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Ladies and gentlemen, good day, and welcome to the PVR Limited Q2 FY '19 Earnings Conference Call hosted by Ambit Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Abhishek Ranganathan from Ambit Capital. Thank you, and over to you, sir.
Thank you, Amen. Good evening, everyone, and thank you for joining this call. At the outset I would like to thank the management of PVR for presenting the opportunity to do this call. From the management here, we have Mr. Gautam Dutta, CEO; Mr. Kamal Gianchandani, CEO of PVR Pictures; Mr. Nitin Sood, Group CFO; and Mr. Rahul Gautam, VP Finance.I will leave the floor open to Mr. Sood to give his opening remarks. Thank you.
Thanks, Abhishek. Thanks, everyone, for taking out time for the call. I'll give a quick snapshot of our Q2 numbers and what are the key highlights for this quarter, and then we can move in to Q&A. Overall consolidated revenues for the quarter were INR 715 crores, as compared to INR 560 crores in Q2 of last year, so which are up by 28%. Overall admissions for the quarter were up by 25%, and consolidated EBITDA for the quarter was INR 130 crores as against INR 96 crores in the same period last year, which is a growth of 36%. EBITDA margins also for the quarter were up by 110 bps. We're at 18.2% versus 17.1% in the corresponding period of last year. And consolidated PAT for the quarter was INR 33 crores, as compared to INR 25 crores, which is also up by 31%. During the quarter, I think 2, 3 big highlights in terms of what are the key developments: One, we completed an acquisition of SPI Cinemas, which is the South India based chain that we acquired. The acquisition was completed on the 17th of August, so roughly about 43 days of operating numbers of that asset as part of the number -- of consolidated numbers that we reported. We acquired a 71.7% stake in SPI. And we've currently applied for a stock exchange approval for the merger of that entity. Effectively post-merger we'll own 100% of that entity. So that is work in progress. And hopefully, by the end of this year, we will be able to close the merger process. Number 2, we also did a deal with our online aggregator partners BookMyShow and Paytm, for a period of 3 years, which we announced earlier during the quarter. Under the transaction we are entitled to receive INR 410 crores towards minimum guarantees and refundable deposits from these partners for enabling booking of PVR movie tickets across their platform. A bulk of this money was received upfront and was used in partially funding the acquisition that we did. We also opened, on the screen-opening front -- the first half has been slightly slower. But we've opened about 34 screens today that includes gold screen property, which is opened under the SPI portfolio post acquisition. We have given a broad guidance of opening 90 screens in a year portfolio, and 88 new screens, which were expected from the SPI portfolio. There we're completely on track to deliver those numbers. We'll add about 22 new screens during this quarter, and another 43 screens during Q4. Bulk of screens, which are scheduled to open this quarter are already completed and are waiting licenses. And some of the screens, which are expected to open in Q4 are in the advanced stage of setouts. So our guidance remains unchanged on that front. During the quarter also we've opened an operating trend from a technology perspective, Onyx screen, which is the latest technology from Samsung. The first Onyx screen in property at Vasant Kunj, in Delhi. So that's been in terms of technological upgradation. And we continue to kind of build on the software side, build out loyalty programs further from what we launched last year. And work on various initiatives to drive consumption up at our cinemas. So these are some of the initiatives that are work in progress. In addition to that, we've also recently launched a movie seat cancellation product, which enables people to cancel movie tickets after the booking, right up to 20 minutes prior to the show, which gives a greater freedom and flexibility to people to plan their movie purchase well in advance and give them a complete flexibility to be able to change their plans if there is a change. We think long-term this will help and encourage people to kind of plan their movie purchases better, and hopefully, drive consumption up. So these are some of the initiatives we continue to work upon to improve the moviegoing experience for our customers. So that's a broad snapshot of where things are. And I like to now open the floor for Q&A.
[Operator Instructions] The first question is from the line of Mishaan Mehta from UBS Securities.
Sir, my question was there has been an increase in unallocable liabilities, so can you just throw light on what part is this?
Just one second. This is just an accounting classification, unallocable liabilities -- this is a, yes, yes. Why don't we come back to this question in some time?
Sure.
Let me just look at the breakup.
Sure. And sir, my second question was regarding the food and beverage. Like what has been the impact on Food and Beverage segment into the High Court Orders, and can you just quantify?
