Ladies and gentlemen, good day and welcome to the PVR INOX Limited Q4 FY23 results call hosted by Axis Capital Limited. As a reminder, all participant clients 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, Aman, and good afternoon, friends. Welcome to PVR INOX Limited Q4 and FY 2023, post-result earnings conference call. The call, as usual, 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, Managing Director, PVR INOX Limited, Mr. Nitin Sood, Group CFO, PVR INOX Limited, Mr. Alok Tandon, Co-CEO, Central, West and East, and Mr. Gautam Dutta, Co-CEO, North and South, apart from the other senior management team. I'll hand it over to Mr. Bijli for his initial comments, post which, we'll open the forum for Q&A. Over to you, sir. Okay. Yeah. Hi. Thanks a lot. Good afternoon, everyone. I'd like to welcome you all to the first earnings call of PVR INOX to discuss the audited results for the quarter and 12 months ended March 31st, 2023. As the appointed date for PVR INOX merger was first January 2023, Q4 FY23 results for the company are reported on a merged basis for PVR and INOX and not comparable with Q4 of FY22 reported results. Similarly, FY23 full year reported results are based on 9 months numbers of PVR and fourth quarter numbers of PVR and INOX combined. FY23 reported results are also not comparable with FY22 reported results. I hope you've had the opportunity to review our presentation and results, which were uploaded last evening on our company's website, as well as the stock exchange's website. The following numbers are after adjusting for the impact of Ind AS 116 relating to lease accounting. For the quarter ended March 31st, 2023, total revenue was INR 1,165 crores. EBITDA was INR 27 crores, and PAT loss was INR 286 crores. This is after one-time exceptional write-offs of some cinema assets to the tune of INR 21 crores and merger-related expenses of INR 5.5 crores, in total amounting to INR 26 crores. In addition to the above, company has taken a one-time accounting write-off on account of restatement of deferred tax assets amounting to INR 134 crores on account of transition to the new tax regime effective FY 23. For the twelve-month period ended March 31, 2023, total revenue was INR 3,819 crores. EBITDA was INR 389 crores, and PAT loss was INR 243 crores. If you were to look at pro forma financials of both PVR and INOX for full 12 months for the period of April 1, 2022 to March 31, 2023, then combined revenues for the year were INR 5,311 crores, and EBITDA was INR 609 crores. INOX welcomed 30.5 million guests across our cinemas in Q4 FY23 and 140 million guests during the full financial year 2022 and 2023. Q4 started off on a high note with the blockbuster success of Pathaan in January and the sustained strong performance of Avatar: The Way of Water, which was released in December 2022, was February 2023 and March 2023 admissions were dismal due to the lackluster performance from other Hindi films. Movies like Tu Jhoothi Main Makkaar and Bholaa from Bollywood garnered average box office collections, Selfiee and Shehzada failed to make any impact. From Hollywood, John Wick: Chapter 4, Ant-Man and the Wasp: Quantumania, Shazam 2, and Creed III delivered decent performances at the box office. Regional films, however, continued their strong performance, with movies like Varisu in Tamil, Waltair Veerayya and Thunivu in Telugu and Ved in Marathi, all registering impressive box office collections. FY 2023 has been a period of strong recovery for us despite the marked underperformance and volatility of Hindi movies and significantly low releases from Hollywood last year. Our revenue from exhibition business witnessed strong growth driven by exceptional performance of regional cinema, an increase in ticket prices, and a substantial increase in consumption spending of F&B by our patrons. There has been a decent amount of volatility at box office over the last few months, we're quite positive that this will settle down over the next two, three quarters. We look ahead to FY 2024, we're optimistic about the robust content lineup across all languages. Over the next few months, we have several big Bollywood movies lined up for release like Maidaan, Adipurush, and Satyaprem Ki Katha in June, Rocky Aur Rani Kii Prem Kahaani starring Ranveer Singh and Alia Bhatt in July. Dream Girl 2 starring Ayushmann Khurrana and Animal starring Ranbir Kapoor in August. Jawan starring Shah Rukh Khan and Yodha starring Sidharth Malhotra in September. Tiger 3 starring Salman Khan in November, et cetera. From Hollywood, we have Fast & Furious 10 in May. Transformers: Rise of the Beasts, The Flash, and Indiana Jones and the Dial of Destiny in June. Mission: Impossible – Dead Reckoning Part One, and Oppenheimer in July, amongst others. From the regional genre, we have Carry on Jatta in June, Maaveeran in July, Jailer starring Rajinikanth, and Bhola Shankar starring Chiranjeevi in August. Viduthalai Part 2 starring Vijay Sethupathi, and Salaar starring Prabhas in September 2023, amongst others. On the screen openings, PVR INOX added 79 screens in Q4 FY23, taking the total tally of new screen additions in FY23 to 168 screens for combined PVR INOX circuit. In FY24, the company intends to open another 150-175 screens. Of these screens, nine screens have opened till date, 15 are awaiting license for commercial opening, and 152 screens are currently under various stages of fit-out. The company has also realigned all upcoming handovers of new sites of fit-outs to next calendar year till the time there is strong recovery in the box office. We've also taken a decision to shut down about 50 screens over the next 6 months across the country. Most of these screens have been underperforming, loss-making screens which are housed in malls which have to come to the end of their life cycle with little hope of revival. The decision to shut down these underperforming screens is in line with the company's strategy to focus on profitable growth and improve unit level economics. Our screen portfolio, including the 38 management screens, stands at 1,689 screens across 361 cinemas in 115 cities in India and Sri Lanka. Now, I'd like to 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. Anyone who wish to ask a question may please press star and one at this time. First question is on the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead. Yeah. Thanks for the opportunity. My first question is on the interview which you just gave. You have said that in FY24, you'd expect a revenue of around INR 6,000 crore-INR 7,000 crore, which is a marked increase versus FY23. Now we have seen almost three, four months of lull. February, March was in FY23. Even April, May, Hindi has been quite challenging. What are the assumptions you have taken for this? Have you taken a very big revival for Hindi movie from June itself for this number? Yeah. April definitely was not as per our expectation. May has surprised us with Kerala Story has done well. Guardians