Ladi es and gentlemen, good day, and welcome to the Q2 FY23 earnings conference call of PVR INOX Limited 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 Limited. Thank you, and over to you, sir.
Yeah. Thank you, Utuja. Good evening, friends, and welcome to PVR INOX Limited Q2 and H1 FY 2023 post-result earnings call. The call will be initiated with a brief management discussion on the quarterly 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 Bijli, Joint Managing Director, PVR INOX Limited. Mr. Gautam Dutta, CEO, PVR INOX Limited. Mr. Kamal Gianchandani, Chief of Business Planning and Strategy and CEO, PVR Pictures. Mr. Nitin Sood, CFO, PVR INOX Limited. Over to you, Mr. Bijli, for your initial comments.
Yeah. Thank you very much. Dear all, I'd like to welcome you to the earnings call to discuss the unaudited results for the quarter and half year ended September 30, 2022. I hope you've had the opportunity to review our presentation results, which have been uploaded on our own website as well as the stock exchange website. Please note that the numbers I'll read out are after adjusting for the impact of Ind AS 116 relating to lease accounting and are different from the reported numbers we submitted to the stock exchanges today. The quarter ending September 30, 2022 witnessed weak performance of movies at the box office, which impacted our revenue, EBITDA and PAT for the quarter. For the quarter ending September 30, 2022, our revenues were INR 7,017 million.
EBITDA was INR 129 million, and PAT loss was 566 million rupees. For the 6 month period ending September 30, 2022, total revenue was INR 17,021 million. EBITDA was INR 2,208 million, and PAT was INR 117 million. The quarter recorded 18 million theatrical admissions across our cinemas, which was lower by 28% as compared to 25 million admissions in Q1 FY23. Admissions and box office collections were adversely impacted during the quarter due to the underperformance of some major Bollywood films like Laal Singh Chaddha, Raksha Bandhan, Liger, et cetera. With the exception of Brahmāstra: Part 1 – Shiva, most of the other Bollywood movies performed below expectations.
Brahmāstra did exceedingly well at the box office and emerged as the highest grossing Hindi film post-pandemic for us, with net box office contribution of 19%. For Hollywood, the second quarter was the weakest in almost 2 decades, with significantly low movie releases and box office collections. Thor: Love and Thunder was the only tentpole that released during the quarter. Contribution of regional movies, however, to the box office collections continued to be robust in the quarter, with Sita Ramam, Karthikeya 2, Rocketry: The Nambi Effect and Tiruchitrambalam performing well at the box office. We witnessed a thrilling response to the nationwide National Cinema Day, organized on Friday, 23rd September. This was an industry-wide effort by the multiplex industry to celebrate successful reopening of the cinemas and welcome moviegoers back to the theaters. Over 11 multiplex chains and 4,000+ screens across India participated in this initiative.
We welcomed 6.5 lakh guests across our cinemas on this day, which proved to be the busiest day for us in 2022, and the second highest attended day to date, with occupancy of almost 80%. Q3 has started off on a great note with strong responses to new releases like Vikram Vedha, PS-1 and Kantara. Given the strong content pipeline, we hope that this momentum will grow and gain traction. We have several big Bollywood movies releasing over the next few months, like Ram Setu, Thank God, Uunchai, Drishyam 2, Cirkus, Kisi Ka Bhai Kisi Ki Jaan, Pathaan, among others. From Hollywood, we have many highly anticipated tentpoles hitting the big screen, like Black Adam, Black Panther: Wakanda Forever, Avatar: The Way of Water. From the regional genre, we have Shaakuntalam, Bholaa, Kushi and Honeymoon, etc.
The company has opened 24 screens across 5 cinemas in the first half of the year and we are on track to open a total of 110 to 125 new screens by the end of the financial year. Our screen portfolio currently stands at 864 screens across 175 cinemas in 76 cities in India and Sri Lanka. A quick update on the progress of the proposed merger of INOX Leisure Limited with the company. Both PVR and Inox, in the meetings held on 11th October and 12th October respectively, have received shareholders approval on the proposed scheme of merger. I'm told the final leg of the NCLT process will take around another 3 months more to complete. Thank you. Now I'm opening the platform for any Q&A. Thanks once again.
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 the 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 Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks. This is, Nuvama. I have 3 questions, and, thanks for the opportunity. My first question is on the screen opening. In first quarter, 10 screens and second, 14 screens, against that 110 to 125, what is the confidence? Because it's a much higher, ramp up. I do understand, these are bunched up and, the approvals are a bit difficult to predict. How confident would you be of 110 to 125?
