Ladies and gentlemen, good day, and welcome to the PVR INOX Limited Q2 FY 2025 Results Conference Call, hosted by Axis Capital Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ankush Pariwal from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Neha. Good afternoon, friends, and welcome to PVR INOX Limited Q2 and H1 FY twenty-five post result earnings call. The call will start with a brief management discussion on the earnings performance, followed by an interactive Q&A session. PVR INOX management will be represented by Mr. Sanjeev Kumar, Executive Director, Mr. Gaurav Sharma, Chief Financial Officer, and other senior management personnel. Over to Mr. Sanjeev, for your initial comments.
Thank you very much. Dear all, I'd like to invite you all to discuss the unaudited results for the quarter and the half year ending September thirtieth, 2024. We uploaded the earnings presentation and the results on our company's and the stock exchange's website earlier today, and I hope you've had a chance to review them. Box office collections during the quarter saw a 40% sequential increase, driven by a strong bounce back in Bollywood, led by the record-breaking success of Pathaan, now the highest grossing Hindi film of all time. This surge was further boosted by Kalki's strong performance in both Hindi and Telugu markets, as well as' the exceptional success of Deadpool & Wolverine, which became the highest grossing R-rated movie worldwide, earning $1.3 billion at the global box office.
Our strategy of re-releasing older films has been highly successful, contributing nearly 6% of admissions during the quarter. Re-releases offer consumers additional choices during leaner periods for a big screen experience. The strong box office performance of both new releases and older classics demonstrates that good quality content is the primary factor that drives cinema attendance. This also reaffirms the profound love of Indian audiences for cinematic experiences. We celebrated the National Cinema Day on 20th September, which saw an overwhelming response. More than 11 multiplex chains and over 4,000 screens across India participated in this initiative, and PVR INOX welcomed nearly 1 million guests to our cinemas, making it one of the biggest days of the current fiscal year. Overall, in Q2 FY25, we welcomed 38.8 million guests across our cinemas.
In terms of the financial results for the quarter, the following numbers are after adjusting for the impact of Ind AS 116 on lease accounting. Total revenue for the past quarter was INR 1,642 crores, EBITDA INR 207 crores, and PAT was at INR 22 crores, as compared to a revenue of INR 2,020 crores, EBITDA of INR 447 crores, and a PAT of INR 207 crores in the same period last year. In the coming quarter, we have several exciting Hindi films. Last week, we had Vicky Vidya Ka Woh Wala Video and Jigra performing well at the cinemas. During Diwali in November, we have the highly anticipated multi-starrer release Singham Again and Bhool Bhulaiyaa 3.
Pushpa 2 is releasing in five languages in the first week of December and is expected to be a mega blockbuster. December also has Baby John Varun Dhawan. From Hollywood, we have Venom, Gladiator II, Kraven the Hunter, Mufasa: The Lion King, among others, and in different languages, we have Kanguva, which is, again, a multi-lingual language release. We are highly focused on executing our strategy of driving free cash flow generation, improving return matrix, and reducing debt. Despite a relatively tough half in FY 2025, the company generated positive free cash flow and reduced net debt by 131 crores. PVR INOX continues its strong growth momentum, adding 71 new screens to date in this fiscal, while strategically exiting 42 underperforming screens.
For the full year, the company expects to open around 110 to 120 new screens and exit 70 underperforming screens. Our current screen portfolio stands at 1,737 screens across 356 cinemas in 111 cities in India and Sri Lanka. Thank you very much. May I open the platform for any Q&A?
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.... The first question is from the line of Avnish Roy from Nuvama Wealth. Please go ahead.
Yeah, thanks. My first question is on the re-releases. Two, three sub-questions there. One is, when I see PVR share versus the India share, it's ranging from 50% to 95% in the three movies where you have given the data. So wanted to understand why we have such a range, maybe because some are only in your screens and may not be widespread. So wanted to understand what is the science behind this? Second is, in a year, how many movies would you be doing in terms of re-releases? For example, October month, again, the current month, Bollywood scheduling seems again quite weak. So are you planning some re-releases again right now?
Third is, in terms of variable cost, I understand you have got a 6% admissions from re-releases. But in terms of variable cost and occupancy, if you could give some data. Do you make good profits here, or it's more of a marketing exercise to increase the movie overall consumption habit as such?
Hi. Kamal, would you like to take that on the re-release strategy first? It's multiple questions.
