“We are only falling off every year in terms of the large budget films. These dependencies kind of increasing every year,” says Karan Taurani, Sr VP, Elara Securities.
What do you make of this? Is there a heightened interest around Emergency and the other movies in the pipeline?
Karan Taurani: So, if we look at Emergency, there is not much of an interest like in the form of a blockbuster or something. But definitely, this is one film with very solid content. And if at all things do well, you can see a positive surprise as far as box office is concerned. We have seen in the past that strong content in films, which are medium budget, small budget in nature, have reported a positive surprise. So, something could be in store for this film as well. As far as pipeline is concerned, Hindi pipeline remains to be mixed. The environment is quite muted in terms of number of films.We are only falling off every year in terms of the large budget films. These dependencies kind of increasing every year. So, this is a risky phenomena for the film industry. What is working for the Hindi film industry rather is franchise-based films. This year we have seen Pushpa 2, we have seen Singam 2, Bhool Bhulaiyaa 3. In the past, we have seen Gadar, we have seen Pathaan. These are all franchise films, Animal. So, franchise-based films is the future from here on as far as Hindi film industry is concerned.
So, let us talk a little bit then about those franchise movies. Where do you think where you think that the successful model really is and they are the ones which are turning out to be blockbuster hits. What is the pipeline looking like for those?
Karan Taurani: If you look at the Hindi pipeline, for now there is not much of clarity beyond the next three to four months. Obviously, there have been many announcements in terms of large films, Border 2, Welcome, and other old franchise films which were kind of be remaked or going to have a next version as such.
So, the future looks to be very bright. What can happen here is that the content needs to change. The audience has kind of become very demanding. They do not want to watch just run-the-mill content. They want to watch content which is worth your time, experience, and money. So, we can probably go for content which is maybe experiential in nature, VFX effect led, which is expensive in nature in terms of budgets as well.
So, very clearly, the type of content is changing and that is the need of the hour. As far as Hollywood is concerned, we can expect some surprises there. Hollywood is going to see large franchise films like Avatar, Superman, Mission: Impossible coming in. And Hollywood has not performed over the last two years. If you look at the situation clearly, last two years for Hollywood has been muted primarily because of the writer association strike and Hollywood box office is actually kind of on a declining trajectory.
We have got numbers here. They are down anywhere between 60 per cent to 70 per cent today. So, we do expect recovery in the Hollywood in CY25 in a very big manner, which will also drive overall box office collections. And Hollywood is also a very big delta for your ticket prices that can be spent and for ad revenue, given the kind of quality of audience that we see in cinemas.
Talk to us about your latest initiation on Trent because there is a bit of a bull versus bear case. Yesterday, Kotak actually downgraded the stock saying it is now finally getting into the overvalued zone, but you are still positive on the prospects.
Karan Taurani: Trent is a very good structural compounding story. No doubt what has happened in terms of competitive intensity over the last two to three years. So, firstly, the fast fashion segment is quite promising. It is growing maybe 2x to 2.5x as compared to what the overall apparel industry would be growing, that is the first very big thesis that we have.
And Trent is a play in that fast fashion segment which is very high growth in nature. Now, if you look at Trent, typically they have been doing phenomenally well ahead of peers as far as store expansion, SSG, all the metrics, even in terms of profitability is concerned. But in the recent past, what has happened is that the competitive intensity has grown phenomenally.
The number of players in the fast fashion have kind of increased in a multi-fold manner over the last two to three years and that may put some pressure on Trent in terms of growth rates. So, the growth rates, which were in the range of 40 per cent , 50 per cent may not come in the medium to long-term basis and that is why clearly the stock has seen the kind of fall it has in the last three to six months in the range of 25-30 per cent . But the concerns are now overdone with what we believe is that Trent as a company is quite solid as a proposition. Zudio is still doing phenomenally well. They have got this entire moat of private label.
They have got the entire moat in terms of better profitability ahead of peers, good styling, consistent upgrade in terms of whatever the inventory that they have and fast fashion as a segment is very much here to stay. So, if they are able to kind of grow in line with industry average of 30-35 per cent , I do not think it should be bad to hold on to Trent as a stock because clearly, we do not have any multiple compounding stories which are showcasing growth of more than 30 per cent plus.
So, from that perspective, we believe that Trent, the Zudio play is very much here to stay. They may not lose market share versus peers despite the increased competitive intensity, they may be able to hold on to market share. Another very important point you have to see is that in any of these businesses, retail businesses, apparel as a category cannot scale up beyond the point as far as online is concerned because apparel has got high return ratios, high on fixed costs. It has got concerns.
Apparel cannot scale up on the quick commerce category and quick commerce is something which is disrupting multiple categories today, whether you call it BPC, you call it FMCG, some of the other categories which are there, FMCD, which is their fast moving consumer durables.
But apparel is one category which I feel is not exposed to this threat of quick commerce, at least for now, we do not know what happens two years down the line, but at least for now, apparel is not exposed to threat of quick commerce for now.
So, even that is going to hold in a very big positive manner for companies like Trent. And eventually, D2C brands are kind of coming in the market. But none of these D2C brands are actually able to scale up beyond the point, most of them are making hefty losses.
Some of them have kind of changed strategically, they have moved omni channel, they moved from online to offline, they have done those kind of things, those kind of innovations. But even after that, I think Trent, Zudio as a story is very much here to stay.
