PVR Ltd
NSE:PVR
Earnings Call Analysis
Q1-2024 Analysis
PVR Ltd
The fiscal year commenced with some uncertainty as initial performances at the box office were hampered by a slate of underwhelming content in April. However, the narrative swiftly shifted with a strong resurgence in May, thanks to a series of hits from various film industries, including both Bollywood and regional cinemas, and notable Hollywood titles like 'Fast X' and 'Guardians of the Galaxy Vol. 3'. This upswing in fortunes continued through June, registering the year's highest weekend admissions. The period was marked by a steady uptrend in box office receipts, culminating in a particularly noteworthy performance with the release of the blockbuster 'Adipurush'.
The company saw remarkable gains from the success of Hollywood and regional language films, especially in urban markets and premium formats such as IMAX. Major Hollywood productions like 'Oppenheimer' and 'Mission Possible' captivated audiences and reinforced the continued appeal of the cinematic experience. This was complemented by regional successes, like 'Carry on Jatta 3' and 'Baipan Bhari Deva', signifying a wider acceptance and enthusiasm for diverse storytelling that translates into robust revenues.
There was a noted diminution in the unpredictability of Hindi film performances, with the sector witnessing improvement in collected revenues on a quarter-to-quarter basis. This includes notable performances from mid-scale movies, suggesting a positive reception to movies beyond the big-budget spectacles.
PVR INOX hosted approximately 33.9 million guests in the first quarter of the fiscal year '24, marking a moment of pride for the cinema chain. Financially, the quarter recorded a revenue of INR 1,324 crores, with an EBITDA of INR 100 crores. However, there was a reported PAT loss of INR 44 crores. This stands in contrast to the prior year where combined financials showed higher revenue and profit. In the previous corresponding period, revenue was INR 1,590 crores, with an EBITDA of INR 338 crores and a PAT of INR 142 crores.
Aligning with a strategy aimed at profitable growth and enhanced unit-level economics, the company proceeded to open 31 new screens while also closing 14 underperforming ones in the first quarter. This move is indicative of a broader initiative to optimize operations and maintain a sharp focus on efficient growth.
Looking forward, the company is optimistic about the content pipeline across all languages for the subsequent quarter, with a strong slate of Hindi, Hollywood, and regional movies poised for release. High-profile projects such as 'OMG 2', 'Gadar 2', and 'Dream Girl 2' in Hindi, 'Meg 2' and 'Gran Turismo' from Hollywood, and prominent regional films such as 'Jailer' and 'Bhola Shankar' are expected to keep the momentum going. Additionally, major productions featuring stars like Shahrukh Khan and Prabhas are set to release, suggesting a continued upward trajectory for box office performance.
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Ladies and gentlemen, good day, and welcome to the PVR-INOX Limited Q1 FY '24 Earnings Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Ankur Periwal from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Karan. Good evening, friends, and welcome to PVR INOX Limited Q1 FY '24 Post-Results Earnings Call. The call will start with a brief management discussion on the quarterly earnings 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, including Mr. Alok Tandon, Co-CEO, Central, West, and East; and Mr. Gautam Dutta, Co-CEO, North and South. Over to you, Mr. Bijli, for the initial comments.
Thanks very much. Dear all, I'd like to welcome you all to discuss the unaudited results for the quarter ended June 30, 2023. I hope you've had the opportunity to review our presentation and results, which are uploaded earlier today in our company's website as well as the stock exchange's website. Quarter 1 of this fiscal started off on a slow note due to weak content in the month of April. However, the box office picked up pace in the month of May with the success of super hits like [indiscernible] from Hindi, 2018 from Malayalam, PS2 from Tamil, and Fast X and Guardians of the Galaxy Vol. 3 from Hollywood. The momentum continued in June as we record the highest weekend admissions of 2023, primarily attributable to the blockbuster release of Adipurush. We are witnessing a consistent month-on-month increasing trend at the box office collection. The number of Hollywood releases has significantly increased when compared to last year. Strong performance of Hollywood films, especially in urban markets and special formats like IMAX, has immensely benefited us due to a robust presence in these markets and formats. The recent success of Hollywood blockbusters like Oppenheimer, Mission Possible, Dead Reckoning Part 1, and Barbie reaffirms our belief that audiences, enthusiasm for theatrical moviegoing remain intact when there is compelling content. Regional movies across languages also continue to do well. Carry on Jatta 3 has become the highest-grossing Punjabi movie to cross the 100 crore mark worldwide, Baipan Bhari Deva has become the fourth highest-grossing Marathi movie 'till date. The success of these digital services is a testament to the growing popularity and appeal of diverse storytelling. We remain optimistic about the continued strong performance of regional movies in the coming months. Volatility in Hindi performance has reduced, and we've seen a quarter-on-quarter improvement in the average collection of Hindi firms as well, with