PVRINOXNSEQ2 FY2024October 19, 2023

PVR INOX Limited

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132turns

13analyst exchanges

7executives

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Management on call

Ankur Periwal

AXIS CAPITAL LIMITED

Ajay Bijli

MANAGING DIRECTOR – PVR INOX LIMITED

Sanjeev Kumar

EXECUTIVE DIRECTOR – PVR INOX LIMITED

Nitin Sood

GROUP CHIEF FINANCIAL

Alok Tandon

CO-CEO CENTRAL, WEST &

Gautam Dutta

CO-CEO NORTH & SOUTH– PVR INOX LIMITED

Kamal Gianchandani

CHIEF OF BUSINESS PLANNING & STRATEGY & CHIEF EXECUTIVE

Key numbers — 40 extracted

4.8 Crore

TP and SPH leading to highest ever quarterly revenue, EBITDA and PAT. In Q2 of FY2024 we welcomed 4.8 Crores guests and delivered an ATP of 276 and SPH of 136 which represents a year-on-year growth of 64%,

64%

rores guests and delivered an ATP of 276 and SPH of 136 which represents a year-on-year growth of 64%, 25% and 15% respectively over proforma PVR and INOX numbers in Q2 FY2023. Coming to the financ

25%

guests and delivered an ATP of 276 and SPH of 136 which represents a year-on-year growth of 64%, 25% and 15% respectively over proforma PVR and INOX numbers in Q2 FY2023. Coming to the financial r

15%

and delivered an ATP of 276 and SPH of 136 which represents a year-on-year growth of 64%, 25% and 15% respectively over proforma PVR and INOX numbers in Q2 FY2023. Coming to the financial results f

2020 Crore

ting for the impact of Ind AS 116 relating to lease accounting. Total revenue for the quarter was 2020 Crores, EBITDA was 447 Crores and PAT was 207 Crores. Proforma financials of PVR and INOX combined fo

447 Crore

nd AS 116 relating to lease accounting. Total revenue for the quarter was 2020 Crores, EBITDA was 447 Crores and PAT was 207 Crores. Proforma financials of PVR and INOX combined for the same period last ye

207 Crore

ease accounting. Total revenue for the quarter was 2020 Crores, EBITDA was 447 Crores and PAT was 207 Crores. Proforma financials of PVR and INOX combined for the same period last year were revenue of 1082

1082 Crore

rores. Proforma financials of PVR and INOX combined for the same period last year were revenue of 1082 Crores, EBITDA of 16 Crores and PAT loss of 78 Crores. The biggest highlight of the quarter was a his

16 Crore

als of PVR and INOX combined for the same period last year were revenue of 1082 Crores, EBITDA of 16 Crores and PAT loss of 78 Crores. The biggest highlight of the quarter was a historic performance of

78 Crore

ed for the same period last year were revenue of 1082 Crores, EBITDA of 16 Crores and PAT loss of 78 Crores. The biggest highlight of the quarter was a historic performance of the Hindi box office. Jawan

750 Crore

during the quarter emerged as two of the biggest grossing Hindi films of all times recording over 750 Crores and 620 Crores at the box office, respectively. In addition, midscale movies like Rocky Aur Rani

620 Crore

ter emerged as two of the biggest grossing Hindi films of all times recording over 750 Crores and 620 Crores at the box office, respectively. In addition, midscale movies like Rocky Aur Rani Kii Prem Kahan

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Guidance — 20 items

Ankur Periwal

opening

“The call will be starting with a brief management discussion on the quarterly performance followed by an interactive Q&A session.”

Ankur Periwal

opening

“PVR INOX management will be represented by Mr.”

Ajay Bijli

opening

“We are on course to open 150 to 160 new screens in FY2024 and expect to exit a total of 60 screens in the current fiscal.”

Abneesh Roy

“I wanted to understand given now you are much more confident from the Hindi movie business which was suffering for the industry what will be the plan from one to two years perspective on the overall debt levels, you had rationalized the store openings, the cinema screen openings also earlier, would that change because of now free cash flow turning on the favorable side?”

Ajay Bijli

“No because we still have a pipeline as I said of 100 to 150 odd screens that we will be filling and I think the accruals will be enough to take care of both and every screen that we are opening is going to be value accretive.”

Abneesh Roy

“So just to understand 1100 Crores net debt which is there currently what will be the long-term goal on this do you have any aim to make it almost negligible over the next two years will that be your vision?”

