Ladies and gentlemen, good day and welcome to the PVR Limited Q3 FY 2023 earnings conference call hosted by Axis Capital Limited. As a reminder, all participant 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 the 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. Ankur Periwal from Axis Capital. Thank you and over to you, sir.
Thank you, Fazan. Good evening, friends, and welcome to PVR INOX Limited's Q3 FY 2023 post-result earnings call. The call will be initiated with a brief management discussion on the earnings performance, followed by an interactive Q&A session. Management team will be represented by Mr. Ajay Bijli, Chairman and Managing Director, PVR INOX Limited, Mr. Sanjeev Kumar, Joint Managing Director, PVR INOX Limited, Mr. Gautam Dutta, CEO, PVR INOX Limited, Mr. Kamal Gyan Chandani, Chief of Business Planning and Strategy and CEO, PVR Pictures, and Mr. Nitin Sood, Chief Financial Officer, PVR INOX Limited. Over to you, Mr. Bijli, for the initial comments.
Thank you very much. Hello, everyone. I'd like to welcome you all to the earnings call to discuss the unaudited results for the quarter and nine months ended December 31st, 2022. I hope you've had the opportunity to review our presentation and results, which we've been uploaded on our as well as the stock exchange website. Let me start with an update on the merger. On the 12th January, 2023, the Honorable National Company Law Tribunal, NCLT, Mumbai bench, has allowed the proposed Scheme of Amalgamation between PVR Limited and INOX Leisure. We have laid out the next steps and the tentative timelines for completion of the merger as part of the investor presentation. Coming to the results.
After a dismal Q2, the quarter ended 31, 2022, witnessed a sharp bounce back at the box office. For the quarter ended December 31, 2022, the current quarter, total revenues were INR 953 crores. EBITDA was INR 741 crores and PAT was INR 25 crores. For the nine-month period ended December 31, 2022, total revenues were INR 2,655 crores. EBITDA was INR 361 crores, and PAT was INR 36 crores. The above numbers are after adjusting for the impact of Ind AS 116 relating to lease accounting. The quarter recorded 22 million theatrical admissions across our cinemas, which were higher by 21% as compared to 18 million admissions in the previous quarter. The quarter saw a healthy box office mix with movies from all genres performing well.
The quarter saw a sharp resurgence of Hollywood with movies like Avatar: The Way of Water, Black Panther: Wakanda Forever, and Black Adam. Avatar 2 has been the highest grossing Hollywood film this year in India with a net box office collection of INR 385 crores till date, which is very, very positive. It's also been the highest grossing movie for the quarter for PVR with INR 37 admissions and INR 108 crores net box office collections till date. Regional cinema movies continued to perform well with movies like Kantara, PS 1 and Love Today. From Bollywood, the biggest hit during the quarter was Drishyam 2, followed by Vikram Vedha and Bhediya. The current financial year has been impacted on account of underperformance of Hindi films and lower number of Hollywood film releases.
We expect both industries to post a strong recovery in 2023 with a robust content pipeline ahead. On the screen openings, we've opened 63 screens across 11 cinemas till date and are on track to open a total of 100-110 new screens by the end of financial year. About 47 new screens across various projects are in the final stage of completion and are expected to open before the end of this fiscal year. Our screen portfolio currently stands at 903 screens across 181 cinemas in 78 cities in India and Sri Lanka. The combined screen portfolio, post-merger with INOX, will be 1,623 screens across 350 cinemas in 115 cities as on date. I'd like to now open the platform for any Q&A.
Thank you very much.
Thank you very much. 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. A reminder to the participants, anyone who wishes to ask a question may press star and one. The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead.
Yeah, thanks, congrats on good recovery, good numbers. My question was on the outlook, essentially on Q4. On Hindi movies, how do you see given Pathaan is a big event, especially given a SRK movie is coming after a long time, the social media protests have also been at a very high level given elections, given all the issues. Would you say that now we are almost at the fag end of Hindi content issue? I had asked this question a few quarters back also, but now where are we on that? And on Pathaan, what's your realistic expectation? I'm not asking for any numbers, but do you think that this could be a big hit given the context?
Hi, Abhi. Yes, you know, whatever the initial advances are of Pathaan, they are looking absolutely amazing. These controversies have never bothered us because ultimately we play what gets passed by the Censor Board. Prior to the Censor Board certification, all these little, you know, controversies of any movies that come, you know, we don't give too much heed to it because ultimately we only play what is passed by the censor. There have been so many controversies in the past as well, but ultimately the consumer gives its verdict. I think from that point of view, the early indications are that this movie is going to do well. We have other movies as well. I mean, I think this, the time of sleeper hit is also coming now.
