, PVR revolutionized the film industry by introducing multiplexes. Peers like

INOL, Fun Cinemas, Big Cinemas and Cinepolis followed suit later on. The next big

factor for the industry is introduction of megaplexes. Certain players are developing

megaplexes with 11-15 screens capable of showing 60-80 screenings per day. The

megaplexes would be built at an average cost of ~INR20-25m per screen and would

have capacity of 2,000-2,500 seats. Megaplexes are apt for a country like India

where it would give freedom to tap and grow regional markets such as Telugu,

Tamil, Marathi, Gujarati, Bhojpuri and other regional movies and give them space on

the larger screens along with Hindi and English movies.

Tier 2 and 3 consumers - next big focus area

With the focus shifting to tier 2 and 3 markets, exhibitors are constantly exploring

ideas to target consumers. Various innovative schemes are being launched to tap

tier 2 and 3 markets. For instance, BIG Cinemas developed an exclusive offer for its

customers in tier 2 and 3 markets by offering ‘3+1 Free’ for tickets booked from its

portal. Movie exhibitors see these cities as potential growth drivers. Though Delhi

and Mumbai contribute 55-60% of revenue of a big budget film, multiplex expansion

in these regions is rapidly saturating. With lower real estate prices in smaller towns

and the leeway to launch no-frills cinema, exhibitors are able to lower the cost per

screen significantly. Knowing the demographics of these cities, ticket prices are

lower compared to metros. For instance, while a regular INOL ticket is priced at

INR600 in Mumbai, it is priced at INR50 in Raipur.

Cinematograph Bill, 2013 – a key legislative change

The present Cinematograph Act was enacted in 1952. Since then, Indian cinema and

society has gone through multiple and radical changes. The key objective of the

Cinematograph Bill, 2013 is to make appropriate amendments to the

Cinematograph Act, 1952, keeping in mind the changing perspectives of audiences

and artists. The Justice Mukul Mudgal Committee was formed to bring reforms to

the current bill. Experts are elected from various fields such as law, film and public

administration. The bill handled one of the most-awaited films of a veteran cine star

Kamal Hasan,

Vishwaroopam,

which faced a ban from the Tamil Nadu government,

despite the film getting a Central Board of Film’s certification. The ban also triggered

16 March 2015

Inox Leisure

a huge loss of revenue due to suspension of screening. The bill is expected to be

passed in the near future, unless further amendments are needed.

Key positives of the Cinematograph Bill, 2013 are listed below:

Appropriate advisory panel representation

Single board film certification

Expanded classification of films

Improved litigation process

Stronger penalties for piracy

Increasing acceptance of 3D exhibition

Indian audiences are getting acquainted with 3D technology but Indian film makers

are yet to master the art of making 3D movies matching the quality of Hollywood.

High quality content can be achieved only by shooting the film completely in 3D.

However, this is expensive and forces film makers to convert 2D content to 3D. India

has also emerged as an outsourcing base for 3D related conversion of Hollywood

films, and ample talent is being developed in the country for 2D to 3D conversion.

3D movies continue to be priced at a premium of 15-20% over regular movies.

Multiplex chains experiment with pricing models to maximize revenue…

Business in the first week of release has increased, driven by wider releases. The

first week and weekend contribute 60-80% of a film’s total collection. Even within

the first week, the trend is getting skewed towards the weekend. Hence, multiplex

chains are experimenting with pricing models to maximize revenue. By adopting a

differential pricing strategy for weekdays and weekends, they are able to maximize

footfalls across the week.

…but states regulate ticket pricing

In many states, governments regulate the ticket pricing. In Tamil Nadu, single screen

theaters are allowed to charge a maximum of INR50 per ticket and multiplexes are

allowed to charge a maximum of INR120 per ticket, depending on the facilities

provided by them. In Andhra Pradesh, a proposal to hike cinema ticket rates from

INR10 to INR25 for single screens and from INR60 to INR75 for multiplexes is

currently on hold. Industry expects state governments will relax regulations that

limit the number of shows and cap ticket pricing, and allow exhibitors to fix

admission rates according to demand. Flexible pricing will also help to reduce black

marketing of tickets as theater owners will have the freedom to revise rates based

on audience inflow.