Nitin Sood

“Our operating earnings and cash flows will continue to grow and they will be sufficient to take care of our growth and the surpluses will be used to reduce the net debt levels in the balance sheet.”

Gautam Dutta

“So largely Rs.99 promotion was done to one correct the price perception of cinema food being expensive, number two we wanted to drive higher conversion at the concession both the objectives were completely met and this is something that we plan to keep the promotions on for a long time.”

Abneesh Roy

“Sure and last quick question on advertising revenue quarter-on-quarter very good scale up and now that you are quite confident on the movie industry revival which I think will be also true for the advertisers and overall GDP is doing also quite well so in that context where do you see pre- COVID level getting breached from outlook perspective when do you see pre-COVID level on advertising getting breached?”

Ajay Bijli

“Q3 and Q4 are looking very good and positive, but in terms of breaching the pre-COVID PVR INOX combined revenue it will be next year.”

Risks & concerns — 7 flagged

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.

— Ajay Bijli

I would not be able to comment on this because the fact of the matter is if you look at the total advertising pie, cinema advertising is only about 1% of the total pie so it is very difficult for me to ascertain where that 1% is getting allocated in terms of any alternate media choices.

— Gautam Dutta

Media planners have different choices available and we are also a brand building media eventually so that money being spent on digital, on radio, on any media that works best for that product category, so difficult for me to put a finger to say the money which were coming to me has now gone to outdoor or mall activations difficult for me to have an answer around this.

— Gautam Dutta

Whether that number will be Rs.20 or Rs.15 is difficult to comment at this stage because part of it will be linked to movie-by-movie performance as well.

— Nitin Sood

For the last few quarters we are seeing a decline on a per admit level so last quarter when this question was asked we mentioned that now both our PVR and INOX are on a revenue base since the deal with BookMyShow has come to an end, I was curious why in the second quarter FY2024 on a per admit basis we are down compared to first quarter FY2024?

— Arjun Khanna

One thing on the synergy bit synergies based on the ticket prices for Q2, so the Rs.20, which it is showing it has impact of higher Hollywood share, which we have seen in Q2, so most likely that might decline a bit in the upcoming quarters right?

— Lavanya Tottala

Once we realize the full synergy benefits clearly that should have an impact of at least 200 bps on our operating margins.

— Nitin Sood

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Q&A — 13 exchanges

Yes thanks for the opportunity and congrats on very good set of numbers. My first question is on your debt levels coming down by 327 Crores. I wanted to understand given now you are much more confident from the Hindi movie business which was suffering for the industry what will be the plan from one to two years perspective on the overall debt levels, you had rationalized the store openings, the cinema screen openings also earlier, would that change because of now free cash flow turning on the favorable side?

Ajay Bijli

You are saying that will our opening of screens get impacted? No because we still have a pipeline as I said of 100 to 150 odd screens that we will be filling and I think the accruals will be enough to take care of both and every screen that we are opening is going to be value accretive. We are obviously very conscious of now how to invest capital, where to invest capital, in which malls, which development, which catchment in south India as well and keeping everything in mind we should be able to maintain our growth trajectory as well as pay down debt. So just to understand 1100 Crores net debt

Thanks for the opportunity. I was just trying to think through how is the footfall count be maintained for the subscription plan that we have just launched. So if I understand this right the customer here is paying us a fee to buy the subscription so to say and irrespective of how many time he visits us we have got our money up front, so how will the footfall count be actually be maintained, will every visit be considered as a separate footfall or how will it be?

Nitin Sood

See this is like a subscription voucher which has been sold to a customer. Every time he comes to the cinema ticket will get issued to him and that is how the subscription count will be captured and 699 is largely an advance that the company we are holding. The revenue recognition how will it happen because this is a minimum three-month plan if I am not mistaken so will we recognize the revenue right at the sale of the pass itself or will it be amortized towards the term of the plan? So it is not a long-term pass it is a monthly pass so it will be recognized at the end of every month. It has a

Thanks for opportunity. My first question is on the advertisement revenue. I think on a per screen basis we are still at least 30-40% lower than the pre-COVID levels and I think this is the best quarter we had even better than the June 2022 quarter almost double the revenue footfalls are also much higher but obviously on a per screen basis the growth is very, very less, is it a structural issue that advertisers are not coming into the cinema because there is something which is happening for the last three, four quarters despite of the strong footballs we are not translating into the advertisin

Gautam Dutta

Advertising technically works on big blockbuster films doing well. We have spoken about this in our earlier calls as well and we were very positive that Q2 would have some big titles and on basis which advertising will go up, which is exactly what has happened. Even now as we move forward advertisers are coming back there is absolutely no issue there, it is just that we need certain momentum to be able to get the money which advertisers earlier used to plough back into cinemas which had gone into other media sources, so it takes time and as I have just mentioned by next year we should definite

Sure. Thank you for the opportunity. First on the synergy benefits overall, your representation does highlight benefits coming from F&B, box office as well as overall cost synergies. Just trying to understand is the ATP improvement because of price disparity and now everything is in sync in terms of pricing across INOX as well as PVR theatres and secondly on the F&B side where are we in terms of updating the menu as well as veg, nonveg options, etc., across the INOX screens?

