Ladies and gentlemen, good day, and welcome to the PVR INOX Limited Q4 FY 2024 Earnings Conference Call, hosted by Axis Capital Limited. As a reminder, all participants' lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during 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, Mr. Ankur. Thank you, Manuja. Good evening, friends, and welcome to PVR INOX Limited's Quarter four and full year FY 2024 conference call. From the management side, we have with us Mr. Ajay Bijli, Managing Director, Mr. Sanjeev Kumar Bijli, Executive Director, Mr. Nitin Sood, Group CFO, and other senior management personnel. As usual, the call will start with a brief management discussion on the earnings performance, followed by an interactive Q&A session. Over to you, Mr. Bijli, for the initial comments. Yeah. Thank you. Just want to correct, Mr. Sanjeev Kumar Bijli, not Kapur. Okay. Okay. No worries. No worries. No problem. Anyway, so, good afternoon. Thank you, and I'd like to welcome you all to discuss the audited results for the quarter and the twelve-month period ending March 31, 2024. I hope you've had the opportunity to review our presentation and results, which were uploaded earlier today on our company's website, as well as the stock exchange website. The exhibition industry witnessed a significant year. It was slightly volatile. While we saw the biggest hits in the Hindi cinema last year and witnessed the best ever quarter played out in Q2, the year ended on a softer note, with the fourth quarter being the weakest due to a lack of appeal for the content released in Hindi, other languages and limited Hollywood releases. The ongoing general election has also impacted the flow of new releases in the current quarter, which is expected to stabilize by mid-June. We welcomed 32.6 million guests across our cinemas in Q4 FY 2024, 151 million customers in FY 2024. Coming to the financial results for the quarter, the following numbers are after adjusting for the impact of Ind AS 116 relating to lease accounting. Total revenue for the quarter was INR 1,290 crores. EBITDA was INR 35 crores, and PAT loss was INR 90 crores as compared to revenue of INR 1,165 crores, EBITDA of INR 27 crores and PAT loss of INR 286 crores in the same period last year. In the upcoming months, we have several exciting Hindi movie releases to look forward to, including Mr. & Mrs. Mahi, starring Janhvi Kapoor and Rajkummar Rao in May; Emergency, starring Kangana Ranaut; Chandu Champion with Kartik Aaryan and Kalki 2898 AD, starring Prabhas, Deepika Padukone and Amitabh Bachchan in June. Sarfira starring Akshay Kumar and Vedaa starring John Abraham in July. Stree 2 with Rajkummar Rao and Shraddha Kapoor. Pushpa 2: The Rule, which is a large multilingual release starring Allu Arjun, is expected to release in August and could potentially be the biggest release of the year. From Hollywood, we have IF, which is Imaginary Friends, The Garfield Movie, Bad Boys: Ride or Die, Inside Out 2, The Exorcism, A Quiet Place: Day One, Despicable Me 4, Deadpool & Wolverine in July, Borderlands, Alien: Romulus and Kraven the Hunter in August. On the merger front, we're happy to update that the integration process has been moving along well on all fronts. We've made significant progress on manpower, technology and operating process integration, which has produced and is, and is expected to produce significant operational savings. During the year, we achieved a total EBITDA level synergy of INR 185 crore-INR 208 crores. Almost INR 127 crore-INR 137 crores of the above synergies were achieved in the box office and F&B revenues, and balance INR 62 crore-INR 71 crores of synergies were achieved on the cost front. We expect some of the revenues and cost level synergies to play out further in FY 2025. While a major part of the synergies of about INR 225 crores that we had guided for at the completion of the merger has been achieved in FY 2024, a heightened impact of these synergies would be visible as occupancies improve. Despite a volatile year, the business generated a free cash flow of about INR 116 crore in FY 2024. Our key strategic priorities going forward will be to enhance our return on capital employed and drive free cash flow generation. As part of the strategy, we will focus on operational excellence to improve performance of our existing circuits. We will be taking various initiatives to drive admissions and improve visitation frequency through programs like the Movie Passport, Cinema Lovers Day, screening of alternative content and running various F&B promotions. Secondly, we will close underperforming cinemas which have reached the end of their life cycle. In FY 2024, we have exited 85 underperforming screens, and we plan to shut down about 70 underperforming screens in FY 2025. We will prioritize initiatives aimed at reducing rental expenses, overhead costs, and streamlining our organizational structure for greater efficiency. We will be transitioning to a capital-light growth model for the new screen additions, wherein our endeavor is to reduce our CapEx intensity by partnering with developers for joint investments in new screen CapEx and actively exploring alternate models like FOCO, which is Franchise-Owned Company-Operated Cinemas. We will be very selective in adding new cinemas and plan to open about 120 new screens in FY 2025, prioritizing expansion efforts in South India. We're also evaluating monetization of owned real estate assets inherited from the INOX merger and plan to use the proceeds to reduce debt. Our scale, market leadership and brand equity will be the key enablers to drive our growth strategy going forward. On the growth front, the company has opened 130 new screens and exited 85 screens, resulting in a net addition of 45 screens during the year. For FY 2025, the company expects to open 120 new screens and exit 70 screens, resulting in a net addition of 50 screens. Our screen portfolio, including the two, 42 management screens, stands at 1,748 screens across 360 cinemas in 112 cities in India and Sri Lanka. I'm delighted to announce that PVR INOX has formed a strategic partnership with Devyani International Limited, one of the largest quick service restaurant operators in India, to jointly establish a company for the purpose of development and operation of food courts within shopping malls in India. Movie watching and fantastic culinary experience is a partnership worth celebrating, and we are happy to partner with a brand that shares our passion, and we hope to accentuate our market presence and potential for significant growth. I'd like to now open the platform for any Q&A. Thanks once again for joining. 