mid-scale movies like Zara Hatke, Zara Bachke, and [indiscernible] performing well at the box office. PVR INOX welcomed 33.9 million guests across our Cinema in Q1 FY '24. Coming to the financial results for the quarter. The following numbers are after adjusting for the impact of Ind AS 116 relating to this accounting. Total revenue for the quarter was INR 1,324 crores, EBITDA was INR 100 crores, and PAT loss of INR 44 crores. The former financials of PVR-INOX combined for the same period last year, where revenue was INR 1,590 crores, EBITDA was between INR 338 crores, and PAT was INR 142 crores. As we look ahead to Q2, we are quite optimistic about the robust content lineup across all languages. Over the next couple of months, we have several exciting Hindi movies lined up for release like OMG 2, Gadar 2, and Dream Girl 2 in August; and Jawan starting Shahrukh Khan in September. From Honeywood, we have Meg 2, [indiscernible], Gran Turismo in August. The Equalizer, The Nun 2, A Haunting in Venice, and Expendables 4 in September, amongst others. From the regional genre, we have Jailer by Rajinikanth, Bhola Shankar starring Chiranjeevi, and King of Kotha starring Dulquer Salmaan in August, Salaar starring Prabhas and Kushi starring Vijay Deverakonda and Samantha Prabhu in September, amongst others. On the screen openings, we've opened 31 screens in Q1 FY '24 and closed 14 underperforming screens, which form part of the 50 screens that we had guided for closure in line with our strategy to focus on profitable growth and improve unit-level economics. Our screen portfolio, including 38 management screens, stands at 1,707 screens across 351 cinemas in 114 cities in India and Sri Lanka. Now I open the platform for any Q&A. Thanks once again for joining.
[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead.
[indiscernible] I have 3 questions. My first question is on the footfall. The last three, four quarters, we are seeing that a number of admits is broadly in the 30 million to 37 million. And now this month and the last few weeks, we are seeing a [indiscernible] has also been good and no controversy for the Hindi movies. Three back-to-back, very good Hollywood movies, Oppenheimer, Barbie, MI, et cetera. So would you say that now we are moving from a say, 29 million, 33 million to a much more robust number? Even Hollywood is also doing well. Regional is doing well, [indiscernible]. okay, but finally, Hindi seems to be doing well, and there has been some delay also. For example, Jawan was delayed by a few months. So is this helping to better have better GSS, better marketing, et cetera. So what would be your take on Hindi movie revival and sustainable footfalls in the coming quarters?
I think Kumar, would you like to answer that? Hindi movies, right?
Abneesh, I think you've -- in your question, you captured all the reasons quite well. And it is definitely, I mean, April, May, and June were throwing a lot of positive signals in the narrative that Mr. Bijli gave the opening statement. We captured a few films which have done well, and those were very positive signals in the first quarter. We could see the buildup happening. And with the success of the three Hollywood films now [indiscernible], I think we are all set for a takeoff. We would not like to get into any specific numbers, but Hindi films definitely are finding favor with the audiences. A lot of -- and Jawan, like you mentioned because of VFX and to augment the marketing effort to ensure that they give the best output in terms of a film, a finished product to the audiences. They have taken more time, and I think this August is well for the exhibition space and also for different entertainment spaces on the whole. So it's all looking very positive without getting into specifics in terms of numbers.
One follow-up I had on the Hollywood, which is doing really well, passed through these. We also have the Hollywood strike, which is happening, so both on the scriptwriter, there's a strike, and also on the main star cast also now joining the strike. Now this could impact... So this would impact the marketing of the movie. And movies may be ready, but if the marketing doesn't happen, then the release again gets impacted, and next year, in fact, the pipeline gets impacted. So would you be really worried about the Hollywood strike? Or do you think this will get self-resolved at some stage.
So we believe it will get self-resolved at some stage and that some stage will hopefully be the next we record 5 to 6 weeks. But that said, this is one of those areas. This is like whether we have no control over this, but we are watching it very carefully. Our sense remains that over the next 4 to 6 weeks, it would be a solution because studios and both the Actors Guild, as soon as the Writer Association they're working very closely. A lot of what we are seeing in media is also part of the negotiation, but we understand from people we are talking to in Hollywood that there are -- the backroom channels are working at full speed, and there could be a solution at any point in time.
And currently, the lineup of Halo movies continues to remain very robust. We have plenty of movies coming. We have Dune 2, The Equalizer, Expendables, Aquaman –
There's no real... Again. So at this point, there is absolutely no delay. If you were at the point that you mentioned that with the active unavailability for promoting films, that could have an impact. We had the same talent with Oppenheimer, and we've all seen the kind of results we've got. So, we're watching it very closely, and we will see how the situation unfolds.
