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Ladies and gentlemen, good day, and welcome to PVR Limited Q4 FY '18 Results Conference Call hosted by AMBIT Capital. [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 use sir.
Yes. Hello and good evening to everybody. Thanks to the management of PVR to be granted this opportunity to host this call. The management here is represented today by Mr. Gautam Dutta, CEO; Mr. Kamal Gianchandani, CEO of PVR Pictures and Chief Business Planning and Strategy; Mr. Nitin Sood, Group CFO; and Mr. Rahul Gautam, VP Finance. I'll hand it over to the management for opening remarks. Thank you very much.
Thanks, Abhishek. Thank you, everyone, for taking out time for this call. I'll give a brief snapshot on the quarter numbers and then we can all get into Q&A. So consolidated revenues for the quarter were INR 592 crores as compared to INR 500 crores during the corresponding period of last year, which were up by 19%. Consolidated EBITDA for the quarter was INR 102 crores, which is up by 60% as compared to INR 64 crores in Q4 of last year. EBITDA margin for the quarter was 17.2%, but we closed the year with EBITDA margin of 18.3% for the company. On an overall basis, the consolidated PAT for the quarter was INR 26 crores as compared to almost no profit in the corresponding Q4 of last year. We closed the financial year with a quarter top line of INR 2,365 crores, which is up by 8% as compared to last year. And the consolidated EBITDA for the year at INR 433 crores, which is up by 15% and PAT of INR 124 crores, which is up by 29%. During this year, we have added about 49 new screens in various parts of the country. The screen rollout pipeline is fairly robust right now. We've been advanced stage of set-outs of several screen during the last few months. We have almost 23 screens, which has been ready for opening, but unfortunately couldn't open this year due to last-minute licensing issues and some real estate developers not ready with their shopping mall developments. And considering that we have a rollover of some of the screens shifting to this year, I think the pipeline for this year is looking very, very robust. We have almost 90-plus screens expected to open this year, 23 already ready to open. 53 screens, which are in advanced stage of set-outs, should be ready next 5 to 6 months. Another 50 to 60 screens, which we're getting handed over of and we expect some of those screens will open by Q4 of this year. So extremely positive on the screen rollout for the year. This year, also the content pipeline is looking much better as compared to last year. We've had a slightly slow box office here in the first 3 quarters of last year. And I think our expectation is box office this year both on Hollywood and Bollywood should be much better. So looking for a good year ahead. So that broadly summarizes our numbers for the quarter and year. And happy to open the floor now for Q&As.
[Operator Instructions] The first question is from the line of Yogesh Kirve from B&K Securities.
Sir, you mentioned regarding the screen will not be ready this year. So are you also happy with the pace at which you are signing up new properties that could give us a visibility in screen addition for FY '19 as well?
Yes. I think what we are seeing is a big update in terms of new screens and shopping mall development, which are at the planning stage. In fact, in the last 12 to 18 months, we are seeing lot of residential money, which was earlier going towards the residential developments, shifting towards commercial assets, which include retail mall developments. And we are seeing retail mall development activity actually picking up in various parts of the country. So from a screen timing perspective, we are actually signing a lot more screens than what we have signed in the past. And we are fairly happy with the amount of new developments, which are at the planning stage right now and are likely to come over the next 3 to 5 years.
Sir, secondly, on the CapEx, I understand we have fairly good understanding as far as the CapEx for new screens are concerned. So on top of that, what could be the CapEx on an annual basis in terms of maintenance and the modernizations, additions?
Yes, our annual CapEx this year was roughly INR 350 crores, including the amount of money that we have to pay to DT to close the transaction. And I think our CapEx outlook for this year is one of the highest, I think should be in the range of INR 400 crores to INR 450 crores on an overall basis depending on the new screens that we are getting for setouts and also upgrades innovations to the existing portfolio that we'll do. So our CapEx outlook will be higher than what we spent this year. Other good news is if you look at our balance sheet and debt profile, almost all the CapEx has got for near-term internal accruals. There has been no change in leverage. So you can technically say we were free cash flow positive and all the CapEx has been funded from internal accruals.
Okay. And finally, quickly on any further updates for visibility regarding the government grant revenue, which we have not been recognizing. So has there been meetings and representations with the government?
Yes. So we made representations to most of the state governments. In two of those states, I think the association and some of the operators have also filed a writ and the respective High Courts asking the government to act. But I don't think as of now there is any order, which has specifically been issued regarding refund of GST. There has been a newspaper report today, which is called Public in Economic Times, but we are still verifying the authenticity of that report. And till the time we actually see what the respective UP governments and Rajasthan governments have issued in terms of policy, it is still difficult to comment.
The next question is from the line of Ankur Periwal from Axis Capital.