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. The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead. Yeah, thanks. My first question is on the company you formed with Devyani. So wanted to understand what are, what are the reasons for doing this now, and what will be the benefits for you? And in terms of investments, say, from a three-year perspective, what kind of investments will go into this? Will this be more of cross-promotion? Because in many developed markets like U.K., et cetera, there is good cross-promotion of food and cinema. Is that the main reason? Because otherwise you and Devyani both are fairly well-established players and who understand both malls and foods quite well. So what is, what is the real benefits for you, and what is the investment and in what time frame? Thanks, Abneesh. You know, basically, most of our revenues, all of our revenues on F&B front are post-ticketed, so only when a person buys the ticket, you know, he, he will end up buying F&B. And we were very keen to pivot towards some pre-ticketing, pre-ticketed F&B business as well. And Devyani is very well established. They've got their own very well-established retail brands like KFC, you know, Pizza Hut, Costa Coffee. We've had a relationship with them for a long time because they are our suppliers to, you know, Pepsi, Pepsi suppliers for the, for the longest time to most of our circuits. And we felt this partnership was a win-win one because, A, we get to, you know, have some F&B revenues which are pre-ticketed, and B, you know, we are able to get the opportunity to come up with some branded food courts. So most of the mall operators currently don't have branded food courts, and we believe that we can add value there and also get more, you know, 150 million people come to our cinemas and get more share of the wallet of the customers already coming to us. So, and who better than Devyani to partner with, since they already have their own brands? So I think they're looking at us from being able to negotiate very good rental deals and lease deals and acquiring good locations, because that's what we bring to the table. We take a very large offtake from the developers of, you know, real estate in terms of our cinema space. So for us, we can get a better deal and better locations on commercial terms with the real estate developers and make these food courts adjacent to our cinemas and pivot only from being an exhibition company to having an F&B play as well. So two, three follow up there. One is in terms of consumer behavior. I wanted to understand how exactly this will work, because the consumer, as in he sees the movie and then he comes out and then he shops, and then he decides to go for the food court. So how exactly you are able to tap or change this? Second, you yourself have pre-ticket booking, which is possible. So that anyway you have, so how does this add or change that? Second is there any CapEx also involved from your side? Because branded food court obviously there will be some level of CapEx, and will this be more towards the new properties? So existing also, is there any possibility of change? Because that will be very difficult in my view, because most existing malls, already the food court will be in a separate location or in a separate floor. So how does it work for existing property? Sir, the opportunities are there in the existing food courts as well. In a lot of malls, food courts are not managed that well. So we of course looked at all those opportunities only then decided to venture into this. So that is one, and we don't have any pre-ticketed F&B businesses now. Very little through 4700BC and very little through some home delivery happens, but most of our, bulk of our business is post-ticketed only. So this simply people don't have to buy a ticket, and then, you know, they go to the food courts. And consumer behavior is already in place. People come to the shopping centers, and they shop, they eat, they watch movies. So I think we are not planning to change the consumer behavior. Yes, definitely, we want to build these, you know, food courts and very good shopping centers and leverage the marketing opportunities, cross promotions between food being consumed at the food courts, or, you know, maybe trailing lots of cross promotions between the cinema. And because these are the two anchors in any mall which generate the maximum footfall. So I think having a play in this with Devyani is something we believe is a good strategic pivot for the company. And the investments in mall, I think we've signed about five odd projects, so Nitin, the first year, if you can throw some light on the kind of investment that is being entailed. Yeah, Abneesh, we are still in the process of developing a long-term business plan, so we will talk about investments in due course. But I think the plan is to open about five to six food courts early this year. You know, both the teams are currently involved in putting together a long-term business plan, so we'll be sharing more in due course. Understood. My second and last question will be on the main box office business. If I see, last year, of course, has been quite volatile, as you rightly said. So we had very strong Q2, which means base for Q2 this year will be high base, and Q1, already half of the quarter is gone and election season is there. So which means Q1 also will be weak. And last year also, except Q2, most of the quarters were challenging, I'll say. Now, when I see QSRs also, that's also a form of consumption. They have seen six quarters of slowdown, and currently, the earliest visibility of a turnaround seems Q3, and that's more of a hope currently. So in our view, for box office, next three quarters, so Q1 is already gone, what exactly is needed to change? In earlier quarters, calendarization