"We believe in taking risk. This is something we have communicated to all our stakeholders. We are not shy about it. We do leverage really high"
Mr P. S. Saminathan, Managing Director,
Pyramid Saimira Theatres Limited.
Pyramid Saimira Theatres Ltd (PSTL), which went public in late 2006, has almost overnight become a company that straddles multiple segments of the film world, from production to exhibition. It has done so by being unconventional from the sta rt, be it leasing old single-screen theatres to ramp up its screen presence or acquiring theatre chains overseas even as all other players remain focussed on domestic markets. In an interview with Business Line, Mr P. S. Saminathan, Managing Director, PSTL, is unabashedly confident of the company’s prospects, although sceptics may still consider some of its targets ambitious, considering that PSTL is still in its early growth phase.
Excerpts from the interview:
Pyramid Saimira’s IPO in December 2006 raised funds for expansion and digitalisation of theatres across India. Now the company appears to have expanded far beyond film exhibition. What is your strategy?
Digitalisation was part of the agenda to agglomerate the theatre chain. Now, we have climbed up the value chain. We have become the largest exhibitor in India and we are possibly the third largest exhibitor in the world. We have almost eliminated the distribution segment and have become an exhibitor-cum-distributor. We have climbed up the value chain further by entering film production. Secondly, we are also expanding laterally. We operate out of the US, Malaysia and Singapore and are expanding into other countries as well. There is a geographical as well as a value chain spread.
How is the company structured? Do all your businesses come under the PSTL fold?
PSTL is engaged in film exhibition and is the holding company of Pyramid Saimira Production (PSPL) and Pyramid Saimira Entertainment (PSEL). PSPL produces films and TV content. Singapore-based PSEL is a content agglomeration unit. The model is akin to Eros International. Eros buys films and distributes it abroad. PSEL not only buys films and distributes them abroad but also buys Hollywood films and distributes them in the Asia-Pacific region. PSEL is a 100 per cent subsidiary of PSTL. PSPL is majority-owned by PSTL and the balance is held by some individuals and venture capitalists.
Your move into production, distribution and other areas have taken place at a tremendously fast pace. What resources do you have to execute these projects?
Fortunately, we have been profitable from the beginning. We entered at a time when the industry was on an upswing. Second, we raised Rs 400 crore on our convertible bond issue. Third, each of our units is raising funds, both debt and equity, independently and no longer rely on the parent companyPSTL. Our Singapore-based unit PSEL has raised capital and debt and our production unit Pyramid Saimira Production is going public.
Now we have multiple entities. In Malaysia, we have Pyramid Saimira Malaysia. There we have a partner and we have raised some debt. We have an US-based company called Pyramid Saimira America. That will raise funds in the US for its expansion.
You straddle across production, distribution and exhibition and have set big targets across all three streams. Are you not spreading yourself too thin?
This company believes in taking risk. This is something we have communicated to all our stakeholders. We are not shy about it. We do leverage really high. In my view, the critical difference between this group and others is the speed with which we execute our projects.
If you look at any company that has grown quickly in the last ten years, it is because of the speed of execution. It is not because they were structurally sound. Most of the companies be it Google, Jump TV, Reliance, Mittal group….each of their moves were independently not justifiable. They had a high-risk element. L. N. Mittal took over sick companies and made them profitable.
Reliance’s execution speed is flawless. We also believe in that speed. We need to ramp up very fast. That is the core focus.
We have reached a stage where we have become big. We are actually doubling in size every three months.
Today we have more than 500,000 seats. We are spread across five countries. We have 703 screens. We produced close to 38 films this year and we think only Paramount Studios and Universal Studios would have beaten this number. We have distributed over 90-100 films. We have started TV serial production.
We will beat Balaji Telefilms in the next one or two months in terms of hours of programming. We have targeted eight channels. Our focus is to go to niche areas and control everything. We will also enter Hindi genre in the satellite television market. To an extent, we are not communicating this pace of growth. But every film in India has to pass through our hands, either at the production stage or at the distribution stage. We are present everywhere, so, without us, no film can be released at the exhibition stage.
How are you backed in terms of management bandwidth?
PSTL is one company that believes not just in taking business risks but in taking risks on people as well. We have a concept called network management in Tamil Nadu. We have removed the top management in TN. The divisional management is given the powers of the top management. And the powers are quite extensive. The Tamil Nadu division alone, on a year-on-year basis, will have a Rs 600 crore turnover. It spends Rs 400-500 crore. Everyday, it spends Rs 1.5-2 crore. Everyday, it adds a theatre. The growth necessitates some kind of innovation in management practices also.
