For someone who runs a company which is in the ‘business of happiness’, 45-year-old Ajay Bijli confesses to taking things far too seriously than he should. “I need to enjoy the work a bit more. I have to learn that art. I am just taking things too seriously,” says Bijli with a smile, as he takes us through his journey of starting out as a youngster in his family’s trucking business to running a single screen theatre to now leading PVR Ltd, the film entertainment company which has become the country’s largest multiplex operator.
Bijli has just pulled off a coup of sorts, acquiring rival Cinemax of the Kanakias for a total of Rs. 543 crore, post-open offer. This acquisition would, in a single shot, propel PVR to pole position among multiplex operators, ahead of rivals like INOX-Fame and the Indian film exhibition business of Anil Ambani-controlled BIG Cinemas. In all, the PVR-Cinemax combine will have 351 screens across the country with 87,493 seats across 85 properties and 36 cities. This translates into entertaining a staggering 5.3 crore customers every year.
Sitting in his room on a rainy winter morning at PVR’s Gurgaon headquarters designed partly on the lines of a PVR theatre—complete with popular movie lines like Mogambo khush hua and Hasta la vista, baby inscribed on the glass panes of the cabins—Bijli displays the restlessness of a child who has just got a prized toy but is keen to grow the collection.
“Our vision is that PVR should be the number one in film entertainment and remain leaders in the exhibition space. As long as PVR exists, we should always have some cinema under construction, and so I don’t like to put numbers to these things,” he says, adding that at PVR, the culture is never to talk about being the first or pioneers, but rather to look ahead and keep growing.
Though he is reluctant to quote figures, Bijli does say that in the next 12-18 months, the PVR-Cinemax combined screen count should ideally touch 500 screens.
The acquisition apart, PVR’s own organic rollout involves adding another 120 screens over the next 14 months and, including the Cinemax pipeline, the final number should stand at around 480 after the rollout. But 500 is an immediate milestone Bijli will be happy with, he concedes.
“One can always dream, but let’s see how things work out. We would also like to be a $1 billion company in terms of market capitalisation. Overseas, entertainment companies have that kind of size; so why not in India? But I am not driven by market cap,” he says. “It’s a moving target all the time for us. And most importantly, for now the task at hand after this acquisition is to focus on integration and do a great job of our organic rollout plan.”
Bijli’s gameplan is to make PVR a highly differentiated retail entertainment company which has cinemas as its main magnet, with an ecosystem of retail entertainment feeding off the core cinemas business. “We want our own unique positioning where the fulcrum is exhibition.
But we want to focus on good, high quality stuff. I am fascinated by what the House of Tata has done across very diverse businesses with quality and trust as the major elements of their business. So we feel if any of our businesses carries the signature that it’s part of PVR, it should have quality. With quality will come quantity.”
The early years
For someone who started off in his family’s trucking business in 1988 after finishing college, Bijli was sincere enough in giving that his best shot like a dutiful son, though he never quite enjoyed it. “It was my father’s passion and also my grandfather’s. But I wasn’t finding my feet and wasn’t even sure if this was what I wanted to do,” he confesses. It was after he got married in 1990 that he spoke to his father and told him that he wanted to do something of his own, in addition to the family business. It was then that Bijli’s love affair with the cinemas business began.
His father had acquired Priya cinema in Delhi in 1978, and by then the property had lost some of its reputation, since it was unable to screen top-of-the-line movies and was also burdened with controlled ticket prices and taxation. By contrast, rival movie theatres like Chanakya and Archana were doing well. Bijli then decided to try his hand at running Priya.
One of the first things he did was to bring in English movies. “I didn’t have much of an education, but common sense told me that maybe English movies would do well since the demographics of the area—RK Puram, Vasant Vihar and Som Vihar—pointed to that. I also managed to get a lucky break with some Hollywood studios.” However, the Hollywood people told Bijli that Priya would need to be refurbished before the movies could be screened there.
And so, inspired by Sterling Theatre of what was then Bombay, he went about giving Priya a new lease of life. He installed a Dolby sound system at the theater, added color to the grey interiors by giving it a dash of pink, got the toilets cleaned up and provided uniforms to the staff. The strategy worked and after the initial hiccups, Priya began doing very well. Added to this success was the pleasant surprise of a partial decontrol of ticket prices and Bijli’s fledgling cinema business was off to a good start.