Gandhi Godse is looking good. Then we've got, you know, Ajay Devgn's movie, Bholaa, which is coming up. We've got some Hollywood films, John Wick. Coming back to Hindi, we've got this Luv Ranjan's movie, which is starring Ranbir Kapoor. We've got one movie of Kartik Aaryan, who's become the flavor of the year, called Shehzada. We've got Ant-Man. We've got another Ajay Devgn movie called Maidaan. Selfiee, of Akshay Kumar. Creed III. Plenty of movies in this quarter as well. Babylon is a big one. You know, it should be good. There's no problem as far as, you know, the quality and the quantity of movies which are coming this quarter.
Right. Second is on your statement on English content. You mentioned obviously in your opening remarks and presentation also that 2022 was impacted by low release. You have said that in 2023 it will come back. Is it going to be a bit back-ended in terms of the frequency of movies? Or do you see that it's from the Q1, Q2 sense, we'll see the frequency issue for Hollywood getting addressed?
Yeah. I mean, Q1 of, you know, Hollywood. You know, first of all, what I said in my opening remarks was that, you know, so many people coming and watching Avatar Two. In the post-pandemic, only 10 months or 11 months after opening, having the biggest hit ever, is a very positive signal. 385 crores the movie has already done till date. This will not only encourage, you know, the Indian filmmakers that, you know, consumers will come to the movies if, you know, movies are good and they connect. But this also is a huge motivating factor for Hollywood, because there again, you know, everybody will be encouraged to release more and more movies on the big screen. But just to your specific question, you know, there's...
You wanna know about Hollywood movies which are coming or you wanna know just the pipeline which is coming in Q1? Is that what your question was? There's plenty of movies. I mean, I've got a list of Indiana Jones, I've got Transformers, The Flash, which is coming on IMAX. There's Guardians of the Galaxy, there's Fast and the Furious. There is, you know, another Shah Rukh movie called Jawan, which is coming. There is on seventh April, Super Mario movie, which is coming. You know, there are a lot of films, both Hindi, English, as well as, you know, regional, which are coming Q1 of next year. They're not back-ended. They're coming spread out throughout the year.
Yeah. My question was on English content only. You're saying in FY 2023, Q1, Q2 also will have a fair bit of English content, right?
Yes, yes. Absolutely. Spread out throughout the year.
Sir, my last quick question is on your expansion plans, because earlier you had said as a merged entity, 200 screens is something per year you'll be looking at. In your recent interview, I read a much larger overall number over the next, I think, four to five years. Could you clarify what is the realistic expansion given mall development will be the first criteria, then only you can expand. Is there a good visibility of the number which you are talking about in terms of mall opening also?
Yes, yes. Definitely. You know, we are a responsible listed company. I can't make any flippant statements. 63 screens we have already opened. As I said in opening remarks, 47 will open in the next two and a half months or whatever is left of this fiscal, as far as PVR is concerned. You know, INOX also has about 100 odd screens opening. That's what we said, that about 200 odd screens will open every year. I don't know which interview you're talking about, but that's the number we've been consistently saying, between 150 to 200 odd screens every year will be the opening pipeline of the combined entity. Of course, these are all in malls in different cities, and retail is doing well.
A lot of developers, in smaller cities, medium cities, big cities, are still going ahead and building, you know, these organized retail formats. Pretty much cinema continues to be the driver of footfalls in these, in these properties.
Thanks, sir. In one interview, I read that a number of 3,000-4,000 screens. I don't know what was the time period that necessarily. That was over a 10-year time frame or that was a longer-term vision?
Not 10 year. I think, I mean, you know, if you just, if you add 200 and we reach about maybe, you know, we are at 1,600 just now, as a combined entity. 1,623. Another 200 or 250 if you add every year. In five years' time, maybe we are talking 3,000 screens.
Yeah. 3,000 I could understand. That 4,000 number was a surprising number.
Maybe the journalist wrote on his own.
Sure, sure. Sure. Thanks, and all the best. That's all for me. Thank you.
Thanks, sir. Yeah.
Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.
Yeah. Th anks for the opportunity. Uh, sir, my first question is, uh, with respect to your partnership, uh, with the French exhibitor, uh, CGR Cinemas, uh, does it entail any kind of outgo like a royalty, et cetera? Uh, if not, uh, can you highlight the nature of, uh, the business relationship over there? And also, what are our expansion plans on the ICE format, if you can just shed some light?
Yeah. I mean, look, PVR is always about, you know, bringing, you know, experiential formats to the consumers. I think, this day and age, you want to enhance and elevate the experience of watching a movie on the big screen. ICE is one such format which we believe is quite exciting. The French company, CGR, there's no partnership. It is just, you know, for these formats, you know, we have bought the equipment from them, but on every ticket that we sell, there is a percentage which I will ask, request my colleagues to tell you. On every ticket that is sold there's a small percentage that has to be shared with them. Otherwise, the expansion plans are that 2 we've already opened, 1 in Gurgaon, 1 in Delhi. In D...