Sure. Hi, Avnish, thanks for your question. And, Avnish, your first question, can you please refresh what was the first part of your question?
Yeah, 50%-95% range between PVR and total in the three examples which you have given, re-releases, the range is between 50%-95%. So why such a wide range?
You know, re-release is something which has been happening in film business for a very long period of time, and usually it's been tactical. You know, if it's some actor's birthday or if there is some event being celebrated, we tend to have either a festival or we bring back a popular film of that particular actor. But in the last, I would say, you know, eight to nine months, we've seen consistent behavior from re-releases, where re-releases, quite a few of them, have performed almost like a brand-new film. And this, many people found it... I mean, this came in as unexpected. Many people were surprised, and they thought it's a fluke, but it has managed to sustain itself.
And initially, because a lot of people didn't believe in the, you know, sort of long-term sustainability of this, new trend that was emerging, a lot of exhibitors were not participating in re-releases. And as you know, PVR INOX has always been, you know, experimental. We've been more receptive. You know, we like to sort of, push the envelope a bit. So we sort of participated aggressively, and which is why the earlier releases, Rockstar, Love Story, Rehnaa Hai Terre Dil Mein, PVR INOX had a disproportionate contribution in the all India, because it pretty much released in the entire chain of PVR INOX. By the time Tumbbad came out in, late August, September, more exhibitors, you know, sort of jumped onto the bandwagon.
You see the contribution of PVR INOX in Tumbbad has come back to, has become more sort of closer to what a standard contribution is in the overall box office. That's the answer to your first question. The second one was, I think, whether this is a sustainable thing or just a marketing, you know, initiative. It-
Yeah, given ATP is lower, given ATP is lower and my sense is occupancy also would be lower. If you could tell us, in terms of variable cost, would you be making money here in terms of, if you take that into account?
So without getting into specifics, it's a profitable initiative. You have to appreciate in our businesses, we, you know, there are weeks which are lean in nature, and therefore, you know, so the percentage occupancy that you do with the film is relative to the kind of period in which you're playing it, right? So we would not do a re-release in a week in which we've got two brand-new films which are blockbuster, potentially a blockbuster category film. We would never do a re-release in that week. But in a week where we have soft releases or we have scarce releases, we will come out with a re-release. And therefore, in that context, with that background, if a re-release does good business, you know, above the threshold admissions that we normally do, it's profitable for us.
At a variable level, it's able to give us the contribution, which helps us recover our overall fixed costs. What was your third question? Could you please repeat?
Yeah, it was again related to this only. So who is doing the planning for this? For example, in October month, again, Bollywood looks reasonably weak. So, are there more movies planned in October month?
Yes. We believe, like the trend of, South films being dubbed in Hindi, which has become like a sustainable practice or sustainable trend, which is doing very handsome numbers. We believe this, the trend of re-releases is here to stay. We've got internally people who are constantly looking at opportunities and not, of course, not all re-releases do well at the box office. So you also have to curate content. You also have to be careful. So we have a lot of people internally who are working at these, gaps and opportunities. But at the same time, we also keep getting a lot of initiatives from the production houses. A lot of producers keep approaching us.
... for example, Khosla Ka Ghosla, which is releasing on eighteenth. We were approached by the producer, and of course, we depend on the producers for logistics, prints, availability of censors, and all of those things. So therefore, producers' initiative, producers' interest in a re-release is also extremely important. So in many cases, we also get approached by producers. So it's a bit of both, like, we do a lot of internal planning, but producers also similarly take a lot of initiative.
Sure. My second and last question will be on Q3. Last year, Q2 was extremely strong, and you have expressed optimism that maybe Q3 will also be quite close to it. Given how October month is looking, bit weak on the Hindi movie side, is your expectation a bit on the optimistic side, given we'll have two months largely to overcome the very strong Q2?
Looking at the lineup and looking at the line of sight in terms of films, we are confident November and December will do smashing numbers. We don't want to get into specifics for these numbers, and I'm not trying to compare Q3 of this year with Q2 of last year, but suffice to say that November and December will do very strong numbers. In October, we are still in the middle of October. Venom is, you know, another film which is keenly awaited. We expect Q3 to be quite robust. It'll probably be the best quarter in this. I mean, most likely it'll be the best quarter in this financial year.
Sir, thanks. That's all from my side.
Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.