We are fairly confident, and that's why we've given this number. I know it sounds a bit audacious and ambitious, but that is how it has got sequenced this year. All these bunch of our projects, we have some very big ones,2 with Lulu, 1 in Trivandrum, 1 in Lucknow, which are 12-screen each. Then we have about 2 with Prestige, 1 in Chennai. They were actually on the brink of opening in the second quarter itself, but they've all got pushed to the third and fourth quarter now. We're fairly confident, and which is the reason why we've given this number, that they will open in the second half of this year now.
Sure. My second question is on the overall footfall and ATP. Ajay, you have mentioned in the presentation that as a company you are focused on driving footfalls and good to see 6.5 lakhs on the cinema day. 1 question there was the second-highest footfalls was on that day, which was the first one. Any learning, and when you mentioned that you're focused on driving footfalls, could you elaborate that, say, apart from the marketing mailers or, say, anything specific in terms of the promotions? If you could elaborate a bit on the specifics of that, how do you plan to do that?
Well, you see the main. I'll say something, and then I'll request you know, Kamal and Gautam to jump in as well. Basically, there are a number of factors that come into play to increase footfalls. In this particular case, of course, you know, post the pandemic, we worked to have a cinema day to get a lot of people who hadn't come in and the response was phenomenal. We weren't expecting the response to be so much. When you dive deeper, we realized that it's not just the pricing that has attracted people, also because a good content was playing.
Ram Setu was, you know, there were a lot of fence sitters that had seen the 2 week performance, heard of reviews, but then they suddenly, you know, came as well and saw the movie. The highest occupancies also were attributable to Ram Setu. Some other movies that got released on the same day, since it was a Friday, also did well. Pricing is not the only thing which is attributed to the kind of footfalls we got, because then we again did some experiments with pricing. With movies subsequently, like Goodbye of Mr. Bachchan just now and another couple of movies, but we realized that content did not connect.
If content is the number 1 thing that has to appeal to the customers, and that is what drives footfalls. That doesn't mean that we are inflexible when it comes to trying various pricing mechanisms. We will be doing that. Of course we need to. Of course, marketing the movies, marketing the theatrical experience to the consumers once again, that is something that we'll continue to do. The other thing that I want to say is that whatever is true is also untrue, because in the South, people are coming in droves. We have PS-1 that got released and Kantara that got released this year and even in this quarter, and thirtieth September, actually.
Even before that, you know, in the second quarter, there were so many movies. Then nothing was done to the pricing. Pricing remained where it is, and people still came. So it's only certain regions, and that's okay. That's the beauty of the Indian market, and that is why we've spread our circuit in such a manner that we are not completely, you know, dependent on one type of content. There's so much diversity of language content in India. If you spread your circuit across all regions, about 35%-40% of our circuit is in South. The rest is, of course, in West, East and North.
If one kind of content doesn't do well, it doesn't matter because you still have other content that can bring the threshold occupancies to manageable levels. We are not that bothered about one couple of months, you know, Bollywood movies not connecting with the audiences.
Sure. I think,
To your question on which was the largest footfall day. It was second of October 2019. Movies playing were War, Joker and Dream Girl, and a South Indian film called Sye Raa Narasimha Reddy. These 4 films had rallied together to deliver close to about 6.71 lakh admissions that day.
Sure. My last quick question is on the Hollywood. There is a global fears of recession and extremely high inflation, which is playing out also in terms of the market generally. Would you attribute September 2022 being the weakest globally in terms of Hollywood content, in terms of collections and number of movies to any specific factor, or this is just bad luck, bad timing?
No. I mean, Hollywood in any case represents only 10% of the box office in India. Which is the reason why the market of India is very unique because our own content is the volumes of our own content are so high that we are not just dependent on one you know sort of type of content. Yes, Hollywood is a big contributor. This year, of course, the number of films are less. If you look at the quarter that you're talking about, suddenly you've got Avatar, you've got you know Black Adam, Black Panther. Also next year, they're gonna ramp it up. This is a bit of a backlog of the movies. You know, after the pandemic, some shootings had stopped.
A lot of factors were at play, which reduced the quantity of movies. Now every studio is ramping it up.
Sure. That's all, from my side. Thanks a lot for the update. Thanks.
Thanks.
Thank you. The next question is from the line of Sanjay Singh from ICICI Securities. Please go ahead.
Good afternoon, sir. Thanks for taking my question. I've got a few. First, on the Bollywood content and the regional is doing good, and Bollywood somehow has been struggling to get that mojo back. Are we rethinking on the algorithm of allocation of screen more to the regional movie, pushing them into the national favored like Kantara into the North? Are we doing anything from our side to push that good content in the South can reach the other part of the region, and hence balance it off? Obviously, we know that it's becoming more pan-India, but what's our contribution? Are we re-looking at allocation of the screen until the Bollywood find its mojo back? That's my first question.
Are you using allocation of our physical screens?
Yeah, screens during a Friday launch, allocating more to the regional where the reviews are coming better than the Bollywood movie which we have-
You're talking programming.