We have two more coming up, one in Bombay, one in Bangalore. Also we have a rollout of another 6 to odd ICE screens in the next, you know, maybe 12 months. The, you know, the kind of % is not significant. It's like 2.5% of box office. There's a lot of movies which are coming as well. Pathaan, I'm quite happy to share with you, has just now been converted into ICE as well. A lot of Hollywood films are almost 25 to 30 films a year will be on ICE format.
Sure, sir. One last question from my side. It pertains to the financials of film distribution. In the PPT, I think the other operating income that we have given, it pertains to the revenue from film distribution. The expenses related to it given in the PPT is approximately INR 106 crores, whereas the income is at about INR 94 crores. Does it imply that we have made a losses over here? I mean, I thought of asking this question because distribution business is one kind of a business whereby we get a cut as a percentage of collections, and hence it tends to be profitable in nature. Just wanted some clarification on this aspect.
Let me clarify. Let me clarify on this issue. The total revenue from PVR Pictures is INR 114 crores, and PVR Pictures has posted a very healthy EBITDA, one of the best quarters of this year. When we consolidate our revenues, because you have to knock off, you know, intergroup transactions, the revenue is appearing lower in the consolidated results. On a standalone basis, PVR Pictures has had a very, very healthy quarter, best quarter of the year. They've done some big film releases like Drishyam and Vikram Vedha during the quarter. Sarpatta Parambarai.
Got it. Film distribution for us is a profitable one in this quarter, right?
That's correct. That's correct.
Okay, sir. Thank you so much.
Thank you. The next question is from the line of Arun Prasath from Spark Capital . Please go ahead.
Thank you. Thank you for the opportunity. My first question is on the content. We have been discussing about the content issues related to Bollywood. This week, can you recall in the past, say, in the last 10, 15 years, when was the last time, aside these controversies on the social media and the other things, when was the last time Bollywood went through this kind of poor quality content and how they recovered? If you can kind of give us, you know, your understanding of what is happening in the behind-the-scenes and also talk about the health of the producers who are operating in this, in this last two, three, two to three years, given that, you know, they could... There's a possibility they couldn't be having enough capital to invest in this business. If you can give a, you know, brief outline on this, that'd be great.
Well, you know, if I tell you last when it happened, I'll have to disclose my age to you. I'm just joking. I think this has happened even previously, if you recall, you know, I think 10 years ago, 12 years ago, Mr. Bachchan's movies, you know, were there, and they had, you know, suddenly, the, you know, the content wasn't connecting with the consumers. There was a, you know, VHS boom, and I don't know what all was happening, DVDs. Then suddenly came, I think, Dil Chahta Hai, Qayamat Se Qayamat Tak, sorry, before that. Again, there, again, there was a resurgence of people coming back. Ever, you know, every, you know, maybe five, 10 years, 10 years maybe, something like this happens.
I really don't think that we have such a serious issue because we've just come from the back of a pandemic. I think it's slightly getting exaggerated because we've had hits in the last nine months. Like Drishyam 2 is one example. You know, we had Gangubai. We have so many films that have done quite well. Brahmastra, Vikram Vedha. I think, you know, it is getting too exaggerated that there is a problem. Of course, you know, content, sometimes content connects, sometimes it doesn't connect, but definitely more have not connected than connected, so that's why all this is happening. I am 100% confident that, you know, the...
I can't, I don't underestimate the creativity and the business acumen of the Bollywood industry. They are all thinking more about it than you and I, and are coming out with some amazing lineup in the next quarters and years. That is one. Second, I just wanna say that India have got a very diverse quality and variety of content. This always happens. Sometimes Bollywood is down, Hollywood is up. Sometimes Hollywood is up and regional is up. Just now regional is up, but that's fine. That's the diversity of PVR circuit and now PVR and INOX's circuit. We are not dependent on one kind of content, which we have a diversified portfolio.
Large number of percentage of screens are spread out in South, East, West, and North. We are not dependent on one type of content, and which is what, you know, basically ensures that we are mitigated from a risk from any one industry. That's all I have to say to this. I'm not that concerned about, you know, a few movies not doing well.
Correct. On the second part of my question, the health of the producers financially, how do you see this?
Well, they're fine in a sense, because we monetize the movies not just theatrically. There are so many other monetization platforms, which are coming on OTT platforms, satellite, television.
Sorry to interrupt, sir. The audio is breaking from your line.
Can you hear me now?
Yes, sir.