To start with, continuing with the CapEx bit, which you just answered. INR 400 crores, INR 450 crores CapEx in this year, this is only for, let's say, 90 screen additions? Or there is some incremental upgradation CapEx as well involved in this?
Yes, it will be a mixture of both. We will be spending on renovating, upgrading our existing sites, which includes civil upgrades, technology upgrades, new format screens apart from CapEx on new screens. And there is a CapEx versus not only for screens that we are opening, but there are a lot more screens, which we will do in the setout as well. So it's a combination of everything put together.
So Nitin, CapEx on a per-screen basis remains in the range of what we have mentioned earlier? Or there is some changes?
Yes. The average CapEx per screen is roughly INR 3 crores a screen, it remains on the similar range. No big changes.
Sure, sure. And now for this quarter as well as for this full year, ATP growth has been, as we know, pretty strong. Now any guidance or any thoughts over there, whether we can continue such rise in ATP going ahead as well?
Yes, I think we are expecting ATP to grow with inflation, that's a broad guidance. Some years grow faster than others. But I think 4% to 5% ticket pricing growth is what we think will continue on a long-term basis.
And with the advent of more luxury formats coming in, that could at some point in time also give some sort of a push to ATP.
Sure, sir. The reason I asked that was because if I look at footfall in absolute terms, the growth is not commensurate over the -- if I compare it even with the number of screens that we have been adding. So any specific reasons why it does not like 1 quarter, 2 quarter probably for a few years now? So just your thoughts on that. Is it that probably the viewing experience overall has become expensive, and if at all, that is impacting footfall? Or it is largely content driven?
Firstly, the drop in footfall when you look at the same-store has -- it's not a decline, which has been happening for years. This is something, which we have witnessed this year, the financial year, which has just finished and the year before that. The financial year '15, '16 was one of the best years that we have seen and that year we had grown by a big number on same-store basis as compared to the previous year. For the business, it is a cyclical business. This is a phenomena, which is experienced not just in India, but in almost all markets. U.S. wants to recycle and many other markets, even the fast-developing markets like China, have gone through this cycle. China was flat if you look at the last year and this year they have witnessed a very, very robust and a solid growth over the previous year. So the point, limited point, that we are trying to make this is a cyclical business. We are buoyant and we are confident that this year with the content lineup that we have and hopefully with the law of averages catching up, we will see a big jump in the same-store growth. Content is definitely one big factor why it's a cycle of declines, steeps in values occur. The other reason is also because India is a very sort of peculiar country, peculiar market in the sense that there is overcapacity in certain pockets. But then there is a huge amount of under capacity or negligible presence in other pockets. Even if you look at cities, you would find there are certain pockets, which are highly competitive and then there are certain pockets, which have no presence of multiplexes at all. As we build more multiplexes, these anomalies will get corrected -- will get streamlined. Because of these anomalies also, often you see in certain markets we experience same-store decline in admissions. But our buoyancy on business, our belief on content bouncing back our filmmakers, our colleagues and our peers on the production side of the business so we remain confident that they will get their act together and they will produce bigger and better films, which will hopefully attract more people at the cinemas.
The next question is from the line of Naval Seth from Emkay Global.
I have two questions. One, the guidance of, say, target for ad growth in FY '19? And second, if I understand correctly, large part of our receivables are pertaining to ad revenues. Is that correct? If yes, then I'll extend my question on this.
Yes, you are right. Large part of the receivables are from advertising. So you can extend your question, yes.
So if I look, sir, historically, last 4, 5 or 6 years, your incremental ad revenues has always been higher than the receivables while this is the first year where I have seen the reverse. Although, marginal where incremental ad revenue [indiscernible] growth while receivable increase is around INR 54-odd crores. So anything to highlight here, its anomaly for this particular year or has the trend changed?
No, there's nothing abnormal. It is that the billing cycles during the course of the year changed because of GST. So there were some confusions and stuff like that, so that kind of delayed our billing and hence collection. And you will see that this would come back to its normal self this year, so there will be no change on that. Having said that, you also asked for the guidance for 2019 -- '18, '19. That largely I think, will be on track. We've maintained close to about 15%, 20% growth. And we are fairly confident that we'll be able to get to that number even -- or we are chasing that number rather in '18, '19.
And sir, as you had stated in the last call that, because of the competitive pressure, there were some kind of uneasiness on the yield increasing, happening as far as 9 months for us. So has that now stabilized? And have you started to see yield improvement happen?
No, it's a process. We are getting there. The market, sooner than later, once their inventory and time gets filled up would also rely that they would also need to play the value game rather than the volume game. It is a process. It would take a few more quarters to really stabilize. But nevertheless, given the branch trends that we have in the market, we are fairly confident that we would be on track to deliver this growth in some form or the other.