of the Galaxy has done well in our circuits. Now we've got Fast and the Furious coming. May is looking better than what we had anticipated. Even June, we've got some big movies like Adipurush. We've got Flash and Maidaan. I think, on the back of these movies, we are optimistic about at least the last two months of this quarter. April of course has been slow. July picks up again with a lot of big movies coming especially for our circuit. We've got. In June, we've also got Indiana Jones, and then July we've got the big Mission Impossible, which, you know, releases like a Indian film. Oppenheimer, which is next Nolan movie. Rocky and Rani, the next, you know, Karan Johar movie. I think, it's basically on the confidence of the lineup which is there. Of course, Jawan has also got shifted to second quarter now and, which is going to be a very big movie. Animal of Ranbir Kapoor is in the second quarter. The numbers that I spoke about in the morning is based on the movie lineup because that is what, you know, gives us the confidence and of course also the rollout of the screens that we are doing. We have some really iconic, destination cinemas opening up this year as well. It's on the back of, you know, that rollout. Sure. My second question is a bit linked to the first one. You are rightfully focusing on the profitable growth. Now I see that earlier your vision was to see an expansion of 200 screens on an annual basis, which has been now changed slightly to 150-175. But you also expect a recovery. When I see your expectation of recovery and say cutting down on the number of expansion, I wanted to understand two things there. One, the cities where you are vacating, for example, some of the smaller cities like Bharuch, etc., you plan to exit. What would be the plan for entering that? And second, you are downsizing your expansion plan when you expect a recovery. If recovery happens, then what will be the recalibration in terms of the faster expansion versus your initial plan of, say, 200 screens? No, we, you know, net-net it is still 2, it's 150 and 175 because we're also closing down, like we've already announced about 50 odd screens we've closed down. We are closing in the next 6 months because these are, you know, PVR is 25 years old, INOX is 20 years old. We have certain properties which have, you know, had their time in the sun and leases have come to an end or the malls have become less attractive than they were earlier on. Some of them even closed down. Net-net, that's what the number is looking like. I think profitable growth is the need of the hour just now. You know, we've just become very strict about our criteria of where we should be spending our capital. Also, you know, the mall, there are a lot of things in the mall also that there's a checklist. The mall has to be fully tenanted, it has to have the right number of tenants. Everything has to be correct, only then we'll start investing our capital. Even 150 to 175 screens is not a small number to grow profitably with. I think we have to also be conscious of the fact that, you know, only 14 months have happened since the pandemic, we just need to be more, we need to be careful about how we grow. We need every unit. Every unit level, the economics must work, and only then the, you know, numbers will look better. We're just being cautious of how, where we invest our money and, you know, what kind of return we'll be getting. On the pending question of, say, your view on the smaller cities like, say, Lucknow and, some of the Bharuch kind of cities, is it a dimmer view for smaller cities or you have a expansion plan in the next few quarters to enter again such cities? No. And se cond? No, no. We're getting into every city. Sorry, you can finish your sentence. Sorry. Question. Yeah. Yes. Just one clarification on the gross versus net. Your gross openings are 150-175, net will be 50 screens lower, right? Net will be 100-125 in FY 2024. 120-125 screens, yeah. Is that right? Yeah, that's correct. Please you could answer the first part? Your other question that you asked about, are we, you know, not opening in smaller cities? No, that's not correct. No. You know, we are opening a lot of properties in smaller markets. I think our focus is on locations, like some of these markets where we've seen better quality shopping centers and malls have come up. We've upgraded or have better cinemas now in modern-day shopping centers. I'll take you example, supposing we're shutting down a cinema in Lucknow. We've opened in a brand new shopping center with Phoenix in Lucknow and PVR is there in Lulu Mall, Lucknow. These are two brand new shopping centers which have eclipsed, you know, the rest of the smaller formats which exist in that market. Hence the decision to shut down their property which has become outdated and is no longer viable to run and operate in that format. No, I got the Lucknow Lulu Mall, that brilliant new large mall. My question was, to summarize, would you be present in all the cities wherever, say, exit is happening currently in the next six months in terms of those 50 screens? A lot of those are in smaller cities also. Do you have a full plan of reentering such cities or currently some cities you will come at a later stage, not in the near term? That was my question. See, most of these markets we'll already be present, you know, in a better shopping mall or some new shopping mall, for example, would be coming up. You took an example of Bharuch. You know, that's a market which hasn't done too well. We are aware of new shopping malls that we've signed up, which will be coming up in the near future. We would be migrating to, you know, better quality shopping centers in most of these cities. You know, just therein, I'm just looking at where we are. Raigad they're coming up. Kochi is there. Pune is there. There's so many smaller cities as well. There is no. Wherever there is going to be consumption of movies, PVR wants to be present over there at a different price point. The opportunity has to be correct. It has to be the right location, right mall, all the, you know, ducks, as they say, have to be in a row. Only then. There's no. Like you can't, you know, make one sweeping statement that we're not going to be in small cities or we only go. Nothing like that. We're going to be in all sorts of cities wherever there is a potential for a PVR INOX to be there. It's just that these particular properties where we have closed or we are not investing, obviously that's not meeting our threshold criteria. Sure. Got it. One quick question. When I see your comparison on YOY for Q4 versus the pro forma, ATP has grown 3% and SPH has grown 13%. That sharp increase in SPH, is it mostly because of the inflation which you have seen in foods, that is the main reason, or is it a mixed improvement because of newer and better menu? It's 50/50. 