“My father was very supportive, and by 1992, I was involved in both the trucks and cinema businesses. Cinema was like a hobby,” he recalls. However, this happy patch didn’t last too long, and Bijli lost his father that year. “I had to go back to the trucking business then, since there was no one to look after it. I worked like a dog through the day and in the evening I’d come to Priya,” he says. “That was my outlet, my respite. I also didn’t want to let down my English distributors and kept an eye on aspects like cleanliness and the sound and projection systems at Priya.”
If it was trucks during the day, by evening Bijli and his wife would land up at Priya and even sell tickets and put up posters to wind down and relax. Clearly, the romance of the cinema was where his heart lay.
But adversity struck again, and a devastating fire left the trucking business ravaged and the family shattered, both financially and otherwise. “We had lost a lot of money and had to settle claims. It was then that I told my mother that I wanted to do something more on the cinemas side. I had seen multiplexes abroad and wanted to do similar things in India. My mother told me to do what my heart wanted,” Bijli recalls.
The roadshow begins
By then, Priya had grown into becoming quite a hub around the area, leading to other food and retail outlets coming up around it. McDonald’s, Nirula’s, Archies and other stores came in around the theater and Bijli saw the area as having the potential of a Delhi version of Times Square or Leicester Square. At the same time, he was keen to get into the multiplexes business. But there was one problem: he didn’t have a clue how to go about it.
It was then that one of the Hollywood distributors told him to get in touch with Australian media major Village Roadshow, which was keen to get into India at the time. “I flew to Singapore and met John Crawford who was the Asia managing director of Village Roadshow. We literally did some number-crunching on a napkin-type paper and a 60-40 joint venture was agreed upon,” Bijli says. He would have 60 percent in the venture.
The market was just ripe for the multiplex model. English releases were coming to Indian cinemas very late since there was an acute shortage of screens. If a movie did well, the trend was to keep it running for several weeks, creating a backlog of new releases.
“I reckoned if a multiplex came in, we could release several movies at the same time and bring in the new movies earlier. The only challenge was whether Indian audiences, which were used to the massive 1000-seater cinemas, would take to the smaller screens and theaters with fewer seats. But I guessed we could get movie-loving audiences in anyway,” says Bijli.
The new JV, called Priya Village Roadshow, presented its own challenges. The Australian partner was keen to get the venture off the ground, but Priya was already doing very good business as a single-screen cinema and Bijli didn’t want to convert that into a multiplex. “I somehow wanted Priya to remain a single-screen theater to take on Chanakya and compete on the big blockbusters. So we started looking for other properties.” It was then that the Ansals offered Bijli the Anupam cinema at Saket, another Delhi locality, since they didn’t want to run it themselves. Bijli then took it on lease and the first multiplex, a four-screen one, was born, with the strange-sounding name Priya Village Roadshow Anupam 4.
“There were kilometre-long queues when we opened. And our campaign was very explicit: four cinemas under one roof, 24 shows a day, multiple cinema complex. Everything had to be clearly explained,” says Bijli. The efforts were worth it, and the cinema started doing very well, encouraging them to expand. More locations were found in Delhi and a phase of expansion followed, with Sonia theater being converted to PVR Vikaspuri and Payal to PVR Narayana.
Opportunity in adversity
By 2000, Priya, which needed refurbishing, was revamped and given a big push for more blockbusters. “Though Village Roadshow asked me why I was going back to a single-screen format, I was keen to take on Chanakya and so revamping Priya was a practical decision,” explains Bijli. By that time, the company had 12 screens.
True to Bijli’s career path, a new adversity presented itself in 2001, when the 9/11 attacks changed the global business environment forever. Village Roadshow didn’t want to expand any further and decided to exit India, leaving Bijli to work things out on his own. “The parting was, however, very amicable and the PVR brand was born out of the exit agreement,” says Bijli.
In the meantime, about Rs. 100 crore of projects, totalling about 50 screens, had been committed by the company which had signed up with a number of malls being announced at the time. Inspired by the large eight-,nine- and ten-plexes which Village Roadshow had constructed overseas, Bijli had decided to plunge fully into expansion mode. However, most of those projects were in various stages of being rolled out—either in excavation or construction mode—so the actual expansion was still some time away.
