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Ladies and gentlemen, good day, and welcome to the PVR INOX Limited Q3 FY '25 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Harsh Shah from Axis Capital. Thank you, and over to you, sir.
Yes. Thank you, Seema. Good afternoon, everyone, and welcome to PVR INOX Limited Q3 and 9 months FY '25 Post Results Earnings Call. The call will start with brief management remarks on the earnings performance, followed by an interactive Q&A session. PVR INOX management will be represented by Mr. Ajay Bijli, Managing Director; Mr. Sanjeev Kumar, Executive Director; Mr. Gaurav Sharma, Chief Financial Officer; and other senior management personnel.
Over to Mr. Ajay for your initial comments.
Yes. Thanks. Good afternoon. I'd like to invite you all to discuss the unaudited results for the quarter and the 9 months ending December 31, 2024. We uploaded the earnings presentation and the results on our company's website and the stock exchanges website earlier today, and I hope you have had a chance to review them.
Q3 recorded the highest box office collections of this fiscal year, driven by multiple blockbuster releases. This strong performance led to the highest quarterly ATP and the SPH reaching INR 281 and INR 140, respectively, while ad revenues touched INR 149 crores, highest since the pandemic.
Pushpa 2 emerged as the biggest blockbuster in Indian cinema history, contributing nearly 36% to the quarter 3 India box office and 12% to the 2024 India box office. Q3 started with Tamil and Telugu cinema leading the way. Devara: Part 1, starring Junior NTR and Vettaiyan starring Rajinikanth dominate the box office in October, collectively, accounting for nearly 1/4 of the month's total box office collections. Their success reinforced the growing strength of South Indian films, which are increasingly finding traction across multiple regions.
However, October was impacted by the underwhelming performance of Hindi and English films as the releases like Jigra in Hindi and Joker 2 from Hollywood failed to make a mark at the box office. November saw resurgence of Hindi cinema with 2 Diwali blockbusters, Singham Again and Bhool Bhulaiyaa 3, each grossing about INR 300 crores at the box office.
Regional films continued their momentum with Amaran grossing over INR 250 crores to become the second highest-grossing Tamil movie of the year. Lucky Baskhar, a mid-budget Telugu movie achieved impressive box office success grossing approximately INR 90 crores.
December was the biggest month of the year, which saw the release of Pushpa 2, which shattered records grossing over INR 1,450 crores in India. Its dubbed Hindi version achieved INR 900 crores-plus, setting a new record as the highest grossing Hindi film of all time.
Hollywood also found success in Mufasa: The Lion King, which resonated with the urban family audience and collected over INR 100 crores at the Indian box office. While Q3 witnessed significant highs, the postponement of key films like Sitaare Zameen Par and Chhaava, amongst others, disrupted the overall box office momentum. Overall, in Q3 FY '25, we welcomed 37.3 million guests across our cinemas.
In terms of the financial results for the quarter, the following numbers are calculated after adjusting for the impact of Ind AS 116 on lease accounting. Total revenue for the quarter was INR 1,739 crores; EBITDA was INR 258 crores and PAT was INR 68 crores as compared to revenue of INR 1,569 crores, EBITDA of INR 226 crores and PAT of INR 41 crores in the same period last year.
After a weak 2024, Hollywood seems ready for a strong comeback in 2025. A lot of sequels of successful franchises are lined up for releases. We have 3 Marvel movies, Captain America in February, Thunderbolts in May, Fantastic Four: First Steps in July. Mission: Impossible-Final Reckoning, Karate Kid: Legends in May, Formula 1 starring Brad Pitt, Ballerina, and How to Train Your Dragon in June. Other notable titles include Superman, Jurassic World Rebirth, Conjuring: The Last Rites, Predator: Badlands and Avatar 3: Fire and Ash amongst others.
From Bollywood, we have Chhaava starring Vicky Kaushal releasing next week; Shankara starring Akshay Kumar and Madhavan; Diplomat starring John Abraham; and Sikandar starring Salman Khan in March. Other notable titles include: Jaat, Raid 2, Housefull 5, War 2, Jolly LLB 3, Son of Sardaar 2, Sitaare Zameen Par, Thama.
We also have an eclectic mix of regional movies lined up for release. We have Thandel starring Naga Chaitanya releasing tomorrow. Other notable titles include: Good Bad and Ugly, Retro, VD 12, Thug Life, Kantara 2, Raja Saab, Coolie and Thalapathy 69.