or scheduling of movies was an issue, which I think will automatically get course corrected, because if it is not working, obviously producers are not foolish enough, so they will course correct that. But what else is needed? Because your ATP is down 2% in Q4, which again, I think is a good initiative, because ultimately it has to be price value favorable to the customer. But when you see QSR slow down, when you see broad-based urban slow down across all forms of consumption, in box office, what is needed to change? I understand content part, which is very difficult to predict. Yeah. I think, you know, I always feel that the Indian market is very interesting, and that's why we are operating only in this market, and also we have a diversified portfolio. I think June onwards, the moment the elections were announced, the lineup is looking very strong to us, and I think that this business is driven... I mean, your question is what will change? What will change is that just now in the first, the way the year has started because of elections, movies are not coming. What will change is there's a robust pipeline that will bring people back to the cinemas because of the supply and and the appetite to go out and watch movies has always been there. So I think this is the nature of the business, because it is cyclical in nature, but at the same time, when the movies come, as quarter two of last year showed us, that you know, if you have a operating base which is efficient, and that's what we've done by cutting down a lot of costs, and even the capital intensity this time is going to be lesser than last year. Then suddenly, you know, all the operating matrices look end up looking very good. So I think it's it's the two drivers which have always helped us in the past, the supply side and the demand side, which we see will start kicking in from June onwards. Okay, understood. Thanks a lot. Thank you. The next question is from the line of Harit Kapoor, from Investec. Please go ahead. Yeah, hi, good evening. You know, could you please shed some more light on the asset-light model? You know, how the sharing of CapEx will work? When do you expect this to kind of, you know, start up? And, you know, how much can the, you know, CapEx from our book reduce? This is in the context of the fact that you've, you know, the gross additions in FY 2024 still resulted in a INR 600 crore type of CapEx. So just wanted to get a sense of that. That's my first question. Thanks. Nitin, you want to answer or Pramod, do you want to answer? Yeah, so, what we are doing is, you know, I think increasingly over the last 12 months, our focus has been to reduce our CapEx investments. During the last, you know, 12-18 months, we've consciously renegotiated and repositioned a lot of our existing contracts which were committed, you know, by both PVR and INOX, earlier, and have got significant amount of developer contributions to fund part of the growth. We've also renegotiated some of the rentals in most of the new locations that have got opened up. Our focus going forward, I think, is incrementally the new screen additions that we make. We eventually want to evolve to a CapEx-light model, which means that, you know, over a period of time, reduce our CapEx intensity by 30%-50%. I think it's beginning to already happen. Our next year projected CapEx is likely to be 25% lower than this year, but it'll take us a couple of years to get down to that 35%-50% level as we roll out the new screen portfolio, where, you know, our landlord partners will take and invest, co-invest with us, for most of the screen growth. In addition to that, I think, the teams are also working on, a model which will be franchisee-owned, company-operated stores, where in a lot of, new markets where we venture into, I think there will be investment made by, the property owners, and we will be operating. So the idea is to leverage our brand and market leadership, to fund, bulk of the growth as we go forward and focus on the free cash flow generation from the business. Got it. Just to follow up on that, you know, what's the give and take here? I mean, the landlord obviously invests with you, and in terms of, you know, his incremental take from this relationship, how does that kind of pan out? Is it in the form of, you know, kind of a higher rental revenue share? Or I just wanted to get your sense on that. At least from the initial transactions which you've done. Give and take will be in form of incremental revenue share for that. I think the core business will end up sharing with the landlord when we make them as a partner. Which means increasingly more and more of our deals, we are trying to pivot to higher percentage revenue share as compared to, you know, investing upfront capital. So yeah, the pivot will be a mix of incremental return on the capital that they're investing, either in form of a pre-agreed return or a higher revenue share. That's largely how it is going to evolve. And in that context, you know, if you look at this year, you know, rental revenue, if you just take rent plus CAM, rental, you know, that ratio is close to 25% of total sales, I think INR 1,500 odd crores on a INR 6,000 crore revenue. Given that you are pivoting towards slightly a more asset-light model, do we expect that those ratios don't dramatically change given that you are putting in less from your balance sheet? Is that the way to think about it? Yeah, I think it will take time for them to change at an overall level because, you know, for the incremental screen additions, it will start getting better. But because we also have a large base, and in the existing portfolio, you know, more as some of the screens are coming out of their lock-in periods, the teams are working towards renegotiating rentals and, you know, pivoting them to more reasonable rental contracts or more lower revenue share contracts. So I think that process will take time to play out. Yeah, so financially, if you look at it, the asset to turnover ratios will become better. The margins may see a slight dip. The ROCE would see a far superior return. So the ROCE would be far superior. So asset to turnover ratio is going to go better. Margins may see a slight dip in our model, which is capitalized. Effectively, the returns on capital employed will be far, far superior. Got it. Thank you. Last thing was on the convenience fee. You know, when we look at this quarter, I think it's a full impact of variabilizing the convenience fee. Just wanted to get a sense of whether this is the kind of run rate as a, you know, on a per footfall basis or a per admit basis that we should kind of model in for the future. Okay. You can use, I think, the current quarter number as a broad estimate, per footfall, you know, to use it for modeling purposes because it is largely variable in nature. So I think it will be directly proportional to, you know, the footfall addition that we will have. Okay. I have more, I'll come back to you. Thank you. Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead. Good evening, and thanks for the opportunity. My first question is on the screen closure that we are talking about, about 70 screens. We are also in the process of renegotiating the rentals with the existing screens which are coming up for renewal. Putting these together, putting these statements together, can we say that only where you are not able to reduce the rentals you are closing? Is it a fair statement, a fair assumption to make? Not really. I think we are also focused on shutting down screens where we believe they have come to the end of their life cycles. The malls which were built 10 or 15 years ago have become dilapidated and are unlikely to survive in that market, given the new shopping centers that have opened up in that city. I think that's the key driver. Of course, rent plays a also. If we believe that rental is the only way to solve for it, then we'll definitely work hard towards reducing the rental. But I think in most cases, we've realized that, you know, in some markets, better shopping malls have opened and taken away the market share. And the new, in most of the new malls, only we are present. So shutting down an obsolete mall will, you know, help us in cutting down not just the operating losses, but also shift most of the consumers to the new age shopping center, where we are the brand we are present. So, you know, we are likely to be the beneficiary of closure also in some of these markets. Right, right. But last time we spoke, I think, last year there was a comment that we have identified all such screens, and this year there will not be such closures. Is it becoming an ongoing exercise or your threshold for shutting the malls is also has gone down? I'm just trying to understand, because obviously there is a data investment, you can't recoup some of the investments which are made in the screens. So how should we think about it? Yeah. So I think this is going to be a continuous exercise in any retail business. Every retail business, on a continuous basis, will continue to evaluate, you know, their retail portfolio and something which was built earlier and become obsolete. It's a continuous process. Most of the retail companies shut down about 2% of their stores on annual basis, which has become obsolete. In our case, the numbers are marginally higher than that because, you know, we this year coming out of a merger and, you know, we've reevaluated the portfolio in context of some markets which are not firing, and hence this number looks high. But this will be a continuous exercise. And most of the assets have actually lived up their useful life, after which we are closing them. So in terms of the write-off, we will be minimalistic because most of these assets have already lived their life. It is when you look at the ratio, revenue ratio, revenue has dropped because the malls are not performing, by virtue of which we are looking at the closure. Right. And one clarification on this FOCO model that we are talking about to reduce the CapEx intensity. I just want clarification because we already operate the management properties. So what is the philosophically, what is the difference between management properties versus FOCO, versus say a developer as a partner where he invests little bit? What is the key difference between this one? In that it is the same model, the franchisee-owned and company-operated. It's the same model that we are talking about, the management structure of things. Effectively, if you look at it, India is one of those countries wherein the box office this year has expanded. Unlike most of the other countries, across the world, the box office in the country has expanded, which gives us a visibility that there is more to happen in terms of screens in the country, and that is one of the reasons to adopt this FOCO model, wherein we are finding a lot of traction coming in from far and wide across the country. It is the same model, but given the scale now that we want to operate it, it may be worthwhile to look at it after three years when there will be substantial income which will be getting generated from the management fee in this model. So, am I right in understanding that in FOCO or management properties, CapEx is 100% done by the developer, and in other cases, only few part of the CapEx is done by the developer, right? Absolutely. In the capital light model, you could look at it that the immovables would be invested by the development partner, and the movables would be brought in by us. In the FOCO model, both the movables as well as the immovables, to the extent of 100% of the investment, shall be brought in by the development partner or an investor. Typically, in a screen, as a percentage of CapEx, what will be contributed by the movable and what will be the, by the immovable? So anywhere between 35%-45% amounts to the immovable, and 50%-55% amounts to the movables. But this is not something new concept, right? Because during the merger also, we had around 35 management properties. Now, if you look at it, it is close to 42 management properties. So it hasn't really grown. The management properties hasn't, in number, hasn't grown in last two years. So what has changed now that, you know, we are, we see more developers will be happy to do this? So one of the reasons which I suggested right in the beginning was the expansion of the box office happening in India, is one of the clear indicators that there is more