So then, is it fair to assume that large part of your 15% to 20% growth number for FY '19 would be volume driven as you're saying that you will progress towards this improvement in quarter -- couple of quarters?
No, not really. Simply because the team always has intent and a target of increasing both by volume and value. When I say volume, I mean more areas of branding sponsorship beyond on-screen is being looked at. We are creating more inventory through digital formats. And hence, this growth of 20% is leveled between both volume as well as value.
The next question is from the line of [indiscernible] AMBIT Investments.
I want to ask you on your presentation, you have a slide on your ROCE analysis. So when it comes to your margins, I think it works at roughly 12.5% for screens operation for 2 years. That's your EBIT margin. So just want to understand what would the EBITDA margins be, though, the split for these 2 would be the same proportion or...
So these are EBIT margin. So you can -- our EBITDA margins would be upwards of 17%, 18% for the similar portfolio.
And supposedly we'll we say 4 years or 5 years or the much older screens, would there be any change there in the margin profile?
Yes. I think it's difficult to classify based on years because our business is location driven. But you are right, I think the profile changes depending upon markets. The profile changes depending upon years. And yes, as the properties get more and more mature, the margin profile gets better and better.
Yes, because I was just wondering if this 12.5%, are you seeing that, that could be the steady EBIT margins or is this EBIT margin probably reflecting maybe a higher-than-expected CapEx, something like that?
No, it's not reflecting higher-than-expected CapEx at all. I think EBIT margin for a mature portfolio and greater than 2 years is a fair way to measure this. But you're right, I think, if we've got the quarters segregated based on greater than 3, greater than 4, greater than 5, I think, the margin profile will get better and better.
Okay, fine. And this would -- would there be some regional trend in this? Or would it be -- would the metro locations have a much higher -- much higher EBIT margin? Will you share then?
Not really. Actually, it's more, I think, city- and location-specific than Tier 1 and Tier 2. So for us, I think, the margin profile is broadly in a similar range. And we realized, I think, the margin profile is really location specific rather than city -- or rather than a Tier 1- or Tier 2-specific. That's not something that we really found. We have seen a very small part of the portfolio so I would say that, currently a start-up kind of a stuff. But Tier 1 and Tier 2, we haven't seen any big difference in profile.
The next question is from the line of [ Tushar Jain ] from IIFL Securities.
My question is on our food and beverages segment. So recently there has been one PIL, right, regarding the price regulation on food and beverages. So upon which the Mumbai High Court is coming up with some regulations. So how do you see that affecting our margins?
So first of all, I would like to highlight, I think, there is lot of miscommunications in the media. You have to read the actual background of the matter. Some gentleman has filed a PIL, asking -- and the PIL has been filed against the government, asking them why he should not be allowed to carry outside food from his home when he goes to the theater. So first of all, this whole talk about regulation of food pricing and interference is completely incorrect. There is no such matters in place. So that's a limited agenda of that PIL to say people should be carried -- allowed to carry outside food from their home inside the theater. In the court, the government has asked the -- the court has asked the government council to file its own response on the matter, which the government has said that we will come back and file a response on the matter. In the meanwhile, since multiplexes are impacted community because of this, we filed an intervention application to be made a party to the suit. And we filed our response on the matter in front of the court and also given our suggestions to the government on the matter. Since the matter is sub judice, I would not like to want to comment on it and the association would not want to go into a media trial on this issue. But it's like, again, to saying that I want to go to a restaurant, but I want to carry food from home and eat there so -- which is a fundamental right given by Constitution for us to conduct business. So I think, this matter is pending, this PIL is pending before the court. And I think it will be heard over the next few months and we'll get to hear on the matter.
Okay. And one more question, regarding this -- so how this OTT platforms are affecting this, like recently some movies have released within 50 to 60 days within from the film's theater release. So how do you see that as a threat?
India, like any other maturing entertainment economy is witnessing its growth of multiple formats, multiple distribution channels and this offers very positively for doing business on the whole because we have the other filmmakers, our colleagues have other distribution channels to monetize their content, which eventually comes back to film business and it creates a positive cycle for film business because producers are in power to make bigger and better films. That's point number one. So we don't see it negatively, we see it as a positive phenomena. Secondly, you have to appreciate that for a very, very long time, historically exhibition teams have enjoyed a window, an exclusive window, over all other distribution platforms. This is a module, which is sacrosanct and which has been applicable to all markets, whether they're developed markets or developing markets. So even in India, if you want to watch a brand-new film in a legal way, the theater is the only place where you can come and watch the film. As far as OTT is concerned or for that matter of fact cable television or satellite television or any other form of watching film at home or on the go is concerned, you can do it only after 8 weeks of the film's theatrical release. So in that context, your comment on a film coming 60 days post the theatrical release is a fair comment, but that is something, which is acceptable to us. And it allows the producers to capitalize on the marketing, which they have done while they were doing the theatrical release. And like I mentioned earlier, it creates a positive cycle. We have absolutely no problem with the way these distribution titles are evolving. We take it positively. But as far as the impact on our business is concerned, a negligible business. We completely disagree with this notion that OTT is impacting our occupancies in a positive or a negative way. We completely disagree with that motion.