Alok Tandon

So Ankur we are answering your first question first. Where ATP is concerned yes we have seen a significant growth in ATP and that is because of regular inflation increase as well as the contribution of the entire synergy which has taken place across the two companies that is one. Where F&B is concerned yes we have changed a lot of menu, both companies have incorporated the best of menu of either and whether it was the erstwhile PVR or the erstwhile INOX menu are available in most of the cinema halls across the country so a lot of work and synergy has been done as you see from the slide also wh

Thank you for taking my question and congratulations on a good set of numbers. Sir I just wanted to understand the convenience fee in a little bit more detail. For the last few quarters we are seeing a decline on a per admit level so last quarter when this question was asked we mentioned that now both our PVR and INOX are on a revenue base since the deal with BookMyShow has come to an end, I was curious why in the second quarter FY2024 on a per admit basis we are down compared to first quarter FY2024?

Nitin Sood

I think Arjun we answered this question last quarter alone. Our previous contract with online aggregators had a concept of a minimum guaranteed payment irrespective of what the footballs would be and subject to a revenue share because there is no minimum guaranteed payment under the existing contract and online aggregators underperform in terms of what effective admissions were in cinemas, our effective realization due to the minimum guarantee commitment in the previous contract was higher than the revenue share commitment which is not the case under the current contract and as a result of whi

Congratulations on a great set of numbers. My question is around the screen openings. So in the earlier calls we had mentioned that our vision is to expand more towards the south and around 35 to 40% of the new screen openings will be in the south, now pertaining to that I noticed that we are fairly concentrated around Karnataka the new screen openings, so wanted to understand why the skewness towards Karnataka and what is the strategy as far as other states are concerned in the south?

Alok Tandon

Well you have seen that yes we opened a few in Karnataka but does not mean that we will not open in other southern states it is that those properties are ready in Q2 and we opened it. Going forward, you will see more screens being opened in other parts of the country also. So as we always say that we are a pan India player and yes south is important to us and this time what you have seen is that we have opened a few properties down south especially in Karnataka but the strategy of the company is to be in all possible states and the guidance which we have given that yes south is a preference. I

Thanks for the opportunity and congratulations on a great set of numbers. Sir just a couple of questions on the outlook for Q3 right so the lineup seems great, what exactly are you expecting from the movie vis-à-vis Q2 numbers and if you could give us any update on how the screening of matches is going that will be helpful?

Nitin Sood

See we do not like to give any specific guidance on Q3 or Q4. All we can say is that the content lineup is quite strong. October and November have been slightly slower in terms of movie releases, but December is looking quite packed. There are almost two big films releasing every month. So both Q3 and Q4 are looking quite strong and they should be decent quarters, but it will be tough to replicate what we manage to get in Q2 where all the films fired in one quarter, Hindi, regional and English that will be a tough act to repeat but irrespective of that I think Q3 and Q4 should be good, decent

Hello, thank you for the opportunity and congratulations Sir. Sir most of my questions are answered. Just one thing when you mentioned ad revenue you expected to recover next year is it on absolute levels or per screen basis that you expect it to reach pre-COVID levels next year?

Gautam Dutta

At absolute levels. So it will still be lower per screen basis even in FY2025 then? Yes. One thing on the synergy bit synergies based on the ticket prices for Q2, so the Rs.20, which it is showing it has impact of higher Hollywood share, which we have seen in Q2, so most likely that might decline a bit in the upcoming quarters right? Yes it could because ATP is a function of the kind of content we get, mega blockbusters and Hollywood do drive ATP up, you are right. That point is quite valid. Ticket pricing will partly also be impacted by big films, but if you look at the way we have calculated

Congratulations on a great set of numbers Mr. Bijli and thank you for the opportunity. My question is on the price elasticity of the tickets. So what I understand is that tickets even for a blockbuster like Jailer are priced lower even where there is demand as compared to Jawan in the north so why is this difference is it because of the competition or if that is the case because the next opening of screens is concentrated in south right, so if this is the case how are we going to work on the ATP to increase the ATP down south I will come on to the second question later?

