Merging company

Merger taken in my stride, focus on immediate priorities related to it, Kailash Gupta, CFO, Inox, CFO News, ETCFO

Kailash Gupta, CFO, Inox

The largest merger of two iconic brands, Inox Leisure and PVR, is expected to be finalized by this fiscal year. While the merger is on track after approval from the capital market regulator Securities and Exchange Board of India (SEBI); it is still waiting for the green signal from the National Company Law Tribunal (NCLT).

“As NCLT approval is still pending, the cinema brands expect to complete the merger before the end of this fiscal year,” said Kailash B Gupta, Chief Financial Officer, Inox Leisure.

In conversation with the CFO of multiplex chain operator Inox Leisure ETCFO explores future plans for managing the merged entity; the woes of inflation; manage the threat of OTT competition and more.

After losses in previous quarters, Inox and PVR reported net profit of Rs 57.09 crore and Rs 68.3 crore for the quarter ended June FY23. Inox CFO for the brand is to add 16 properties with 77 screens in FY23, of which 17 screens have already been added to date.

“The effort is to get closer to our customers – geographically and emotionally. We focus on large-scale, experience-driven entertainment destinations,” he added. Edited excerpts…

Inox-PVR Merger: I've taken the merger in my stride, I'm focusing on immediate priorities related to it, Kailash Gupta, CFO, Inox

Q: What will happen to the CFO position once the merger is completed?

Kailash Gupta:
We are still quite far from the moment when we must seek answers to this question. I am currently focusing on the immediate priorities regarding the merger. More importantly, such a scale of operations would require a lot of brains to handle it, so we think there would be enough room and demand for financial acumen.

Q: How do you see this whole situation as CFO? What can budding CFOs learn from such an experience?

Kailash Gupta:
Most of my fellow CFOs would agree that even in our usual routine, the role requires us to make many critical decisions where the stakes are high. As financial advisors to corporate management, CFOs take a holistic view of the business, not only current, but also retrospective and futuristic. Therefore, as CFO, I have taken ownership of the merger and am able to focus on immediate priorities related to it.

Finance, as a function, must play an extremely important role in the entire merger process, and for me and my team it is the top priority. Instead of looking at concerns, I see this as a great opportunity to learn from a distinct opportunity. There is a lot to craft, learn and execute, as few CFOs have such opportunities to lead a merger of this size, scale and proportions.

Q: How do you expect market dynamics to change after the merger?

Kailash Gupta:
This historic merger will create an entity that will be a massive force to be reckoned with, not only in India, but even globally. There are not many cinema chains in the world with a presence in more than 100 cities with almost 350 cinemas and 1600 screens.

While strongly countering the adversities posed by the advent of various OTT platforms and the aftermath of the pandemic, the combined entity would bring the cinematic experience to Tier 2 and Tier 3 markets. We believe such synergies of strengths would be also augurs well from a financial point of view.

We will seek to create tremendous value for our stakeholders, including property developers, content producers, technology service providers and our other supply chain partners, and of course employees.

The strengths of both organizations, when synchronized, would lead to huge revenue opportunities, economies of scale, great customer journey, and therefore huge profitability, that too, without too much gestation time.

With two outstanding balance sheets, a fantastic lineup of investors and tremendous stakeholder confidence, the finances of the new organization are sure to deliver excellent results.

Q: Competition still persists with OTT platforms, the entertainment ecosystem is changing with small screens gaining popularity, how do you see that? Do you think a merger will be a solution? How? ‘Or’ What ?

Kailash Gupta:
For a company driven by an infinite and timeless passion, relevance would never be an issue, and the margin for innovation and growth will always remain predominant.

Yes, the emergence of more options has improved the revenue potential of content, if the globally prevalent windowing patterns are followed. Technological interventions and growing consumer awareness and aspirations have caused every business to face competition and challenges, and the movie theater industry is no exception. With movies being an integral part of our culture, consumption and affinity will always remain on a high growth trajectory, despite more options for consuming content. Therefore, those who are movie consumers will continue to consume movies across all platforms, be it cinema, OTT or satellite, if not all of them.

We believe that all entertainment options, including OTT, cater to different consumer behaviors and have a distinct delivery environment, largely due to medium. It should be understood that audiences who subscribe to OTT platforms will be for everyday entertainment which includes binging on web shows or series, while going to the cinema for an experience. All entertainment channels will continue to coexist in our country due to its distinct appeal.

We need to understand that the emergence of OTT as an alternative distribution channel is purely a result of the pandemic and subsequent lockdown, and not due to the inability of cinemas to attract crowds.

Q: There were two years of downturn due to the pandemic, after which inflation woes took over, what is the impact on the businesses you envision?

Kailash Gupta:
Despite the presence of economic ills like inflation or recession, the film industry has withstood the harshest headwinds. Not only has the film industry weathered the storm, it has always come out of it stronger and sharper, and growing at more than a double-digit rate.

If you take a look at the industry’s remarkable performance in the first six months of CY’22, any talk about the impact of the pandemic or inflation would seem futile. We are convinced that the company will be robust despite all the setbacks.

Q: How do you see the growth metrics in terms of revenue, fnb sales, ticket revenue, ad revenue?

Kailash Gupta:
Cinema advertising is also still short compared to pre-COVID levels, but is gradually picking up. Not only have routine advertisers started incorporating cinema into their media plans, but we’re also seeing great interest from new-age advertisers. We are determined to take the advertising journey to a new level in this new phase.

We have rewritten our F&B roadmap. We are revamping menus a lot and adding new cuisines and concepts in our F&B offerings in addition to making our dishes available on Swiggy and Zomato and also positioning ourselves as a complete restaurant brand.

There’s a lot of action on expanding the range of menus, adding new cuisines, new GTM approaches, new channels, and more. by also increasing their visibility with non-cinema consumers. With a comprehensive roadmap, we seek to cater to new consumer segments, in addition to strengthening the F&B revenue stream. The idea is to tap into a new base of consumers who buy our food products even if they don’t watch a movie. In addition to making our food available on online food ordering platforms, we’ve made plans to expand our range, add more home meal replacement options.

Besides the expansion in terms of infrastructure, we are also focusing more on the consumer front. On the consumer side, we are doing a lot with new digital innovations. We recently launched InstaPay, our integrated payment wallet which is fast, secure and rewarding. We’ve also rolled out our merchandise line, where INOX fans can purchase merchandise and feel connected with their favorite superheroes or movie franchisees.