Okay. And as far as the content costs are concerned like -- so are we seeing any increase in the content costs or into this demand from OTT and all? And OTTs are producing their own content, so do they have that advantage or something?
See, as far as content costs, I'm assuming you're referring to the distribution share, that we share with the country partners. As you know, we work on our revenue share model. So the context -- the cost of content impact to the extent of a film is performing well or not performing well at the box office. If it performs well, of course, the content partner gets the largest share of the takings. And if it does not perform well, of course, the content partner is at -- it gets an inferior share of the box office takings. But it does -- if OTT has an impact on content costs, 0 impact and -- but like I mentioned, it improves the viability from the content creator's respective because now the content creator has another distribution platform to exploit his offers, which means that they can earn more for the same property, which they had created for theatrical release and for television release. Now we have another channel to monetize the thing. So if they earn more, it creates a positive cycle of them being able to invest back more in making a bigger and better film, which augers well very -- it augers very well for theatrical business. So there is no direct negative impact on the content costs. If at all there is an impact, it's a positive cycle, which is getting created.
The next question is from the line of [ Sonal Gandhi ] from UBS Securities.
I had one bookkeeping question. Why is the convenience fee down 10% on a Y-o-Y basis on competitive properties?
Yes. So I think we have currently partnerships with 2 online aggregators and some smaller ones. But our contract with BookMyShow was a long contract, which has drawn out over a 5-year period and this was the last year of the contract. So one of the reasons, I think, towards the tail end of the contracts, the revenue share was not very heavily skewed in our favor and that's one of the reasons you see the [indiscernible] Share has been slightly marginally lower than previous financial year. And last year, we also had another operator, Justdial, which was contributing to the 50 and after Justdial has moved out. One of the reasons also is we haven't been able to find a big replacement for Justdial, so that's the reason one of the revenue streams and convenience fee is marginally lower.
Okay, okay. And secondly, also what would be our share in Bollywood revenues right now, in Bollywood movies?
It will be roughly between 22% to 25% depending upon the kind of film that's releasing, but it would be broadly in that range. I think for films like Padmavat, et cetera, I'm just looking at the number, which if you look at our box office sheet, given our next box office, in the case of Padmavati of about INR 75 crores. And broadly, I think the business for Padmavati has been slightly below INR 300 crores, if I were to believe in that sheet reports. So that would roughly be about 25% of overall theatrical business for the film.
The next question is from the line of Jay Doshi from Kotak Securities.
Just a couple of questions from my side. One is so just a clarification. Sir, You mentioned that CapEx in FY 2018 was INR 350 crores. So does -- is that a gross CapEx number? Or it is after adjusting for the fact that you must have received about INR 50 crores for PVR bluO sale also?
Yes. So it's just including everything. So gross including investments that we've made. So I would say all the CapEx that we've put in, investing activities, et cetera, because we've also made similar investments, et cetera. So I'm talking about the net number after accounting for everything because like we've made a subsequent investment in iPic and we've also made some other investments. So I'm just saying the total investment of -- that has been major in areas, but also includes deposits, et cetera, that we paid for signing new properties, CapEx spend on existing properties, everything. So what I essentially mean is long-term capital outlay on long-term projects.
Right. And so the guidance of INR 400 crores to INR 450 crores for the next year, is this sort of a new normal that will continue at similar level, you'd be at a similar sort of next 2 or 3 years?
My sense of this is that if the screen outlook picks up, I think, yes, that should be the broad number because we are also hoping that the amount of screen timings that we have done and as the screen expansion activity picks up, hopefully, I think the screen expansion outlook will incrementally keep improving. Difficult to comment, but I think we'll want it to remain at that level for the screen outlook activity picks up.
All right. So see, our understanding maybe about 2 or 3 years back was that by FY '18 or FY '19 the company will perhaps be at a level where our CapEx may settle or stabilize around INR 250-odd crores. At that point of time, maybe assumption was about 60, 70-odd screens additions every year. We see acceleration on that front would be good. But I also believe that, on other hand, you're also accelerating the upgradation of your existing circuit. So just want to know whether -- what's the thought process behind it and what's driving those decisions, given that in the past, most of your workings would have been based on the fact that screen typically needs refurbishing after 8 or 9 years and not any meaningful CapEx in the interim period. So some thought process. And should we just sort of settle around INR 400 crores, INR 450 crores? Or maybe 2 or 3 years down the line this upgradation can continue, it can also cross INR 450 crores, INR 500 crores of CapEx per year?