We've added 77 new screens and exited 67 underperforming screens in the current fiscal year to date. For the whole year, the company expects to open about 100 to 110 new screens. Our current screen portfolio stands at 1,728 screens across 350 cinemas in 111 cities in India and Sri Lanka.
An update on our new growth strategy. We have signed 100 screens under the new capital-light growth model. Of these, 31 screens are under the management contract model and 69 under the asset-light model, where 42% -- up to 80% of the CapEx investment is contributed by the developer. These screens are expected to come up over the next 2 to 3 years.
Post-merger, the company has consistently managed to reduce its net debt. As of December '24, net debt stands at INR 996 crores, which is a reduction of INR 435 crores since March 2023.
I'd like to now open the platform for any Q&A. Thank you once again for joining.
[Operator Instructions] We take the first question from the line of Abneesh Roy from Nuvama Wealth.
My first question is on overall consumption impact on your business. So, we have seen this quarter and maybe previous quarter also, lot of the FMCG and even discretionary categories call out slowdown in urban. Of course, yours is an essentially urban consumption. So how do you see in the near term this impact?
I do understand Q4 because exam season anyway, pipeline every year is a bit less. But would you be worried in the near term because of the urban slowdown? And on the flip side, because of the budget, the taxes have been reduced and substantially also. So, in the past have you seen any such measure -- similar measure lead to more consumption? Or is it still fully dependent on the quality of the content?
Abneesh, when I look at the content pipeline of this year, which has got impacted because none of the big superstars released any movies this year like Shah Rukh or Aamir or Hrithik or Ranbir and even Ranbir was in an [Indiscernible] [0:08:42] movie. So I think this year, in fact, the content pipeline of Hindi was subdued.
Then, we had -- Hollywood had a strike, and therefore, only in the third quarter, we found some momentum with Mufasa, Gladiator II and other movies coming. But when I look at the next year's pipeline and I look at the way people are watching re-releases, in fact, some of the re-releases like Yeh Jawaani Hai Deewani have made up for some of the big movies, which did not perform well like Game Changer.
So, I see that content will drive consumption. Of course, the new tax benefit, which is -- income tax benefit, which the FM has announced will definitely give more discretionary income to the consumers. So add to that, the content pipeline, I feel consumption is bound to increase. It's still a very small ticket size in the overall spending pattern of anybody to watch a movie and have a 3 hours of pure escapism and entertainment. So I see consumption pattern only improving going forward.
My second question is a bit related to the content only. And it's specific on the Hindi content. So we have seen a few Hindi movie producers facing very tough times because one after the other, the movies have not done well. And we have also seen, for example, marquee producer like Karan Johar sell out a major stake to another company.
And we have also heard that in terms of mid-budget movies, there is a calendar which has become erratic and bit inconsistent. So, how do you see that funding of Hindi movies, because most of the hits are coming essentially from South India or dubbed South India. So from a funding perspective, how FY '26 you see for Hindi movie?
And if you could talk about mid-budget movies, how the calendar is? And FY '25, why did the large tentpole kind of Hindi movies not released? What was the specific reason? Because normally, these can be easily planned. What was the reason for lack of tentpole Hindi movies?
The reason was because I think a lot of movies got bunched up in '23, '24. That's why it was an aberration to see in 1 calendar year, 3 movies of Shah Rukh coming up. And Hrithik always makes a movie once every 2 years. So therefore, no movie got released. Ranbir had about 3 films that got released that particular year.
So I think last year was all being focused on production. And I also feel that Adar Poonawalla putting 50% or buying 50% stake in Dharma is a very good thing because now there's enough capital there to make more movies. So that was the reason why the movies did not come last year, I'm talking about. And this year now, everybody is back.
When I look at the lineup and the movies which have been announced, and there's also scrambling for dates, which is a very good sign when people are saying, okay, who wants August 15, who wants 26 January or Eid or big key dates, which are coming. So when scrambling for dates happen, that's only a good sign.
So when I look at the lineup, there is Sitaare Zameen Par of Aamir Khan, Lahore of Sunny, Sunny after the back of Gadar 2 success is a big one. Very anticipated Ranbir's Love and War being made by Sanjay Leela Bhansali. Then, basically, War 2 is coming in August, which is -- so plenty of movies on paper, which are released and announced. And on top of Welcome to the Jungle, which is a very big franchise.
So I'm seeing only good lineup. On top of that, Hollywood, which from quarter 3 onwards is now back. Captain America is coming next week only. And then after that, we have the final -- the Mission Impossible, the new Brad Pitt big movie Formula 1, Superman is getting rebooted, Avatar 3. So, these are the big blockbuster -- so many franchises, Final Destination. All these films are coming. So, for me, the lineup is very strong.