Sir, thanks, but this my last question is on the very good scale of the F&B spend, 9% quarter-on-quarter versus ATP, only 3%. So how much of the work in terms of augmenting INOX in terms of some of the requirements on the F&B side is already done? So what is driving this sharp-up move quarter-on-quarter that's much higher than ATP? And how much is the job done in terms of INOX also being brought up? Of course, PVR also is a continuous process. I wanted to understand that a bit.
So at least we know what has been done with synergy of F&B concerned. A lot of the INOX properties have now -- the menu has been changed. The new SKUs have come into place. And also new items like microwave popcorn, instant popcorn, all those things have been added. To take it further, a few INOX also are now selling [indiscernible]. So whether it is the changes of SKUs of popcorn and Pepsis, or Coke or whether it is introducing new MRP items or whether it is changing the sales mix, all these have contributed to the increase in SKUs.
And I would like to add to the comment you made on the average ticket price we continue to remain boring. We are quite happy with the 3% growth that we've seen in this quarter. You would also appreciate that we are comparing this quarter, which was lacking blockbusters totally, and we're comparing it to Q1 of last financial year, which was full of blockbusters, one after another. And as you know, our ability to charge in terms of ticket price goes up, and the willingness of consumers to accept our offering goes up when we have blockbusters and bigger films. We expect the second quarter to sort of makeup for the average ticket price growth. We remain quite positive on ATP growth as well.
So one very quick follow-up there. In terms of the F&D and overall, what you're doing, I'm seeing a lot of innovation, marketing innovation also being there, for example, in non-prime time, this INR 99 Samosa and all those, which are much higher. How is the response to that? What are you learning? And similarly, the minute INR 1, I think the cost in terms of the payers, what is the response? What is your learning from there?
Okay. So on the trailer show, we've got a fantastic response. We are spending close to about 22% occupancy on these shows. And what is most encouraging is that roughly about 40% of the audiences who are coming to watch each trailer are actually being tracked on booking a ticket to watch a film of one of the trailers that there was. So clearly, this technique is working. Is this that given the fact that it's a trailer so for [indiscernible] comes all the way towards the cinema to watch the show, it's people around the mall and the destination who technically walk in to watch this half-final show. So that's on the trailer show. On the -- what was your other question?
On the INR 99…
Yeah, that's been exceedingly well. In fact, all the chatter around F&B pricing being too high is completely now mitigated. We are -- we've got fantastic striate the cinema consumers are able to club both tickets as well as SMB as a holistic experience cost and which they are finding it a lot better, and we feel it's very timely done, both for weekends as well as for weekdays. And clearly, it's showing a great positive move for the SMB.
So thanks. That's all from me. Thank you.
Thank you. [Operator Instructions] The next question is from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.
Yes, thanks for the opportunity. I have a bookkeeping question. If I look at our convenience fee, it has fallen by about 23% year-over-year on a pro forma basis. But if my understanding is correct, we typically enter into contracts with ticket aggregators, and the minimum guarantee generated over time towards the term of the contract, which you essentially impact, there should not be a substantial rise or fall in this income. If you can, just explain the reason behind this 23% fall.
Yes. So two things. One, our contract with BMS came to an end earlier this quarter. So PVR has renegotiated the contract. The contract is more on a revenue share basis and not with a minimum guarantee commitment. Secondly, also, this is also the first quarter where INOX contract is also consolidated. INOX is already on a revenue share basis. So part of the impact that you see is due to drop in admissions and when you compare it with Q1 of last year. And that's partly the reason. And secondly, there is no minimum guarantee. Now it's a pure revenue share contract, which is similar to the previous term.
In share, what is the quantum of our share in this arrangement?
No, we'll not be able to share any specifics with respect to the contract.
Sure. And sir, my second question is with respect to the debt level, which were up by about INR 150 crores on sequential basis. If you can elaborate a bit on this, because if I recollect properly, in the last call, you highlighted that our net debt levels will remain more or less constant. And the CapEx funding will happen via internal approvals, but we have seen that move by about 150 or so. So any reason behind this?
So first of all, debt levels have only moved up by INR 70 crores at a net debt level, not INR 150 crores. I think our gross debt has moved up, but that is because of our strategy to keep more cash on the balance sheet. So net debt is only about INR 70 crores. And we just hit by the guidance that we've given, but there will be quarter-on-quarter volatility. Some quarters which are -- because we are on a CapEx plan, we are putting out screens. Some quarters, which have a lower EBITDA, you will see debt levels marginally rising. In some quarters where we have higher EBITDA, you will see debt levels decreasing. But on an annual basis, there is no change.
Sure. So actually, I was actually referring to the gross debt number, but nonetheless, that's okay. Sir, one last question from my side. I mean we have the Cricket World Cup or come up in India in the month of October. And historically, we have been airing to massive on the price side as well. So any particular contract you are excluding the PPP this time around? Or where are we on that point, if you can just share some thoughts on that?