Yeah, programming.
Sorry to interrupt you.
I would let Kamal.
We are unable to hear you. Your voice is breaking.
My voice is breaking?
Yes, it was.
It's got nothing to do with my answer. It must be the line. I think, Kamal, why don't you answer this, if it's okay with you. They're talking about programming and showcasing of movies.
Sure. Mr. Kumar wanted to make a point. I would request him to make this point.
Yeah, I think a lot of these movies that have come in the past 2Q this year have first of all been national films, be it RRR, KGF, and they've all been made and dubbed in various languages. Original language films like RRR, KGF have played in their local markets. At the same time, they've got a very good showcasing and number of shows and representation, equal amount of representation in the other non-traditional markets as well, such as North and West and Central India, you know, in the dubbed versions. We are very cognizant of the fact that when these films come, they get equal representation across the country, and it helps since they also come in dubbed versions.
Therefore, we're able to tap into non-traditional markets across the country. Some of them come on the first day only in all languages, and one of them, recent example, Kantara, which came in Kannada was the original version. Then the response was so good that the producer decided to also release it in Hindi after 2 weeks. There's a lot of support that's coming from the regional industry to cater to as wide an audience and as Pan-Indian an audience by dubbing it in various languages. We're accommodating these films all over the country in equal measure.
Okay. What we are telling that is not a challenge. If the content is good.
Yeah.
Getting a screen is really not a challenge for us.
Yeah.
To elaborate his point, even KGF, if you see, did INR 400 crore of business in the North and the West region. That was primarily because the way the film was programmed. It became bigger than Dangal only because of the kind of showcasing the film got. Mr. Kumar, Gautam has covered all the important aspects. To your question, whether it's a challenge, yes, it's a challenge. It's always a balancing act. It was a balancing act even pre-COVID, and it continues to be a balancing act post-COVID to accommodate dubbed version, Hindi in original version. We also play, incidentally, Tamil, Telugu, Kannada, Malayalam films in original versions in non-traditional markets like Mumbai rather, Delhi, and many other parts of North India and West India.
Let me, you know, conclude by making this point that it's a good challenge to have. This phenomenon where, as Mr. Kumar mentioned, that the demand and the reviews were so strong for Kantara that exhibitors requested the producer to make a dubbed version available in Hindi. The film was dubbed in quick time and then made available within 2 weeks.
Now it's doing fantastic business, which means out of thin air, the exhibitors have created incremental admissions, which wouldn't have happened if exhibitors had not applied pressure on the producer and producer had not relented by dubbing the film in Hindi. It's a good challenge to have. We are constantly, you know, our whole attention is on the ball. We are looking at all opportunities that exist, and we do everything possible to exploit these opportunities.
No, that's great to hear that we are taking initiative to push for the dubbing. I think that requires because you have a lot of insight into the movie and content, and that was exactly what I was looking for. Are we pushing the producer to produce more Pan India so we can expand our good content reach at least, and it benefits us in terms of a better business?
Yeah.
My second question is more on the cost line item and EBITDA break-even. I could see that there is a rental cost decline sequentially by 6%. So what is driving this decline? Is there any some part of the screen where there is a revenue sharing and hence there is a decline in the rental? Is that a right understanding? If yes, how many-
Yeah.
as a percentage?
Yeah, that's correct. We have a lot of screens where we have a revenue share percentage. In quarters where, you know, performance is below the level revenue share doesn't kick in or there is a very small revenue share and hence the decline, sequential decline that you see is largely on account of that.
Great. Is there any intent structurally or by design we want to reduce this operating leverage and make it more predictable model by making rental more variable or linked to the revenue? Is there a concerted or conscious effort towards doing that?
I mean, these are slightly older contracts, but of course, I think our endeavor is to make this also as variable as possible. Our endeavor will be to do that with, you know, upcoming projects and with the new developers as well. It's again, you know, a challenge, but a challenge that is something that we want to explore. We have been successful in some cases and not so successful in some other cases. That's the way forward, I guess, to make it as variable and based on revenue share with the developers.
Any insight what percentage of today's screen will be on a variable and what would be a realistic target, say 3 or 4 years down the line for us?
Yeah. In fact, most of the new screens that we are signing would have a minimum guarantee and a revenue share clause. Bulk of those screens will have that, is what I would say. 70%-80% of the new screen signings would have typically a revenue share clause already built in.
Great. Thanks. Just one last bookkeeping question. The tax rate on the gross box office collection this quarter looked quite high, from 17% to 23%. Last quarter it was 17%, this quarter it's close to 23%. Can you help us understand what is driving such a sharp sequential jump in the tax rate?
I don't know what numbers are you looking at, but we can have this chat offline. It will not be so high.
What is the average tax rate today on the gross profit, gross box office collection?