Yes, so if you look at the Food and Beverage revenues for this quarter, they have been muted, our SPS growth has been muted. The company has proactively taken cause to address the price value creation market based on the customer feedback. And we've actually done a lot of offers and promotions. So that has been a muted growth in SPS in this coming quarter. But it is bouncing back now. In spite of this, we've had a strong growth on SMB revenue on overall basis because: One, admission growth has been very, very strong. He had same-store growth in admissions of 9% this quarter, which is a big one. And on top of that, you will see that of the GST-written SMB was brought down from 18% to 5%. As a result of which, the net revenue looks higher. Some of that benefit is lost because you will also see a corresponding increase in expenses, because now we do not get a input GST type credit on -- of proportion of our expenses. So SMB revenues in spite of this, same-store growth has been in the range of 19% to 20%. Sorry, your question regarding unallocable liability that is basically the debt amount which has increased, which under the standards as required to be allocated as unallocable. So it's just a debt increase, which is reflected in that.
Okay. So do [ they then get in on ] account of this?
On the acquisition...
On the acquisition. Okay.
The next question is from the line of Urmil Shah from IDBI Capital.
So my first question is on the ad revenue. Firstly, was there some kind of slight miss as regarding the Q2 growth versus what we have been expecting at the start of the quarter? And how should we look at the growth for the second half? Because the ask rate increases, keeping in mind our outlook for the full year?
First to your question, it's not all been lower than what we had expected. To be -- we are completely on track with what we had projected, or wanted to achieve in the H1 of this year. Every year, Q3 is supposed to be the biggest quarter and this year is no different. The bulk of the growth will possibly be coming out of Q3 and Q4. And we are sticking to our guidelines of what we have stated at the beginning of the year of close to about 15% growth overall on the ad revenue piece.
Sure. Sir, regarding the convenience fee, adjusted for the one-off in this quarter, should we take that as the run rate going forward?
Yes. That will broadly be the run rate of how it will get accounted for. And that entails, because we have already [ last ] part of this money in advance, so you need to also account for the high money cost of that particular event, high allocation towards finance costs. You would know this, we've put up the note. So that is how it will look. But yes, broadly, we've got 2.5 months of numbers under the new deal consolidated in this quarter. The run rate will marginally be higher in the subsequent quarter on account of 2.5 months changing into 3 months.
Got it. And in regard to gross margin and SMB, should we be able to maintain this and maybe increase it over the long term as the mix increases? So should we take that as a base?
Yes, so first -- more than margin, absolute money realization is the key. So we don't worry about margins too much. It's the naturalization, which is our focus. So if we can get a higher revenue growth at higher costs, I think that's more than acceptable. So I think the naturalization for customers is a key metric that we track. And so this will keep varying marginally, the 25 will not become 30. But whether I give you 25 or 27, you can keep varying depending upon how we kind of play out our SMB strategy.
Okay. And my last question was on the screen addition, it was good to see you maintain the full year outlook. But what is the kind of number wherein you could see any risk of slippages?
Broadly, we don't see any risk of slippages. I think the broad slip could be if anyone [ putting ] it veered, if any one of the largest properties veered, technically a 10-screen property can move from March to April. That's broadly the risk, you can take in a number. But we think there are a lot of other properties, which we are not covered in this list, which are also parallelly in progress and likely to come up around the same time. So we are reasonably confident. I think we should be able to deliver these screens.
Next question is from the line of Abneesh Roy from Edelweiss.
My first question is on advertising guidance. In Q1 it was 18% to 20% growth for the full year, you have reduced that to 15%. While I see most of the movies doing well, your top 5 movies, the admits are up sharply. So why would you cut your guidance in that category? Is it because of the liquidity crunch plaguing the -- overall advertisers? Is that the reason why you want to be a bit cautious?
Not really. Actually, as I said, we will be in the region of 15%, 17% growth. The only thing is that normally cinema advertising gets triggered with blockbuster films, which are all coming together in the quarter 3 and early quarter 4. So you will see a much healthier, bigger number sort of getting clocked in this year. And we would get to that number. So technically, we are not changing any guidance. We are largely saying it will be upwards of 15%. And we should be able to get there, if we sort of have a good run with some big blockbuster films coming.
Sir, this seat cancellation seems to be an interesting development: One, is why introduce this after so many years? Second is, how does it work? So does he get some points, which he has to use later or you reimburse him cash? Could there be some negative impact on the occupancy because of this?