So we are in the process of signing the contract, and we will screen just about any match that we wish to in the tournament. So we will kick on those important matches, and we will be seeing those matches, specifically all the India matches.
Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead. Mr. Arun -- ladies and gentlemen, we've lost the line for the current participant. We proceed to the next question from the line of Harit Kapoor from Investec Capital. Please go ahead.
Hi, good afternoon. I just had two questions. One was on the special format slide which you posted in the presentation. Given that experiential films are actually doing even better probably than inventory COVID levels. Is there a draw that this 13.5% salience, which is a special format, should be increased further? I just want a better outlook on how you're thinking about this...
Yes. I mean this is already 13.5%, and as the slide said, in 2019, have some special format. Definitely, this differentiates us even further from any other format of movie watching. And I think consumers have given their verdict when they go out, and they see these movies, they become more impactful. As I said, big movies become even bigger.So we are rolling out more and more of these in our various properties, which are coming up. And also in some of our existing properties, which were retrofitting and renovating, we are also introducing various formats like IMAX, ICE, 4DX, MX4D, and also LUXE, Insignia, and Director's Cut. So all these special formats, definitely have further room for growth.
So in terms of our overall mix, this number should keep increasing. Any targets that you haven't paid in terms of percentage of current mix, maybe 1 year, 2 years out.
We don't look at it from that perspective. We look at it very specific to each market and what is the right fit for each market. Obviously, this percentage will grow and would land up anywhere between 15% to 20%, but very difficult to put a target of any specific numbers because we're very focused on building the right product for each market, but we should get to anything between 15% to 20%.
That is correct. And the second question is on the cost side. Is there any expenses incrementally that you want to call out on a kind of merger, et cetera, any costs there in Q1? Or what is that in Q4 and is just pretty much landed?
Yes. I think merger-related pretty much we're done with most of the expenses. So there is no merger-related expense appearing in Q1.
Got it. And lastly, I just wanted to understand your occupancy on your numbers. The occupancies are kind of flattish on a Q-o-Q basis, while footfalls are up more than 10%. Is this mainly primarily due to a higher number of sales? And was that only the impact of June? Just wanted to get your sense on that.
That's correct. We've played a higher number of shows this quarter, and that's the reason the occupancy percentage is appearing similar to what it was in Q4. February and March are very slow months for us, and we cut down a lot of shows during those 2 months. So yes, we increased the number of shows during this quarter.
Thank you. The next question is from the line of Jay Doshi from Kotak Securities.
Bijli, is it possible for you to give us some color in terms of where are you in the journey of capturing synergies that you had called out? What percentage of that overall target date that you've already achieved? That's my first question.
Yes. I think it's still early days. We've begun a lot of work on that front. F&B is the first one which has kicked off, and we are seeing some very promising results. We're already seeing some part of the synergy kicking in, in Q1. But I think more will follow in Q2, Q3, and Q4 later this year as we implement more and more initiatives across the chain. So F&B is completely on track. I think bulk of our ticket price synergy will flow in, in Q2, Q3, and Q4. Quarter 1 was when you compare it to Q1 of last year was -- it was not possible to get a ticket price increase at that level. But we harmonize a lot of stuff at the operating level, including harmonizing the programming efforts, ensuring the shows are programmed quite well, ticket price annualization, all of those initiatives have been implemented on the ground, and they will start reflecting in Q2, Q3, Q4. I think advertising is one number that is currently lagging behind once the box office recovery plays out. Maybe the latter half of this year is when that will start kicking in. On the cost front, we are running absolutely on track, in fact, running slightly ahead of what we had thought we'll be able to achieve. And in Q2, Q3, we will start getting some of the synergies reflected in the bottom line. And maybe later part of this year, we will be sharing an update on where we stand with respect to the synergies.
Understood, thank you. And second, on the earlier question on Cricket. Now this World Cup is a 1-year format, right? So for that deviation, have you in the past experimented and what is the kind of traction and demand that you anticipate for it?
So we have done many shows for one year, and typically how it works is that we go to corporates who end up sponsoring a certain match. And they are the ones who would call in people, it could be the whole lot of dealers or consumers that they would kind of invite. Some bits of the tickets in the auditorium are also left for us to sell at the box office. So that's how it's largely done. People come and go, and it's like a bit like a carnival or a gala that happens at the cinema. There are face painters and [indiscernible] and stuff like that. So we meet it out of really like a carnival. And in the past, we've seen some of the key matters garnering some great interest across. And so we seem to be choosy about the matches the pickup. It can't sort of play out for all the matches, but surely, some of the Sri matches and the India matches will be sort of picked up for screening, and we are 100% sure that we will get corporate sort of participation for this event.
Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Thank you very much for the opportunity. The first question is on ad revenues. As you mentioned, it is to recover completely. Can you just give me a high-level category commentary on what is driving -- what has recovered? Is it because we already have more in these footfalls coming to normalized levels, et cetera, definitely. So should we assume this is a normalized level of the ad revenues?
No, clearly not. I think starting Q2, as Nitin had just mentioned, the recovery will clearly be seen. And by Q3, which is also the festive period, we will see fairly normal levels of advertising coming back, thanks to some of the big releases that happened in the month of July, the overall -- the noise level around cinemas is not better now very positive, and we are getting some big accounts back. What we see has been the absence of some long-term campaigns because of the overall negativity in the market about which tools are doing well, is Bollywood be able to deliver success or not, and then how we would soon do well. All that noise has completely died out now. And we are now over the next 60 to 90 days in the market to close some of the long-term deals. Even sectors like telecom and consumer durables are something that we believe will come back very strongly even -- and hopefully, we'll be able to post some very strong numbers starting sales.
Okay. So this confidence obviously depends upon the footfalls coming back. Is that the right understanding?
Actually, both in advertising and more than even footfall, you need big banner films, and you need a certain positivity. The good thing is that happened. Clearly, films that have performed have left a dent with the advertisers to say that they've missed out on an opportunity. And we have -- the entire teams have kind of used this as an opportunity to create more conversations with clients. So I think the hard work is all done. And now we are ready to reach the benefits of some of the good marketing that has been done by these films over the last couple of months. So we are now on the path. It's not as I said. We are waiting for more recovery to have.
You mentioned long-term deals with advertisers. Was it the case pre-COVID [indiscernible]?
No, it was always there. We always had about 10, 15 very big clients who would be with us advertising for 8 to 12 months of the year. Those were kind of missing in action so far, and we hope to get them back very soon.
Understood. And my second question is on the box-office collection from regional, which seems to be around 20% of the overall regional box office per end of share is close around 20s. The report Hollywood is almost at peak. What are our plans under this anomaly? And why -- what are the current bottlenecks we are facing in achieving this?
Could you repeat your question, please? Your voice was cracking. We couldn't get the question properly. Could you please repeat it?
I was asking if you see the total regional box office collection, and our share of the regional back office is close -- it's hovering around 20s. There has been Hollywood and Hindi around 50s. What are the steps we are taking to bring this regional box office as part of the share of regional box office and part of the other language is – this was my question.
So that's a very good question. We just need to grow more in the southern territories, these other films, seasonal films. And when you say regional, I'm assuming you're referring to the South Indian films because of Punjabi films, Marathi films, the contribution of PVR INOX even for Gujarati and Bengali films, contribution of PVR INOX is similar to Hindi. But for Southern films, because it penetrates deep, it travels deep into smaller centers. We need to increase our penetration mode. That's the road map. I would just leave it at that.
So that means most of the -- you need to go into, say, Type 2, Type 3 cities. But obviously, the mall coming up in these, say, cities or towns is obviously not up to the mark. So this roadblock will always be there or we can do something about it?
So we are adding -- we've already guided that we are adding a lot of screens in South India. In fact, 40% to 45% of our total screen additions right now are in South India alone. And we will build according to the right opportunity. We are entering new cities every year. This year, we've entered much [indiscernible] is a city where we're entering. We entered [indiscernible], we've entered in Nizamabad earlier last year. So a lot of new city additions are happening as we go along, but we are waiting for the right opportunity to build a PVR property. And even in big cities, we are adding a lot more cinema. We just opened a very large 12-screenplex in Bangalore with prestige in Kanakapura and that hit the road running. It's already performing very well in the first 2 weeks itself. So there is a lot of focus on adding more screens in South India.
Understood. Just one last question on this. [Operator Instructions]. The next question is from the line of Lavanya Tottala from UBS. Please go ahead.
Hi, thanks for the opportunity. So these particular questions, I just wanted to check how you see employee costs going ahead in the upcoming quarters. And also the depreciation as you reduce the number of screens going ahead along with the refurbishments?
So employee costs will grow with inflation. We are bound for a large part of our workforce with minimum wage increases. And from a headcount perspective, at least at a site level, we are at the optimum headcount level. So I don't see any reduction at least at a high level. So that cost will grow with inflation or with minimum wages, as the case may be. At the depreciation level, I don't see any significant impact while we are shutting down screens. Most of those screens have come to the end of their life cycle. They're already depreciated to a large extent. So depreciation would only change based on the new screens that we are adding effectively. So no big substantial change other than additional depreciation of new screens.
Okay. So anything on the new interval high ticket pricing like a continuous screening -- any different kind of offering that you are planning or -- no intervals, no ads, but at a higher price, something like -- similar to OTP but a bigger screen experience.