Sure. My second and last question is on the 2 new developments. One is, if you could talk about initial learnings and initial feedback on the first property, which you have opened in terms of food court with Devyani in Rajasthan. If you could talk about that.
And second is, in terms of the asset-light model, again, how has been the initial discussions? Is it a game-changer? I do understand 100 screens over 3 years may not change your overall numbers significantly, but if you could talk about longer term in terms of your debt levels or your return ratio, how this impacts, not on FY '26 because that's the first year, but how does the longer-term picture change because of this?
Well, if I can say it myself in all humility, the brand, basically, anybody who's able to do an asset-light model or a FOCO model, management fee franchise model goes to show that there is some strength in the brand. So we've developed our brand equity with all the key stakeholders, whether if it's a customer, it's the film fraternity or the developer, and people who are ready to spend money on the brand and let us only do the management.
So I think this has already been done by a lot of retail players. As you know, hospitality brands have done it. Nobody had ever done it in the cinema business. So we were very keen to test the waters with this. 100 screens we have signed, but there are lots of others which are in the pipeline, and already lot of capital has got deployed in the 1,728 screens that we operate. And I think time has come to now monetize on the brand equity that we have built. And this will obviously reduce our capital intensity, improve our margins, but at the same time, it will not reduce our growth trajectory.
We will still grow by about 122 screens, 100 to 120-odd screens every year. And I think it's a testimony to the brand. And definitely, this is bound to bring our debt levels down as well, because if you have healthy cash flows, a lot of -- only so much can be spent on renovations and new properties. The rest all will be utilized to pay down the debt.
The next question is from the line of Kavish Parekh from B&K Securities.
Firstly, I want to get a sense on synergies. The numbers that we had laid out in the time of our merger, where are we now? From here on, what levers do we have to improve the cost structure or margin trajectory, especially if occupancy stays where it is?
And secondly, what is the update on our deleveraging plans? So we had set out plans to generate proceeds of about INR 3 billion, INR 3.5 billion from sale of some of our properties. Where do things stand as we speak? So of course, debt reduction this quarter was commendable, but what from here on, considering the weak trends as we go into 4Q?
Gaurav would you like to answer the question, please?
Sure. Sure. On your first part of the question regarding synergies, I think to a large extent, we have already implemented steps for integration over the course of last 2 years. And the cost structure also reflects -- if you look at over the course of last 4.5 years and compare on a per screen basis, our fixed cost has been stagnant, even for the 9 month period ending December '24, our overall fixed cost has been at flat level despite of the cost inflation.
So, the cost structure is already reflecting bulk of the merger synergies. I think we will see the impact on margins as the footfalls recover. Just to give you some directional sense, pre-COVID at a 32% occupancy, the business used to deliver 18% margins. However, in quarter 3 itself this year at [ 25% ] occupancy, the business has delivered 15% margins. So as the occupancies improve, the benefit of synergies in margins will start getting reflected.
On your second point around deleveraging, I think [ hard truth ] deleveraging the balance sheet is one of the key strategic focus areas for us. All our efforts are geared towards generating free cash flow. Despite of volatility in box office, we have been able to reduce our leverage over the course of last 1.5 years. And the pivot towards capital-light model will only aid in that effort. So going forward, I think we will continue to see reduction in our net debt levels.
As far as the sale of properties is concerned, I think we've been working with some property consultants, and we have received some offers for our properties in Pune and Vadodara. But even in those locations, there are operating cinemas with positive EBITDA. So, at this stage, I think the value and the offer that we have received don't justify the loss of EBITDA that we will incur on the sale of these assets. However, we continue to explore with the consultants for better values or better offers, but the priority is to generate organic free cash flow and reduce leverage.
Understood sir. So, just a follow-up on our asset-light model. Can we have some more color on how would the economics work in case of both the asset-light models? And if I can squeeze in one more question, any thoughts on price hikes in our F&B segment? So I think the last hikes we took were in April '24.So -- and this quarter, sequentially, F&B revenues remained largely flat. So, what levers do we plan to exercise to ensure sustained growth in the F&B business?
So, let me go first and then maybe Pramod can talk about the asset-light model. On the F&B side, every year, we do take an inflationary increase and it's not going to be any different for the coming year. We are going to be taking a 5% to 7% increase on certain product items, but that has to be measured against the sales mix. So, the way we actually do this is that we always would want to have 50% of our increase coming through volume and 50% of the SPH increase coming through value. So that's really what we follow.