So one -- I think our normal refurbishment cycle is about every 6 to 7 years. So there is no change in that cycle. Secondly, I think because we are having a large portfolio, so we'll continuously continue to reinvest in our existing portfolio of screens because what we're really finding is that the payback on incremental investment on our refurbished screen is exceedingly high. It's better actually than even the paybacks on the new screens that we are doing because once the property is getting matured, the ability to kind of take up the ticket pricing, the ability to increase F&B spending, advertising is significantly higher. And some of the renovations that we have done recently has had a very, very, positive impact. So one of the reasons why we are continuously able to sustain high ticket pricing growth and F&B growth is also a function of the renovation activities that we take to upgrade some of the mature properties, which have been around for a while. For example, this year at Phoenix Mill property in Mumbai is undergoing a renovation. Part of the property is already shut and we are doing a state-wide renovation, which will get completed in the next few months. So we're realizing -- I think, the potential for growth in some of our existing portfolio screens is very high. When they were built 7, 8 years ago from now -- to now, think, the whole consumer preference is evolving. The ability to be pay more on existing screens is something that we are witnessing, provided we improve the experience, provided we improved the quality of seating technology, the format of screens. So my sense is all the CapEx in existing screens is delivered by incremental ROI. it follows the same process.
And just adding what Nitin said, a few years back there weren't so many technology upgrade option, now they are. So consumers are now wanting to sort of experiment on newer technology format. And the good news is they are willing to also shell out more for a better technology product.
Understood. So I mean, what I understand is, in that case, would it be reasonable to assume that there is upside as to your both your guidance of 5% ATP growth on a CAGR basis and perhaps on the F&B side as well. So we are seeing higher growth this year, that can continue for more years as you intend to clearly upgrade of your -- is that reasonable to expect?
Yes, that's fairly reasonable to expect because we continuously believe that the revenue potential is fairly large in a country like India. And there's a large segment of the people who are willing to pay more for a better experience.
Can you give -- sort of help me with the definitions of Tier 1, Tier 2 and Tier 3 because how do you -- what do you...
Yes, I would say top 8 to 10 cities is what we would consider as Tier 1. And broadly, I would say the big -- the 4 big metros when you look at Delhi is a market, Mumbai is a market, Chennai, Hyderabad, Kolkata, maybe Ahmedabad, Pune. So some of these markets would classify as Tier 1 markets. Hyderabad, this is a nonmetro kind of city. Top 10 cities is what we would focus as Tier 1. And pretty much everything else will come in Tier 2. And then there is a small bracket, which is Tier 3. So at present, Tier 3 is relatively small right now, but I think, as we grow over a period of time that will increase. But the opportunity in Tier 1 and Tier 2 is quite large right now because lot of pockets even in those markets are under screens and we still have huge amount of growth.
Understood. So top 8 to 10 would be Tier 1, maybe the next 30-odd or 35-odd would be Tier 2. And is it reasonable to expect that maybe in just 4 or 5 Tier 3 based on the way you are classifying right now?
Yes, we have total of about 9 properties that classify Tier 3.
That figure, right. And just final one, would it be possible for you to sort of give us a breakup of both ATP and F&B in terms of what would be like-to-like price increase versus, in case of ATP premiumization, is there a -- is it at all possible to...
On Tier 1, 2 and 3.
No, no, no, just at overall level, at a company level?
I didn't get your question because we do publish our same-store numbers in terms of pricing.
No, no, I'm saying like-to-like ticket price increase in like-to-like terms versus through upgradation?
Okay. I can give you that answer. Just to give a broad overview, we have 58 screens, which are premium screens that we have and those were close to about the INR 500 -- no, actually -- yes, INR 440 ATP so double of what we operate on currently. We currently operate on INR 209, so we are double of that on the premium screens all consolidated. And even the HPS is exactly in line with that, is the double of what the company gets on that.
Next question is from the line of Shilpa Patnaik from JM Financial.
So I have just one question. So recently, we have seen instances where Netflix has bought rights -- international rights to some, I mean, certain Hollywood movies. As a result of, which theatrical release of those movies haven't happened in places like India. Do you see this trend affecting your Hollywood revenues meaningfully?