“Most of these projects were still pieces of land, I had no partner and I had to fund the Village Roadshow exit too by buying out the 40 percent stake,” recalls Bijli. It was then that he decided to consult good friend and mentor Sunil Mittal of Bharti who advised him to consider speaking to private equity players.
“I was very lucky to meet Renuka Ramnath of ICICI Venture who put in Rs. 40 crore. We couldn’t buy property like other competitors who were announcing projects and decided to run only on a lease model. Matching equity with debt, we raised about Rs. 80 crore which was enough to see us through. I sold some personal property and put part of the money into the business. We bought out Village Roadshow.”
As PVR began finding its feet in the new environment, new projects began opening up. The Forum Bengaluru property—an 11-screen multiplex—opened to a phenomenal response and turned out to be a game-changer for PVR. Properties at Juhu in Mumbai and MGF Gurgaon also added power to the growth momentum and PVR was firmly on the road to growth.
A scorching pace
Always hungry for growth, the initial responses to his new properties added to Bijli’s hunger even more. “The five-year-out for the PE became a three year out and we came out with an initial public offer in 2006, where ICICI Venture part-exited at a great multiple. We got in Rs. 128 crore into the company, added some debt and had a total of Rs. 250 crore plus positive cash flows and were ready to grow further.”
Then followed an aggressive rollout plan which involved 120 screens and a much greater recognition and acceptability for the PVR brand nationally. “We decided we didn’t want to be known as a north Indian brand and so we went national aggressively, setting up projects in Hyderabad, Mumbai and Chennai apart from Delhi,” says Bijli. As the market for multiplexes opened up, developers and consumers warmed up to PVR. Equally, new competitors with deep pockets were entering the multiplexes game, bolstered by the action which the sector was witnessing. With Anil Ambani buying into Adlabs, the game changed once again.
Says Bijli: “Here was a deep-pocketed guy who came in. So while on the one hand you feel good that there’s testimony that you’re not doing something completely wrong since a major player has come into the segment, you also wonder how to take on such strong competitors. INOX was also a strong contender. But we decided to keep chugging along.”
Flirting with film-making
As competition heated up and the game got more intense, Bijli decided he wanted PVR to become more than just an exhibitor. That’s when the studio bug bit him. “This was a period where I wasn’t too happy with our positioning. INOX and BIG had more screens and I had this idea of moving away from the pure play exhibitions business to becoming a studio. We lost our focus,” confesses Bijli bluntly.
Ironically, his flirtation with movie-making started off well, with PVR Pictures, the movie arm, producing the mega hit Taare Zameen Par with iconic film star Aamir Khan who also directed the movie. The PVR-Aamir Khan Productions partnership backed this up with another big hit, the teenybopper love story Jaane Tu Ya Jaane Na, and PVR Pictures looked all set to help realize Bijli’s studio dream.
PVR even raised equity for the movies play with J.P. Morgan and ICICI Venture backing it. However, following the initial successes, the film production business floundered with some poor performances followed by the disastrous showing of the ambitious Ashutosh Gowariker-directed Khelein Hum Jee Jaan Sey in 2010. That pushed Bijli back several notches.
“There were some other flops, but Khelein…was a tsunami. Almost Rs. 30 crore was wiped out from our profits. We were extremely discouraged,” recalls Bijli. “Rather than creating scale in our core business, we had looked at backward integration. It is only logical provided you do a good job of each vertical and your core business doesn’t suffer.”
Regrouping quickly, however, Bijli and his top team at PVR decided to get back to what they knew and did best: film exhibition. Lessons learnt, the focus was back on the core business and its expansion. “The good thing about us is setbacks always motivate us to do better. So we said, let’s just focus on our core and go mad. This is where our passion lies. We then grew really fast, signed up the best locations and kept growing.”
The Cinemax factor
As PVR grew, inorganic growth was also an obvious option. An opportunity came about when Fame, the Shroffs-owned multiplex chain, was on offer. However, that deal was sealed by PVR’s rival INOX Leisure. Says Bijli: “The Fame deal was on the table but we couldn’t pay what INOX could. We have respect for INOX, but we thought we would also have our opportunity later.”