Over to you, Pramod.
Yes. So, these are 2 different models, when we're talking about an asset-light model, it effectively means that the P&L is through our books of account. And the developer ends up investing anywhere between 40% to 80% of the capital that is needed to be deployed for the screen fit-outs. In this model itself, while it is comparable to a regular lease model, it becomes asset-light because most of the assets on the fit-outs, on the cinema fit-outs are in the books of the developer partner -- developing partner.
In the FOCO model, the investment is completely by the development partner or the investor and who ends up enjoying the profit and loss and we are eligible to enjoy a management fee anywhere between 6% to 10% of the net of GST revenues that get generated from the property. So these are the 2 models. So you look at it, the 100 screens are a combination of asset-light as well as the management model.
Management is, we call it the FOCO model, the Franchisee-Owned-Company-Operated model. So this is the combination. As we go forward on this model, we do look forward to the major footprint of screens coming from our umbrella in this model. And this will also allow us to expand the footprint much faster. So that's how we look at it. I hope it does answer your queries.
So I'm clear about the management contract model that we will receive a 6% to 10% management fee. My understanding is, this will be across all revenues, ticketing, F&B as well as ad revenues. Is that right?
Absolutely.
And under asset-light model, could you just elaborate some more on how the model will work? So I understand the CapEx, I mean 40% to 80% will be borne by developers. But how does this play out in terms of revenue sharing?
So in terms of the revenue share, think about it that anywhere between 15% to 20% -- 15% to 20% is the occupancy cost, which the developer would end up enjoying for giving the property. For the balance CapEx that he has given, he becomes eligible for a fixed yield, a yield which could be anywhere between 7% to 12%.
Hi Seema, are you there?
The next question is from the line of Arun Prasath from Avendus Spark.
Arun Prasath from Avendus Spark here. So, continuing the discussion on the asset-light model, can you just throw some light on how does this framework work from our perspective? I mean, if you are opening, say, 100 screens, what you will give for the -- what you allot for FOCO model and what will you allot for the asset-light model and which one you will be completely putting 100% of your CapEx? Or is it left to the -- option is left to the developer or do we have some say in this? So can you just help us understanding this framework, how do we distribute the new screen buckets among these 3 buckets?
Sure, Arun. I think as explained by Pramod earlier, the strategy is to leverage the brand now and the market presence and scale to drive growth towards more capital-efficient screen openings. I think we will continue to have these -- all the 3 models working in the market. Lease models will be there. Again, these conversations will be dependent on location, market, developers. In certain locations, we will prefer to go with lease model; in certain locations, the preference will be with asset-light or management contract models.
We've also mentioned that majority of new screen openings from next financial year will be undercapitalized model. So that sort of gives you a directional sense. It's hard for us to quantify how many screens will be there, but we have signed 100 screens. And as they open up over the course of next 2 to 3 years, we will see incrementally more screen -- new screen additions under this model. But we will also have lease model, the older model working in certain parts of the country with certain developers in certain markets.
Sir, I was asking slightly a different question. Say, you have -- you want to go for a management fee model versus the -- where the developer has to pitch in, say, 50%, 60% CapEx. So between these 2, say, given a location, do you have any say on this or the developer comes out and says that, "okay, I want to put 100% CapEx. No, I will only put 50%." What is...
It will be different strokes for different folks. So each of the location or a development represents a unique proposition or a unique opportunity. So it will be very difficult or extremely impossible to suggest that -- which will be the preferred model. That is one.
Our preference is absolutely clear that in certain markets, it can only be FOCO. In certain markets, we would basically have an option for an asset-light model. So, it will be driven on a unique case-to-case basis. It'll be no one shoe fits all, one size fits all sort of a strategy.
Okay. Let me frame it in a different manner. What kind of developers are interested in say a FOCO model and what kind of developers are interested in, say, the asset-light model? Is it like -- more like a premium old model...?
So, I would say that -- okay, let me just explain it to you from a real estate perspective. So, let's say there are developers who have a trust in the brand and they believe that the brand does a good job in terms of delivering cinemas. And if they are basically REIT-able assets, they would prefer to get into an asset-light model. That's a preference from a very developer's perspective.
If the developer is basically doing one unique development, his interest could be aligned towards a management contract wherein he could be enjoying the P&L. But that is like, it cannot be generalized across. So if you say the qualification of developers, which developers would qualify for a management contract, which developers would qualify for an asset-light model? Again, the answer, there is no one answer to this question.