Same number, 17%-18% is what the GST we see.
Just 17%-18%. Okay. I will take this question offline. Thanks for answering all my question and best of luck sir.
Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead.
Thanks for the opportunity. My question is surrounding footfall. Now in this quarter, I understand that we were 39% lower than the pre-COVID phase, and understandably so because of the average content. If I look at some of the measures that we have been taking, like for example, showcasing the old movies of Amitabh Bachchan or for that matter, having plans to kind of like bring the old plays, concerts or for that matter, coming up with an idea of the National Cinema Day. Basically are these measures an indication that the industry is struggling to attract footfall due to evolution of the audience taste post-pandemic? I'm basically asking this question because this was a pandemic-free quarter for us, yet we struggled because of poor content.
Your thoughts on that?
No, I think we've answered this before. Kamal, you want to answer that? I mean, because we have to clearly clarify that all the numbers which are there-
Sure.
In the South are not showing any struggle at all. People are coming out and watching movies. This is not something alien to the Indian consumer and it's just that couple of months of some big Bollywood movies which have not done well due to which there's a decrease in footfall. Otherwise, National Cinema Day was not, you know, done out of desperation. It was to celebrate the fact that we were shut for so many days, so many years, 18 months rather. It was something that was done as a worldwide initiative, and India also did it. This is no indication of any.
Lack of appetite of either the movie makers to continue to make the number of quality and the quantity of movies that they make, nor any diminishing appetite of the consumer to go out and consume the number 1 form of out-of-home entertainment for them.
Also, if you look at our Q1 numbers, that was a testimony itself in the sense we got 2.5 crore people coming in. What more would you want? This was just after the pandemic. We did get the number of people. It's purely this quarter is largely because of certain content not hitting the bull's-eye, and because of which. Coming to your fact, as marketers, as people who would always want to ensure that people keep coming to cinemas, our job is cut out. Whenever a content doesn't do well, we will need to see different ways to get people in. We've got the infrastructure, we've got the people, we've got great F&B. That is the reason why we will keep trying for newer things.
Like Mr. Bijli said, NCD came in, and that was a big help to overall to see again whether consumers had rejected or accepted the whole concept of cinema. Given the fact that we had 10% footfalls on 1 single day, when you look at the month's complete footfalls, was a indication that consumers love to get to cinema and it's just about the content. Whenever there'll be a low content, we will like to package product differently. We will like to get into alternate content like we will be playing T20 and T5 as well going forward. These are great opportunities from stand-up comedies to, you know, little conferences within our auditorium. We try everything to see how we can get more and more people in the cinema.
Yeah. Just to summarize what Mr. Bijli and Gautam have shared. Firstly, we would urge all our stakeholders, including analysts, and you know, the other observers that we have with the film business to form an opinion on the box office after the end of Q3 and not base their opinion just on Q2. As Gautam and Mr. Bijli rightly mentioned, A, there are a lot of geographies which continue to do exceedingly well. Also with respect to Hindi, it's not fair to say that Hindi has totally underperformed because there have been films like The Kashmir Files, Brahmāstra, Gangubai Kathiawadi, Sooryavanshi, Gully Boy, JugJugg Jeeyo, Doctor G, which released this Friday.
While 83, Vikram Vedha, a lot of analysts, observers would say, have underwhelmed in terms of box office collection, we would tend to disagree because both are bordering at INR 100 crore net box office collection, which is not a small number by any stretch of imagination. From our prism, you know, a lot of Hindi films have performed and South has performed exceptionally well. We would also request that people form an opinion at the end of Q3 and not base it only on Q2. On the diversification in terms of content supply, well, that's part of our strategy. We like these big blockbusters which have, you know, something for everyone, which hit all the 4 quadrants. But at the same time, we also like discerning content. We also like niche content.
Chhello Show, which is a Gujarati film, which is India's entry to the Oscars. We are deeply passionate about such films, but at the same time we are also big supporters of Brahmāstra, Vikram Vedha, you know, the obvious big blockbusters which are hitting all the 4 quadrants. We are also supportive and big believers in such films. At the same time, whether it's cricket, football, exhibition, musical concerts, anime films, we want to offer as much content as possible so that we can reach out to as many different segments of moviegoers as possible. That's part of our strategy. Our mainstay will always be feature films. That will not change. That is the DNA of our business. That's the reason we exist.
Sure, sir. Thanks for an elaborate answer. In this context, I mean, is it fair to assume that we'll end FY 2023 at a pre-COVID footfall run rate of approximately 10 crore? Because if I look at 1H, I think we are somewhere around 4 crore currently. You also highlighted that 1Q was an exceptional quarter. The reason I ask this question is, even in 1Q our footfall at 2.5 crore was roughly 17%-18% lower than the comparable pre-COVID base. In that context-
Can I interrupt you, sir? We can't hear you at all. You will have to-
There's a disturbance at your end. We're not able to hear you clearly. Should we just?