That opportunity came in November 2012, when the Cinemax deal presented itself. The Kanakias, who owned Cinemax, wanted to exit and PVR, which had already consolidated its position after the movie-making debacle and had a robust pipeline of screens under construction, decided to finally go ahead and do the deal. “We said, let’s just go all out. And our private equity partners L Capital and Renuka Ramnath’s Multiples backed us on it. This will be a game-changer for PVR,” declares Bijli.
Adds Pramod Arora, Group President, PVR: “Cinemax was one of the companies which was available and exciting in terms of the numbers that they were generating: the profitability per seat and the overall profits. This is the fit that we were waiting for. This acquisition means a lot for us in terms of getting more strength in the market. The objective has been to have meaningful market share in whichever markets we are present in.”
Despite the fact that PVR’s organic growth pipeline is strong, the next big leap, Arora says, could only have come through an acquisition. “People who have really good organic growth are the ones who can aim at taking a shot at inorganic growth. You can’t grow banking only
on organic growth.”
Concurs Sanjeev Kumar Bijli, Joint Managing Director, PVR, who took the strategic call together with his brother Ajay: “Organically you can grow only so much. It is dependent on the real estate sector, when developers announce and make malls, availability of space, rentals and external factors. But in the Cinemax case, there was someone well-managed and profitable, looking at an exit. For us, it’s a focus area and we were looking at growing.”
The acquisition, which has two stages—the first, a 69 percent purchase and then an open offer for another 26 percent—is being funded by way of equity infusion of Rs. 260 crore in all from the promoters, L Capital and Multiples Alternate Asset Management, the latter run by Renuka Ramnath. While the promoters will put in Rs. 25 crore, Rs. 82 crore will come from L Capital and Rs. 153 crore from Multiples. Following the deal, the holding of the Bijlis will go down from 40.2 percent to 32 percent, while the two PE investors will hold 15.8 percent each.
The backing of the PE investors clearly added muscle to PVR’s ability to do the deal. Admits Bijli: “It would have been very difficult for us to pull off the acquisition on our current balance sheet. We are fortunate to have big investors who have always backed us.”
The market has received the deal enthusiastically, but some obvious challenges remain. In a report put out after the acquisition was announced, ICICIdirect says: “This deal may result in synergies in terms of better bargaining power with producers and distributors as well as cost savings. Given that Cinemax has been acquired at an expensive valuation of 16.1x FY14E EPS, this would result in equity dilution and increase in debt while synergies may take time to play out.”
Broking firm Edelweiss, though, is optimistic of PVR’s clout after the acquisition. “Post this deal, PVR will be the largest multiplex operator in India with 351 screens, well ahead of peers. Also, ability to execute the deal without putting a significant strain on the debt level is a laudable positive,” the firm says in a note. However, a ‘key negative’, it says, is a dilution of about 36.7 percent of minority shareholders. “Also, we need to monitor how PVR manages the two brands—PVR and Cinemax—and possible concentration of screens in some geographies,” the report adds.
Allaying concerns, Nitin Sood, CFO, PVR, says: “We have made a full barter of the deal and at the same price we are also making an open offer to buy the stake from the shareholders. We have given them full value of the stake we required from them. So I think, from the investors’ point of view, there is no concern; they are extremely happy with the price they have got.”
Consolidation and integration
Former rivals and those who know the business view PVR’s pace of growth and the Cinemax acquisition as commendable. Shravan Shroff, who was once Bijli’s rival when he owned the Fame chain of multiplexes, is all praise for PVR. Says he: “The acquisition is a very smart move. Like a cheetah, PVR pulled it off without any noise, and did so very quickly without anyone knowing about it. Though it has stretched the company, it’s a good combination of debt and equity and has created a big difference with competition.”
Shroff, who is a shareholder in PVR and swears he won’t sell his holdings worth about Rs. 4 crore, adds that the acquisition makes eminent sense, since the intensity of construction of new malls is far lower now and hence organic growth is going to be slow. “The pace of growth of new malls is at least 25-30 percent slower compared to seven years ago. I would therefore give PVR ten on ten for doing this deal,” says Shroff.