Well, this is, firstly, not a new trend. HBO in U.S., which is considered to be father of cutting-edge content has been producing their own original films, which they released straight on HBO channels. In addition to that, they also acquire films, which go straight to television. So this whole concept of films, which go straight to OTT platform has been there for many years. India has also witnessed this concept where in past films have gone straight to TV release or to home video release or to both at the same time. There is no impact of this because Netflix so far is focusing on films of $10 million to$15 million budget. And these are typically I would characterize them somewhere between small budget and mid-budget, somewhere in between these 2 categories. These categories are not very popular in India. In any case, we tend to go after films, which are more visual, which are larger than life. Avengers is a case in point, Jungle Book is another example of such films. And such films would never go straight to OTT because the whole business model of producing a big film is defeated if you don't release it in theaters. So theatrical release has its OTT value where producers and filmmakers release their films in theatrical is the best way to measure a success of a film. And secondly, the economics, the success that you get in theatrical, the upside of that is so phenomenal and so attractive that for films, which are worthy of cinematic release, the business model does not permit you to release straight on OTT or television. So while this concept has been on for a while, this is not a new concept, but we are experiencing absolutely no impact of such instances. Does it answer your question?
The next question is from the line of Jignesh Kamani from GMO.
It's around the ROCE profile and the pivot you had in the mature screens. So if I'm comparing last 2 years, compare to 4Q 2016 presentation and the current presentation, so if you take about EBITDA margin roughly has increased by around 200 basis point in last 2 years. Despite it, mature screen our EBIT margin is has been manipulated to 12.6% in last 2 years. And ROCE of mature screen has virtually deteriorated from 24% to 23 percentage. So incrementally, what are amount we spend on the refurbishment, upgradation [ in the big period ] is much more inferior? Or how is the scenario?
I don't know what numbers are you comparing?
I'm comparing both numbers given in fourth quarter -- 4Q 2016 presentation and current presentation, where you're looking both revenue EBIT and ROCE profile of the mature screen. Definitely number of mature screen would be slightly higher this year because of there's many screens. So it may not be complete [indiscernible], but if take about direction-wise?
There are minor changes that will keep happening depending upon which part of the country we are opening screens.
So my question is direction-wise despite of the increasing EBITDA margin, EBIT margin remains same then ROCE is deteriorated, I'm saying.
What has deteriorated?
So EBIT margin in 2014 was 12.6 percentage.
Okay.
Which is also currently 12.6% of the mature screen despite our margin is increased by almost 200 basis points last 2 years. And ROCE profile was 24% in 2016, which deteriorated to 23 percentage right now. That would improve?
Not really. These minor changes will keep happening, depending upon which part of the country we are opening and what is the year. So I think these minor changes, 24% changing to 22%, 22% changing to 25%, will keep happening depending upon how the properties are shaping up and performing at various parts of the country. So I don't think this is a material change. And I think it's very difficult to predict exactly which property will do better. If there would have been a material change, I would have been worried. But this is a directional slide, which shows that bulk of our mature properties are performing well. And depends upon which part of the country we open a screen rollout, some properties will have superior margins, some will be slightly lower. So we don't think it is a material change.
But despite 200 basis point improvement in operating margin, ROCE is not improved, so whatever investment you are making is not -- are not ROCE accretive?
Yes, that's true, but we just started making incremental investments over the last 2 years. So I think the payback will reflect over a period of time. Bulk of the technology investments won't pay back within the first year of opening. So -- because incremental upgradation on existing screens, any that we are doing is all reflected in greater than 2 years. What is captured in less than 2 years are only the new properties that we will fund. So yes, it will take time to pay back, but yes, that is the need of the business, to incrementally keep upgrading to maintain the margin profile of the business.
The next question is from the line of [ Neetak Kalani ] from [ BNP Securities ].
So my first question was on the fact that majority of our screen openings are in the south as I can see from the presentation. So I just wanted to understand from you, given the ticket prices cap and the LBET in position in south, are ROCEs and EBIT margins different or maybe lower in the south compared to the other regions?
Actually no. South is one of the most profitable markets in spite of, I think, ticket price cap in some states. Chennai, more importantly, has taken a 40% price hike this year after a long period of time. I think the big opportunity down south right now, especially markets like Tamil Nadu is that the screen penetration, multiplex screen penetration, is in single digits in that market right now. And Tamil Nadu has 20% of all those screens in this country with less than handful of multiplexes in that market. So -- and it was operated at exceedingly high occupancy. In fact, their return on capital employed metrics is the highest in that market in the country right now simply because share occupants -- share occupancies in that market.
Okay. And so could you give us a breakup of in which states will your majority of the expansion be in?
So out of the properties that are opening in south, we have a few properties opening in Karnataka, which is in Mysore in Bangalore and a few properties opening in Chennai. We have 3 properties lined up for Chennai opening this year and about 2 properties in Mysore, 1 property in Bangalore. So it's a mix of Karnataka, Hyderabad and Chennai.