Is this better now?
Yes.
Better. Go on, please.
Yeah. What I wanted to ask is that in this context, is it fair to assume that we'll end FY 2023 at a 10 crore kind of a footfall number, which we reported during the pre-pandemic time? Because if I look at 1H, we are at 4 crore currently. The reason I asked the previous question is because in 1Q FY 2023, despite having footfalls of 2.5 crores, we were approximately 7%-8% lower than the pre-pandemic base. Given whatever explanation you have highlighted, is this 10 crore a reasonable number to go ahead with or is it slightly aggressive?
We would not like to make any forward-looking statements at this point, but looking at the lineup, looking at the way we've started, Q3 , we feel extremely confident that box office will, you know, perhaps surprise a lot of people on the upside. That's all we would say at this point.
Sure, sir. Thank you so much.
Thank you. The next question is from the line of Aaron Armstrong from Ashmore Group. Please go ahead.
Hi. Good afternoon. Thank you very much for taking the questions. Just a couple from my side. Firstly, on the average ticket price and spend per head, could you talk a bit more about the decline that we saw, please? For example, ticket price went down from INR 250 in Q1 down to INR 224 in Q2. How much of that is due to underperforming blockbusters or kind of movie mix? Do you charge a higher ticket price for a certain type of movie versus another? How much would be attributable to the National Cinema Day or any kind of promotions around that? Looking forward, how do you see those numbers in the next couple of quarters?
The numbers we saw in Q1, the INR 250 for ATP and the INR 134 for spend per head, was Q1 just an extremely good quarter or do you think we can get back to those kind of numbers in the next couple of quarters?
ATP did take a bit of a hitting simply because some of the big blockbusters did not fire and we needed to revert to the popular price band as we step down from the blockbuster pricing. Having said that, we believe in Q3 , given the slate of the big films, we should be somewhere closer to the Q1 ATP. That's really the reason. National Cinema Day also eroded some of the ATP because the admissions were very large that day. We got close to about 10% of the overall month footfall on that single day. Technically that did erode some of our ATP. It would have been much higher if we didn't have the National Cinema Day.
Having said that, Q3 we should be back closer to the Q1 numbers.
Thank you. On the spend per head?
That will be maintained. There shouldn't be any change at all on spend per head. We will be largely in the INR 135-INR 140 mark.
That's great. Thank you. On the exclusivity window versus the OTT releases, are we back to pre-pandemic levels now?
Yes.
Yeah, we're back to 8 weeks.
8 weeks. Yes.
8 weeks approximately, yeah.
Great, thank you. Could you give an update on advertising revenue, please, and kind of normalization?
Advertising is taking a bit longer than what we had expected. We were very bullish about the 2Q recoveries. However, given the fact that some of the bigger films did not fire, we've taken a bit of a dent. We are back to about 62% of recovery over 2019 number. This recovery percentage largely looks similar in that sort of a range for Q3 as well, given the fact that quarter 3 in 2019 was one of the biggest quarters for advertising. We had INR 122 crore revenue in 2019. We believe that our number will again be around the 62%-63% recovery mark.
However, end of the year, I think, we will be upwards of 70%-72%, given the fact that Q4 , we'll kind of march ahead of the 2019 advertising numbers.
Understood. Thanks. That's on a revenue basis in absolute terms? In Q4 this year, the revenue from advertising will be higher than it was in 2019? If we look at, say, a percentage of total revenue or some kind of way that reflects the fact that the network is now obviously much larger than it was 2 or 3 years ago.
In Q4 , the advertising number will be a lot bigger than what we have recorded in 2019. This is how it's been anticipated and this is how it's looking given the release schedule of the films.
The absolute number.
We can't possibly give you an absolute number, but we'll, as I said, close to about 72% recovery at the end of the year, at the end of Q4 , on the 2019 number.
That's great. Thank you very much.
Thank you. The next question is from the line of Nitin Sharma from Macquarie Research. Please go ahead.
Hi. Thank you for taking my question. 2 questions. Would like to understand what kind of occupancy you are seeing in the premium segment. Out of those 102 and 225 screens, how many will be premium? Some sense with regards to it, and then I have follow-up.
I'm sorry. Our definition of a premium screen would be all of our IMAX, 4DX, Playhouse, Luxe, and Director's Cut. We normally operate at a higher occupancy than the normal auditoriums. So it has a premium of about 5%-7% premium over the normal auditorium. And of course, the pricing premium-ness is also there.
Okay. Out of those 110-135 screens, this year you'll be adding how much will be the premium screens?
Is premium. 11% of the total screens is premium screens.