to screen growth in the country. That is point first pointer. The second pointer being the fact that many of the shopping centers who are looking at multiplex being their partner are very happy to work on a franchise-owned, company-operated model, provided they have returns out of it. So in effect, if it's a bad center or a bad shopping center or a ghost mall, there a FOCO model is also not going to make any success for anyone, because that is going to die down on natural death in very less time. So that is not the objective. So FOCO model again, would be happening in very, very select malls. It will not be that anyone who is able to give a deal for a FOCO model can basically do a contract with the company. It is a proper feasibility wherein it is done to the returns of the developer also as well, because if the development partner or the investor doesn't make returns, this model is not going to fly for a long run. Understood. Understood. Finally, on the new screens that you are guiding of 120 new screens in 2025, you mentioned that it's you are very selective. Does it mean the actual supply of new screens by your letter of intent is much higher, and out of that you have chosen only this much? So that this guidance can dynamically improve over the period of the year? Yeah, I think currently our focus is we to, you know, expand more in South, like we said, and you know, we are reducing down the new screen handovers this year. The focus is to, you know, optimize occupancies across the existing surface. That's the near-term focus, and reduce CapEx intensity. So I think progressively over the last 12-24 months, we've reduced the new screen handovers and additions. So this 120 screen, you know, almost 16%-65% of the pipeline is already under fit-out, and the balance is some of the screens where we are taking incremental handovers of. Bulk of them are in South India. And that's how we will end up opening about 120 new screens this year. Nitin, does that mean you have rejected to take over the other properties which were handed over to you? Yes, we rejected a huge number of properties. So the ratio is actually one to six. So out of the six projects which come on the table or basically are having a multiplex, we end up selecting one of those. Understood. Then any, of course, any screen, obviously, at some cost you will be happy to take. There is never a no to the screen, so probably at a lower rental, so you'll be happy to take. No. Because, you know, you can look through the screen and look at it, that which screen and even which is a zero rental also would have an operating loss. So, you know, the screens can make an operating loss even at no occupancy cost. So effectively, not all screens would be able to pass the litmus test. I think the fundamental of any retail business is demand-supply economics in that catchment, which is the way we look at as a business. That's the primary, you know, basis for us to take a call on when, whether we want to do the site, and then apply the cost dynamics on top of it. Understood. Understood. Thanks for answering all the questions. All the best. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead. Hi, thank you for the opportunity. I just wanted to check if it would be possible to quantify the incremental mergers and acquisitions that you expect in FY 2025? It's very tough for us to quantify that number. I think as we progress along during the year, we'll be able to give a better guidance, but it's very tough for us to quantify a number right now. Understood. Thanks. The second question I had was, if you were to remove the drag of 70 screens that you plan to close in the upcoming financial year, would it be possible to share any term margin data which you can expect, assuming that some of these screens could be loss-making? If we were to look at FY 2024 performance of these 70 screens. No, I think it's too small a number for us to comment on, on a portfolio of 1,700 screens, how it will impact the overall margins. But, you know, broadly, most of these screens are, you know, loss-making in nature. It's so any closure of, you know, bottom end of the portfolio will have incremental impact on the margin. But in the overall context of things, I think it will not be very significant. Understood. Understood. That's all. Thank you. Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Pvt. Ltd. Please go ahead. Yeah, thanks for the opportunity. So the 70 screens that we plan to close, I mean, has the rental agreement ended or are we disengaging in between? And if yes, do we have to pay any fee for that? And a related follow-up is that, if we are choosing to opt out in between, how does it impact the relationship with the developer if we are signing a new property with him anywhere else? Our contract... We are not in breach of our contractual obligations in all these 70 screens. So we are maintaining the sanctity of the contractual documents that we have signed with our development partners, hence ensuring an amicable exit, which is allowed as per the clauses or the covenants, you know, signed by both the parties. Do we have to pay any fee? Because typically these are long-term contracts, if I remember right, for 10-15 years. Do we have to pay any fee for disengaging in between? Oh, with an enforcement of a lock-in, most of the clauses, most of the agreements do have a lock-in period to our favor, which could be anywhere between three to seven years. And, in accordance with that, we have the right to take an exit after the lock-in exit period without any obligations of any payout. Sure. And, can you share, are the closures a maximum under the PVR brand or under the INOX brand? And, if possible, is there any screen which is... Sorry? It's a mixed bag. It's a mixed bag amongst both PVR and INOX, everywhere PVR, everywhere INOX property. It's a mixed bag, and the ratio could be very, very similar. Any screen below, say, five to seven years within this portfolio?... which we have opened, say, five to seven years? Not as of now. Sure, sure. So just one last follow-up from my side, and this pertains to the ad-free movie campaign that we launched recently. I just wanted to understand the business rationale of replacing ads with content