50% is purely attributable to value increase, and 50% is on volume. We have introduced many products, better products, and we've also come up with a range where consumers are encouraged to buy products and consume at home, like the kernels of the popcorn or the microwave popcorn. These are all low-priced items which are being sold at the cinema. It helps us increase our SPH. At the same point in time, does not eat into the consumption pattern of the consumer at the cinema. That's what we are working on. Sure. Thanks. That's all from my side. Thank you. Thank you. Before we take the next participant, I'd like to remind the participant to limit your questions to two per participant. If time permits, you may join the queue for any follow-up. Thank you. The next question is from the line of Atul Mehra from Motilal Oswal Asset Management. Please go ahead. Yeah, yeah. Good afternoon, and thanks for the opportunity. This is with reference to slide 23, where we have put out the SOMA numbers pre-COVID and now. One of the observations is that, while, say, total revenue is more or less similar, profitability has declined quite materially versus pre-COVID, 11.5% margins versus 18% margins. Despite like COVID being a time which has taught most businesses to be. A lot of businesses have invented ways of saving cost. As we look forward in the next year, and like we said about the INR 6,000-7,000 crore of revenue guide, like, expectation, how do we, how do we think about profitability? Like, when do we when do we hit the 18% number that we did pre-COVID? Yeah, I think if you look at the numbers, it's largely down because of the operating leverage in the business. Like, this year has been a tough year for the business. If footfalls are down, it has a direct impact on the profitability of the business. We did about PVR INOX combined did 168 million footfalls in FY 2019-2020. As compared to that, we've done only 140 million footfalls. That is the reason for the decline in profitability. This year comparing costs of 3 years ago. While most of our costs are down, whatever is controllable, rental cost after a 2-year holiday that we got and tax the breaks that we got from our landlords are back to their original contracts. Which is obviously they're reflected in the profitability. Our hope is that this year will be a strong revival in box office performance of both Hindi films and Hollywood films as well, which have underperformed last year. Admissions and profitability should improve significantly. It's difficult to say what the exact number would look like, but like Mr. Bijli spoke at the beginning of the call, we are expecting much better content starting May, June onwards. Q2, Q3 are looking quite good on paper based on the content flow we have. We should lower revenues anywhere between INR 6,000-INR 7,000 crores, depending upon where the box office settles. We are hoping to get back to pre-COVID level margins of 18%-20%. Right. Got it. Got it. Secondly, sir, in terms of the vagaries of the box office and the content which you have no control over, so in the medium to long term, obviously we have other competing media like OTT and so on and so forth. In the medium to long term, will we always be at the fate of how a producer or a director manufactures content? Or is there anything now that we are a much larger entity, two companies coming together, is there anything we can do on the content side, which is more innovative and which perhaps has never been done before? Actually, there is no shying away and being embarrassed of. There's nothing to be embarrassed about. This business is about cinema since time immemorial has been about movies. In a country like India, where 1,800-1,900 films get produced and released every year, how can that be a disadvantage? That is an advantage because if one movie doesn't do well, there are other movies that take their place and, you know, compensate for that one movie if it doesn't do well. It's just that last year, it has been very volatile, we don't see this to continue. I think depending upon movies is our business, and that is something that we are very confident about, that, you know, people. The supply of movies and the quality of the movies connecting with the audience will happen, and it's already happening. On the other side, on the demand side, consumers will continue to go out and entertain themselves. And they, number. The number one form of entertainment still out of home is cinema. I think we're in a market where both the supply side and the demand side is very strong, and it's just an aberration that we've had of a post-COVID syndrome of about 12 to 14 months, which is going to correct itself. There's no question about it. Right. Great, sir. Thank you and all the best. Thank you. The next question is from the line of Karan Taurani from Elara Capital. Please go ahead. Hi. Thanks for the opportunity. My question is around, you know, the profitability aspect again. If you look at the box office revenue, I don't know if it's right or, correct or, wrong, but you try to compare this to a quarter in what Q1 FY18 had in the form of Baahubali. If you look at the collection numbers of Baahubali, they are more mirror of Pathaan, wherein one single film has done well for, you know, multiple weeks, and the other films have not done well. You've probably got one more film which is at INR 100 crores this quarter, which is 2.0, and at that time you had T-Series. In terms of the margins, that time around 18.5% EBITDA margin for the merged company. Today, which has come to almost about 2.3% ex-Ind AS. What is the gap here clearly? You know, even if you look at the Hindi box office revenue also, it's around 8,300 crores for that particular quarter in terms of net box office. What is this big gap here? You know, the number doesn't seem to weigh dismal as far as Hindi box office is concerned. I know for a fact that advertisement revenue is down very sharply, so that's having an impact. Is the delta that big that your margins can move from 18% to 2%? Karan, I think When you look at the pro forma number. You know, you are comparing box office revenues, you know, of 3 years ago versus now. A lot of it is driven by ticket pricing growth. You know, the big jump is in the cost front. You know, we were paying X rentals 3 years ago. We got rebates in rental and CAM costs. Costs have moved up with inflation. If you look at a lot of our fixed costs, which are external based, they have moved up after a 2-year holiday that we, you know, got or time or the break that we got from our landlords. As a result of which, those costs are up. Second big impact area for our business is advertising revenue, still significantly below, you know, pre-pandemic level. These two are, I think, the key two items which go directly to the bottom line. While, you know, price realization and entrance growth has kicked in and they have helped us to get to the top line number, you know, advertising revenue shortfall and the rent and CAM increases across locations over a three-year period have been the biggest reasons why, the operating margin are low. Right. There