No, so the way the product works is that: One, people who have currently the products can only -- is only available in an online mode, it's not available in offline. So if you booked a ticket online, so every customer who has booked a ticket online has an option to cancel the ticket if his plans change later. And he can -- if he books, cancels the tickets anytime towards prior to the show, we charge a 25% cancellation fee. And 75% of the money is refunded, there is no points. We refund him the money. And he has an option to cancel it up to 20 minutes prior to the show in which case we will also refund him 50% of the money. There has been lot of data analytics that we have done in terms of how our movie booking behavior, et cetera also is. But the whole idea is to drive up consumption and create a habit for people to book in early. Our experience is a lot of people want to plan a weekend purchase but they are not decided, they are on the fence, by the time you get to decide on the weekend, all the good seats et cetera are gone. So the idea is to encourage early booking, let people to plan their movie purchases earlier. And in case their plan is tentative and undergoes a change, 25% is not a big amount of money. So a lot of people will be willing to forgo that just in case their plan changes. And it allows a greater amount of flexibility in the current operating environment where customer has choices across various other products and platforms to make the whole customer experience more meaningful.
You should evaluate this product on the basis of what perhaps Amazon and players like Zara have managed. They have sold shopping on the basis of return. So technically, which was never thought through, nobody ever in the retail would have ever sold shopping because you could return. So similarly, because you can cancel, we think that over a period of time consumers would be more willing to book. The idea is get them to book more not to cancel more. But because there is freedom to cancel, perhaps we believe very strongly that it would cultivate a stronger desire to also book. So our game plan really is to say, you lose nothing, or you lose marginal, but you gain lots in terms of what Nitin explained, better seats and a surety of going and watching the film.
Sir, here are 2 question. One is, in hit movies could this be negative? Because in just 20 minutes, if you have to use this perishable commodity, you're getting 25%, but you may lose 75% for a hit movie, for example, so could it be negative for a hit movie?
Because if you look at the data, at box office most of our purchasing is happening 40 minutes prior to the show beginning. So between minus 40 to minus 20 is when your bulk of your tickets are getting sold at the box office. So we believe that if somebody even cancels last minute, that inventory for a big film can get liquidated at the box office. Vice-versa, if it's a small film, any which way, there is nothing much to lose for us because you never have a situation of a house full day.
Sir, your SPS is down 3%, y-on-y and quarter-on-quarter also it is down. So it's a conscious strategy, I understand. Could you give some more color, how many screens are seeing this conscious strategy of cutting down in the nonpeak? And could there be more cuts? Because if you really ask a customer, 3% cut is, how to put it, number seems quite low. It can already move us some motion. I understand I think it will be higher.
First of all, the belt, where we sort of went ahead and cut severely was Maharashtra. But beyond that, there was only 2 strategic promotions that we had run all in India, One was the deals day, and one was the happy hour. What you see is a minus 3 is a blended impact of the price cut. But wherever, we have cut the price it was fairly severe. And we have taken pricing down by about 30%, 40%. So I agree to your point, that we needed to show value and that's what we did. We did gain on certain volume uptake wherever we did that. But now, we've sort of done a lot of data analysis. And you will see that in quarter 2 and 3 we'll be completely back on track.
But your SMB growth is coming because of higher volumes in the nonpeak? Or is it coming because your peak hours was really strong in terms of occupancy? So the way we are seeing it seems, in the nonpeak it does not work. Is that correct in terms of understanding?
Yes, it did not work on the nonpeak because even after cutting significantly, people did not see enough value and there was not so much of a conversion. You're right.
Sir, in nonpeak it will now come back too, in terms of parity in terms of the pricing?
Except for Maharashtra, we've -- some of the key products have been corrected. But beyond that, we have -- what have been subsidized across. But beyond that, you're right, we've got most of the pricing for the other product back to normal.
Sir, one of your key competitors did not have the 2 aggregators for a few weeks. Did that lead to market share gain? Because these aggregators are important. And if they find you as the prominent one and next one is not there, did it lead to market share gains? And is it possible to quantify?
Look, so I mean, you'll have to appreciate that this is a very hypothetical question. And although, we were monitoring the situation closely, but it's tough to give an accurate answer on this. Our sense is that there was a minor uplift in admissions, there was a confrontation between our competitors and one of the aggregators starting, I think, early September. And even if our sense of a certain uptick in numbers -- admission numbers is correct, it was too small a period to meaningfully impact our overall admissions. I would leave it at that.