I was saying that the monetization of content makes sure that producers are healthy because the movies play theatrically first, and then they go to, you know, other platforms like OTT, satellite. I think they get their money back. In a way, it's a little contrarian to what you would probably hear from our mouth. When a movie gets sold to an OTT platform, at least the producer makes money. That's fine. As long as there is money, you know, funds are getting flown back into the film fraternity, we are okay.
I think they seem to be fine. I think that is the reason why you see a very strong lineup of Hindi movies this year as well. You've got three Shah Rukh Khan films, two Ranbir Kapoor films, two Salman Khan films, two Ajay Devgn films, you know. Ranveer Singh also, and with Karan Johar. Of course, it just goes to show that, you know, one way or the other, money is not an issue, and that's why the release scheduled for Hindi films this year is looking very, very strong on paper.
Understood. Thank you. My second question is, we spoke about the distribution, regarding the distribution of the movies, from the previous participants' questions. I just wanted to understand, how do you decide whether you want to distribute a particular movie or not? How, what kind of a data goes into deciding this? Could merger change this? Would we have more kind of intelligence to understand what needs to be distributed, what needs to be avoided? Would we be seeing more action in this front from the combined entity?
Kamal, you wanna take that? Kamal, would you like to take that?
Sure, sure. It's a mix of both art and science. We look at lot of data. We also look at what's been the track record of the producer and what does he or she have as a slate, which is in terms of the upcoming films, so that, you know, we have a safety net. Because as you know, our business model is to extend advances, and we get a cut in the revenue of the films. You know, in certain situations, we also run into circumstances where the advance is not fully recovered from a film. So looking at the producer's future slate is also a sort of a safety net for us. Ultimately, you know, as you know with films, no two films can be compared on parity.
I mean, films could have similar star cast, similar storylines, you know, same director, similar production values, but the outcome can be very different between the two films. We also have created a pool of very experienced people resources in our team, so that we have this collective instinct of, after having done data crunching, this is the material that we have been exposed to, be it the trailer, you know, the storyline, the posters, the other key arts. Looking at all of that, we make a judgment call, which is a layer on top of the data crunching that we've done and also the safety net that we've looked at. This is, you know, pretty much the process that we follow.
I would not get into further detail because then we would be sharing business sensitive information. In terms of whether we will grow the business post-merger, I would request my colleague, Nitin, to, you know, share some thoughts on this.
Yeah, I think it's a fairly valid question. You know, as we have more screen share, clearly it will give us more distribution bandwidth in terms of understanding performance of the films even better. Clearly, you know, we will do a lot more in terms of indie film distribution, in terms of opportunities with our revised size and scale of the exhibition circuit. Clearly, you know, the focus will be to grow that business, even further, you know, post-merger.
What is usually the steady-state margins in this kind of a business? Yeah, I understand it's a portfolio of films. Some will be hits, some will be miss. Generally, a steady-state margin in this business, can you give a guidance?
Yeah, like.
What margin are you saying? Could you repeat what margin are you referring to?
The distribution margin. Basically, the cost at which you buy and then what you realize at the end of the life cycle.
Got it. Thanks. You know, we have two, mainly two segments of films that we deal in. One is the foreign language category of films, and there, we take all rights and not just theatrical. We also take television, streaming, home video, and many other rights. Typically, the margin tends to be 25%-30%, but it is spread over multiple years because some of these revenues from the broadcasters and streaming rights and other platforms come over a period of four to five years. We end up with a margin of 25%, 30%, but it's spread over multiple years. With Hindi films, margin tends to be between 5% and 10%, depending on the structure of the deal, and we get it pretty much.
You know, the turnaround of advance, the capital that we've invested is typically between three months to about seven or eight months. Within that period on our investment, we get a margin of 5%-10%.
Very, very helpful. Thanks, Kamal. Just my last question on the ad revenues. just, as you can see, still it is lower than the 3Q FY 2020 on a per screen basis. How much of this can be attributed to, say, football inconsistency and how much is because of the end categories are not spending enough, let's say, from series and others?
A bit of both, I would say. At the macro level, movies not doing well and content not resonating is a partial reality. However, the bigger thing is that just too much of media hype around the fact that Bollywood hasn't worked or English movies are not connecting has created some sort of a doubt in the minds of the media planners and buyers. We just need a couple of films to get that confidence going. As you can already see, quarter three, we posted a very decent number of 79 crores. Going forward, we see the recovery getting better as we move forward. Once we start off the next financial year, I think it should be fairly good.
Thank you. Very helpful. Thanks for answering all the questions. All the best.
Thank you. The next question is from the line of Shivam Gohil from Motilal Oswal. Please go ahead.
Hello?
Yes.
Hello. Yeah.
Yeah.