Keen to keep moving, Bijli says he cannot afford to rest just because he has done the Cinemax deal. “The market has become dynamic, others can also consolidate. I am also focusing on organic growth a lot. Integration is top of the agenda for us now. The Cinemax deal was a big one. We now have to focus on getting economies of scale and profit maximisation, sponsorships, higher food & beverages (F&B) revenues and ticket income.”
Bijli is also focusing on how best to integrate the culture and brands of the two companies. “The brand is much more than the logo. A lot has to happen. The formal acquisition of control happened only on January 8. We are now conducting an audit and teams are going out and examining the properties. We will then decide on the branding and other areas. But we’ve acquired the Cinemax brand anyway.”
Adds Sanjeev: “For now, focusing on maintaining the numbers and the profitability in Cinemax—and analyzing the numbers there—are top priorities. We are also talking to the team and meeting and motivating them, assuring them things are the way they were. We are also learning from each other. Cinemax is a very well-run company with high profitability, processes and systems. We are trying to apply best practices of both to the common entity. We are also looking at enhancing the numbers of the common entity.”
Having seen ups and downs in his career, Bijli is also acutely aware that his position as the leader in terms of number of screens can change anytime. More than number of screens, the focus must be on profitability and return on capital employed. “Someone else can consolidate. Things can change quickly,” he says. “This is one six we had to hit. Now we’ll take singles, twos and fours. We’re not in a hurry. You should be careful how you manage your growth.”
Already, there’s talk of INOX eyeing a takeover of Essel Group’s Fun Cinemas chain, which could again intensify the multiplexes game. Ask Bijli whether he’s interested in Fun too, and he says emphatically: “We don’t want to bite more than we can chew. I am happy to say we’re not looking at anything more right now. We have lots of projects under construction and an organic growth plan, apart from integrating Cinemax.”
Retail entertainment focus
Having burnt his fingers in movie-making, Bijli is keen to focus on what PVR knows best—exhibition and related retail entertainment. So, the multiplexes play will clearly be the dominant contributor to revenues, together with distribution through PVR Pictures, a 100 percent subsidiary of PVR Ltd. Alongside, there is the bowling joint venture with Thailand’s Major Cineplex Group—BluO—a smaller piece, but which fits in with the
larger strategy.
BluO, Bijli points out, has to be pushed more than cinemas which, in a sense, is marketed automatically owing to the nature of the business. “But BluO has to work hard to create a buzz,” he says. “It’s not a scale business.” Currently, PVR operates five BluO centers which Bijli says are doing well. The group does not open BluO centers in malls which don’t house PVR cinemas. “The bowling alleys have to be located in spaces of around 40,000 sq. ft. and we work on low rentals.”
Despite its comparatively smaller size in the overall picture (a topline of about Rs. 35 crore), PVR Pictures is now the largest independent distributor for Hollywood in India and is betting on the fast-growing independent Hollywood studios. With a sharp focus on Hollywood blockbusters, PVR Pictures now has a pipeline with a visibility of 35-40 Hollywood movies under production which will be released over the next two to three years.
Says Kamal Gianchandani, Group President, PVR Pictures: “The films business is showing an upswing in spite of the slowdown. During January-December 2012, the gross collections were close to Rs. 700 crore for Hollywood films in India, compared to Rs. 400 crore in 2009. This shows the tremendous growth of the Hollywood space.” PVR Pictures has a large slice of this business, with films like Broken City, Midnight’s Children, The Reluctant Fundamentalist and Zero Dark Thirty being distributed by it. There’s a robust Hindi film pipeline as well. Gianchandani says the aim is to release at least 24 films every year, or two a month.
And with the Cinemax acquisition, PVR Pictures’ clout just got stronger, with 351 of the 2000 screens across the country belonging to the PVR-Cinemax combine. Besides, there is a estimated requirement of a phenomenal 20,000 screens in the future, something which can only be good news for the distribution business. The PVR-Cinemax ecosystem will now account for as much as 40-45 percent of the overall India box office pickings for Hollywood releases. Not surprisingly, Gianchandani says the distribution piece is expected to grow
anywhere between 25-35 percent in FY14.
Forever innovative
Despite the big acquisition and the scorching growth pace he has set for PVR, Bijli remains a cinema builder at heart. No wonder his eyes light up every time he speaks of the latest offerings—be it a new design, new technology or changes he is bringing in on the F&B front.