And sir lastly on the MENA, now do you have more details to share, it has been 3 more months?
Not really, we're still in the process of developing a business plan for that market, along with our local partners there. And I think, once the plan is developed, we'll be in a better position to share.
The next question is from the line of Chirag Shah from CLSA.
A couple of my questions have been answered, just a quick question on the comparable property expense increase. Now I understand that the numbers are not apple-to-apple due to partial GST tax credit loss on [ SMB sale ], but even adjusting for that can you just highlight where are the cost pressures that you're seeing apart from rental cost, because employee costs seems to have increased quite a bit?
Yes, so as we mentioned, there are 2 or 3 big areas here: One, the total expense growth includes a one-time expense of roughly INR 5 crores of transaction cost relating to the SPI transaction that we did, the book micro deal that we did and the ongoing SMB matters. So roughly, I would say INR 5 crores is one-time costs depicted in the cost. Part of that is coming in our other expenses, part of it is coming in terms of bonus incentives et cetera as part of personal expenses. The big pressure area is really apart from that, I think roughly because we now lose 30% of the input credit -- GST input credit. In almost all the expense lines, you will see the big ticket lines about 30% of 18% being a sell out, which is about 5%, 5.5%. In some cases it is marginally lower, some cases it is marginally higher. On the other expense side, we're also running a lot of operating initiatives this year, including investment in the loyalty program, investing in marketing, investment in a lot of digital and IT infrastructure and services, which is reflecting in higher other expenses. But we believe some of these costs with some of the programs that we're building is also helping us to build on a long-term higher occupancy threshold, helping us to drive up admissions. So these are really the areas where we would look at as an investment that we are making this year.
Sure, Nitin, that's very helpful. Just as a follow-up on that, so can you just share what is your breakup between contractual expenses and owned employees? Because that would mean that the adjustment on the SMB side would be a little different. I am assuming, there is a GST on the contractual expense amount.
We wouldn't have the specific breakup available to -- with us right now, but we can share that with you offline.
The next question is from the line of [ Sadesh ] from Dolat Capital. There seems to be no response from Sadesh's line. We will move to the next question. The next question is from the line of Swati M. from East Captial.
I just wanted to check the status on the state level taxes. So on top of GST how many states are now building in local body tax?
At this point, local body tax is applicable in the state of Tamil Nadu.
For the Chennai-specific corporation.
And to be more specific this applicable in Chennai, and a couple of more cities, Coimbatore and a few other cities. But not in the entire state of Tamil Nadu. In addition, to that, recently, there has been an announcement by Madhya Pradesh -- in the state of Madhya Pradesh by Indore and Bhopal City Councils that there would be LBET. Apart from that, there is low LBET in any other part of the country. Even in Madhya Pradesh, I must clarify that the Multiplex Association of India, which is the apex body for all multiplexes in this country, is in constant engagement, continuous engagement with the Government of Madhya Pradesh, and also with the officials of the local municipalities of Bhopal and Indore to withdraw the LBET. While the matter is in discussion, all I can say is that we are fairly confident that we would be able to get a positive outcome even in these 2 cities. But at this point in time, apart from a couple of cities in Tamil Nadu, and Bhopal and Indore in Madhya Pradesh, there is no LBET in any other state or city or town of this country.
Okay, understood. So you mentioned that about the city of Madhya Pradesh, and I read in the news that there are film screenings were suspended in that state, because of -- because the owners were protesting the local body tax, so was -- can we expect any impact this quarter because of that?
Well, firstly, your point on film screenings being suspended is correct. The suspension has been on for last 2 weeks. We expect this suspension to come to an end very quickly. Because like I mentioned, we are in continuous engagement with the state government and with concerned people. As soon as it impact in the third quarter numbers are concerned, from PVR perspective the prevalence in Madhya Pradesh is limited to 3 multiplexes. And if there is these 3 multiplexes have a very, very small contribution in our overall admission base. As far as financial numbers are concerned in Q3, we expect no meaningful impact on numbers because of this temporary suspension in Madhya Pradesh.
Okay, understood. And how has the quarter been so far? I mean, all the expected super hits are still yet to come, but I think, we already have a couple of good hits here?