is also SPH and ATP, we see the big delta, right, versus that time. Right. I got the point. I mean, advertisement is a big driver here. To the second question, how does one foresee ad revenues? Ad revenue was, you know, lot of premium pricing happened in the Hindi circuit only as far as advertising is concerned. What is the kind of acceptance, what is the kind of growth that we are seeing in non-Hindi circuits as far as ad revenue is concerned? Tomorrow, in the next 6 months, if Hindi content remains to be this way in terms of volatile performance and maybe small medium build films don't come back, do we see a scenario that, you know, regional content is good enough to pull back this ad to pre-COVID levels? Clearly this year we are aiming to get closer to the pre-COVID number. That's the big one, the big target. Having said that, advertising revenues do need some big tentpole films. We saw a spike in advertising revenue whenever a big film releases, even in case of Pathaan. The brand managers' confidence is coming back at the cinema very, very strongly. We hope that by quarter two and more by the beginning of the festive quarter, which is the quarter three, we will be able to get to very, very strong numbers on advertising. Some path breaking work is being done at the ground level to influence and get these advertisers back to the cinema. We are very hopeful that within next quarter, we should be able to get back on track very strong. This merger with INOX has really helped to accelerate and seal the gap in a big way because now the undercutting, all of that has gone. There is a certain synergies in terms of rate card, the way we are selling all of that. That's really helped us as we move forward to bridge this gap. Thanks. Very helpful. Just one bit on this. You know, obviously ad revenue is going to be one lever, but what about cost realignment? What are the key levers that you're seeing around cost heads which can actually reduce over a period of time? Anybody can take. Well, let me tell you that where costs are concerned, after the merger, we are going through every line item with a fine-tooth comb. Whether it is the repair and maintenance costs, whether it is the COGS where food is concerned, whether it is the heat like power, that how we can work together to reduce the units. Yes, we cannot do anything much about the rate of power, but how to control the units. Let me tell you that each and every line item of P&L is being looked at. Yes, we are getting a lot of benefit from the economies of scale. I think that by the end of the next couple of months, you will see a drastic reduction in all our cost heads. Thanks. Thank you. That's it from my side. Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi, good afternoon, thanks for the opportunity. My first question is on related to slide 19. If I look at, you know, 4Q FY23 versus 4Q FY22 pro forma numbers for PVR and INOX. There's a 20% increase in admissions, 6% increase in seats, but, you know, occupancy seems to have dropped by 290 basis points. I'm just trying to understand how can occupancy decline YOY when admits have gone up 20% and seats, we increased by 6%. Yeah. Jay, the main reason for that is in Q4, we were still operating at 50% capacity in a lot of markets. when you calculate occupancy. Understood. The occupancy in Q4 FY22 was still being calculated on half the capacity. That is the reason, you know. Got it. In some markets, that's the reason there is a difference. Perfect. I think, you know, associated question is on costs. On a YOY basis, rent is up 40%, personal costs are up 49%, and electricity utility is up 41%. Is this also because the base quarter had did not have costs pertaining to? That's correct. We had a lot of rebates from our landlords which finished on 31st of March, FY22. you know, we had a lot of discounts and rebates which were continuing till Q4 of FY22. Understood. For QFY 23, more or less a normalized cost structure, and you will start realizing synergy savings during the course of this year from these levels. Correct. That's correct. Finally, can you give some color on, you know, other operating income that comprises of, A is your, ticketing contracts with, BookMyShow and I think Paytm. I'm not sure if that is still on, and the Virtual Print Fee related revenue. What's, what's your outlook from a 2-3-year perspective on these two revenue streams? We have long-term partnerships with all of, you know, our online aggregators, so these partnerships will continue. Some of that will come up for renewal during this year. We are in advanced stage of discussions and, you know, all these partnerships will continue, and we continue to work with our aggregator partners. Same for Virtual Print Fee as well over the next two to three years. There is no sunset clause associated with VPF, right? VPF continues... No, there is currently no sunset clause on VPF. Sure. Thank you so much. That's it from my side. Thank you. The next question is on the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead. Yeah. Thanks for the opportunity. I have a bookkeeping question, on the balance sheet side. Despite INOX being net debt free, I think the combined entity's net debt position has gone up by about INR 250 odd crores on sequential basis. Does it mean that new screen openings that we have done in Q2 have been funded by debt? If yes, what is the sustainable debt level from here on? You know, between INOX and PVR, we added a lot of screens this year, including, you know, the acquisition of one of the cinema properties in Chennai called Jazz Cinemas. If you include that, the overall CapEx of both PVR and INOX put together this year has been INR 300 crores approximately. Yes, the incremental debt has largely gone to fund the CapEx as the earnings have been, you know, slightly short. Yes, our net debt levels have gone up from 31st March, that largely the incremental debt has gone to fund the growth. We think this year as the earnings move up, our debt levels will get better, by the end of this year, our net debt levels should look lower than what we've ended at this year. Basically our screen opening guidance of 160-175, that we have stated, primarily that will be funded by internal approvals and not debt. Correct. That's correct. Sure. Sure. Secondly, if you can just share what was the revenue and EBITDA loss from the 50 screens that we intend to shut down. Rather than closing these screens down, perhaps we could have entered into a variable rental model and brought down the fixed costs, so to say. If despite evaluating that option, we have taken this decision to close down, I mean, I was just thinking whether this is an indication of any change in consumption pattern or a routine business decision. I thought of asking this question because even some time back we had closed a few screens and such instances have not happened quite frequently pre-COVID. Just wanted your thoughts on that. I think that the second part of the question, your voice