I want to ask that, considering that you are planning on opening new screens and merging with INOX, that will definitely increase the total number of screens. What are you guys doing to increase the per, like, revenue per screen, on an annual basis?
What are we doing to increase our revenues?
Per screen.
Yeah. Yeah,
Sorry, you want to take this, Nitin?
Yeah. If you look at our average revenue per screen and not counting the current 9 months, if you look at average revenue per screen in a pre-pandemic period, it's grown at an average rate of 7%-8% per year. If you look at our average F&B realization, if you look at average ticket price realization, our average admission growth, which plateaus after a few years after we hit the peak, and look at the advertising income growth, our average revenue per screen has grown by, you know, almost 7%-8% in any kind of analysis that you do, you know, on a year-on-year basis. That will continue to grow, you know, going forward as we believe, the circuit becomes larger and larger.
Also these new screen openings that we are doing, we are not doing them in the boondocks. We are doing it where we know that there is a demand for a PVR experience or an INOX experience, and we know that, you know, business will grow and there is also a steady supply of content. There's a lot of method to the madness in terms of how we do our selection of our sites and locations and which malls we go into. It is always value accretive and also business accretive. These are not screens that we are just, you know, adding for the heck of it. We look at everything and only then decide on screen counts.
Yeah. Okay. Thank you.
Yeah.
Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.
Yeah. Good evening. I have two questions. you know, I was referring to your, you know, presentation,
Harit Kapoor, sorry to interrupt you. The audio is not clear from your line. Please use the handset mode.
Yeah, just a moment. Yeah. Is this clear now?
Yes, sir.
Yeah. This is just referring to your slide 16 on your presentation where you've given, you know, the 2019 and 2022 comparison where, you know, for GBO as well as number of movies. If you just look at, you know, Hindi, it looks like, you know, the problem was more in terms of number of films released rather than actual, you know, gross box office collection per film, which if you just calculate, is down only 78%, 2019 versus 2022. My question is, you know, on the actual number of films releasing, and do you expect that to also, you know, kind of come.
Amit, do you want to take that?
Sure. Sure. Harish, you know, in this box office number, there are two components in terms of Hindi films. One is the Hindi film in the original version, the second is the dubbed version of Hollywood films or Tamil or Telugu or similarly other language films, which are not original Hindi films, but they have been dubbed from the original version into Hindi. You're right, the quantity has also been an issue, and the way our conversations with various content creators, producers, studios are going, we're getting a sense that this quantity will improve in a noticeable manner in financial year 2023, 2024. As we all know that quantity would not always translate to quality and therefore box office. I think the challenge that one has been referring to with Hindi films is with the original version Hindi films.
Right.
The success ratio has been low. There have been various narratives in media and with the analysts on why the success ratio has been low. I think this is a good opportunity to debunk some of these narratives. From our point of view, when we've analyzed different languages, the box office that we've done in 2022, and I would rather say not box office, but the admissions that we've done in 2022 compared to 2019, the only language where we've had a decline is Hindi language in original version. The dubbed Hindi language has grown manifold. Regional languages have remained the same as 2019 in terms of admission, or they have grown.
Like for example, Kannada has grown manifold vis-a-vis 2019 as Kannada languages had a landmark year in 2022. Similarly, Marathi, Punjabi, not just the South Indian languages, but even languages from Maharashtra and Gujarat, they've managed to... For that matter of fact, even Punjabi have managed to score similar admissions as 2019. There is no sort of, you know, the narrative that there has been an impact of streaming on film business and the admissions. When we look at the data informs us that is not the challenge. The challenge is with the Hindi original version only and with Hollywood films where the number of films was substantially lower than 2019.
We could get into the reason why Hindi original version has performed below 2019, that's a, that's a debate of another subject. Your question on, you know, Hindi is not looking significantly lower and it's just a quantity issue. It's been a quality issue with the original version, and there is a small quantity issue also which we feel would get corrected in 2023 and 2024 as we move forward. Does this answer your question?
Harit , we are not able to hear you.
This is like. Yeah. Thank you. Thank you very much. I had a on margins. If you look at, say, if you compare quarter 1 2023 to quarter 3 2023, I mean, the first quarter, which was, you know, bottom most quarter for you. If you compare all metrics, it looks like the only differential between achieving a 19% and a 13% EBITDA is occupancy, which was 34 odd % quarter one and 29 odd % in quarter three. Is that understanding, you know, fairly correct? Given all cost structures that you've been able to maintain, you know, is that really the only missing piece?
Because, I adjust the, you know, ad income as well. Ad income was lower in quarter one versus quarter three. ATP is a little higher in quarter one versus quarter three. If they offset themselves, it seems like, you know, the occupancy is the only kind of, you know, the footfalls are the only kind of variables here which are, you know, restricting you to get back to those, you know, those levels, right? Would this be the correct?