Yes, so I think we started the quarter on a very good note. I think the good news is content this year is filling out well. And a lot of small- to mid-films have done really well and have been appreciated well. Overall, I think, we have good pipeline of content in this quarter and November and December are expected to be big months, not only for Bollywood films, but also for regional films, and Hollywood films as well. So I think we're looking for a good quarter ahead.
Okay, understood. And then in your annual report, you had mentioned that 50% of the transactions are now online. Can you tell us how much of the 50% would come from aggregators? Like maybe you can think, say just how much is coming from Paytm? And how much is coming from BookMyShow? And how much comes from your own website? That would be interesting to know.
The overall online admissions, there is an uptick. We are happy to report that has exceeded 50%. We are hoping between 52.5% and 55% now. And you must also note that the gross box office contribution of this 52.5%, 55% is actually almost 5% more. So this is the admission contribution that I have spoke about. But when you look at the gross costs of this contribution it's almost 57.5% to 60%. As far as split between our aggregators and our own platforms this is sensitive business information. We are uncomfortable sharing it...
No problem, no problem. Just the last question from end, if I may. I mean, for the real estate industry, yes, there has been a little concern there has been liquidity tightness in the market. So for this year, I'm sure like you have visibility, but do you think there can be a problem next year? Because your -- you have been guiding that you'll add around 50 screens every year. And the impact on that, can that be addressed? And what kind of -- if you see the pool of developers you work with, what is your level of confidence with respect to business continuity in these conditions for developers you work with?
So I think it's very tough to say at this stage because it's so premature. We have a lot of screens, on malls getting big. How this will impact 6 to 7 months out is very tough to predict. All I can say is, we have a very strong pipeline of shopping centers. At this point of time, we do not see any major risk to that. Until, yes, the whole financial condition for the real estate sector becomes extremely tough over the next 6 to 9 months, there could be an impact. But I think, it's too early for us to comment on that.
But for this year, are you pretty confident on the 90? I mean, you've already told us in your guidance but the visibility is pretty strong with respect to like -- I mean if the license comes from the multiplex will be operational, is it at that stage?
Yes, yes.
Okay. Just one last question, if I may. Just because you're increasingly opening the screens in South, right, if you have to describe the behavior of the customer in South like with respect to SMB spend and with respect to maybe ad revenue per screen. Because ticket prices have lowered we all know that, but if you could just give some qualitative input on this?
So South technically can be -- there are 3 different worlds in our thinking. Bangalore behaves, or Karnataka behaves in a certain manner, AP behaves in another manner and Tamil Nadu is another animal in its own self. So the fact is that we consume a lot more languages, and hence admissions are very, very high in all the 3 markets. As far as the SPH goes, they go far beyond the norm of 45% of the ATP value, specifically in markets where prices are kind of regularized. Consumers are in a habit to come and eat. And what we've seen is as against any other market, where SPH is normally about 45%, 50%, in these markets, there is a huge capability of taking that SPH much higher than that ratio. Having said that, you -- the third question you asked was on advertising. Most of our advertising-generating market is Delhi, Bombay and Bangalore. Advertising, the way it works is about 20% of the advertising revenue is local in nature, where retailers and certain corporates operating out of that city advertise. But largely advertising-generating markets in that ratio is Delhi followed by Mumbai followed by Bangalore.
The next question is from Yogesh Kirve B&K Securities.
Sir, in terms of the lineup of -- the screen lineup that we have, so that -- can that support this kind of addition that we are likely to see this year of about 90 to 100 screens? So is that going to be sort of a new normal going ahead?
Yes, we definitely expect, I think, screen outlook to move up. I think we'll be in a better position to comment on the outlook for next year by the time we enter Q4. But we definitely think, I think, the screen opening outlet -- outlook for us will definitely move up from 50 to 60 screens, which we opened in the past. And would move up to the range of 80 to 100 screens like the current year that we are opening.
All right. And sir just in terms of what you are seeing a lot of premium properties, which have been opened up here by the PVR. So our usual guidance in terms of the CapEx per screen of about INR 30 million, so that stays, right?
Yes, that stays. And it's a portfolio as we say. Some years it'll be marginally higher, some years it could be marginally lower. But there is no change in that.
All right. And so in the guidance so what would be the CapEx apart from the new screens during the current year?
Our total CapEx this year should be in the range of INR 425 crores to INR 450 crores. That should be our total CapEx.
This is based on 100 screen additions, right?