Not really. We aren't planning anything screening without an ad or an increase in the ticket price on account of no ad. No, that isn't in the plan.
Thank you. The next question is from the line of Nikhil Garg from BNP Paribas.
Hi, there. Thanks for the detailed presentation. I have a couple of questions. One on quarterly results, and the second one which is more structural in nature. On quarter results, if I look at on a Y-o-Y basis, your EBITDA is down if something INR 100 crores to INR 200 crores. And this is despite higher ATP, F&B spend per head, lower volatility in the movie, and a much higher number of Hollywood movies also on a year-on-year basis. So would it be fair to say that to achieve INR 300 crores of EBITDA, we would need one all month to fire and probably two big hits every quarter. And if we have like one big it only like Pathaan in Q4 or Avatar 2 in Q3, then we would be somewhere in the middle. So that's my first question.
Yes. So the answer to your first question is that our business is a very high operating leverage business. We run a certain fixed-cost structure for all the properties that we have. And a number of footfalls have a direct impact on the overall profitability of the business. When you compare it with Q1 of last year, Q1 of last year was one of the best quarters ever in box office history. We had almost INR 1 crore more footfalls than this quarter. And that is -- that reflects the operating leverage directly on the bottom line. So obviously, Q1 has been a smooth quarter. April was a very slow month, and May and June have built up, but we're still trending significantly below on footfalls as compared to what we did in Q1 of last year or even prior to the pandemic. So as the momentum picks up, July has been an excellent month. And as the footfall increase, the operating leverage due to higher admissions will reflect directly on the bottom line. So that's broadly the answer to your question.
Sure. And just to add to this question only and on a quarterly basis. So basically, you could -- given the content also remains volatile on a quarter-on-quarter basis. So we could expect this kind of volatility to continue. I mean, it's not that something structurally has changed for the content to be on an improving trajectory from here, and therefore, we don't expect volatility in content going forward.
No, we can't -- we don't have an answer. We can only say that there is a good lineup of content, a lot of pessimism around Hindi film underperformance, which was there and has been kind of done away with in the last few months. We've seen small to mid-budget been doing quite well. So the volatility in the Hindi box office is reduced considerably. The share of negative noise has died down. Films are hitting to INR 100 crore benchmark, and we have a good lineup ahead. Hollywood still -- slate, which was very low last year has got supplemented. This has been one of the best-followed performances over the last few months, and all the firms there have been doing exceptionally well. So Hollywood is back both in terms of content availability as well as box office performance, and regional sales continue to be a stable fare. Yes, there will be quarter-on-quarter ups and downs depending upon what content is coming up in each quarter, but we see a lot more stability in all the language content. And that is reflected in the back-to-back success of the last 4 or 5 films starting from May with Kerala Story, then [indiscernible] followed by the [indiscernible] and then MI7, Oppenheimer, Barbie, and Rocky Aur Rani. So there is a lot of positive sentiment, and this is something that we started this quarter, and hopefully, this will continue in August and September.
Sure. Sir, the second question is, have you given a thought on stopping expansion in metro cities? The reason why I ask is that like, for example, if the demand for a particular movie is more than the supply for that particular week, then our footfalls move to the second week, which in fact should be more profitable for us, right? Because secondly, the distributor share would be lower, and you would get more. But expansion in metros will prevent that. Second, in the scenario where demand is, in fact, less than the supply for that particular movie for that particular week, occupancies, in fact, pick up a bigger hit, and therefore, our profitability also goes down. So are we thinking something on like stopping expansion in the current metros like Delhi, Bangalore, where you already have enough presence, and going into more into Tier 2, Tier 3 towns only?
No, that's not the case. We are not stopping our expansion into metros. And we talk about going into Tier 2 and Q3, we are already present in, whether it's a metro or Tier 1, or Tier 4. So we are present all over. We have a presence in 114 cities. So just to tell you that you said that there will be more footfalls in metros. My only answer to that is that really Indian movies are under-screened. We still have about 3.2 multiscreen per million conditions and about 8.5 to 9 screens per million population if I add all the screens in the country. So today, also, there's a lot of opportunity for us to grow. And I don't think that we as a chain will ever stop expansion, whether it's a metro or even on Tier 4.
The next question is from the line of Rohit Gupta from [indiscernible]. Please go ahead.
Based on the current mid-debt levels, business outlook, and leadership bonds, do you see any need for fundraising, let's say, in the next 1 year.? Thank you.
No, we have no plans to do any fundraising during the next 1 year. As we've guided, we intend to fund all our growth from internal accruals. So there is no plan to any fundraiser.
Thank you. The next question is from the line of Abhisek Banerjee from ICICI Securities.
Yes. Thank you. First, a question on the revenue sharing contracts, which you have been discussing with a lot of the land -- could you give some color on how that is working out, especially now that crowds are back to the circus.