Yeah, thanks for the opportunity. Sir, I have a bookkeeping question. So if I remember right, our contract with BMS ended some time back, and now I believe the convenience income is variable in nature, and ideally it should move in tandem with the box office performance, if I'm not mistaken. Now, in this quarter, we saw a 25% fall on a YoY basis in our net box office collection, but the convenience income was down by only 5%. So has there been any revision in rates with BMS this time around?
Hi, Jinesh. Gaurav here. Let me take that question. The BMS contract was renewed last year itself, and we have a four-year term with BMS, and that will expire by 2027. I think drop in convenience fee as compared to 25% drop in box office was seen because during the quarter, what had happened was Paytm had sold their ticketing business to Zomato. And as a part of that transaction, there was an arrangement between PVR INOX and Paytm, where IT integration services and support was provided by PVR INOX, in the integration and transfer of their ticketing business to Zomato. And we've received some one-time payment on account of that IT integration process, which has been accounted for in the quarter two convenience fee.
As a result, the convenience fee in quarter two is higher, or the drop is lower compared to the box office drop in revenues.
Got that. The second bookkeeping question is on the event expense, which is flat on YY basis, despite a 2% increase in the weighted average screen count. So if you can share the reason behind it, and also our film hire cost is down on YY basis. So has there been any change in terms of our agreement with the distributors during the quarter? And the related follow-up is that for re-releases, do we pay a similar film hire cost or is it lower?
On the, film hire terms, there is no change in the contract terms. The drop compared to last year, quarter two, we are seeing this year is because of, the revenue share that got triggered in both rentals as well as film hire charges last year. Sorry, only on the rentals, but in film hire charges last year in quarter two, there were films which did very well, so we had to pay out some bonuses. As a result, last year, both FHC, as well as the rentals, to the landlords were higher compared to this year. In addition to that, we are also keeping a very close eye on our rental costs. We have taken, you know, a lot of initiative in renegotiating rentals and properties where, there was underperformance, and that is also reflected in the rental cost reduction.
And the re-release part, if you can just highlight that.
On the re-releases, I think Kamal had mentioned earlier without getting into specific details, the film hire charges that we pay to the producers on older films that are re-released are lower compared to what we pay for a newer film. Therefore, you know, the gross margin there is higher, but at the same time, the average ticket price is also lower. While in terms of as percentage gross margin, it is higher, but you know, maybe comparable in terms of absolute value.
Understood. Sir, one last question from my side. I think sometime back, there was some news article in the media which stated that the Tamil Film Producers Association has called for a temporary halt on all film-related activities from November one. Any idea whether this will be implemented, or you expect some kind of a solution to be figured out by then?
It turned out to be a media speculation. No such halt to the production has taken place in Tamil Nadu.
... films are being produced and being shot at the regular pace. So it was just pure media speculation. Understood. Thank you. Thank you so much, sir, and all the best for Q3.
Thank you. The next question is from the line of Abhishek Kumar from JM Financial. Please go ahead.
Yeah, hi, good afternoon, and thanks for taking my question. See, this quarter, in many ways, you know, represented typical probably period for us, where a couple of months were very strong, one month was relatively soft. We did reruns, et cetera. Still, after all that, the occupancy, you know, for the quarter was 25.7%. So is that the new normal that we should look at in the movie exhibition business? Because obviously we can't expect, you know, every quarter to be like Q2 of last year or Q3 of this year. So just your view on, you know, what should be the new normal for occupancy, and if it has to go up on a sustainable basis, what would it take, you know, for the occupancies to move up?
Kamal, would you like to take that?
Sure. So, you know, firstly, in terms of occupancy percentage, we hope and all the effort, the entire PVR INOX team puts is in the direction of raising this occupancy, improving this occupancy percentage. So while it's a good percentage, you know, it's something which, especially given the backdrop of COVID, we've come a long way, but we believe there is a lot of headroom to grow, and we are not sort of, you know, pausing and being satisfied with this percentage. The reason I say there is headroom to grow is because post-COVID, the back end, the production side of our business, was. I wouldn't say disrupted. Disrupted is a strong word, but it was definitely disturbed.
A lot of producers who were regularly churning out films took a pause, and a lot of people went into that zone where they became quite unsure whether they should make, you know, a A film or B film or a C film. And there was a lot of, sort of the green lighting process went through a lot of churn because the consumer taste was changing, box office had become more unpredictable. But in the last, I would say fifteen, eighteen months, there is more, semblance to the box office. It's becoming more and more like what we used to experience pre-COVID. And currently, the challenge that we face is with the quantity of films, quantity of, I would say, wide releases. But in terms of quality, in terms of admission per film, we are pretty much back at two thousand and nineteen levels.