was quite muffled. Answering your first question, if I heard it right, was at all what was the EBITDA impact by closing those 50 screens? That will be a saving of INR 10 crores. That's the EBITDA impact we'll have by, closing down those 50 screens. If you could just repeat the second part, what you said, please. Yeah. What I was asking is that rather than closing these screens down, we could have perhaps entered into some kind of a variable rental model and brought down our fixed costs. If despite evaluating that option, we have taken this decision to shut these screens, is this a routine business decision or any kind of change in consumption pattern that you are evaluating? Pre-COVID, shutdowns were not as frequent as we have witnessed currently. I think Mr. Bijli answered that question that most of these have lived their end of the life. They've reached the end of the life cycle. We feel that even if we put in more money in these properties, there'll be hardly any returns. Why put good money after the bad? That's number one. Number two, the consumption habits have not changed at all. The Indian audience is still the same. They still go to movies for a great experience, and it's all quantity of content which brings in people. The consumption habits have just remained where they are. When you talked about speaking with various operators for revenue share, yes, we are in talks with various operators for revenue share, and a few of our properties also are on 100% revenue share basis. If that answers your question. Just one small clarification. Out of this 50 screens that you intend to shut down, do any of them belong to metro or Tier One markets? Well, it's a mixture of all, Tier One and Tier Two. Sure. Thanks a lot. Thank you. The next question is from the line of Ali sgar Shakir from Motilal Oswal. Please go ahead. Yeah, thanks for the opportunity. I had a first question on your. Understand a couple of quarters back, we had done a survey to understand, you know, consumer behavior, post-COVID in terms of, you know, the experience, the liking, in different, you know, customer segment, who's coming to the cinema hall, what kind of, you know, products they like and multiple things like that. If you could just share your insights of from that survey and, you know, what were the readings, what were the learnings that we got out of that survey? While a lot of, you know, little points came in, but I can just sum up to say that one thing that stood apart was the fact that every consumer unanimously said that the cinema experience is differentiated. Once they feel that the content is up to their liking, they would all want to come to the cinema. In one voice, when we asked them, when the researcher asked them on saying, what do you think of a cinema experience, they said it's fantastic. Today, we only watch a plot. This was very interesting, is that we get to see the plot, but we never enjoy the content. We never enjoy the story, the film, because we're always consuming it on a small screen. They were very well aware. However, they said, you know, I am checking with my friends. I am possibly wanting to do my research because the biggest asset that I am kind of investing when I'm coming to the cinema is my time. I just want to be 100% sure of the content that it's worth. That's number 1. Number 2, they spoke about this entire experience of going to a cinema. They said it's no longer just about watching a film. They credited companies like PVR, INOX, and others to say that they have invested a lot in experience. Today it's no longer just about going out and watching a film. It's about eating the right food, sitting on a recliner, and enjoying the entire ambiance and the way cinema. They In fact, it was a very pleasant surprise to see that they said, "This was our doors to fantasy. When we enter the cinema, we tend to forget everything." The fact that they could switch off their mobile phones and be completely drowned in that experience is something that they really look forward to. From that perspective, I think very strong positive signal, all waiting, trying out and saying that these are, you know, I just need to get back. Also at that point in time, because they were coming out of COVID, I guess the whole meeting with friends and parties was up on the rise. Everybody felt that soon that would kind of subside, and very soon we will all begin to go back to the cinema the way we used to. At that point in time, they felt a bit, you know, wanting to meet up with friends and party and do a face-to-face bonding. I guess, you know, everything has a kind of a life cycle. That's the reason we feel that with the right content now coming in, big tentpole films coming in, PVR and INOX investing a lot in experiential cinema, we believe that we're just a few months away from getting the consumer back. We ourselves are also working very hard to sort of convince and work on the consumer to remind them of the great experience they've had at the cinemas. This is very useful and quite detailed. Just one thing is, any insight we got to understand, you know, what is leading to lower occupancy? I'm just saying this from the point that, if you see the, you know, average IMDb ratings, they would have probably remained the same, you know, typically for the top 25 movies in 18, 19 versus even now. Any insight you got in terms of, you know, what particularly are they looking for or anything that would help us understand the content that will work well? As I said, they kept talking about content and then about saying that is this a content which possibly deserves the big screen. There are even films like they felt horror. They set a certain genre. Like even films like Drishyam did well simply because it needed that attention for the movie watcher to enjoy that content. They said that in their mind, they were kind of segregating that. The second piece that came in very strongly is that when I want to bond with my friends, when I want to bond with my family, cinema is the place to go because I get a holistic 360 entertainment. When I'm on the move, when I'm alone on the flight, when I'm traveling, I may end up consuming a plot, as they kept saying, not a story, not content, a plot on my small phone or on the iPad. I think what was very positive to know was that they knew exactly what they were doing with every film. In fact, a lot of people said that while I was watching a film, I felt that it deserved a cinema viewing, and I either stopped midway or I regretted of watching the plot on my phone. These are very positive signals. Yes, it takes time because they've been, they were out of the cinema for Nearly about 18 to 20 odd months. It would take time. But we are very certain with the way some of the big tentpole films are performing, you know, we are just about a few titles away from getting the consumer back very, very strongly. Got it. Thank you so much. Just last one question is, you know, on the operating matrix. You know, I'm, if assume