So are you talking about existing properties? Are you talking about new properties?
New properties. New properties as well as existing properties that you're managing to renegotiate?
Yes. So all of that is work in progress. Most of the new properties are structured on a minimum guarantee on a revenue share basis, whichever is higher. That is broadly the structure of our deals. The minimum guarantees have come down from what they were, and the revenue shares are where they were. So yes, we have been quite successful in pretty much renegotiating most of our leases for upcoming properties and have achieved a lot of success. In some of our existing properties, which are underperforming where the rental cost is high, we are currently in discussions with some of our landlords and hopeful of getting some success there as well.
Understood. And one more thing on this thing. So post the merger. I'm sure you would have a lot of properties where there is a significant overlap of attachment areas. So the recent closures that you announced, will that also be to find us to reduce the overlap of properties?
Not really. I think from a selling capacity perspective. I think the bulk of the screens which were deciding to shut down are in catchments which are either run down or we built cinemas 10 or 15 years ago. Those malls have become dilapidated and have not become relevant with the passage of time. Or in a lot of cases, those malls cannot also be revived, and the properties cannot be revived, so as a result of which, we have decided to shut them down. In some cases, there could be overlap situations as all. But generally, as a principle, I don't think that's a big area for concern and the reason for the shutdown of any property.
So overlap is not a concern at all?
And areas where we appoint overlap, we our programming differently. So for any gift, one does not get a ticket in one particular flix. He can walk across or just drive across in a few minutes to the other property. So we're using that advantage to have different programming so that a guest has never turned back in a high-volume day because of multiple tickets.
Understood. And just one last question. So regarding what you see in this month, July. What would you see -- I mean, I know you might not be willing to give out a number, but qualitatively speaking, how would you rate this month in terms of the statical trends with a 60%, 65% occupancy delivered, I don't think I've ever heard of that kind of occupancy in this business.
Well, we are always buoyant about the prospects, and sometimes our business has peaks and valleys. There are times when we peak in terms of occupancies, and there are times when things underperformed vis-a-vis expectations and results are not occupancies, and percentages are not as per expectations. So it's difficult to predict, and we've always sort of encouraged offends in the analyst community to see the business on an annual basis and not on a quarter-to-quarter basis because quarterly occupancies can be fairly volatile. At this point, like we mentioned earlier, we've been seeing positive signals in April, May, and June. We look pretty set to take off in terms of admission numbers. So we are fairly positive, fingers crossed. I think we will see numbers hopefully that we've not seen before.
Perfect, sir. Thank you so much. Really best of luck for the next coming quarters.
Thank you. The next question is from the line of Anurag Dayal from HSBC. Please go ahead.
Could you give some update on the loyalty program, as [indiscernible] INOX is integrated already? Or we have some plans, and what is the membership today? And do you track what percentage of the ticket is internally, what percentage of ticket sales come by these loyalty programs, and the plans ahead?
So we have close to about 20 million each member, both for PVR and INOX, so about 40 million in all. However, our current loyalty program is coming towards an end. We have already issued a communication to all the members across the year in INOX to say that the points-based system is coming to an end. And towards H2 of the year, we will embark on a new personalized loyalty program, which will really focus on a little more active involvement of the consumer and seeing how we could sort of push the consumer for higher consumption at the cinema.
Great. Thank you so much. And just one small bookkeeping question. So there have been sequentially 39% open electricity and discharges. So is there any one-off here, or what's the reason behind it?
No, there is no one-off here that the nature of our business, that is due to change in seasonality. We have a lot of properties in North India and then winter, you don't have high air conditioning bills. In summer, you have air conditioning bills which are very high. So there's nothing that's quite normal in our business. Q4 is the lowest quarter in terms of electricity consumption. And in Q1, Q2, Q3, the electric consumption is high.
Thank you. The next question is from the line of [indiscernible].
Just wanted to get a sense on the Bollywood movies. So this quarter, you're expecting probably 6 to 7 Bollywood movies, and probably the next quarter will be a similar sort of number. Now pre-COVID the number of Bollywood movies is used to be slightly higher. So is this a concern regarding the number of movie-taking relations in the first place?
I think the sales are -- have been fairly steady in all quarters, and we continue to solidify. But our problem in the past has been the quality of films. So success issue of Hindi films performing at the box office has left a lot to be designed. I think the good news is that the situation is improving in a noticeable and firm matter. So thankfully, in this quarter and in the subsequent quarter, including the third quarter, we have some very strong quality films, compelling content, and fingers crossed again. Hopefully, the success ratio will also be better than what we've seen in the last few quarters.
Thank you. The next question is from the line of Jensen Jacob from Centra Insight.
Hi, thank you for taking my question. My question is on the growth front. This quarter, we have only added 18 screens, and could you please throw some light on why are these additions are so low?