Alok Tandon

See Jailer was a Tamil film and in Tamil Nadu there is a price cap incident. So there are few southern states where there is a cap on tickets and hence we cannot increase it. So the comparison with Jawan and Jailer was not right because Jawan released all over the country and in states where there is absolutely free pricing so that is one answer and when you said that how will we increase the ticket pricing once the movies which are released in Tamil Nadu, Andhra Pradesh or Telangana we have to go as per the rates which are already subscribed but in other states depending on the demand of the

Thanks for the followup questions opportunity. My question is on synergy so if you look at the PVR INOX combined numbers the pre-COVID level we are around 19 to 20% EBITDA margins and going by the quantified synergy benefits we have shown in this quarter it looks like our steady state margin should be at least 200 bps higher than the pre-COVID levels is this the right understanding and this is what we can build in our numbers?

Nitin Sood

Absolutely I think this is what we have guided. Once we realize the full synergy benefits clearly that should have an impact of at least 200 bps on our operating margins. Right so that means the current quarter margin 22% it is still below because this is a very strong quarter so despite that we just achieved around our steady state margins, so in a future scenario where this kind of a blockbuster quarter should result in a much higher margins, right? This quarter already reflects a very large portion of the merger synergies, but yes lot of elements will play out like advertising revenues stil

Yes, Sir congratulations on great set of number. Sir how much could be the synergy benefit in the coming quarters left to pencil out?

Nitin Sood

We cannot give any quarterly estimates. On a ballpark basis we still have like 30% left or we have 70%.we have done with it, 30% still remaining. I would not like to give any guidance. On the cost front when we were comparing quarter-on-quarter the rentals are up by 12%, personal expenses about 8% and then other expenses about 16% because rentals are more or less fixed in nature, why there is so much of inflation in such cost can you just throw some light? There are three factors. One we have added a lot of new screens, new age screens in new shopping centers, so one there is screen addition.

Hi congratulations on good second set of numbers. I missed the first 20 minutes of the call, so I am sorry if question is repetitive but my question is regarding debt are you giving a guidance on debt for the next two years, we see the debt number in the next two years and also what is the net debt right now?

Nitin Sood

One our net debt at the end of this quarter is about 1100 Crores as compared to 1430 Crores which was at the beginning of the year. So we have reduced our net debt by 327 Crores in the first six months. I think I can only give you a directional sense over the next two years depending upon how the business performs; our endeavor would be to reduce and pay down leverage from even the existing levels. Our current year endeavor is to get to 1:1 debt to EBITDA but over a period of next two years we want to fund all our growth from internal accruals, be free cash flow positive and use the free cash

Thanks everyone for taking out time to join the earnings call. If you have any unanswered questions please feel free to write to us and we will be happy to respond. Thank you.

Management

Speaking time

Nitin Sood

Moderator

Gautam Dutta

Arun Prasath

Arjun Khanna

Ankur Periwal

Apurva Mehta

Abhisek Banerjee

Lavanya Tottala

Yash

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Opening remarks

Ankur Periwal

Thank you Anshup and good afternoon everyone and welcome to PVR INOX Limited’s Q2 FY2024 post result earning call. The call will be starting with a brief management discussion on the quarterly performance followed by an interactive Q&A session. PVR INOX management will be represented by Mr. Ajay Bijli, Managing Director; Mr. Sanjeev Kumar, Executive Director; Mr. Nitin Sood, Group CFO and other senior management personnel including Mr. Alok Tandon, Co-CEO Central, West & East and Mr. Gautam Dutta, Co-CEO North and South. Over to you Mr. Bijli for the initial comments!

Ajay Bijli

Thank you very much. Good afternoon everyone. I would like to welcome you all to discuss the unaudited results for the quarter and half year ended September 30, 2023. I hope you have 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’s website. I am delighted to share the quarter ended September 30, 2023, was a record-breaking quarter in company’s history with the highest ever admits ATP and SPH leading to highest ever quarterly revenue, EBITDA and PAT. In Q2 of FY2024 we welcomed 4.8 Crores guests and delivered an ATP of 276 and SPH of 136 which represents a year-on-year growth of 64%, 25% and 15% respectively over proforma PVR and INOX numbers in Q2 FY2023. 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 2020 Crores, EBITDA was 447 Crores and PAT was 207

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