that, you know, occupancies remain, you know, post-COVID at, you know, the mid-25 levels approximately or, you know, even if we see improvement, but this is at this level, what are the other levers we have? I'm just asking this from the point of view that many of the global developed markets, you know, occupancies are low, but maybe they understand that price, I mean, cinema is priced inelastic, so you could, you know, charge way higher and if pricing is used as a tool. Are there any other tools like, you know, in terms of your cost structure, whether your, you know, exhibition cost, rental, any other cost where you feel that, you know, we have another, you know, way to basically have higher storage, you know, or rather screen economics if even occupancies are at these or slightly higher levels? Yeah. The biggest difference, you know, in India versus globally is that we have high occupancy, but very low ticket prices in comparison to what exists all over the world. Those compensate for each other. On the cost front, I think, all our costs are very, very, you know, manageable and, you know, we've kept them at really low levels when you compare to global benchmarks, except for the rental and occupancy cost, which is quite high in a country like India. That's true for the entire retail industry. You know, hypothetically, if the occupancies were not to improve in the long run, then I think the company's focus will have to shift to. Resetting. Bring down and reset, you know, all the cost structures of the business. The biggest cost structure of the business would be your rental and occupancy costs. Got it. Do you think pricing can be used as a tool? To a certain extent, it can be, and that's the mandate we have for this year. We will work on, we are working with sophisticated now tools to see wherever there is elasticity in pricing that we should be able to charge more. Given that this is India and given the fact that this is the most popular form of entertainment, our, you know, focus is always to get the extra footfall. Our focus is always to entertain more people, get more people within the cinema rather than getting lesser people at higher ticket price. That's not the idea. At the same point in time, we don't want to leave any money on the table. Whatever is the right pricing for the right consumer for the right experience, will be charged and that's what we are working on. Just to continue, the other thing, continuing, that we want to make our cinemas much more experiential. Whether to have 4DX, MX4D, whether to have a playhouse, kiddies, whether to have club seating, ICE, ScreenX, whatever it is, we want people to come to our cinemas and see a particular movie in more than one format, and that's something which we are working on. That's yielded a lot of results. Pricing is one side. The other side is how do we make our customers come to our cinemas and enjoy a great experience, whether it's crystal clear sound, absolutely clear picture, having laser projection in our system in all our screens. That's something where we want people to come in, have a great time, spend a lot on, where INOX and PVR are concerned on aesthetics, on luxury, on safety, on service, so that people are de-couched and they come to our cinemas to watch movies. Thank you. Mr. Shakil, I request you to join the Q&A follow-ups as we have several participants waiting for their turn. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your question to two per participant. If time permits, you may join the queue for follow-ups. Thank you. The next question is from Arun Prasad from Avendus Spark. Please go ahead. Thank you for the opportunity. Good afternoon, everyone. My 2 questions. One is on the, you have indicated that, you will be deferring the takeover of any fit out properties going forward till the industry recovers. Does it mean if the Hindi movie industry doesn't recover, we will not be adding any screens in the next year, that is, in FY 25? Consequently, what is the obligation of the developer, according to the agreements that you have signed? Can he wait out for a longer period of time, or can he seek out for another exhibitor? How does it play out? That's the question number 1. My 2nd question is on the OTT window. A few days ago, Mr. Bijli talked about this, where he said that industry shouldn't shy away from extending the OTT window. What is the thought process going behind this? Are we trying to push the OTT window beyond the current stipulated time? Those are my two questions. Yeah. I'll respond to the first one. You know, currently we are in the advanced stage of fitting out about 175 odd screens, which we plan to open this year. We have a very robust pipeline of, you know, similar number of screens which are coming up for handover this year. In view of the huge amount of volatility at the box office that we've seen, we want that to stabilize before we take the next leg of screens for handover and start fitting them out. Keeping that in mind, we've, you know, delayed the handover, all new handovers that are coming up. We are not worried about, you know, losing some screens because the pipeline is quite massive for us. The opportunities are quite large. You know, in some of these shopping centers and malls, you know, most of the developers have consented, agreed. They understand the situation. We have long-term partnerships with a lot of these guys. In some cases where developers have an opportunity or would want to do, you know, screens with anybody else, you know, that is possible that we may end up losing a few screens. There are enough huge pipeline of screens that we have, we are not so worried about that. That's the way we are approaching it. You know, between PVR and INOX, the screen pipeline that both the companies have signed for development is in excess of 700 to 1,000 screens, which will come up over the next 5 to 7 years. We are not worried on that front. The second question was on. Okay. On theatrical windows. Let me tell you that what Mr. Vijayabalan said is, yes, for Hindi, we have a 8-week window, where after the movie is released on all theaters, it takes 8 weeks for it to come on OTT. There are some in Hindi film industries other than Hindi, where the period is a bit shorter. We're in discussion with them because a longer window helps everybody. It helps the producer, it helps the talent, it helps the exhibitors, because they can earn more from the box office and then whenever they release on the OTT, they can earn more from the OTT. That's something we feel world over there's a long window or the window is quite high between the time it's released on the screen and it comes on OTT. That's exactly what we want in India because it benefits the entire the earning potential of a film. The more it plays at the box office, the more the producer earns, the more the exhibitor earns, the more the distributor earns. Better it is for the entire industry. That's something which we are speaking with people who make films in other languages that, yes, and if it increased it'll help everyone. Thank you. To the first answer in which we are talking about, we are not worried about if the screens go out of our pocket and it is ending up in the exhibitor. Is it also you are trying to renegotiate the contracts in terms of rentals and CAMs? Is it a fallout of that is why we are not taking the handover? No, as I said, we've given you the outline of company's strategy to say we are sitting there. We have got a huge CapEx already on screen which we are fitting out, and that's the reason we've decided to postpone any new fresh handovers till the time, you know, the box office stabilizes. We want to ensure that we fund all our growth from internal accruals and cash flows. You know, in spite of deferring all handovers, we'll still add about 175 screens this year. Great. Thank you. Thank you very much. Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead. Yeah. Good afternoon. I just had 2 questions. One was on the breakeven side. You know, this quarter is broadly breakeven at an EBITDA level. You've done about 22% occupancy. Once, you know, we kind of realize all the synergies over the next say 18, 24 months, what do we believe this number will now hover for the merged entity? Yeah, I think, like we've guided, bulk of, you know, the synergies is very revenue driven for us. There will be some bit of cost savings, but bulk of the synergies will come from revenue. Advertising is one number which is currently lagging behind. This number will not change dramatically. The 22% could look like 20% or 21%. You know, from a synergy perspective, this number as advertising revenues kick in, get down to normal levels and there are some cost savings. This 22% number could potentially look like 20%, 20.5% kind of a number for our breakeven. Got it. The second question was, you know, on the movie pipeline. I understand on the quality of the content, you know, based on your discussion with production houses, et cetera, do you also believe that the quantity of content in terms of number of films released, releasing maybe over the next calendar year versus say pre-COVID, as probably even producers are recalibrating the same way as you are, could be a bit lower. Is that also the sense that you're getting? Maybe they focus more on quality than quantity. Just wanted to get a sense of, you know, what you're hearing from, you know, the other side of things. Very difficult to say what the producers will do. Yes, for us, and for everybody, quality is very, very important because I think today's Indian audience, they've got very, very refined taste buds. They know what they want from a script and when they spend 2 and a half to 3 hours in an auditorium. I think that quality is more important. Today's producers are looking or the content creators are looking at giving great quality, great content. And that's something what we know in the industry people are working on. A good quality is very, very important. Yes, quantity too is important for us to have shows for all 52 Fridays in a year. That's, that's not denying the fact that we don't want quantity. We also need quantity, but at the same time, quality is also something which is very important for this entire industry. I'm sorry, just to follow up to this, you know, my question is becoming more from the fact that, you know, are production houses kind of, you know, keeping similar budgets, but doing lesser films within that budget to kind of improve quality or create bigger, you know, bigger films? Is that a sense that you're getting that they're trending towards given that the smaller midsize films have not done as well in the theaters? Or, you know, just any kind of, you know, insight that you have there that you can help with. Well, I think that's a question of a budget you should be asking them, not us. At the same time, it's I don't think it's right to say that small quantity or the small budget movies don't do well at all. I can give you lots of examples of small budget movies which have performed well at the box office. As I always say, it's the content which matters, and people come out to see great content. For them, they're not bothered if more money has been spent on a film. If that be so, if it doesn't perform or it doesn't cater to the taste buds of people, nobody will come in. People go for great stories. They go for great direction. They go for great choreography, for great screenplay, rather than the budget of a movie. That's very important for the entire industry. Okay. Okay. great. I have some more, but I'll take it offline. Thanks. Thanks. Thank you. Next question is from Jinesh Shekar from Svanik Advisors. Please go ahead. Thanks for the opportunity. My question was regarding the management screens that were mentioned in your presentation. It would be great if you could explain how these arrangements work and its economics, if possible. Yeah. These are about 38 screens. 35 of them were, you know, from INOX portfolio, 3 screens, PVR. Basically we run and operate these screens. We earn a management fee from operations. We don't consolidate revenues from these screens. Hence, you know, these screens are being called out, you know, separately. We just earn a management fee from these screens, which is, you know, reflected in our operating numbers. These management fees would show up in your other operating income head, if I'm correct? That's correct. The reason why I was asking about this, even though it's a relatively small number, is because you mentioned that you are looking at higher profitability going forward. I was just wondering if you are looking to do more of these management fees models in the future, considering its asset-light nature? No. We are looking at different models. We will, you know, guide the market as we do some of those screens. Our focus is to be in full control of screens which we run and operate, obviously with a lower CapEx intensity. We are working on various models right now, to build a long-term, you know, better model than what we've been traditionally investing with. Okay. These arrangements are just like a consulting model, right? Or is it like a franchisee, as in the hospitality industry? No, it's not a franchisee. It is something where INOX and PVR run these properties. The PNL goes to the developer. He's the one who puts in the CapEx. Everybody is on his rolls. We as cinema experts, we run everything for that particular developer. In all aspects, it's like an INOX or a PVR property. Okay. The branding will be the owner's branding, right? No. The branding is either INOX or PVR. Understood. Thank you. That's all from my side. Thank you. The next question is from the line of Abhisek Banerjee from ICICI Securities. Please go ahead. Yeah. Hi sir. Just a couple of questions from my side. First, on the advertisement front. In terms of the total proportion of ad slots per movie running time, what would that be pre-COVID, and what is that now? One more question