Well, I don't think the additions are low. We have opened 31 new screens in Q1. And in Q2, as we speak, we have opened another 15 screens. And as we said after we opened one in Patnem. So overall, we have already opened in this financial year, 8 properties and 46 screens, which I don't think is low by any standards. And the target which we have given for opening the number of screens this year will be on target to receive those.
Okay. So what is the target that you have given as the combined entity?
When it's about anything between 150 to 160 to 165 screens. And as I said, we have already opened 46 screens 'till today, and we are on target for the remaining.
Thank you. The next question is from the line of Sumit Sarda from Compound Everyday Capital. Please go ahead.
Yes. So I appreciate the guidance that you have given that you would want to grow only through in FY '24. But I wanted to go a step [indiscernible]. Given the content volatility and a fixed cost structure in and in our business, do we have an aspiration to go 0 debt and improve the resilience and robustness of our business?
Yes, I think that will automatically happen with the passage of time as the operating earnings start kicking in. The focus will be post-growth, whatever is the free cash flow left to reduce the leverage on the balance sheet, and that's the way we think about the business.
Okay. So do you have any medium-term period target, maybe 3, 5 years, you want to do that?
Yes. I think we should get there in 3 to 5 years, maybe earlier, depending upon how soon the operating earnings comes back and what is the free cash flow generation based on that every year.
Thank you. That's all I have. All the best.
Thank you. The next question is from the line of Khush Gosrani from Incred Asset Management.
Sir, I just wanted to ask a lot of the medium-tier volume plans are going towards OTT, and OTT sensors have started to produce a lot of increase in the purchased plans. So how is it impacting our footfalls say, as of now? And what's the overall view on the OTT impression?
[indiscernible] and yes, there are movies which are made to the OTT, and there are some movies which are made for the cinema, and then they come on OTT platform. So it's not that all movies are going to OTT. I've always said that for a shy-s kin experience, for uncompleted towns for an absolutely clear image, larger-than-life movies are there to be entertained only in a cinema hall. Yes, there are a few movies that have taken the OTT route only, but that's the will of the producer, the person who's already made it. But let me tell you, with the footfall we have seen in the last couple of weeks. We had Hindi movies, movies, and other Indian languages or Hollywood movies. I think that movies are here to stay, and it's only a matter of time because great content again kicks in and people again have -- they come back to the cinema halls.
Sure, sir. And so the increases are -- sorry, the increases are what you could say, the dependence on the big budgeted or the higher budgeted plan, right, across the languages?
[indiscernible] So I think that [indiscernible].
Sure. And on the advertisement revenue income side, what would be the Y-o-Y comparable growth for us in this quarter?
Last quarter Q1, we are at INR 93 crores, and we are INR 89 crores this time. And again, in Q4, we got INR 93 crores. So basically, somewhere to INR 93 crores to INR 89 crores at this point.
And the last question, you don't see there to be a structural impact to the advertising income, right?
No. It will bounce back very sharply, and we strongly believe in it because once cinema starts to sort of deliver footfall, which it has, the story is now going out very strongly. We've been out of the game for close to about a couple of quarters during COVID, and this has taken some time for the market to stabilize. We are working very strongly with all the media, planners, and buyers, and we are hoping for a sharp recovery starting Q2.
Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Thanks for the follow-up opportunity. I was going to ask, what is the percentage of screens you think is currently kind of underperforming and pulling down your overall numbers, which will probably be, in turn be candidates for future closures?
We've already given that guidance that we believe, I think, the bottom, 2%, 3% of our screens is what we intend to shut down, which we don't think are revivable. That number will be between 50 to 60 screens, broadly what we intend to shut down.
Okay. Second, just on the PP, the audience for coming to watch trailers, we said these are part of the footfall that we are showing in our report and part of the ATP calculation as well?
Yes, they are part of the report, has not reported the number.
So that means actually will be excluding this trailer is higher than much they are?
There will be marginal differences. Sorry, you can give the actual number of admissions this quarter on trailer premium?
It's about 3.8 lakhs, about 4 lakhs.
It's about 2.8 lakhs. 3.8 lakhs.
3.8 lakhs. Yes.
3.8 lakhs?
3 lakhs, sorry. 3 lakhs.
Correct. So my understanding is they may not be contributing ATP, but obviously, they will be contributing to SPH, right?
Yes, a little bit not as significantly as a movie consumer does because they are into the cinema only for about half or yes, they do end up buying some SMB but not as significantly as a movie consumer if you were to get it like how both ATP and SPH will marginally go up.
Thank you very much. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone, for taking out time to attend the PVR Q1 Earnings Call. And if you have any follow-up questions, feel free to reach out to us individually, and we'll be happy to answer your questions on a one-on-one basis. Thank you once again.
Thank you. On behalf of Axis Capital Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.