So in terms of, you know, audiences coming and patronizing films of their choice, we are back to two thousand and nineteen level, and therefore, producers are very confident. They're enjoying a good run at the box office. A lot of producers are also laughing all the way to the bank because of the success that they're seeing at the box office. But at the same time, the quantity is still not back in shape. It's still not back at the level at which it used to be in two thousand and nineteen. So that's an area where we are hoping over the next twelve, fifteen months, we will see a lot of improvement. The quantity of wide releases, good quality, big budget films or mid-budget films, that number will increase, and hopefully that will help us increase the percentage occupancy.
Okay, that's helpful. You know, so just picking up on that, based on your conversation, do you think that, you know, the pipeline for next year, you know, by studios, et cetera, is looking better compared to what it has been so far this year, in terms of just the quantity?
Certainly. Certainly, both in case of Hindi, regional Indian films and also in case of Hollywood. Hollywood, as you know, was disrupted because of the strike. That's behind us, and therefore, the number of wide releases that you will see globally, including India, would be much more than what we have seen in two thousand and twenty-four and twenty-three. And in Hindi, we see a lot of producers, you know, who were on a pause mode, they've become active, and we see looking at the... I mean, the line of sight will become much more clearer by the end of the year, by the time we get to December and January. But just, basis what we know now, whatever is releasing in two thousand and twenty-five, we feel quite excited.
And then, just kind of, additions to what Kamal said. One is the fact that you need to view the H1 of this year without any big starter films getting released. So, next year, hopefully we'll get these blockbusters back, even in the H1. Number two, the way this year is panning out and the way we are working on re-release strategy and the alternate content, it's something that will be hugely fine-tuned by the time we hit April of 2025. And we believe that this also has its own little charm and a science to it, which I think we are learning. And, as Kamal had just explained, about eighty odd re-released films were marketed to our you know audiences in H1 alone.
And this number would surely be upwards of one forty, one fifty by the time the year ends. So technically, next year, this is another-
... a line that we would have got created. Pre-releases would be one, and, the alternate content would be the two. And, coupled with the fact that some of the big star which were completely missing this year, your Ranbir Kapoor, your Ranveer Singh, Shah Rukh Khan, Salman Khan, all of these guys have not really had any single release this year, and they all probably will be back next year.
Great! That's very encouraging. One last question on your operating leverage. You know, has it kind of run its course? By that what I mean is, if the occupancy stays where it is, is this the level of margins, or fixed costs that we should expect for our models going forward? Thank you.
So Abhishek, taking a lot of steps to control our costs, especially the fixed costs, and the biggest line item in our fixed costs is occupancy costs, rental and CapEx, which is driven by the contracts, but even there, wherever properties are underperforming or, you know, are located in malls which are not doing well, we are picking up conversations with developers to renegotiate rentals, rest of the costs on the fixed side, whether it is utilities, overheads, employee costs, we are, you know, trying to control as much as possible, and that's one area which, you know, the management team is very much focused on, so yeah, I think that's what I can tell you without getting into detailed numbers.
Sure, that's helpful. Thank you, and all the best.
Thank you. The next question is from the line of Arun Prasad from Avendus Spark. Please go ahead.
Good evening, and thanks for the opportunity. My first question is on the F&B spends. If you look at this metric for last four to five quarters, we are more or less this number is more or less stable. So, have we reached kind of a maximum that we can extract out of the footfalls via the without the price increase? Is it from here, the way forward is to only the price increase, or how we should think about it on this line item?
No, there is a long way to go still. We believe that our FPH has a huge headroom to grow. The H1 really, you're right, has been a bit staggered in terms of when you compare it with last year, but there are reasons around it. There was huge blockbuster films last year, and that too, Hollywood films, which drove FPH brilliantly well. Because Hollywood normally gets high propensity customers who are, you know, the top line of the cinema. So, because of Hollywood films, because of the fact that we have had muted ATPs, FPH has largely been in line with that.
Apart from that, we've also done Cinema Lovers' Day, which has also sort of brings down the FPH drastically for that month, because roughly about 10% of the total month's footfall hits the cinemas on one day. So, having said that, we believe that there's a huge headroom, there's a lot of innovation that is happening. We are also looking at different formats within F&B to be able to take the group forward. But this year, clearly, given the fact that last year we grew fairly sharply, there will be a little bit of a pressure on FPH, but come next year, I think this will really explode.