What is your strategy of going international? Are not those markets already saturated with multiplexes?
Yes, but there is no focus on the Asian population. We have two goals. The first is to be a giant in Asia-Pacific. Here we do not focus on Indian films alone but on the respective region’s appetite. For instance, in Malaysia, we do not focus on Indian films but on Malay, Chinese, English, and so on. We want to become a giant theatre chain here, so that we can agglomerate Hollywood content here.
The second is to go abroad and focus on Indian films, and target Asian audiences in the western territory. There is no company that has, so far, focussed on the ground level. They have focussed on the middle level, that is, distribution. No one has built the required infrastructure.We believe in ground level strength, and not on in trading alone. So we are building infrastructure so that we have a sustainable base.
What is the progress on the digitalisation front?
We have started digitalising. We have digitalised about 200-250 theatres. As a percentage of overall screens it is still low. We were not focussed on cost cutting. We are using digitalisation as an expansive mechanism. Digitalisation to me is like banks computerising their core banking operations. It is a technology solution that enables you to manage better. By 2009-10 most of the screens will be digitalised. Because by then we won’t be able to grow further. I cannot expand more than 1000-1200 screens in South India. The focus will then shift to quality, digitalisation, improving network, and so on.
How does your margin profile differ from other multiplex players? Most of the names are focussed on the premium end.
Our ticket admission rates are lower and we have not focussed on improving infrastructure and raising the admission rate. Those improvements will happen only in 2009. We will still want to have low-margin high value on the box office. But that does not mean we will have low margins in foods and beverages. F&B is a very high margin business.
It gives you 100-250 per cent margin even without fleecing the public. You go to a theatre expecting coffee to be expensive, and popcorn that is available for Rs 5 outside to be Rs 10 inside. Your price expectations are higher. So if we sell it for Rs 7.50, it will be seen as cheap.
We want people to see our F&B as an independent business. We want more footfalls. Our operating margins will always be less than 20 per cent for our theatre business.
What would the typical occupancy rates be?
In the first quarter it was about 44 per cent, and in second quarter, around 34 per cent.
Is it because it has been a good year for South Indian films?
No, not really. Honestly, whether a film is good or bad does not make a difference to us. This Diwali, every Pyramid theatre had a new film. Nearby theatres did not. That is because we distribute all films. We have effectively denied content to competition.
Interviewed by Shanthi Venkataraman, Business Line.
Excerpts from the interview:
Pyramid Saimira’s IPO in December 2006 raised funds for expansion and digitalisation of theatres across India. Now the company appears to have expanded far beyond film exhibition. What is your strategy?
Digitalisation was part of the agenda to agglomerate the theatre chain. Now, we have climbed up the value chain. We have become the largest exhibitor in India and we are possibly the third largest exhibitor in the world. We have almost eliminated the distribution segment and have become an exhibitor-cum-distributor. We have climbed up the value chain further by entering film production. Secondly, we are also expanding laterally. We operate out of the US, Malaysia and Singapore and are expanding into other countries as well. There is a geographical as well as a value chain spread.
How is the company structured? Do all your businesses come under the PSTL fold?
PSTL is engaged in film exhibition and is the holding company of Pyramid Saimira Production (PSPL) and Pyramid Saimira Entertainment (PSEL). PSPL produces films and TV content. Singapore-based PSEL is a content agglomeration unit. The model is akin to Eros International. Eros buys films and distributes it abroad. PSEL not only buys films and distributes them abroad but also buys Hollywood films and distributes them in the Asia-Pacific region. PSEL is a 100 per cent subsidiary of PSTL. PSPL is majority-owned by PSTL and the balance is held by some individuals and venture capitalists.
Your move into production, distribution and other areas have taken place at a tremendously fast pace. What resources do you have to execute these projects?
Fortunately, we have been profitable from the beginning. We entered at a time when the industry was on an upswing. Second, we raised Rs 400 crore on our convertible bond issue. Third, each of our units is raising funds, both debt and equity, independently and no longer rely on the parent companyPSTL. Our Singapore-based unit PSEL has raised capital and debt and our production unit Pyramid Saimira Production is going public.