in the current environment. So basically, when you play ads, the flow-through to EBITDA is high. But when you're trying to replace it with content, especially in this environment when the release flow is a bit erratic, you may incur a fixed cost with, say, little corresponding revenue because footfalls are lower. So just wanted to get a sense on timing with respect to this product launch. So first and foremost, this is an experiment. We have just kind of done this experiment in about seven cinemas, spanning over 29 screens. And there is no right time for an experiment. We often, whether it's F&B, whether it's design, or whether it's such experiments, we would want to, at any point in time, continue our journey on these experiments. Because by the time we get to know the real output of how consumers are behaving, we are in a position to either then sort of expand this experiment across a larger domain or shut it down. So in fact, on the contrary, we felt that this was a great time to do run all such experiments. Now, coming back to what was the logic? The logic was simple that in our luxury cinemas, we get a clientele which is very, very, you know, time sensitive. They are the ones who would want to get in for a movie experience, and they would not want anything to sort of come in between the movie experience, because they are largely all time poor guys. They are also the consumers who are willing to pay a tad extra for getting that kind of experience. And that's the reason why, when we started off, we felt there were two ends to this whole experiment. When the big movie comes, because of the shorter turnaround, we could add a show during that time. During the non-peak or non-blockbuster period, we could sort of charge a higher ticket price for an ad-free experience. These experiments are on course, and hopefully within about eight to 10 months from now, we will have a much far better, clearer picture of how this is kind of evolving. So far, is it fair to assume that the incremental revenue that is coming from adding an additional show more than compensates for the ad revenue loss that you might be taking? So we exactly know what is the ad revenue in these cinemas. The whole plan has been chalked out, keeping in mind that this experiment should be successful, because nobody would plan an experiment wanting it to fail. So we have planned and we have chalked out a budget of how much we need to incrementally sort of galvanize extra footfalls to be able to offset that revenues from advertising. So the teams are fully aware, and as I said, with big films, extra show will start to play because of the sheer quick turnaround time. And during the non-blockbuster period, we will playing with a slightly higher ATP growth in these seven cinemas to see how it kind of covers up for that deficit. Sure, sir. Actually, I still did not get the answer. I just wanted to know whether the incremental revenue so far has compensated for the ad revenue loss or not? I'm sorry, I'm repeating. Too early. We- the experiment will run for nine to 10 months before. We We can give you an answer on this. It's just been four weeks, it's very difficult to give an answer currently. Sure, sure. No worry. Thank you so much. Thank you. The next question is from the line of Vivekanand Subbaraman from Ambit Capital. Please go ahead. Hi, thank you for the opportunity. Two questions. So one is with respect to the passport refresh that you have done and launched in the South, South markets as well. So, what's the update with respect to the variants of the passport scheme that you've launched? That's question one. And the second question, as far as the franchise model is concerned, do you have any specific targets in terms of what proportion of your new screens will get rolled out in this model? And have you had any discussions or detailed study in the catchment areas where you will roll this out? Is it more a South phenomenon? Is it more on an incremental basis in Tier Two and Three cities? How should we think about it? Thank you. So, I'll take the passport question. A passport currently as of today is about 1.8 lakh total out of which South contributes close to about 35% total passport enrollment. What we are seeing while there is a fairly decent uptake so far and we are adding subscribers virtually every day what we are seeing is that once the flow gets better this has a potential of doing a lot better. We had actually envisaged that South will kind of take over all the other markets but actually North and West are also keeping good pace with the overall addition. And South still dominates with 35% but North is just behind at about 32%-33% additions as well. So overall, a very, very, encouraging signal. We believe very strongly once consumers are able to see a kind of a pipeline of movies coming in, Passport could really evolve into a game changer for us. Thank you. Thank you. The next question is from the line of Anurag Dayal from HSBC. Please go ahead. Yeah, hi. Thanks for taking my question. So I have one clarification on the FOCO model, basically. So is it fair to assume that it will be more directed towards smaller towns, or will it be in metros as well? It will be in both, both metros as well as small towns. It depends on the demand and supply situation that we are going to evaluate, and it will be in both the markets. So is it like you are offering these developers both the models when you're negotiating and they what they choose and that way you're proceeding, or you already have identified, you know, certain properties? It will be something that we will be choosing on the basis of our parameterization and then go for it. The, you know, the metros in a country like India are very, very large. So there are still unaddressed pockets wherein a FOCO model may represent a possibility for us, and that's where, you know, a FOCO model even in metros can come up. And of course, in many small towns which are still bereft of a cinema or have very limited screens, there, you know, the model may find relevant, and we may come up with the model. So, you know, when we talk about a development partner, he has certain expectations on his financial return. As a company, we have certain financial expectations