Okay, understood. Fair enough. And, secondly, we spoke about the closing of the non-performing screens. Can you help us understand, obviously we will be closing only if, say, obviously for the malls which are deliberated, we will be closing no matter what is rental is. But in those cases where the closure is because of the, you know, mall is good, but we close it because of the non-performance, that part of the operation is, that is, closure is done or still it is an ongoing process?
I think the strategy on the closure of underperforming screens is mainly, you know, because we are a mature company with almost twenty, twenty-five years of operations. A lot of cinemas are now, you know, which were open maybe fifteen, twenty years back, are located in malls which have lived their life. So as a regular process, we will evaluate our entire portfolio every year, and, you know, we will, the endeavor is to improve profitability of the business and exit properties which are consistently not doing well because of the mall issue or the location issue or, you know, the catchment has become over-penetrated. So I think, well, this year we have identified about seventy odd screens for exit.
Going forward, maybe about 1-2% of our portfolio will undergo a churn, where we will replace older screens with newer properties in those locations.
Okay. Actually, what I was trying to understand is, what percentage of our, say, underperforming screens is it to be renegotiated for any rentals if other than the mall, that is a closure of the mall or other than the location issues? And, I mean, apart from that, is there any scope? You know, we have, say, still some 30%-40% of the properties which is not it's not yet renegotiated, but that will lead to a better rental cost control going forward. That kind of a commentary, can you just give some understanding for us?
So, as I said, Arun, I think this is a continuous exercise. We evaluate our entire portfolio on a regular basis, while we are not chasing any target in terms of closures. But, wherever we are identifying locations which are not doing well, we are picking up discussions with the landlords or the mall developers to renegotiate the rentals or figure out, some operating efficiencies to turn around those locations. Having said that, I think, you know, going forward, it's going to be a continuous exercise. There is no, specific percentage of closures, or there is no specific, properties that we are wanting specifically to exit.
Okay. And finally, you spoke about a lot of emphasis on increasing the screen presence in the South. South is obviously beyond the top cities. If you look at the tier two, tier three cities, the supply of malls may not keep pace, so how are we planning to address this supply issue? Because obviously we'll need some kind of developer support to increase our screen share in the South. Right?
Yeah. So, you know, wherever the malls are coming in, there we are going in. You guessed it right in terms of... Your question is right in terms of suggesting that there are not too many malls coming up in the interiors of smaller towns in south. But this is changing very fast. You know, from Cuddalore to other small cities like Tirunelveli, many, many, many small cities in south are now coming up with shopping centers or malls which are housing cinemas, and that is where we are going. Besides that, we are also, you know, using the push factor to reach out to developers in these small towns, suggesting them for malls wherein we can house the cinema, looking at the economic viability of the complete shopping center. And that is working favorably for us.
These new shopping malls or shopping centers, this will be asset-light model for us?
Most of them would be asset-light model for us.
So, the developer has to contribute a substantial CapEx?
Yeah. The developer has to contribute substantial CapEx, and he's getting returns in either as, in the form of rental or in the revenue share, where he's able to make up in case the center does well.
Right. Understood. Thank you, sir. All the best.
Thank you. A reminder to all the participants, you may press star and one to ask a question. The next question is from the line of Umang Mehta, from Kotak Securities Limited. Please go ahead.
Yeah. Thank you, sir, for the opportunity. Just continuing the last question, so, what is the new screen guidance for next year, at twenty-six, and the CapEx guidance for the same? And what would be the mix of FoCO and management properties, within that plan?
So you have the first question, we shall be roughly going at 100 screens per annum, give and take 20 screens. It could be 80, it could be 120. That is the screen count that looks year after year for the next few years. In terms of the FoCO, which is Franchisee-Owned, Company-Operated, we are looking at about 15% of the screens coming up in FoCO, which is Franchisee-Owned, Company-Operated. About 35% to 50% coming up in the asset-light model. And balance would be again, a structured lease model.
Understood. Then, maybe Gaurav could help. So in terms of CapEx, should we expect decline from 475 odd crores, which you expected this year, given that mix of asset-light is fairly high?