You're absolutely correct. I think, if you look at the numbers right now, I think our business is high operating leverage business. You know what you see in terms of EBITDA margins is largely impacted on account of footfalls and the consequent impact on advertising revenues. As soon as the films, and the admissions come back, we also believe advertising revenues will also bounce back quickly. Clearly, given a high operating leverage business that will start showing on the bottom line.
I think how long of content consistency do you believe you need for advertising revenue to kind of come back to peak over your estimates?
Actually, national content, we also need some big films to do consistently well. That's all advertising needs currently. In terms of number of footfall, these are fairly decent numbers to go out and talk to advertisers. It's a question of the big films doing well, because a lot of media buying in cinema happens on big touted films. When they don't perform, the market is left a little disappointed. The advertising market is left a little disappointed. As long as some of the bigger films like Avatar did well, Drishyam 2 did exceedingly well, and because of which we were able to garner some great numbers, and we believe that this momentum is now only on the uptake.
Even in the coming quarter, we believe that we'll be able to maintain a better recovery than what we've posted. Clearly the sentiments are changing for the better, and we believe that we are back on track.
Got it. That's it from me. Wish you all the best. Thanks.
Thank you. The next question is from the line of Lavanya from UBS. Please go ahead.
Hello. Can you hear me from here?
Ma'am, the audio is very low from your line.
Okay. Is it any better?
No, we can't hear you.
Okay. Thank you for the opportunity, sir. I just wanted to understand what kind of-
Sorry, we're not able to hear you clearly. We're not able to hear you.
Lavanya, please use the handset mode.
Yeah. Yeah, I'm in handset mode. I'm not sure if there is an issue. Maybe I'll join the queue. Thank you.
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Yeah, hi. I have just two questions. One is if you could just talk a bit about the health of single screen owners, given that, you know, if I were to adjust the admits on a per screen basis, they are substantially lower than the -16% reported. That is one. Secondly, just, I think, you did talk about the narrative around advertisement. It's more about the narrative which has led to lower advertisement income rather than the propensity of, let's say, the FMCG guys to spend. I just wanted to confirm whether that is true or not.
Let me answer the first question first. You know, the same store admissions, like you rightly said, when we do our comp/non-comp analysis are marginally higher. If you look at, there's been average about 3% increase in seat count versus where we were in Q3 of last year, and you combine that with 16% admission drop. Yes, if you add both the numbers, the, comp, drop in admissions has been roughly about 19%-20%. When we break down our circuits, we realize that bulk of that drop is largely been in the markets of North, followed by West. South has seen the smallest amount of drop because the Southern films have actually done equal or better.
Very small percentage of revenue which comes from Hindi and Hollywood, in those markets, has been the big reason for a small drop that we are seeing in South India. That's the broad overall analysis in terms of admission drop. I'll let Gautam respond to the second question.
Sorry, can you repeat your second question on advertising?
No. My question was on single screen. What is your view on the single screen owners given or the health of single screen owners in terms of, you know, as you said, right, you think that there's a 20% kind of decline on a like-to-like basis? Just wanted to understand the industry success from a single screen owner perspective, whether they are seeing equally or they are more under distress versus us.
Pratik, I can take this. You know, it'll depend on which geography you're looking at. If you're looking at Karnataka, they've had a fantastic year, one of the best year, you know, since they've been existing. If you look at Tamil Nadu, very good year. If you look at Telangana and Andhra Pradesh, very good year. If you look at maybe Kerala, not such a good year because they had long-ish lockdowns. A lot of films, a lot of Malayalam films ended up going to streaming platforms. Similarly, if you come to North or to central India or to the western part of the country. Western part, the single screen damage has been less because Gujarati films and Marathi films have done reasonably well.
The maximum damage has been in East, where Bengali films have done well, there has been a drop in Bengali films. In Hindi, of course, we spoke about there has been a drop. It depends which territory you're looking at. I think your question is more overall, how are single screens fairing vis-à-vis multiplexes? If I get the question right, there is a big difference in occupancy %. There is a big difference in terms of ability to have these ancillary revenues like advertising, F&B, convenience fee, BPS, the various other incomes that we have in addition to our core income, which is box office, their ability is limited. Their revenues as well as profitability has always been in pressure. To that extent, the narrative is the same.
Even pre-COVID single screens were under pressure. They continue to be under pressure post-COVID as well.
Okay. Second question, just extending this regional differences which we are seeing, even in your advertisement income, is it that the South advertisement income is higher on a per screen basis than what it is in North and West? Is that okay? Because of the events over there, I'm assuming would be higher.