Based on about, yes, 90, 90-plus screen additions that we are doing this year. Of course, in this I've not counted the SPI screens. So that should be another INR 20 crores to INR 25 crores. So it will be in that range of INR 400 crores to INR 450 crores CapEx.
All right, sir. Just lastly, just on the bookkeeping. So I think the Food and Beverage spend per head, as far as this expense and the money concerned, does that work out to something close to our number only, in terms of -- around INR 90, INR 93?
Yes, absolutely.
The next question is from the line of Darpan Thakkar from HSBC Securities.
One question. Entertainment tax has gone, so maybe it is because of the merger of SPH and [ LOC ]. I There is entertainment tax on it, which -- [ is SPH you are referring to? ]
So it's not in any -- this presentation. I just calculated it based on the numbers. So...
No, entertainment tax is not on it. It is the same GST rate applicable everywhere. I think what you may be referring to is that in Chennai specifically there is LBET. So Chennai specifically has LBET in quarter and there is LBET in that market. So for [indiscernible] effectively difference between gross and net is higher because in addition to entertainment tax there is also LBET. So there is no changes technically otherwise.
Okay, okay. And one question is how much of subsidies are there to be reported, which is not being reported because of GST?
No, so post GST, we are not reporting any subsidy, as we have taken a course that as and when the government kind of clarifies its position on how they will deal with the post GST scenario, we won't really even account for it. But effectively, I think, in the last financial year that was about INR 18 crore to INR 20 crore number, but there is still no clarity from where is the government on that issue. And this year will be about a INR 10 crore to INR 12 crore number. But we've not accounted any of it till the time we have actual clarity from the government on the balance exemptions that were overdue.
Okay. So I mean, on the basis of, what earlier regime it's coming about INR 10 crore to INR 12 crore for the full year?
That's right.
Our next question is from the line of [ Utka Shraheshveli ] from Reliant General Insurance.
What was the total consideration you paid for [ APM ], for commission?
It's INR 35 crores for the total consideration, we paid for 71.7% stake of.
Agreed. But then how come the goodwill acquisition is coming at INR 10 crore or INR 15 crore what you mentioned in the balance sheet? I mean, I want to understand how the goodwill is computed.
So that also accounts for the minority interest amount, which is INR 250 crore. So that's how the goodwill has been calculated.
Good, then basically you meant that this is INR 33 crore and the balance minority portion is basically actually put together is shown as goodwill?
I mean, that has been accounted for as a total consideration while calculating.
Minus the existing book value of asset. So that's how we account for goodwill.
And I think now we are nearly at 0.95 our debt to equity, and probably, do we see this particular level sustaining? Or do we see some sort of more inorganic volume then probably some sort of pullup in the debt equity ratio going forward?
So see, on the capital structure point of view, we will always fund any organic or inorganic growth that we'll end up doing. We'll fund it in the most optimal manner. We don't see the debt equity levels will move up from there.
Okay. And I mean, if you can just break down that goodwill components that would be helpful. Because, I mean, it really comes as a surprise.
No, it should not come as a surprise because we bought the asset for roughly INR 1,000 crore at enterprise value. Minus the book value of assets of that enterprise, the difference has to get accounted for the goodwill. So that means...
INR 1,000 crore minus what you got on the book is less than INR 300 crores or whatever, [ INR 750-ish ] is goodwill?
That's true.
What? I've not got the answer, so can you just repeat?
So basically, INR 635 crores is the consideration we paid, INR 250 crores is the value of minority interest. The net asset value that we have got after doing the fair value of this, we've got about INR 200 crores, so balance is the goodwill amount.
Okay. So this particular thing will be actually amortized over the period of time then?
No, goodwill doesn't need to be amortized in the books at all, it only needs to be transferred, sent for impairment and like that.
Not really transferred. You have goodwill in there. I'm not going forward after that... [indiscernible].
[indiscernible] Goodwill will not be [indiscernible].
So it will be only the single impairment at the year-end levels?
Absolutely.
The next question is from the line of [ Ragham Akham ], who is a retail investor.
My question is regarding SMB. In the last few months, we have expanded our brand Simply Sushi. My question, are we looking forward to expand it as another entity from a multiplexes? Or are we are limiting it to multiplexes?
Currently, it's in early stage. We are currently only focusing on multiplexes and decent opportunities that may come up in other cinemas, we may look at it. But currently, we're only looking at multiplexes.
Are we looking to add Simply Sushi stores in Mumbai and Bangalore also for going further?