Umang, you know, this year our endeavor is to do about INR 400 crores of CapEx. In the first half, we've done about INR 205 crores, so you know, we are well within our target for the year. Next year, as you know, Pramod said, the mix of asset-light or capital-light screens and properties will increase. As a result, our share of CapEx outflow for new screen addition should ideally come down. But, you know, we will not be able to give you an exact guidance of what we are targeting next year. We will do that as part of our AP planning by the end of this year. But, you know, overall, I think we should be in the ballpark of INR 400-500 crores. As a strategy, we will allocate slightly more CapEx on renovation.
There are high value, high performing properties, where the payback periods are much faster and the risk is much lower. So some additional CapEx allocation will be towards the renovation side.
Understood. Makes sense. And just the second question, which is not related to your core business, but on the food delivery business of PVR Café. Anything you can share on that? Any current scale plans to scale it up or anything on that?
... So, that's on course. We still need a lot of work to be done on that, because when we work with Zomato and Swiggy, there, we realized that given the fact that cinemas are on the third floor, our deliveries tend to get a bit delayed. The walkers need to come to the third floor to collect. So while in south, we, we're doing some brisk business around home delivery because a lot of cinemas do manage to get the food down to the box office, where it's very easily collectible. But overall, I would say that we still have to crack this model fully and perhaps set up dark kitchens under the name of PVR Café to be able to deliver.
Delivering from cinema will always give us an incremental food sales or an FPH, but it could only be limited to an X amount, and we need to relook at the delivery model completely there.
Got it, got it. This is very helpful. Thanks a lot, and all the best.
Thank you. The next question is from the line of Naveen Baid from Nuvama Asset Management. Please go ahead.
Yeah. Thank you for the opportunity, sir. This is also in line with what the previous speaker had asked. What should we model in terms of, you know, sort of annual occupancy ratios, since this is mostly become a eight to nine-month kind of a business model with, you know, IPL every year and some of the other event, and, you know, T20 World Cup every second year, and fifty over World Cup every four years, and many other sporting events. What should we work with in terms of, you know, annual occupancy rate, something that the company is targeting?
You know, we're not targeting any annual occupancy rate because it's very difficult in our business to say how the films will perform. It's also dependent on suppliers and their performance. While, you know, therefore it will be very difficult for us to provide you a guidance on what you should model in your assumptions for occupancy. But as Kamal was referring at the beginning of the call, in financial year 2026, we have a very strong lineup of films. Some of the biggest blockbusters from some of the biggest stars is lined up across Hindi, as well as Hollywood and the regional films. So on the basis of lineup, I think our feeling is that next year could be possibly a very strong year in terms of occupancy levels.
Very difficult to comment on exact numbers, but I think I would, you know, restrict to that. Kamal, you would like to add anything?
Yeah, no, I think you covered it well. I would only add to what Gaurav is saying, that this, point that you raised about World Cup and IPL or some other sporting event or some other global event which could impact the release schedule in India, see, it's a function of number of the quantity of films that get produced and which are ready for release. If that quantity goes up, the producers would tend to come out and compete with these global or local events, as they have done in the past, as they used to do pre-COVID. So once the quantity of films, good quality or wide-release films goes up, you would find that they would also start releasing it during IPL, during World Cups, during, you know, other events, and they'll figure out a way to coexist with that.
Okay. That's helpful.
Thank you. The next question is from the line of Sukkant Garg from Equirus Securities. Please go ahead.
Hello. Hi. My question is related to the JV that we are pursuing with Devyani International, first one. My second question is regarding PVR Cinemagic. I heard news around four months back that there is a new range of cinema screens that have been launched by PVR, called PVR Cinemagic, but that's been suspended in a very short span of time. Is there any particular reason for that?
Sorry, can you repeat your question on the food court? I'm losing your signal.
So my first question is, the state of the JV with Devyani International, when it is going to be launched, when it's expected to be launched? And my second question is regarding PVR Cinemagic. So, which I heard that, you know, there is a new set of screens being launched by PVR around in May 2024, called PVR Cinemagic, but it is suspended in a very short span of time. Why so? So is there any particular reason for that?
Okay, so let me take the second question first. Cinemagic has not been suspended. Those first things are, we are changing the interior. We're doing some changes after we've got some feedback from the guests. So, just to assure you that Cinemagic has not been suspended, and we'll be opening it soon. So that's first. Secondly, where with Devyani, our joint venture is concerned, it's on track, and we are hoping to open the first food court in December. So that's... We are working towards it, that's our endeavor, and we all are working to ensure that the first food court opens by December.