It's 1/3 of opening also. Okay. Second question is, can you please talk about how much occupancy you are seeing in different regions, some sense that. How much you are seeing in the western region and the southern region? Thank you.
In terms of occupancy percentage, as would reflect from the kind of films which are typically box office. South Indian box office occupancy are higher as compared to West and North. I would request my colleague, Gautam, to give you the exact percentages. Gautam, would you like to share the percentage? I wouldn't have it off.
I think if you look at broadly the occupancy for this quarter was average at about 24%. South would be about 30-35%, close to 35%. Whereas north and western region, which is the Hindi dominated belt, would be about 20%-22.5%, which is broadly the difference that you would see. South occupancy in south has like come down compared to the previous quarter or at the same level?
Yes. Even South has come down by about 30-odd%. It has also declined while other regions have declined more sharply.
13%-14%.
14.
14%.
Sequentially, my colleague, Gautam spoke about the south occupancy, you know, Nitin spoke about south occupancy being 35%. Sequentially, as compared to Q1, it has come down by about 12%-13%, versus the drop which has taken place in north and west, which is also at similar level, but they also were operating at a smaller base in terms of occupancy percentage. The drop has been fairly even if you look at sequential degrowth in occupancies.
Understood. Thanks a lot.
Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.
Yeah, thanks for the opportunity. I just want your comments on the pricing. You know, you did mention that pricing you saw this quarter some impact because of, you know, some of the movies not doing well. You also indicated that, you know, National Cinema Day lower pricing has given us a very strong, you know, occupancy volumes. Any thoughts around there to, you know, I mean, probably if you can share, you know, if we have internally done any work in terms of understanding the price elasticity and, you know, if that can be used an effective tool to probably, you know, improve our occupancy?
The follow-up question here is also, you know, recently, Laal Singh Chaddha and a few other movies like Dhokha: Round D Corner and the others which did not, you know, do very well in box office, had a reasonably good viewership. In fact, I think they were on top 2 positions on Netflix. So, you know, I mean, your comments on that also will be very useful.
I would request my colleague, Gautam, to speak about the learnings from National Cinema Day pricing, and then we can address your second question, which we understood you're saying Laal Singh Chaddha has done extremely well on Netflix. That was your second question, right?
Yeah, correct. Laal Singh Chaddha, as well as I think Dhokha: Round D Corner and a few others which didn't do well on box office, you know, have seemingly done pretty well on Netflix. You know, I mean, just your thoughts on that.
First, your question on the National Cinema Day. See, National Cinema Day, the way we looked at it was an event. An event where people celebrated cinema, and it became such a rage, for people to come out and get to the cinema. Even cinemas which had a normal ATP between INR 100-INR 150, which meant that they were operating at prices of between INR 80-INR 200, also came out in hordes to actually come and enjoy a film that day. One of our biggest learning was that
Cinema became relevant, cinema became a talking point, and this was one of the biggest marketing exercises we could have done together as an industry to get people back to the cinemas to savor this unique offering. The way we looked at it was that it was never about incremental sales, and that's the reason why the price that was picked, which was INR 75, was a sharp cut over what multiplexes normally operate with. Even our F&B prices that day, we'd taken a sharp cut only because we wanted more and more consumers to come and savor this product. From that perspective, as a marketing exercise, I think it was unparalleled initiative which was taken by the industry, and it got the whole topic of cinemas back.
We got a lot of positive press around it. Brahmāstra, which was running in week 3, got huge amount of footfalls coming in. The new releases, movies like Dhokha and JugJugg also benefited a lot, clearly indicating that, you know, if pricing could be played tactically, this could be a great way to get more and more people to come and savor this product. What we also observed was that, given the fact that there was parity of pricing across all the cinemas, the premium set of the cinemas did even better, simply because people wanted to upgrade and it was upgrade at no cost. People really came in numbers, irrespective of the content that was playing, but wanted to enjoy that experience.
I think, as time would possibly sort of open up for us, we will only get better with this whole exercise and initiative, and we believe it was a great initiative in the right direction.
To summarize, the key points, you know, while we've had a lot of learnings, and you would continue to see a lot of new initiatives from PVR chain, which would involve pricing related decisions, but they would all be taken in a very responsible fashion, and we would be treading this path in a very cautious fashion. You know, our endeavor would always be to get incremental footfalls, but without really compromising with respect to the value that we managed to achieve on the pricing front. On your second question, Dhadak, Laal Singh Chaddha, and some of the other films clocking very strong streaming numbers on Netflix or other streaming platforms. Frankly, very tough to comment on it because the streaming data is not freely available.
Unlike theatrical platform, where box office data is quite transparently available with many stakeholders between exhibitor, distributors, analysts, trade pundits, media. A lot of people have access to box office data, but very few people, in fact, I would think even the producers who have licensed their films to streaming platforms, even they don't have access to streaming data of their own films. That's the nature of relationship between streaming and the content creator fraternity. I'm not too sure what is the source of your information. But the last I looked at Netflix, I recall seeing Laal Singh Chaddha at the fifth spot in the top ten list.