High taxation restrains sector’s growth

High entertainment tax acts as a major impediment to exhibition industry’s growth.

The overall tax implication is as high as 40-50% in states like Maharashtra and Uttar

Pradesh. To save on entertainment tax, theater owners declare occupancy rates at

the lowest possible level. Industry estimates indicate that theaters under-report 25-

30% of ticket sales.

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Inox Leisure

Company description

Inox Leisure Ltd is the diversified venture of the INOX Group into entertainment.

INOL’s aim is to be the leader in cinema exhibition industry in every aspect -- from

the quality and choice of cinema, to the varied services offered and eventually the

highest market share.

Since the launch of its multiplex in Goa in CY04, INOL is the venue for the prestigious

International Film Festival of India (IFFI) every year. From its inception in CY99, INOL

has been active in exploring acquisitions and/or expansion opportunities on a

continuous basis, with a view to consolidate its position in the multiplex industry. In

CY07, Calcutta Cinema Private Ltd (CCPL), a multiplex cinema theatre company

based in West Bengal, was merged with INOL.

In May CY13, Fame India Ltd, another multiplex cinema theatre company having a

nation-wide presence, was merged with it. INOL operates 79 multiplexes and 310

screens in 43 cities, making it a truly pan-Indian multiplex chain. INOL will continue

its expansion into cities like Jammu, Mangalore among others.

INOL’s cinemas have state-of-the-art facilities in terms of modern projection and

acoustic systems, interiors of international standards, stadium-styled high back

seating with cup holder arm rests, high levels of hygiene, varied theatre food, a

selection of Hindi, English and regional movies, computerized ticketing and

pertinently high service standards.

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Inox Leisure

Key management

Mr Pavan Jain, Chairman

Mr Pavan Jain, Chairman of the INOX Group, is a chemical engineer from IIT, New

Delhi and an industrialist with over 38 years of experience. With over 22 years of

experience as the Managing Director of INOX Air Products Ltd, Mr Jain has steered

the company's growth from a single plant business to one of the leading domestic

players in industrial gases business. In addition, Mr Jain has been instrumental in

diversifying the INOX Group into various industries such as Refrigerant Gases,

Chemicals, Cryogenic Engineering, Entertainment and Renewable Energy.

Mr Vivek Jain, Director

Mr Vivek Jain has over 34 years of business experience. He graduated in economics

from St. Stephens, New Delhi and did his post graduation in business administration

from IIM, Ahmedabad, where he specialized in finance. He is currently the Managing

Director of Gujarat Fluorochemicals Ltd and has grown the company to be the

country's largest manufacturer and exporter of Refrigerant Gases.

Mr Deepak Asher, Director

A commerce and law graduate, Mr Deepak Asher is also a Fellow Member of the

Institute of Chartered Accountants of India and an Associate Member of the

Institute of Cost and Works Accountants of India. He has more than 25 years of

experience in the fields of corporate finance and business strategy. Mr Asher is the

President of the Multiplex Association of India and a member of the FICCI

Entertainment Committee. In 2002, he won the Theatre World Newsmaker of the

Year Award for his contribution to the multiplex sector.

Mr Alok Tandon, Chief Executive Officer

As the CEO of Inox Leisure Ltd, Mr Tandon is at the helm of INOL's expansion plans

and concentrates on strengthening the INOL brand on a national scale, making it the

first choice in the business of cinema exhibition in India. An engineer by

qualification, he has been with INOL since its inception and has more than 25 years

of varied work experience in companies such as Hoechst, ITC Welcome Group and

the Oberoi Group.

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Inox Leisure

Key risks

Timely execution, given aggressive roll-out plan

INOL plans to take up space in various upcoming malls. Thus, any delays in the

construction of these malls will impact the execution of its rollout plan.

Quality of content

Good quality content is the key driver of footfalls in multiplexes. While the quality of

content is improving, in any particular year, if the content released is commercially

unsuccessful, it could impact the revenue of multiplexes.