Just to follow up on that, for PVR Cinemagic, are we planning to expand that also in other parts of the country, or it is just going to remain in a very specific concept as a, you know, as a experimental exercise?
Yeah. Yeah, Cinemagic would expand to different parts of the country, wherever the demographics permit us to do so. So it's conceptually a little different from the other cinemas, and we expanding to other parts of the country also, yes.
Thank you. Thank you very much. That's all for my side.
Thank you. The next question is from the line of Ketan Athavale from RoboCapital. Please go ahead.
Gaurav sir, thank you. I just wanted to know pre-COVID EBITDA guidance.
Sorry to interrupt you, sir. I request you to use the handset, please.
Yeah, I'm on, I am on handset, ma'am. Am I audible now?
Mm-hmm, inaudible.
Hello?
We can't hear you. It's not, we can't hear you. No, you are not.
Okay. I will come back in the queue.
Thank you. The next question is from the line of Nitin Sharma from CIBRC Private Limited . Please go ahead.
Yeah, thanks for taking my question. Firstly, can you please point out how many of these closed screens in the first half include premium format? And then I have a follow-up.
So there is no premium format. These are all old screens, 15 years old, 10 years old screens. They are all mainstream, regular screens.
Understood. And, secondly, is there a level of growth that you aim to achieve by end of this year or the next year?
Can you please repeat?
Yeah, is there a target debt level that you want to achieve by end of this year or the next?
Yeah, I think, you know, our capital allocation strategy is clear, that whatever Free Cash Flow that we generate from the business, after meeting our CapEx requirements, will go towards debt reduction. And that's, you know, that's what you can see in this first half as well. While our gross debt levels have been same, our net debt levels have come down. We've built up reserves to, you know, take care of contingencies. Our idea is to reduce overall gross debt levels in the next couple of years by significant number.
Understood. Thank you.
Thank you. The next question is from the line of Palvir Bahia from Halo Global Asset Management. Please go ahead.
Hi. Can you hear me? Hello?
Yeah, ma'am.
Yes. I just wondered, how do you think about profitability? Just going back to an earlier question, you know, you're at sort of 25% in the EBITDA, relatively good quarter. I appreciate what you're saying about next year, but again, you know, that's very much reliant on the supply of new films and the success of those. In terms of how you're modeling your business, you know, how should we, and how do you think about the sort of ongoing profitability? You know, what is breakeven for your business? And is it really, it really will come down to occupancy for you to generate sustained profitability going from here?
What are the levers do you have to give us confidence that you can sort of sustainably be profitable on a continued run rate from here?
Yeah, I think, you know, on profitability, if you look at our second quarter at a 25.5% occupancy, we did roughly 13% EBITDA margin, which is similar to what we did in financial year 2024, where we had 25% occupancy and 13% operating margins. You know, I think as the occupancy levels go up, which we feel should go up in the quarter three, quarter four and next year, because of operating leverage, the improvement and operating margins will be more. When you compare. When you look at our quarter two earnings last year, where we had a 32% occupancy, we did roughly 22% EBITDA margins. So I think, you know, that's the range where we are operating. A lot of synergy benefits are already baked into the business.
As the occupancy levels improve, we will see a substantial increase in operating margins of the business. It's very difficult to model the occupancy numbers, because it's highly dependent on the lineup of films and the performance of films which are released. But on the fixed cost control side, we have, you know, we are very, very focused towards controlling all the controllable fixed costs and trying to renegotiate rentals wherever the opportunity exists.
Okay, thank you. It's difficult as analysts to try and, you know, just put in an occupancy number which is higher, given the trend at the moment. Because we've had, I appreciate we've had a lot of disruption via COVID, the election, but now there's still a lot of hope. It's why I think we're getting a lot of questions on this. Thank you for your time.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Ketan Athavale from RoboCapital. Please go ahead.
Hello, sir, am I audible now?
Yes, we can hear you.
Yeah. I just wanted a pre-COVID EBITDA guidance.
Sorry, can you repeat?
I just wanted your pre-COVID EBITDA guidance.
Sorry, Ketan, we don't provide guidance on EBITDA numbers. So I don't think we'll be able to, you know, address that question.
Okay, okay. Thank you.
Thank you. Ladies and gentlemen, we'll take this as the last question. I would now like to hand over the conference to the management for closing comments.
Thank you so much, everyone, for joining this call. I really appreciate your time.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.