“We’re now keen to do a very good job of creating a brand which people admire. Any way you slice it and dice it, you should see quality. Whether it is the consumer, investor, distributor, employee, developer, any stakeholder. We want to create a very admirable company,” says Bijli, showing us the designs of the huge ‘tulips’ with the names of movies embossed on them which are the highlight at the PVR Orion lobby in Bengaluru or the imported LED chandelier which he is installing at the new PVR at Phoenix Market City, again in Bengaluru.
“Innovation is critical. I am fascinated by companies like Samsung and Apple. The consumer is always looking for some innovation,” says Bijli. So whether it’s the on-screen experience at the high-end PVR Director’s Cut, installing ticketing ATMs, introducing pre-ticketing F&B at Pune (which he says has significantly boosted spend per head from Rs. 45 to Rs. 65 there), getting a DJ to play live film music or introducing technical advancements like IMAX or Enhanced Cinema Experience (ECX) at his multiplexes, Bijli is always up to something as far as improvements go.
“These could be little things or major technological innovations which the industry dictates. I am happy to see something is always being done in the black box, which is the auditorium,” he says. The next exciting thing for him is the imminent installation of a state-of-the-art sound system at a new PVR opening in Andheri, Mumbai. “If an ordinary audi has 20 speakers, this will have 120, including on the ceiling,” he says, excitedly.
Says Shroff: “I have found Ajay passionate about the business. He gets into building cinemas almost as if he is building his own house.”
The demands of a chief executive notwithstanding, Bijli says he’d rather be spending his time looking at cinema and seat designs and artworks, while his team and the financial investors break down the hard numbers. “I am privileged to have a great team. I have a great CFO, a great company secretary and a good legal team. I have heavy duty financial investors who take care of the financial matters. I want to just focus on the business,” he says. Agrees Shroff: “He has an excellent team. They are smart and do detailed work.”
The PVR way
Bijli says he is both hands-off and hands-on as a manager. “The top team of Pramod, Gautam [Dutta, COO] and Nitin take care of the heavy lifting. But some things I want to touch and feel and they leave that to me. I don’t want to lose sight of building cinemas.”
He says though the decision on where to build cinemas is typically taken by him or Sanjeev, the team too sometimes does the groundwork and signs up new locations because ‘they know the madness’. But once they have signed up for a location, either Bijli or Sanjeev always has a look at it.
“Once they finalise the shell, Sanjeev or I get into the picture in terms of how many screens it will have, the design, the legroom and the demographics; whether it will be a luxury cinema, an IMAX or an ordinary one. Once it is built, then again I am hands-off”, Bijli explains.
Thereafter, the marketing, F&B and positioning is handled with Chief Operating Officer Dutta coming into the picture. Later, the Bijlis only get in on strategic discussions with the team.
How does he divide work with brother Sanjeev? Says Bijli: “We both handle the exhibition business together. PVR Pictures is handled by Sanjeev. I got into it only when we were making movies.”
This apart, Bijli himself handles the bowling business and the two brothers divide new verticals between themselves.
The bustle at PVR is palpable. Top executives are constantly on the move, checking out new locations, auditing existing Cinemax sites or striking new deals across the country, including in tier II and III cities. Not surprising, since PVR is expecting to clock a 30-40 percent growth in FY14 on an investment of Rs. 250 crore which it has in the pipeline. “About 1.2 times of whatever you invest is generally added to the topline,” he says. As a group, PVR, together with Cinemax, will end FY13 with about Rs. 1100 crore in terms of topline. Of this, about Rs. 650 crore is likely to come from exhibition, about Rs. 35 crore from distribution and Rs. 40 crore from the bowling business. Cinemax will bring in around Rs. 400 crore more.
For now, investors seem to be buying the PVR story. Shroff says he started buying PVR stock last year and is continuing to do so. “They are miles ahead of the competition in terms of smartness and passion. If PVR is number one, the competition begins only from number six. The gap for me is that much,” he asserts.
Having started off with a single screen cinema, is he satisfied now that he is the undisputed king of the multiplexes? “I hope that can happen. It hasn’t yet sunk in,” Bijli says candidly. “Now there’s a different kind of restlessness. It’s now about integration and doing a good job. People should see the difference in the first quarter results. The restlessness never ends.”
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