I can't comment specifically on that because it's an operating question. We will, I think, we'll look at all such opportunities based on every cinema and multiplex. We may add if we find there is a decent demand and the price value question works then we will add a few stores.
If you come to on the area of PVR ICON, which is part of Infinity Mall, you will find a Simply Sushi counter there, which is part of the cinema, inside the cinema. So it's available in Bombay. If you're around there, and will be there, please feel free to visit.
Okay. Second, my second question is regarding Director's Cut. It has been years since we charted at a certain value. So are we looking to chart this Director's Cut multiplexes in Bombay and Delhi, Mumbai or Bangalore also?
It's a very niche and differentiated product. We need a certain landscape. I like what [ Gautam ] explaining what it means in terms of Simply Sushi. It needs a certain demographic and a profile of customer and the mall. But yes, to your question, we are expanding Director's Cut franchise. There is one more signed in NCR, and there will be one soon in Mumbai as well.
Okay. My third question is regarding your approach towards Tier 3 and Tier 4 cities, because there was a -- there was something, which I read somewhere, that you guys are opening sub-brands for the Tier 3 and Tier 4 cities.
We will soon be making an announcement in this regard. We would not like to jump the gun because our first low-cost cinema targeted towards Tier 2, Tier 3 is slated for an opening shortly. And at that junction, at that point, we will be making a formal announcement. So kindly bear with us till then. Soon you'll have more information on this.
Can we expect that in FY '19? Or should we expect that in FY '20?
Absolutely, FY '19, you will have it.
Next question is from Urmil Shah from IDBI Capital.
Sir, just one data point, just wanted a number of premium screens.
There are total of 60 premium.
62 screens in total, is what we have been.
Sure, and if you look at the additions for the second half would it be possible to share how much of that would be premium screens?
In the pipeline that -- what we are sort of looking to execute?
Yes. That's right.
Why don't we share that with you offline.
The next question is from Jay Doshi from Kotak Securities Limited.
A couple of quick questions. One is, could you please give us an update on what's the progress on the PIL and the Mumbai court as it goes to sort of -- been taken up by the Supreme Court? So what is the status of this now? And when do you expect it to sort of close?
Sure. So just a quick update on the SMB matter. As you're aware, several petitions were filed in various high courts. And some of the high courts like the Velpur High Court and the Indore High Court dismissed these petitions. Even one was dismissed in Hyderabad. The matter of J&K High Court, which has passed an order in favor of the respondent. And Jammu and Kashmir was challenged by the Multiplexes Association in Supreme Court. The stay was granted on that matter. Subsequent to that, the matter, which was being heard in Mumbai High Court regarding the PIL, the Multiplex Association of India has filed a transfer petition to transfer that petition in Supreme Court. And requested for a -- for a stay of proceedings in the Mumbai High Court. And a stay on those proceedings was granted by the Supreme Court. Subsequent to that, no next date for hearing has yet been set up in the Supreme Court. And I think as and when the next date for hearing is set up in the Supreme Court, the matter will come up in Supreme Court. So now, all the matter has been [ plugged ] both the J&K matter, and Mumbai matter has been [ plugged ] and currently stay of proceedings has been granted. And we are awaiting for the next date of hearing on the matter.
Good. Now in terms of some price value -- improving the price value equation. I think, you experimented largely in Maharashtra, which you talked about, and so what's the way forward? Do you intend to roll it out across the country? And should we expect further decline in SPH from the current levels? Or it will stabilize at these levels and grow going forward?
Well, this will grow, and it may be slightly muted to the kind of outlook we had at the beginning of the year but having said that, we will definitely grow from here in post close to about a 5% -- 4% to 5% increase in SPH over last year.
In FY '19, over FY '18?
Yes.
In the second half of the year.
Understood. Now what is the peak debt level that we should expect, net debt level that we should expect by the end of this year? And also if you can sort of give us some indication that it will sort of further increase in case you invest in Middle East and Saudi Arabia?
Yes, I think, so I would like to keep the Middle East and Saudi Arabia part out of it because we're still in the process of kind of reviewing the market, and kind of figuring out the development plans et cetera. So we are in a kind of a feasibility phase right now. But we think our debt level should peak between INR 1,300 crores to INR 1,400 crores this year, depending upon certain milestones so that will be where the debt level is going to be.