Yes. Currently it is trending better, but as things normalize and we come back to normal trends, then it's largely divided amongst the top tier cinemas, which would have a similar average, then followed by the second tier and then the third. Currently, if you look at it for this year, clearly, South screen seems to be gaining a lot more revenue. Even businesses and clients out of West and North are wanting to advertise a lot more in South.
Okay. Are you back to pre-COVID levels on advertisement income in South?
no, we are marginally down. We are still down-
Marginally.
The recovery is about 80 odd % in South. Yeah, that's what the number is.
Why? Why is it so? Because-
Simply because the retail industry there has not really fired. That used to be very, very big for businesses in South, especially Tamil Nadu, which is taking time and that hasn't really fired for us.
Got it. Very helpful. Thanks. Thank you.
Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal . Please go ahead.
Yeah, thanks for the opportunity. I have a question on your average ticket price. I understand that, we, you know, priced, you know, tickets, based on, you know, how well the movies are doing. I mean, you know, while, the, you know, occupancies have been little soft, I still see we've, you know, in this quarter, if I compare versus pre-COVID, you know, it's still nearly about 20% up. You think that is a lever that can play, to revive occupancies, at least in the near term, you know, given that we are seeing a little soft? I know that, you know, probably, understanding is that maybe content is also not fired, but, just to attract, audience, you know, to the screens, that's one of the tools you are looking at.
Basically, pricing is a lever to sort of play on occupancy. We've also been seeing a trend where consumers are saying that their time is the biggest asset they put forward. When it's a good film in the second and third week, we do play heavily on pricing to make sure that we get more and more consumers coming in. At the same point in time, we've also observed that when there are big and good films coming in, you know, we have the opportunity to be able to take our pricing up and maximize revenues at that juncture. That's exactly what we are trying to do.
With content that does not connect or is slightly weak or gets rejected, no amount of pricing reduction really helps to garner more footfalls. It is handled very, very tactfully, using a lot of data. We believe that we will be able to maximize playing the kind of content that comes out and then pricing it accordingly. Thanks.
Got it. You don't think this 20% increase would have had any impact on occupancies?
No, we don't think the pricing, has any impact on the occupancy, no.
Just to add to what Gautam shared, just keep in context that we've not increased price since 2019 January, which is when GST rate was reduced. Just keep that piece in context. Once you sort of, you know, realize that prices have been increased after a gap of almost three years, 20%, compounded growth is only about 5.5%, maybe 6%.
Also, just to sort of inform you that with Cirkus, over the weekend after the first day when people were not kind of connecting to the content, we did drop the pricing to INR 100. We keep doing such experiments across the board in different markets continuously to learn and to come up with newer ways to price. We've actually not seen much traction there. It is the good content that really plays out well, and then it's about timing. Week one, week two is where you need to maximize. Week three and four is when you can play on advertising and get more and more people.
this is exactly what we did in the case of Brahmastra, where the first two weeks we really maximized, and the second two weeks we really pulled in more crowds, through, giving, pricing offers.
Understood. This is helpful. Thank you.
Thank you. The next question is from the line of Ashutosh Chaubey from Centra Broking. Please go ahead.
Good evening. This is Jensen Jacob from Centrum Broking. I had a question based on the advertisement income. You have already mentioned that it depends on the big films, and also you're facing supply side issues on the retail industry. There is a difference between the ad income per screen of PVR and INOX. Post-merger, what can we expect? Can we expect it to get back to pre-COVID levels of PVR or should we expect an average ad income per screen?
Okay. We will not like to comment at this point in time. There's a lot of work that needs to happen. Just to tell you our way forward in terms of this is there are some great properties which INOX has. When our teams will start working on them, we are quite hopeful that they should sort of come to PVR's level. There is a certain slotting and a science that gets used to not only sort of price inventory in these cinemas, but also a way to sell. Yes, to a certain extent, the merger will affect and positively affect the revenues of our partner, but there is a lot of work and detailing to be done on this.
one more question regarding the merger. Post-merger, how will the brand be affected? Will, since both the brands are going to be operating on a, as separate entities, but, how will the, branding improve INOX's numbers or PVR's numbers?
Just to clarify, we've said this in the earlier media reports, that once the merger is completed, which we expect to be completed in this quarter, which includes, you know, issue of PVR shares to the INOX shareholders, et cetera, merger will stand completed. At a consumer level, you know, whatever cinemas are existing as of today will continue to exist with the existing branding. The company's name will change at PVR INOX Limited. There are a lot of cinemas which are currently in the pipeline, so they will open as it is. Over the next six, eight months, as the new pipeline comes shape, the new cinemas would open with the revised branding. As far as consumer journey is concerned, there is no change. I think both the brands will continue to exist on the ground.