Okay, understood, sir. And secondly, for the amending resolution of raising about INR 1,000 crores through NCDs is that -- is it directed towards event maybe that you have in mind in the next 2 years? Or it's just maybe some inorganic expansion? Or is it just for the purpose of maybe some regulatory...
See, as a business, we always want enabling borrowing powers and upon raising the abilities to be paying in the business. And normally, the way the law is that any fundraising that you need to do, you also need to have a broad enabling approval from shareholders. So we started in a good opportunity. We believe that, I think, the whole cinema business in India will consolidate further in the next couple of years and the number of model players will find it tougher to operate in the business. And [indiscernible] consolidation opportunities over a period of time. And PVR is a leader who would want to participate on these opportunities on its own merit. So this is enabling resolution so that we do not have -- we should have the flexibility to raise capital and financing as and when the need arises. And I don't think you should read anything more than that into these.
The next question is from the line of Amit Kumar from Investec Capital.
To begin with just a bookkeeping question. There is other comprehensive loss of around INR 9 crores in this particular quarter. What is that exactly?
Yes, I think -- so we had made that investments in iPic, one of the companies in U.S. It's recently got listed and the stock has been trading, I think, below the investment price. As per the accounting guidelines, we just need to mark all financial instruments at mark-to-market every quarter. So I think there will be fluctuations you will see in this other comprehensive income line on a quarter-to-quarter basis. This doesn't impact earnings because it's a long-term investment. We have no plans to trade on any of this investment, but that's something from accounting guideline perspective we have to mark to market.
Okay, understood. Very quickly in this 8-week exclusive window [indiscernible] In the previous quarter. Could you give us an update on [indiscernible] incrementally signed up with -- on that in the individual quarter?
Can you repeat your question?
This 8-week exclusive window, I think, you sort of formalized this agreement with [indiscernible] you indicated in third quarter con call. So incrementally, over the last 3 months, which are the other studios have sort of signed up on this?
All films that are released in the fourth quarter have released after a recent agreement of increased window. It is now an industry practice and this will continue not just in this financial year, the financial year which has just started, but it will also contribute in 2Q.
Okay. And sir, just a quick follow-up on this. I mean, when you look at the international markets, the developed markets like Hollywood U.S. I know [indiscernible] are slightly longer. So I assume [indiscernible] window as well and I don't think these are [indiscernible] some point of time, we would want to create more value for the content partners you would want to sort of [indiscernible] or something like that?
So we would not like to comment on our discussions with our content partners. Those are confidential, sensitive discussions, which we would like to keep between the 2 parties. But we are very comfortable with the 8-week window. India is a market in that context is different from U.S. as a market. And we have to see India with a different prism. All I can say is that we are extremely comfortable and very, very satisfied with the 8-week window and we think it's a good win-win for both content creators as well as us, exhibitors.
All right. And just one final point in mind. The share of Bollywood, Hollywood and regional budget gives and if you can just share that for FY '17 and '18, please, on the box office side?
So the share for Bollywood in financial year is 59% is Bollywood, 15% is Hollywood and 4% is Hollywood dubbed and 22% is regional.
All right. And what was just last year?
It was 65% for Bollywood, 3% for Hollywood, 7% for Hollywood dubbed and 25% for regional.
I'm sorry, can you please repeat the last numbers again, 65%, you said?
So we'll give you the exact numbers, but I think, the point that you're trying to move to is that this year the contribution of Hollywood films and regional films as compared to last financial year has dropped a bit. Is that the question you were trying to allude to?
No, I'm just sort of trying to get the numbers, that's all.
Okay. We'll just give you the exact numbers. If you could just give us 1 second, we'll give you the exact number. Yes, it's for '16, '17, that number is 55% for Bollywood films, 22% for Hollywood films and the remaining -- I'm talking in terms of admissions, sorry. I try and correct it, this is not the box office. This is the admission I was referring to [indiscernible], yes, and 23% for the regional films. And I will repeat, I was pointing a number for 18%, 19%, you got that right.
The next question is from the line of Mayur Katani from OHM Portfolio
Sir, there was some BPM dispute in the South and that impacted some business for 45 days in Tamil Nadu especially. So do we, as an exhibitor, have any role to play over there?
So this is a dispute between third-party service providers and the producers, distributors of Tamil Film industry, we don't have any direct role in it except to the extent that films when they get pushed back, we also indirectly get impacted. But the answer to your question is we don't have a direct dispute in this matter, although indirectly we are a stakeholder.
Okay. And I mean, has the matter been resolved now because this could escalate and hit north as well? Or it has been resolved?