on our money. So effectively, that is the mix that we are going to use in terms of defining whether it will be a FOCO model or a capital-light model. Great. Great. And, my second question is on this JV with Devyani. So basically, it is, purely for pre-ticketing, or you are exploring that, you know, in future, brands, will be available inside PVR premises as well, like you have the, your tie-up for Costa Coffee, something like that? No. So I think, currently the partnership is focused exclusively on rolling out food courts for a pre-ticketing area. Obviously, you know, Devyani has been a good SME partner to us. They, they supply to us the entire Pepsi products. We've also had a partnership with them for Costa, where we have 76 or 78 stores already operational within, in premises. So that is independent of this JV. Here, I think the focus is to roll out food courts in shopping malls all over the country, and we're in the process of building a long-term business plan for this business. Okay, thanks. That's both of my questions. Thank you so much. Thank you. The next question is from the line of Akhil from Piccadily Family Office. Please go ahead. Yeah. Hi. Thank you. So my question is on the expansion plans that you have. So, the last few years have been challenging for the industry and for multiplexes in general. You had to do fundraise a couple of times. Your debt on the balance sheet is really high, and yet PVR INOX is expanding rapidly. You spent over INR 600 crores in CapEx this year. So don't you think consolidation would be a better strategy other than just expanding? Don't you think strengthening the balance sheet, reducing borrowings, and just having a strong balance sheet would be a better plan going ahead? Yeah, that's what we've said in the presentation. If you look at our investor update, that's what we've said, that we intend to reduce CapEx by 25%-30% this year over what we did last year. We want to use all our free cash flows that we generate from the business to pay down debt. In addition to that, we've also mentioned we are also evaluating monetization of our own real estate assets that we acquired by way of merger with INOX, and looking at a potential sale of those assets, which could potentially, you know, get us anything between INR 300 crore-INR 400 crore, and use all of those proceeds to reduce leverage from the balance sheet. So the idea is in next 12-15 months or 12-18 months, bring down leverage on the balance sheet from free cash flows and, monetizing real estate assets by at least 50%. Okay, but 2023 has been one of the best years for cinema and cinema history, and we are still PAT negative. So do you ever see that changing? Do you see the economics of it changing or... Because even now, a large part of our costs are going into interest costs as well as rental expenses. We are not, first of all, PAT negative. We have INR 114 crore PAT this year. But yes, our operating margins are still trending below where we were pre-pandemic. You would notice that we've done a lot of work on the cost side, costs which were, you know, within our control. I think but the revenues are still not fully back, occupancies are, you know, trending still lower than where we were pre-pandemic. Mix of supply side issues, because, you know, we've not had, you know, all the languages firing together. But and ad revenues have shown good traction this year. They've picked up versus last year, and we are hoping that, as the momentum continues, hopefully, you know, this year we should see ad revenue growth over what we've achieved in the current year and getting closer to where we were, you know, pre-pandemic level and hopefully crossing that number. So as the revenue picks up, I think the margin profile of the business should come back. And, you know, whatever is the free operating cash flow the business will generate, will be used to reduce the leverage on the balance sheet. Okay. Sure, sure. And my second question is around competition. So when you are opening up new screens, do you see any competition from other multiplexes? How do you see your competitors evolving? Do you see the number of suppliers of theaters in the country reducing? Because that is where a major growth is going to come going ahead. So the competition in the country is in fact expanding. If you look at a lot of regional players have taken a position wherein there is more and more, fleet of operators coming into the market. Within this competitive domain, we intend to keep our, you know, position intact, and we would tend to believe with the modeling and the structures that we have come out with, which is capitalized FOCO as well as a lease model, we should be able to retain the position and, be able to grow and expand also as well within the given terrain of the country. Okay, okay. Sure. Thank you so much. Thank you. The next question is from the line of Abhishek Kumar Jhunjhunwala, from Ken Capital Services Private Limited. Please go ahead. Yes, Abhishek, go ahead. The participant got disconnected. The next question is from the line of Rajnish from Bharat Pe Research. Please go ahead. Yeah. So my first question is slightly strategic in nature. So on the one hand, we are being slightly conservative with screen growth, and our net screen growth for the next year will be, say, around 3% odd. At the same time, we are moving towards, F&B partnerships with Devyani. So just wanted to get a hang of the management view on the core, movie box office business, and whether they are seeing any medium to long-term, negatives there as a result of which we are trying to diversify, or the broad rationale, with respect to the capital allocation, away from the core business into, ancillary business as such. Yeah, I think, the main idea behind, you know, the merger and, building a large scale in the core exhibition business was to leverage the brand, to the competitive advantage and reduce, you know, be in a position so that your return on capital employed, the metrics could improve. Now that we've reached that position where we have a large market share in this business, our ability to incrementally grow by putting in lower capital on our own balance sheet has to evolve from here. It will not happen