I would imagine if Laal Singh Chaddha was one of the leading, you know, film, which was being streamed on Netflix or Dhadak, which was being streamed on ZEE5, ideally, they should have been the number 1 in the top ten list, but I didn't see that. I would just-
Laal Singh Chaddha is top in Hindi, which is what most websites, media websites have been hinting. I'm also not sure on the source, but that's what all media websites have been hinting. The main question I had basically is that, you know, given the fact that, we also saw, you know, good turnout when pricing was, you know, lower on National Cinema Day. A lot of these guys also actually, you know, are playing on the pricing when they see volume.
I understand your point that, you know, you don't want to be disruptive, but probably, you know, that's why I was trying to figure out whether is price elasticity positive and, you know, that could kind of, you know, help us, you know, get better occupancy, better revenue if we can play around with pricing. But I get your thoughts on that.
Just to clarify, when I say top ten, I am referring to the top ten list of Netflix platform. You know, if you go on Netflix, one of the category that they offer in order to improve their discovery on their platform is the top ten list on their platform. Laal Singh Chaddha is not the top film as far as I recall, but you know, I would just leave it at that.
Sure.
I would add that some of the films that have done well, be it, Gangubai and Kashmir Files and Bhool Bhulaiyaa and JugJugg Jeeyo, they've all played on normal pricing. That wasn't really a reason why people didn't come in or that wasn't a reason why a movie didn't perform. All of these hits that we have in the last 2Q have all played at regular pricing only.
Fair point. That is useful. Just last one question on the you know, cost. I understand we have very fixed cost structure, but do you think, you know, I mean, we have any, I mean, apart from the rental part that you did mention sometime back, other costs have any variability that can be created, you know, in a way to cushion any kind of such impacts that we see in specific quarters?
I think personnel is one of them.
Yeah.
which has come down.
That is already reflected if you look at the existing numbers.
Utilities and personnel have both come down because they are a lot more in our control as well. We're experimenting a lot with people and formats. A lot of our sales have moved online now, which means requiring perhaps a lot less people. The technology is something that we're really sort of looking at driving more aggressively, so we're able to reduce personnel cost and also regulate utilities, better utilization of utilities through technology.
Yeah. You must also remember when you look at some of these costs and you compare it, we are comparing it to pre-pandemic, which is 3 years ago.
Yeah.
There is huge amount of inflation that is built in. You know, so when you see the cost remaining static or at the same level, it is after 3 years of inflation and wage growth which is factored in. Which means there has been a decent amount of reduction over where we were operating at a pre-pandemic level.
Correct. Do you think exhibition cost, movie exhibition cost has a possibility of creating some variability?
The film exhibition cost is 100% variable.
Yeah.
Yeah. I mean, my point was basically that given the fact that, you know, occupancy in these quarters have been low, we could kind of reset or revisit those kind of numbers that we have so far having.
No, we would not comment on this aspect. All we would say is that our market has tremendous headroom to grow, and this is a time to collaborate with our content creators and help them expand the market, create bigger and better films, and that's where we are focused on.
Absolutely. Got it. This is very helpful. Thank you so much for patiently answering all the questions.
Thank you. The next question is from the line of Dhanisha from Investec Capital Services. Please go ahead.
Yeah, hi, good evening. This is Harish from Investec. I just had 2 questions. First one was on, you know, net box office. You know, in the Q1 call you had mentioned that for the first 6 months of this calendar year, net box office was about INR 5,700-odd crores. Would you have a similar number for what Q2 looked like in your estimate?
Sorry, can you repeat the question once again?
Yeah. You had mentioned in the Q1 call that net box office overall in India was about INR 5,700 crore for the first 6 months of the calendar year. Would you have a similar number in your estimate for Q2 on how much was overall net box office in Q2 , so July to September?
No. That number we don't have, you know, like a formal number which has been validated by any official source. It's safe to assume that INR 5,700-6,000 crore, which translates to about INR 1,000 crore on an average per month, would have reduced by about 15% each month in these last 3 months, which is Q2 of the current financial year.
Okay. The reason to ask this question was my back-of-the-envelope calculation suggested that, you know, versus pre-COVID, there would have been a material market share gain at your INR 330 crore net box office that you delivered this quarter. It's just to validate that point. That was my question.
No, we PVR chain and you know, we would also imagine that many other organized chains would continue to gain market share from the independent cinemas, be it independent multiplexes or single screen cinemas. That's a trend which is in play and would continue for quite some time.
