On Sunday, PVR Cinemas issued a release saying that it had acquired SPI Cinemas, which owns the iconic brand Sathyam Cinemas, in a transaction valued at ₹850 crore. On Tuesday, Kiran Reddy , the CEO of SPI Cinemas, explained the rationale behind selling off the business and what he intends to do after the transaction is concluded. It was an entirely financial decision, he said, adding that this time, it had nothing to do with politics. Excerpts:
Everything seemed to be going well for SPI Cinemas. What led to this sudden decision to sell your business to PVR cinemas?
We have seen explosive growth, which means that we are borrowing more money than our cash flows can generate. Business has its own variances: this year has been fantastic from a ‘content’ standpoint. Now what happens is that it is a capital intensive business and it puts enormous strain on cash flow. So, on a personal level, it was putting strain on me and it had come to a point where, maybe if not now but in six months or a year, I would have to raise capital because debt as a route of continuing business was not something I could feel comfortable with as a promoter. I did not want to get to a stage where my own personal fears would come in the way of doing what is right for the business.
How does this deal help you?
One, I will not be responsible for bringing capital into this business. So I don't feel the pressure of it. I don’t have my own personal debt. I am free to grow without any constraints and restrictions.
Were political compulsions one of the reasons for going through with this deal?
Not this time. Not this time. Last time, yes. Actually, to be fair, everyone from across various political parties have been supportive. Given that what happened to us in 2015 [when people perceived to be close to the ruling party forced them to sell one of their properties], a lot of people recognised that it was unfair. We don’t want to dwell on the past, I have moved on. Subsequently, people have been extremely generous and helpful. I think we got support from everybody — whether it is from political parties or the bureaucracy.
How involved will you be in the business now?
It seems like my involvement is only going to increase. For the past few years, I had actually stepped back. When I say stepped back, my role moved to being a mentor and guide to the organisation focussing on the vision, culture and where we need to be. This time the organisation needs me more because I need to give that emotional support. I’m saying: Listen, a large part of your company has been acquired by somebody else, yet I’m actually going to have the independence to run it. They are not going to believe it because even if that's my intent — will it actually happen? You can’t predict what will happen in reality but the starting point is that they (PVR Cinemas) value what we have and they recognise what we have.
So, are you going to be managing their PVR properties as well? Especially the ones in the South?
We have to let them evolve. We will start by managing our own properties. The hope is that we slowly start taking the PVR theatres closer to us and we start managing it. It is logical. Now the question is how will it happen and within what period will it happen. We have to wait and see. Both organisations have not sat down to discuss this.
So would there be a name change or a re-branding anytime soon?
It’s SPI and it’s even clearer after everyone’s message on social media platforms. The brand is in the hearts of the people and that's something no one can take away. It’s a fantastic asset for any business to have a brand that connects with people in such a way that people feel and have such strong emotions towards the brand.
So what are your projects/ plans – now that you have capital to work with?
They (PVR) have their own growth portfolio and we have our own growth portfolio. We have not sat and thought through which projects we will integrate — it will happen over time.
Does that mean that you have divided your regions between PVR and SPI Cinemas?
We have not. I want to focus on certain areas based on what makes logical sense since we are going to be operating in the same environment. For the next 5 years, we have signed up on quite a few sites. The thing with real estate is that the buildings never get built on the promised date. We have even sites that we signed up in 2009 – that never came through.
What are the impacts of this deal? Will SPI continue to have the space to innovate and introduce more technology in theatres, for which the company is known?
Absolutely. We will continue to push for any new technology that comes in and we will be one of the first few places to have it — ideally, we would like to be the first place to have it. We have certain constraints in this environment — take for instance, 4D cinemas, which PVR has been doing aggressively.
In different environments, we can price it differently. We can’t do it here. We can charge ₹120 plus or ₹150 plus taxes. We are thankful to the State government for the licence to run our IMAX screens, which we can operate at a differential price level.
Do you ever look back and think about what you have created?
My family had owned the property for a while, I don’t know for how long. I came in after my education. My memory is very hazy; there would be others in my team who can talk about tangible things. At every point in time, we have been supported and cheered. That’s the memory that has resided in me. I have to be grateful for the support that we have received throughout the entire journey. And it is factually wrong to say that it is an achievement of an individual.
What do you make of the state of film business today – there have been strikes, upheavals, financial problems…?
All that are a distraction to really doing the business. The question I should be asking is how does the cinema business become relevant, given the situation with Netflix and Amazon Prime? People are consuming good quality content at home. What is the relevance of movie theatres? It is really about creating out-of-home social experience. We have to provide that spectacular reason for you to come out of your house to go to a movie theatre. You can listen to music in your home, but why do people go to a concert? The feeling is very, very different. And as long as we continue to do it exceptionally, we will be relevant. I don’t think there will not be movie theatres (in future), but theatres will do extremely well because they understand the aspect of providing a special experience.