So the matter has been resolved to both parties' satisfaction. And in the next 1 week to 10 days, you will start seeing a lot of Tamil films would start releasing in Tamil Nadu and other parts of the country. The only reason that Tamil producers have not been able to kick start the release schedule is because a lot of films are bunched up and they got bundled. And obviously, producers have to calibrate their release dates in a manner so that films don't end up cannibalizing each other. But films will start releasing in a matter of days now. The matter has been resolved to both parties' satisfaction.
Okay, great. And you've given segment-wise numbers like the F&B advertisement. Would it be possible for you to provide us what kind of margins also you make in this?
No, we can't -- see, broadly I think if you look at our presentation, it captures a gross margins. Gross margins on box office are roughly about 40% at first after paying the [indiscernible] and the payouts.
Okay. And on F&B, et cetera?
I'm sorry, roughly 50% and on F&B 75% and advertising is 90%. But we don't have very large export business, so the gross margins on independent basis are more meaningful because they have to cover a large fixed cost. So that's the way we look at our business. We look at our business on a consolidated basis, but independent revenue streams will have independent gross margin.
If I look at it on the overall basis, let's say if I keep box office -- only focus on box office, I mean, on a general basis, what kind of an EBITDA margins would you make if you're making -- on average?
I can't understand your question.
I'm saying on average, if you're making 17%, 18% EBITDA margins overall. I mean, if I exclude the other parts, advertisements or the food and beverages, what kind of margins can you make? Just on the box office collections?
No, we make a loss. We don't make any money.
This is a core part of our business proposition.
[Operator Instructions] The next question is from the line of Girish Pai from Nirmal Bang Institutional Equities.
Just had one question, this is regarding that enabling resolution to rates INR 1,000 crores of NCD money you mentioned this gives you flexibility to move quickly on M&A. And I remember asking you a question regarding M&A when you mentioned that there aren't any attractive opportunities in the market. So has the situation changed?
The situation hasn't changed much, but I think we are seeing a lot of smaller operators. We are seeing the pressure on lot of smaller operators to kind of grow further from here. And we think that a lot of smaller operators will definitely come into the market to consolidate further. And then they will consolidate further over for the next 12 to 24 months and we would get our opportunity to participate and have a look at them. So nothing specifically there has changed, but we want enabling the resolution because we do not want a situation to not have the flexibility to raise capital as and when the needed arises.
So just to follow up on that, has the valuations on some of these M&A situations, I mean, is it going the DT cinema way? Or is it like substantially lower than that? What's the kind of market devaluation that's going on right now?
See, I can't comment on that because there is no specific transaction that we are looking at, so very difficult to comment on that question.
The next question is from the line of Abhishek Ranganathan from AMBIT Capital.
I have a couple of questions. So one is on the like-to-like admissions, which I refer to here. The like-to-like admissions you said would have 18% adjusting for issue and Padmavat not getting released. Now are you excluding these screens where Padmavat was not screened? And are you excluding the Tamil Nadu and south markets to arrive at the 8% number?
Okay. So if we exclude these markets and look at rest of the country, that's the way we calculate this.
Okay. And lastly, in terms of breakup of your renovation CapEx, upgradation CapEx, and your spend amount for upgradation CapEx in FY '18, [indiscernible] INR 450 crores, how much of it would be the renovation CapEx you're looking at? And for how many screens, more importantly, how many screens you're renovating in FY '18?
Yes. So it's very difficult to put a number because I think both CapEx on existing screens there are a bunch of things that we must do, which is technically maintenance CapEx and then there is stuffs that we do on renovation. But broadly, I think, our CapEx on new screens will be about INR 300 crores to INR 325 crores and CapEx on existing portfolio will be INR 100 crores to INR 125 crores. So that's a broad estimate right now, but I think as the year progresses, we will take a view. Because sometimes the CapEx on existing screen is also determined by free period that we get to shut down properties and renovate that sector. If we find the tailwind of box office to be very strong, then some of the CapEx is therefore to limit materials. So I think, it is more opportunistic sometimes to take a view on the operating -- the CapEx on operating things.
And how many screens did you renovate this year? And how many are you planning to renovate next year?
About roughly 17 to 18 properties is something that we've renovated this year. I think it would be broadly a similar number or maybe about 12 to 15 properties again coming up for renovation this year.
So 17 properties, we were looking at something like about in the region of 50 to 60 screens, is that a number which we -- number of screens we have renovated?
We have to actually calculate.
Yes, about that much, yes.
Thank you. That was the last question. I now hand the conference over to the management for their closing comments.
Thank you very much, everyone, for taking out time and being on the call. And if you have any follow-up questions, please feel free to write to me or my colleague, Rahul Gautam, and we'll be happy to answer them. Thank you.
Thank you very much. Ladies and gentlemen, on behalf of AMBIT Capital, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.