Got it. My second question was on the breakeven. You know, this quarter, you've kind of broken even at EBITDA level on 24% occupancy. Obviously ad is not yet back as well. Assuming ad comes back to normalized level, is breakeven occupancy then 21%-22% number for you? Would that be the right way to you know to look at?
Correct. That's correct. If advertising revenue was to come back full steam, our breakeven occupancy would be about 20%-21%.
21%. Got it. Those are my 2 questions. Thank you.
Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.
Hi, good evening to you. This question is on a news article that was sort of, you know, Business Standard yesterday where CCI, you know, has conducted a study and is urging some self-regulation, revenue share, and, you know, discontinuation of virtual fee. What I want to understand is how, you know, what's the background of this and why is CCI got involved into something which, you know, it has to do with commercial terms of the industry?
Yeah. First of all, you know, CCI at various points of time does its own independent studies for various sectors. You know, I think, our understanding is that this is a study which was initiated by CCI several months ago, to understand the film distribution market and, dynamics at play. This study has been made public only couple of days ago. You know, even we have not finished reading the study, so it'd be difficult for us to comment. CCI, as a practice, initiates and does this study for various sectors, including e-commerce, logistics, all the other sectors at various points of time. I think, similarly, they've done a study on the film distribution space in India as well.
You know, can they force some changes, or is it more of a, you know, just a study where they give some suggestions and recommendations?
No, see, we haven't read the study, so we would not like to comment on it. We've also been made aware of this copy of the study only a couple of days ago, which was published by CCI. We haven't read the study, would not like to comment on it.
this is the first time they have done some a study on cinema, film industry. Is this correct?
Sorry, I didn't get your question, Jay.
Is this the first time they have done a study on film industry or have they done something similar in the past?
I'm sorry to interrupt you, Jaykumar, but your voice is breaking, so we cannot hear you clearly.
Hi. Am I audible?
Yes. Please go ahead.
Yeah. Is this the first time they have conducted such a study on film industry, or have they done something similar in the past as well?
No. This is the first time they have done a study on the film distribution, piece in India.
Understood. Thank you. My second question is you've launched some PVR INOX Passport loyalty program for select cities today. How does this differ from the, you know, loyalty program that you had earlier? If you could just give a quick overview of some.
Passport program is like a subscription program, where it was sort of envisaged as certain fees being deducted every month from the consumer, whoever would enroll into the program. He would be given a certain amount of visitations free of cost against that subscription plan. RBI midway changed a few of their payment systems and processes and guidelines because of which, there's been a little change and a delay. Now the rule dictates that we could only charge a consumer upfront and not be asking for subscription fees every month.
We've made a few changes, and we've launched that service on the 28th of September in 3 markets just to see how it kind of sort of works with the consumer. This is being done in Kolkata, Lucknow and Pune. These are the 3 markets where we are doing a beta trial of the Passport program. These are very initial days, just about a week that we've kind of launched it. We will put this on a study for next 3 or 4 months, make a few changes to it, and if it sort of works well, then we will take it nationally.
Understood. Thank you so much. That's it from my side.
Thank you. The next question is from the line of Abhishek Gupta, an individual investor. Please go ahead.
Thanks for the opportunity. I have 2 questions. First one related to the booking. How much of the-
Sorry to interrupt you, Mr. Gupta. We will request you to speak little louder.
Yes. Sorry. I'm saying that how much of the booking that we are doing through their own PVR app compared to the other and distribution member on spot bookings to BookMyShow or the other third parties compared to the PVR. Regarding the price hike, like in Telangana and Andhra, there's the price hike a couple of quarters back. We do see a downfall over there due to the price hike or anything related to that. Yeah, I'll speak all the questions together, so it will be easy for you guys. The third one regarding the F&B optimization. As a consumer and an investor myself, when you go there, it's very unoptimized way of getting an F&B served on a Friday night.
I'm worried about what would happen on a National Cinema Day when 6.4 lakh people visited your campuses. On a regular Friday or a Saturday or Sunday, there is a very less optimized, you can see. People, myself, went back to the theater after interval without taking the food because it was not optimized, not serviceable. They were very slow in all those things. How are we adapting? That's it. Thank you.
I think your first question, which is PVR apps and websites contribution, this is sensitive information to our business. If you don't mind, we would like to pass this question. Your second question was. Can you repeat the second question?
About optimizing.
Second one was.
Regarding the price hike that happened in Telangana and the Andhra market couple of quarters back. How that impacted the footfalls and the appetite.
There was a price hike, and clearly the pricing decision has been taken. It will take a little time for it to settle. The price hike in that market is a little severe, but we believe that given the overall cinema experience and the way we are kind of upping the game on F&B, we'll be able to settle the market with that.
Okay. Thank you.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Yeah. Thank you, everyone. Thank you for joining the call and appreciate your questions and your support. Thank you and we will convene again in the next quarter.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.