Escalating rental costs

Rental costs have seen an upward trend for most multiplexes. The escalation in

rents is leading to pressure on margins and impacts profitability.

Continued price controls by state governments

Several states still control cinema ticket prices. While free pricing prevails in West

India, in some parts of North India, approvals are needed to price tickets in a

particular band. In South India, especially Andhra Pradesh and Tamil Nadu, there are

strict restrictions on pricing. In Chennai, for instance, ticket prices are capped at

INR120 and 10% of a show’s tickets have to be issued at INR10.

High entertainment tax on cinema tickets

High entertainment tax is a major impediment to exhibition industry’s growth. The

overall tax implication is as high as 40-50% in states like Maharashtra, Uttar Pradesh

etc. Though post GST, the peak rate is likely to be ~16%, leading to significant cost

reduction; the visibility on GST implementation is still limited.

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Inox Leisure

Key assumptions

Exhibit 48: Key assumptions

Particulars

Operating metrics

Number of properties

Number of screens

Occupancy rate (%)

Total footfalls (m)

Average ticket price (INR)

Average Spend Per Head (INR)

Avg revenue per screen (INR m)

Growth rates %

Ticket Revenues

Food and beverages

Advertising income

Total

Revenues contribution % of sales

Ticket Revenues

Food and beverages

Advertising income

Others

Total

74%

16%

100%

75%

16%

100%

75%

17%

100%

73%

19%

100%

64%

21%

100%

62%

23%

100%

61%

24%

10%

100%

47%

45%

38%

46%

13%

18%

13%

78%

100%

82%

83%

15%

53%

14%

13%

37%

73%

21%

25%

40%

49%

29%

25%

32%

41%

28%

239

23%

152

11.6

257

25%

156

12.2

285

28%

160

19.6

310

28%

156

19.2

108

375

27%

167

18.0

121

425

27%

179

19.7

135

480

28%

189

21.9

FY11

FY12

FY13

FY14

FY15E

FY16E

FY17E

Source: Company, MOSL

16 March 2015

Inox Leisure

Financials and valuations

Standalone - Income Statement

Y/E Mar

Gross Operating Revenue

Less: Entertainment Tax

Net Operations Revenue

Change (%)

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Expense/(Income)

PBT after EO Exp.

Current Tax

Deferred Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY10

2,536

317

2,220

12.4

364

16.4

154

209

181

-84

-43.8

261

7.1

11.7

FY11

3,703

492

3,211

44.7

612

19.1

188

424

126

322

378

6.0

356

303

16.2

9.4

FY12

4,187

521

3,667

14.2

540

14.7

202

339

167

223

-97

126

18.3

103

182

-39.8

5.0

FY13

7,653

1,020

6,632

80.9

980

14.8

431

549

267

319

-25

294

37.2

184

200

9.8

3.0

FY14

8,688

1,061

7,628

15.0

1,220

16.0

507

713

276

526

-4

522

29.2

369

372

86.0

4.9

FY15E

10,503

1,279

9,224

20.9

1,326

14.4

795

531

426

195

22.0

152

-59.2

1.6

FY16E

13,558

1,593

11,965

29.7

1,878

15.7

963

915

168

103

849

212

25.0

637

319.8

5.3

(INR Million)