overnight, but it will play out. That's the way we want to grow, you know, going forward. And that's part of the core exhibition business expansion strategy. I think the 120 screen addition and 70 screen closure is part of our operating strategy. We are very focused on growing the business profitably, and hence the decision to close down bottom end of the screen, is, you know, focused purely from a profitability metric. The idea is, so our exhibition growth, you know, reduction, that you're seeing is largely because we are rationalizing the portfolio of underperforming screens. We're still continuing to add 120-odd screens, and I think that screen growth number will continue, but our CapEx investment to build out new screens in the coming years will keep going down from where we are. And the idea is to use the free cash flows to look at adjacent businesses which could potentially, you know, add value over a period of time. And hence, food is a very large piece, which we currently are in a post-ticketed area, and this partnership to invest in the pre-ticketed F&B, you know, is one of such things that we are, you know, looking at. Got it. And so my second question is on our market share in the Hindi box office segment. So if I'm looking at the slide correctly, I think our market share has gone down slightly from, say, 42.9% to 41.5% in the Hindi segment. So just wanted to check that despite our growth and our market position there, why do you think we're losing market share in this segment? And incrementally, what is the management focusing on to kind of improve our position there? I think the market share hasn't changed materially. What happens is, you know, it's the nature of films which end up doing well. Sometimes there are mass market films like Gadar, which will do exceedingly well in large pockets. They are not typically multiplex films. They do exceedingly well in large number of single screen theaters, so your market share in case of those films will be slightly lower. Then there will be films which will be, you know, do significantly better in multiplex. So these minor fluctuations in market share is entirely a function of what kind of films have done well. And if there are some films which have done exceedingly well, were dominated by large single screen theaters, you know, that's how it plays out. So if you look at a film like Rocky and Rani, which was primarily a multiplex movie- Right. Our market share in that film was in excess of 50% you know, as compared to other, where our market share would be probably 30%. You know, so those variations are the reason when you look at the total average numbers, it could be minor, you know, here or there, but there is no overall shift. That's it from- Thank you. The next question is from the line of Naveen Baid from Nuvama Asset Management. Please go ahead. So, of the 120 screens that the company plans to gross additions, how many are going to be in the FOCO model? About 15 screens out of this would be in the FOCO model. The balance- 15, 15. [audio distortion] Were contracted under a lease model itself. Bulk of these screens, like I mentioned, are already under fit-outs from previous year. This year, the new screen additions is, you know, very limited in terms of new screen handover, but yeah, about 15-20 screens will be [audio distortion] under this model. So but since you said that most of the screens are already in the fit-out stage for this year, so would it be fair to assume that, in FY 2026, whatever the screen addition count would be, a bulk of that would be under the FOCO model? Like, for example, this year, it's turning out to be close to 10%. Will it be closer to, say, 20, 30% or even higher in FY 2026? The model is going to gain presence in the coming years. It will take about four years for this model to become a dominant model. In the next year, you could see 20%-25% of the screens in the Capital Light, and FOCO model. Got it. Thank you. Thank you. The next question is from the line of Devang Bhatt from IDBI Capital. Please go ahead. Hi, thank you for taking my question. Just wanted to know whether it is possible for you to quantify the debt that you are planning to reduce this year and next year. And because of this FOCO model, how much reduction in rental will come for this year and next year? Yeah, it's very tough to quantify. Like we said, you know, the plan is to whatever free cash flows that the business will generate after the CapEx this year, all the money will be used to pay down debt. You know, but it is a function of how the, you know, box office pans out this year. So it's difficult to quantify a number. In addition to that, we've also indicated that, all the proceeds from monetization of real estate assets, they will get used to, you know, pay down debt. So over the next 12-18 months period, we think, it will be at least 50% of, we want to get down to 50% of the existing average loans. Right. And in terms of rental that you are seeing, how much benefit in terms of rental you will see roughly this year? No, it is not possible for us to quantify on that. Okay. Lastly, in terms of screens, that you have said that, you know, there will be a reduction in CapEx by 25%. Would it be on combined business? I mean, the CapEx that you will do for Devyani with Devyani, is it that, you know, or it would be similar to FY 2024 if you combine Devyani in terms of CapEx? Yeah, yeah, yeah. Actually, if you look at our total CapEx outlay this year was about INR 630 odd crores. So we expect that to go down by at least 25% this year. Okay, that includes Devyani investment? Yeah, everything included. Everything included, yeah. Okay. Thank you, thank you, sir, for taking my question. Thank you. Due to time constraint, that will be the last question for the day. I will now like to hand the conference over to the management for closing comments. Over to you, sir. Thank you. I would like to thank everyone for taking out time for the earnings call. In case, you know, we've not been able to answer some of you, you feel free to write to Gaurav Sharma and Saurabh Kant, my colleagues, and we'll be happy to come back to you with answers to your questions. Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.