Right. Understood. And you're planning to open about 60-odd screens in second half. That's something, which we have not seen in the past few years. So any one-time launch expenses or anything you would like to call out in terms of absolute numbers? Or...
Nothing significant at launch really required...
It's also been there in this quarter, including launch and including some of the brand building campaign ads that we have done. So that's part of the operating part of the business, nothing significant. I think that's part of the operating pool of the business. So that's nothing out of that.
Great, that's good to know. And the final one, on SPI, now that you've taken over control, and are you still expecting the same kind of EBITDA contribution for full year of operations from the entities, which was I think you indicated 20% plus EBITDA and INR 100 crores, INR 110 crores of absolute EBITDA in FY '20? Is that still the expectation? Or can it be better? Or...
Yes, I think it's early days. We only kind of been in control of the asset for 60, 65 days. But I think it's running completely on expected lines. You would've noticed in 40 days of operations, I think the asset is delivering good numbers. Q3 and Q4 are going to be good quarters. And as we add more pipeline of screens on the portfolio, our expectation is, I think, we will definitely hit that number, and as we realize more synergies in next 6 to 9 months, we'll have the ability to comment whether this guidance can be even better than what we are thinking or not, but we are completely on track.
The next question is from Dheeresh Pathak from Goldman Sachs.
Sir, on an average the property comes up for renovation after how many years?
It varies from location to location but roughly between 6 to 7 years, is typically the renovation cycle for a property.
And what would be the cost of, like the INR 60 crores being moved and paid on average, renovation costs would be how much?
Typically, 30% of that. But again, as I said, depends on the profile of the property and how many visitations it has had. We're discussing averages, so I am just giving you an average number. But typically, that's kind of...
Sir, just on the P&L maintenance and [indiscernible] maintenance, which is about INR 200 crores per year, which you expense through your P&L. That is not on renovation, right?
No, so one part of the expenses really relating to day-to-day maintenance upgrades, which is expensed off. The second part of the renovation is building out the assets, renovating it for a long term, which is capitalized.
Okay, so where are you spending this INR 200 crore, which regarding common maintenance and normal repair and maintenance, why is it so high?
This is part of occupancy costs. I mean, we have most of our properties in malls. And the malls have a lot of common facilities that are provided. So the development, there is a charge, which is paid for as common area maintenance.
Okay. And for -- the work that are happening for the malls, you know what is the [ application ] you're doing on average on the metro side?
There is no average, every location is different. I think, where it ties to the market. So there are no average, it is ranging between 10% to 50% depending upon location to location. And what -- at what point of time it was a signed and what was the current rates are.
Next, we have a follow-up question from Swati M. from East Capital.
Just wanted to check on 2 things. So the subsidiaries -- I'm sorry, the client centers that you have put up, right, Zea Maize and Singapore International PVR Pictures. Just wanted to check, for Zea Maize I know that you have the 70% stake? Who owns the rest? And then, Singapore International PVR Pictures what is the plan there? And what is the stake that you have and what kind of investments will you do?
So on Zea Maize, that balance stake is owned by the founding partners of that business, there are 2 owners who started that business so they own the balance stake. And drives the business as an investor. In case of [ PVR ] Pictures there is just the entity that we have set up to explore distribution opportunities outside of India. So it's only technically a shell company right now. There is no business, which is currently even structured.
Okay. Understood. And then, I was in India recently, in the district of Hyderabad. I saw a movie in PVR. I just wanted to check because the tickets for the recliner were around INR 250 rupees, I mean is it -- I thought the cap was INR 300, and why aren't you then charging at the cap? Because I think people would pay in Hyderabad.
No, in Hyderabad the cap is INR 250 for recliners.
Okay. Because I read somewhere that it's INR 200 to INR 300 depending on the format.
INR 150 for the normal.
It's INR 250 for the recliners.
It could be, I'm not so sure, it could be INR 300 for the gold class auditorium. But recliners, last recliners was only INR 250.
Thank you very much. Due to time constraints, we will take that as the last question. I would now like to hand the conference back to the management for any closing comments.
Thank you, everyone for taking out time to -- for the call. And if we have not been able to answer some of you on this call, feel free to reach out to us. You can call me, or my colleague Rahul Gautam, who’s been on the call. And we'll be happy to address your queries individually. Thank you, very much.
Thank you very much. On behalf of the company, that concludes this conference. Thank you for joining us, ladies and gentleman, you may now disconnect your lines.