PVR INOX · tone and specificity signals across the available quarters.
Language signals
We have no control over this, but we're watching it very carefully. Our sense remains that over the next four to six weeks, there would be a solution because studios and both the Actors Guild, as well as the Writers Associations are working very closely.
What was missing has been the absence of some long-term campaigns because of the overall negativity in the market about which films are doing well, is Bollywood be able to deliver a success or not... All that noise has completely died out now, and we are now over the next 60-90 days in the market to close some of the long-term deals.
Our business is a very high operating leverage business. We run a certain fixed-cost structure for all the properties that we have. Number of footfalls has a direct impact on the overall profitability of the business.
The outstanding performance of both big and small films demonstrates that audiences are eager for high quality content regardless of the film's budget or the star cast.
We have had flexi ticket pricing forever. We always use pricing as a lever. We practice variable ticket pricing depending on the films, locations, days, weekend, weekdays, even within the days. What's happened in this quarter is lack of blockbusters—without Giga stars, consumer's willingness to pay higher ticket price is muted.
There is a lot of urgency. There have been several discussions with all stakeholders... As you know, we function with multiple different industries coexisting. Telugu is a separate industry with their own ecosystem, Tamil is a separate industry. So we've had meaningful conversations but very difficult to put a precise time frame to this.
This signals a healthier practical environment, where performances are less skewed by mega blockbusters and more anchored in the sustained strength of mid-to-high performing titles.
The sheer footfall has increased, and consumers are very actively now seeking fresh content. I think the swing is completely back. You can see this across... We've been sort of doing deep research at each of our cinema locations.
There is clearly a fatigue where people are saying, 'I've seen it all.' In fact, they seem to be now getting into a rut where a similar kind of content is finding way. They have now got into a bit of a constraint where stories, cast, everything is plain to a certain plot, whereas cinemas have started to now break the mold.
The quarter ended September 30, 2023, was a record-breaking quarter in company's history and highest ever ATP and SPH, leading to highest ever quarterly revenue, EBITDA and PAT.
The biggest highlight of the quarter was the historic performance of the Hindi box office. Jawan and Gadar 2 emerged as two of the biggest grossing Hindi films of all times.
Our focus this year is to get down to a 1:1 debt to EBITDA. But over the next couple of years, reduce that from existing levels.
Re-releases offer consumers additional choices during leaner periods for a big screen experience. The strong box office performance of both new releases and older classics demonstrates that good quality content is the primary factor that drives cinema attendance.
At a variable level, it's able to give us the contribution, which helps us recover our overall fixed costs.
As the occupancy levels improve, we will see a substantial increase in operating margins of the business.
What is giving us confidence is the fact that people are coming out. That fatigue factor of staying at home has crept in, and they want to get out. Movies, if they keep coming continuously, which they are coming continuously, because even the producers have now realized that they can make a movie even for a smaller budget.
Our guiding principle and strategy for cash is that because we are a fixed cost business, a bulk of our costs are fixed in nature. We carry anywhere between 45 to 60 days' worth of fixed cost coverage in the form of liquidity.
We agree with Mr. Aamir Khan's statement. Windows are short, and we do believe there is potential to make the windows longer. We think there is a gradual, sure shift which is taking place in the thought process of producers. They are appreciating the value for each eyeball that they get from theaters, which is much higher than the value that you get from streamers or television.
It's really heartening to see that in the calendar year 2023, India stands out as the sole major market worldwide to surpass the pre-pandemic peak in box office collections.
December has been the highest-grossing month of 2023, with the phenomenal success of Animal, which grossed over INR 650 crores and became the second highest-grossing Hindi movie of all time.
The 77 screen closure that we've done this year is going to repeat itself. It's a one-time event. New screen opening number, next year will be similar range, 150 to 160 new screens opening next year.
Theatre occupancy levels are lower than pre-COVID because admissions continue to lag. The primary reason for this has been the volatility in content supply.
December was in fact the biggest highest occupancy month for us, where the occupancy was upwards of 30%.
The idea has really got some virality. A lot of people are talking about it and are inviting their friends and family to join the show that they have created. I think this idea is going to be quite lethal and is here to stay.
If everyone comes in, just scores 30, 40 runs, you can still make 200 runs. And it's not important that one guy has to come and hit a century.
For two consecutive quarters now, the business has delivered 18% EBITDA margins at an occupancy of around 28%, compared to pre-COVID levels where similar margins were achieved at 35-40% with higher occupancies. This underlines the sustained benefit of merger synergies and structural cost optimization.
I would go to the extent of saying that our best years are ahead of us. We've not yet seen our best years post-COVID. 2026, 2027, just on paper, looking at the slate, is looking like a very, very strong year.
On advertising, Q3 has been a bit of a dampener... Starting next financial year, things would really begin to look up because we have all the three streams working concurrently — Hindi film industry, English, as well as regional.
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.
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 we are coming out of a merger.
We are evaluating monetization of owned real estate assets inherited from the INOX merger and plan to use the proceeds to reduce debt.
This year itself, people will come back to the cinemas. They are coming. Already, we got 137 million people coming to our cinemas. It remains an integral part of any mall to generate footfalls. These are temporary dips, but everybody believes in the long-term potential of this format of multiplexes in a country like India, where 1,800 films get released every year.
I think the right way to look at it would be on an annual basis. There will be quarter-on-quarter variations because this is dependent on the lineup of films and the rights that we get for distributing certain films in certain quarters. If you look at overall increase in revenue from other operating income, which is largely distribution income, on a year-on-year basis, the distribution income is up by 70%.
Going forward, with uptick in earnings and increase in occupancy levels, we will have significant operating cash flow, and the CapEx intensity in the business will come down as we transition towards the asset-light model. As a result, the operating cash flow from the business will be more than enough to take care of our repayment obligations and achieve a further reduction in net debt levels.
FY26 was a defining year for PVR INOX. We delivered our best ever financial performance, brought net debt to a negligible level and pivoted decisively to a capital light growth model.
Theater first model is a very clear model for all the producers. This year 470 have come to theatrical and only 30 have gone to OTT.
We are the preferred partner for India's leading mall developers and top food producers.