is on the, you know, quality of content that we are talking about. All right. We obviously read a lot about, you know, the quantum of money being charged by the big actors. However, when we see certain big budget movies, the quality of production, you know, is not probably at par with Hollywood, despite having a reasonably large budget. Is there any change which is happening in that regard? Let me take the advertising question. We normally on an average would play about 19 minutes of advertising. Now in certain big movies this goes up. Largely if you average it out, the advertising time slotted is about 19, and these are in two slots, before the start of the film and in the intermission. We currently are doing about 12.5 minutes consumption, and this is expected to grow as we move forward. Abhishek, does this answer your question? Hello? Yes. Yeah. You mentioned that the 19 minutes will grow going ahead. No, no. We are currently at 12.5. The 19 cannot grow. 19 is the time slotted. Got it. Film for advertising. Got it. Technically, we need to grow both value and volume currently. For PVR, this time is slightly higher. For INOX it's slightly lower. If you average that out, we are consuming close to about 12.5 minutes currently. Our uptake is currently about six odd minutes that we can move up, so we have to sell more advertising and then also, get our rates up. Right. That's how the journey is gonna be. From just a volume perspective. Then we've got a whole lot of media outside the big screen as well. We also have a plan to monetize the off-screen spaces as well at the cinema. Got it. Just in terms of volumes, you have a 50% upside, possibly, and value-wise, what would be the upside? Difficult to say. Currently, our whole focus is to get the volume back, and that journey may happen once all the merger stability comes into, PVR and INOX. I guess that would be done, next year largely. This year we are concentrating largely on volume increase. Understood. That's helpful. Would you be able to comment on the question on production value? See, again, the production value, as I earlier said, that I think the producers and the content creators will be able to answer. More importantly, you know, we are in conversation. We have with the producer, and believe me, more than us, they are the ones who are doing a lot of research, understanding exactly what the consumer wants. They have been digging deep into data and, you know, the content that we are expecting this year will be fresh and is made keeping in mind what the consumer wants. We believe that the content that we will all see this year and moving forward is ingrained in deep consumer insights and will be very powerful. That's our hypothesis and hunch. Understood. Thanks, sir. Thank you. Next question is from the line of Mayank Babla from ENAM AMC. Please go ahead. Yeah. Thank you for taking my question. I had a bookkeeping question. Could you please give us the proposed Ind AS total operating expenses for the combined entity for FY 2023, the entire year? No, it's difficult to give a, Ind AS expense because, you know, the accounting changes quarter on quarter, depending upon, you know, how the assets are done. you know, we can take this question offline, but it's difficult to give, you know, with Ind AS what the expenses would look like. Okay. Thank you. Thank you. That's it from me. Thank you. Thank you. The next question is from the line of Saikumar Toshi from Kotak. Please go ahead. Yeah. Hi. Thanks for the opportunity, again. I just want to sort of understand the screen expansion sort of plan a little better. If I understood correctly, you'll be opening 175 screens ballpark in the coming year, where you've already incurred some CapEx. Any further expansion beyond that 175, you'll wait for the box office situation to normalize. How should we think about screen additions for FY25, and what does this change mean for your mix? Because if I understand correctly, earlier you were targeting about 40% of new screens coming from South and 60% from rest of the country. How will that mix change, you know? And what- Yeah. If you can give us some color, where do you think you will cap your CapEx plan for FY 2024 and maybe FY 2025, the way you see things today? Yeah. There is, first of all, you know, our screen expansion, like we said, a large proportion will be focused on South. The year-on-year ratio is difficult to predict, but it will vary anything between 40%-50% of our overall screen count will, you know, continue to be added in Southern India over a period of time. Secondly, you know, this does not change anything as far as our growth plan is concerned. What we are basically saying is, depending upon how the year pans out, we want to manage our cash flows slightly better. We want to fund bulk of our growth from our operating earnings. Hence, you know, the decision to delay even further handovers, you know, has been taken in that in mind. This could potentially mean, yes, we open a slightly less number of screens in FY 25. It's possible, like this year, we have a lot of screens that we've opened this year have all opened in Q4. 50% of all the screens that we opened this year have opened in Q4 of this year. FY 25 will potentially look like a similar situation if we delay the handovers, you know, by another 9 to 12 months. I think we are reasonably confident because the pipeline of screens is so huge, we will still end up opening, you know, a similar kind of a number even in FY 25. I don't think it changes anything. It just delays and, you know, the timing of opening would change. Like current year, a lot of our screen openings would happen in the early part of the year as compared to previous years, where a lot of screen openings happened towards the end of the year. What about refurbishment, upgradation CapEx, which, you know? Which is going to be a big focus area when we will continue to spend on refurbishment, you know, maintaining and upkeeping our existing screens because they are the screens which are continuing to deliver a strong ROIs, where we have strong admissions. We will continue to do that. I think our overall CapEx number for this year will continue to be in the range of about INR 700 crores, you know, for all the new screens, existing screens, investments in technology, IT, maintenance, everything put together. This year, I think the number will be in that range, for these 175 screens that we are adding. Understood. Thank you so much. Thank you. Ladies and gentlemen, that would be our last question for today. I would like to hand the conference back to the management for the closing remarks. Thank you, and over to you. Thanks, Ankur. Thank you everyone for taking time to attend the call. If we've not been able to answer any of you during this call, you feel free to reach out to us separately, and we'll be happy to address your queries offline. Thank you very much. Thank you very much. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. Thank you.