Now we have multiple entities. In Malaysia, we have Pyramid Saimira Malaysia. There we have a partner and we have raised some debt. We have an US-based company called Pyramid Saimira America. That will raise funds in the US for its expansion.
You straddle across production, distribution and exhibition and have set big targets across all three streams. Are you not spreading yourself too thin?
This company believes in taking risk. This is something we have communicated to all our stakeholders. We are not shy about it. We do leverage really high. In my view, the critical difference between this group and others is the speed with which we execute our projects.
If you look at any company that has grown quickly in the last ten years, it is because of the speed of execution. It is not because they were structurally sound. Most of the companies be it Google, Jump TV, Reliance, Mittal group….each of their moves were independently not justifiable. They had a high-risk element. L. N. Mittal took over sick companies and made them profitable.
Reliance’s execution speed is flawless. We also believe in that speed. We need to ramp up very fast. That is the core focus.
We have reached a stage where we have become big. We are actually doubling in size every three months.
Today we have more than 500,000 seats. We are spread across five countries. We have 703 screens. We produced close to 38 films this year and we think only Paramount Studios and Universal Studios would have beaten this number. We have distributed over 90-100 films. We have started TV serial production.
We will beat Balaji Telefilms in the next one or two months in terms of hours of programming. We have targeted eight channels. Our focus is to go to niche areas and control everything. We will also enter Hindi genre in the satellite television market. To an extent, we are not communicating this pace of growth. But every film in India has to pass through our hands, either at the production stage or at the distribution stage. We are present everywhere, so, without us, no film can be released at the exhibition stage.
How are you backed in terms of management bandwidth?
PSTL is one company that believes not just in taking business risks but in taking risks on people as well. We have a concept called network management in Tamil Nadu. We have removed the top management in TN. The divisional management is given the powers of the top management. And the powers are quite extensive. The Tamil Nadu division alone, on a year-on-year basis, will have a Rs 600 crore turnover. It spends Rs 400-500 crore. Everyday, it spends Rs 1.5-2 crore. Everyday, it adds a theatre. The growth necessitates some kind of innovation in management practices also.
What is your strategy of going international? Are not those markets already saturated with multiplexes?
Yes, but there is no focus on the Asian population. We have two goals. The first is to be a giant in Asia-Pacific. Here we do not focus on Indian films alone but on the respective region’s appetite. For instance, in Malaysia, we do not focus on Indian films but on Malay, Chinese, English, and so on. We want to become a giant theatre chain here, so that we can agglomerate Hollywood content here.
The second is to go abroad and focus on Indian films, and target Asian audiences in the western territory. There is no company that has, so far, focussed on the ground level. They have focussed on the middle level, that is, distribution. No one has built the required infrastructure.We believe in ground level strength, and not on in trading alone. So we are building infrastructure so that we have a sustainable base.
What is the progress on the digitalisation front?
We have started digitalising. We have digitalised about 200-250 theatres. As a percentage of overall screens it is still low. We were not focussed on cost cutting. We are using digitalisation as an expansive mechanism. Digitalisation to me is like banks computerising their core banking operations. It is a technology solution that enables you to manage better. By 2009-10 most of the screens will be digitalised. Because by then we won’t be able to grow further. I cannot expand more than 1000-1200 screens in South India. The focus will then shift to quality, digitalisation, improving network, and so on.
How does your margin profile differ from other multiplex players? Most of the names are focussed on the premium end.
Our ticket admission rates are lower and we have not focussed on improving infrastructure and raising the admission rate. Those improvements will happen only in 2009. We will still want to have low-margin high value on the box office. But that does not mean we will have low margins in foods and beverages. F&B is a very high margin business.
It gives you 100-250 per cent margin even without fleecing the public. You go to a theatre expecting coffee to be expensive, and popcorn that is available for Rs 5 outside to be Rs 10 inside. Your price expectations are higher. So if we sell it for Rs 7.50, it will be seen as cheap.
We want people to see our F&B as an independent business. We want more footfalls. Our operating margins will always be less than 20 per cent for our theatre business.
What would the typical occupancy rates be?
In the first quarter it was about 44 per cent, and in second quarter, around 34 per cent.
Is it because it has been a good year for South Indian films?
No, not really. Honestly, whether a film is good or bad does not make a difference to us. This Diwali, every Pyramid theatre had a new film. Nearby theatres did not. That is because we distribute all films. We have effectively denied content to competition.
Interviewed by Shanthi Venkataraman, Business Line.
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