At operating level, there will be only one legal entity, and the management teams have already started, you know, engaging together, to figure out long-term, you know, business synergies.
We are understanding you've already given a guidance of reaching 3,000 to 4,000 screens post-merger. After that, are you expecting any inorganic growth, and what will be the future possibilities?
No, we are currently focused on integrating both the entities and, you know, over the next 12 months, focused on getting the best out of the integration of both the entities. We have a massive pipeline of screens to execute going forward. That will continue to be the focus. We are not looking at any further inorganic opportunities.
Thank you. That's all.
Thank you. The next question is from the line of Nitin Sharma from MC Pro Research. Please go ahead.
Hi. Thanks for taking my question. two question, if I may. Can you please talk a bit detail about the occupancy region-wise that changed this quarter? Last quarter, there was good 12%-13% decline sequentially, with South, Middle East, North and West. So how it has now changed? I'm trying to gauge what kind of pockets of recovery are there, and then I'll follow up.
Yeah. We don't share specific numbers, you know, on our region-wise occupancies. Like I said in the earlier comment that I made in response to a question, we've seen that this year the biggest hit has been in Northern India, which is a market which is largely dependent on Hindi films, and Hollywood films. West dip has been slightly lower because Gujarati and Marathi films have continued to work, and some of the local regional content, down South, Kannada films like Kantara have done much better in the western part of the country as compared to North. South has seen a very little drop.
It has seen a drop, but it has seen a very little drop in average occupancy, and that drop is largely attributable to, you know, proportion of Hindi and Hollywood films, contribution to admissions in those markets. The admission contribution of South Indian films has actually grown or got better in South India. That's the broad analysis and which we've also shared, you know, as a big picture level, in our slides in the presentation.
Okay. Understood. Just a bookkeeping question. Are you on target to do 125 screens by end of this financial year? It has changed. How many seats would be there on average?
Yeah, we've given a guidance on that in all our investor presentations and quarterly updates. Even in our investor deck, we mentioned we are on track to open 110 screens, and we've given screen-wise details as well.
Understood. Understood. Thank you.
Thank you. The next question is from the line of Sumit Sarda from Compound Everyday Capital. Please go ahead.
Thanks for the opportunity. Am I audible?
Yes, sir.
Yes. Yeah, yeah. My question is little, you know, longer-term oriented around balancing growth with capital discipline. We have seen in the U.S. market with how growth without that discipline can lead to fall of banks like. Of course, India is at a different trajectory than U.S., and, you know, market has been growing, and therefore we have been growing very fast. Going forward, do you think that it would be prudent to, you know, as far as our organic growth is concerned, you know, grow more out of internal accruals rather than, you know, borrowing towards expansion?
This is also in relation to, you know, the fact that because of vagaries of content, et cetera, higher debt can also lead to some kind of increase the, you know, risk on the balance sheet. Next question.
You know, fair point, and, you know, it is, you know, now for the board of the merged entity to give us some guidance. Yeah, I think the broad thought process is that, you know, the combined operating earnings of the merged entity should be significant enough to fund all the growth from here on. Obviously, when you look at the current year, it doesn't look so promising given, you know, the content challenges we face. We believe that is more a short-term issue, which will get resolved over the next 12 to 18 months. As we bounce back in terms of admissions and earnings, the combined earnings should be good enough to take care of, you know, the expansion ahead.
Okay. Sure. Second question around that is, are there any ways in which we can further reduce the capital intensity in the business?
Yes. I think as we expand to more smaller markets, our capital intensity in the business should start coming down. We're already doing projects in some of these smaller markets, where not only our capital outlay is lower, but I think we are getting more favorable terms from landlords and developers who want us as a brand. They are willing to contribute a lot more in building a cinema, which reduces our capital outlay. The focus, you know, will be to continue to improve our capital efficiency as we go ahead and build the next level of screens.
Yes. Got it. The last question, if I may, is around, you know, do you go through a formal process of evaluating the screens which are towards end of their lease tenure, how their finances has been and does it make sense to renew or not to renew? Do we weed out unprofitable screens?
There is no right or wrong answer to this. Each location is unique and, you know, we take those views based on, you know, how that location is performing towards the end of its lease cycle, and then accordingly, you know, we take decisions. Between 2020 and now we've shut down 47 screens. You know, their leases have either ended or they've come to the end of their life cycle. Those decisions are very, you know, driven by location and could vary from location to location.
Got it. That's all from my side. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
I just wanted to thank everyone for taking out time to attend this call. In case you have any follow-up questions, please feel free to write to me or my colleague, Gaurav Sharma and Saurabh Pant. We'll be happy to answer your queries. Thank you.
Thank you. Ladies and gentlemen, on behalf of Axis Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.