FY17E

17,303

1,999

15,303

27.9

2,567

16.8

1,059

1,508

116

118

1,510

415

27.5

1,095

71.9

7.2

Standalone - Balance Sheet

Y/E Mar

Equity Share Capital

Adjustments to equity

Total Reserves

Net Worth

Deferred Liabilities

Total Loans

Capital Employed

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Capital WIP

Total Investments

FY10

619

-4

2,494

3,109

156

1,863

5,128

3,802

667

3,135

219

827

FY11

619

-4

2,565

3,180

174

2,115

5,469

4,164

766

3,398

854

1,591

127

169

1,269

464

271

161

1,126

5,469

FY12

619

-3

2,667

3,283

194

2,307

5,784

4,279

948

3,331

241

1,793

1,073

142

828

654

417

137

100

419

5,784

FY13

616

346

2,285

3,246

228

2,810

6,283

7,607

2,080

5,528

423

2,173

367

233

1,519

1,851

929

625

298

322

6,283

FY14

962

2,948

3,909

290

2,422

6,621

8,437

2,576

5,861

485

2,197

334

166

1,612

1,960

1,161

547

252

237

6,621

FY15E

962

5,862

6,824

290

1,835

8,949

11,437

3,371

8,066

587

2,640

115

432

159

1,934

2,381

1,395

684

302

258

8,949

FY16E

962

6,499

7,461

290

1,535

9,286

12,637

4,334

8,303

705

3,241

149

520

155

2,417

3,001

1,783

855

363

240

9,286

(INR Million)

FY17E

962

7,594

8,556

290

785

9,631

13,837

5,392

8,444

900

4,003

190

664

128

3,022

3,754

2,249

1,069

435

249

9,631

Curr. Assets, Loans&Adv.

1,385

Inventory

Account Receivables

Cash and Bank Balance

576

Loans and Advances

700

Curr. Liability & Prov.

438

Account Payables

350

Other Current Liabilities

Provisions

Net Current Assets

947

Appl. of Funds

5,128

E: MOSL Estimates; * Adjusted for treasury stocks

16 March 2015

Inox Leisure

Financials and valuations

Ratios

Y/E Mar

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

Working Capital Ratios

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Working Capital T/O(Days)

Leverage Ratio (x)

Debt/Equity

FY10

4.2

6.7

50.2

0.0

42.9

26.9

3.6

8.4

51.3

0.0

-0.2

8.7

5.5

0.4

3.2

0.6

FY11

5.7

7.9

51.4

0.0

31.4

22.8

3.5

6.0

31.5

0.0

-6.5

9.6

8.7

0.6

3.0

109

0.7

FY12

1.7

6.2

53.0

0.0

108.7

29.1

3.4

5.3

36.3

0.0

11.2

5.6

7.2

0.6

3.1

0.7

FY13

3.0

10.2

52.7

0.0

60.3

17.6

3.4

3.0

20.3

0.0

-2.3

6.1

10.1

1.1

3.0

0.9

FY14

3.8

9.1

40.7

0.0

47.0

19.7

4.4

2.6

16.1

0.0

2.7

10.4

13.0

1.2

4.1

0.6

FY15E

1.7

9.8

71.0

0.0

108.5

18.3

2.5

2.1

14.4

0.0

-19.2

2.8

8.3

1.0

4.6

0.3

FY16E

7.0

16.6

77.6

0.0

25.8

10.9

2.3

1.6

10.0

0.0

3.8

8.9

11.5

1.3

4.5

0.2

FY17E

12.0

22.4

89.0

0.0

15.0

8.1

2.0

1.2

7.0

0.0

7.5

13.7

17.7

1.6

4.5

0.1

Standalone - Cash Flow Statement

Y/E Mar

NP / (Loss) Before Tax & EO Items

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(inc)/dec in FA

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

(Inc)/Dec in Debt

Interest Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

E: MOSL Estimates

FY10

181

154

-39

102

432

-3

430

-439

-822

-1,239

1,414

-53

1,361

552

576

FY11

188

111

-567

-157

-152

-252

-26

-101

-379

252

-127

150

-382

576

194

FY12

126

202

135

-58

578

983

-5

978

-284

-790

-1,071

193

-198

-81

194

113

FY13

294

431

254

-30

-284

664

713

-855

193

-11

-673

202

-265

126

113

211

FY14

522

507

266

-93

1,285

-30

1,255

-997

269

-672

-134

-240

-254

-628

-45

211

166

FY15E

195

795

336

-43

-28

1,255

-3,101

-3,012

-587

-426

2,763

1,750

-7

166

159

(INR Million)

FY16E

849

963

-212

1,680

-1,318

103

-1,215

-300

-168

-468

-4

159

155

FY17E

1,510

1,059

-2

-415

-36

2,115

-1,395

118

-1,276

-750

-116

-866

-27

155

128

16 March 2015

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