Okay. Got it. And secondly, when you said that this will ramp up your deployment of the screens, obviously, the CapEx is not a constraint here, but more mall supply, especially in South was our constraint. That is capital is a secondary constraint. So does this solve your primary constraint of mall supply in some of the regions where you are looking to grow faster?
Two things. One is, any organization or any company has a management bandwidth. The moment you get into a management and an asset-light model, the resources which come in from the development partners also join hands in terms of developing the cinemas, be it the design resources, be it the project management resources, and then last, the financial resources also as well. So they all join hands together, so -- which basically increases the bandwidth to be able to deliver the right cinemas in a given fixed time.
The second thing in terms of -- you're asking the mall supply. So, the mall supply with the REITs opening up is now on an increasing trend. Including South, you're seeing the coming up of new malls, which are being invested by the larger funds. And even in the smaller towns, the malls or the shopping centers are coming up. So the unorganized retail sector is giving way to the organized retail sector.
Okay. Understood. And that means that most of these 100 screens that we have tied up should be coming from Tier 2, Tier 3 cities? Is it the right understanding?
No, they are in Tier 1, Tier 2, Tier 3. Again, there is -- I'm not in one of these statements have I said that there's a qualifier across management contracts or asset-light models to be in Tier 2 or Tier 3 towns. There -- many of them are in Tier 1 towns and Tier 1 developments of maybe even a million square feet, we have centers having a million square feet.
Understood. Understood. If I can just add one more on the bookkeeping questions. On the like-to-like basis, we are showing CAM growing at an alarming pace throughout this 9 months period, much higher than the rest of the fixed line items. What is the reason for this kind of a growth in CAM?
So, if you look at CAM, CAM is our direct proportionality relationship to the input costs. So input costs are human resources. If the wages are increasing, so the CAM would increase. So are they dependent on the fuels, because the DG sets which still get utilized. So again, if the diesel cost is increasing, CAM goes on for an increase. So does it go for electricity unit charges? If they are increasing, CAM would increase. So that is the proportionate increase, which is visible in the CAM charges.
Do we have any control on this or it's whatever the developer [ bills ], we need to take it?
We are working alongside with the government as well as the developers. With the developers, we are looking at rationalizing, helping them rationalize these costs to optimize the common area maintenance charges for across the retail fraternity, which is sitting in the mall. Alongside with the government, we are working on a possibility of introducing, like the electricity on industrial rates and so on and so forth. So a couple of initiatives, which are in work-in-progress with the development partners as well as a representation to the government.
The next question is from the line of Jacob from Centra Insights.
I just needed a small clarification on our screen additions. At the end of FY '24, we had reported that our screen count stood at 1,748 screens. And currently, we're at 1,728 screens, which is a net reduction of 20 screens. But we've also reported that our net screen addition has been 10 screens year-to-date. So, could you please clarify this for us?
Yes, Jensen. This is Saurabh from the IR team. So maybe we can connect offline, but the figure that you might be referring to, it might not be as of March '24. It might be as on the date of the IR presentation. You can connect with me offline and then maybe I can take you through the number of screens that we have added. But till date, we have added about 77 screens and we've closed about 67 screens.
By the end of this year, we intend to add another 33 screens. That will take the total addition to 110. And then there will be an additional property, which is a 5 screen which will get closed. So effectively bringing the total closures to 72 screens. This effectively brings the net addition for the year to about 38-odd screens. That's the math. And maybe then we can talk offline on the reconciliation.
Sure, sure. We can take this offline, Saurabh.
The next question is from the line of Tanay from Investec.
So first question is regarding the ScreenIt initiative that you have launched regarding those re-releases and people being able to book their own shows. So I just wanted to understand like how has it been -- how is it since the past -- I think it's been 1 or 2 months since then, and how is the shows count per month? And what do you all expect it to go ahead with this?
So, these are early days for ScreenIt. The only -- one thing that I can share with you that we've currently done close to about 100-odd shows under ScreenIt. These are confirmed screenings that have happened, which is very encouraging. Number two, the idea has really got some virality. A lot of people are talking about it and are inviting their friends and family to join the show that they have created.
I think this idea is going to be quite lethal and is here to stay. However, may not have the potential to really move the needle. So, it will kind of keep picking on 100, 200, 500 shows in a month, but that's where it is. But it's a very strong proposition for consumers who love the cinema experience and want to watch movies that they have missed out on. So that's really what it is. But I guess in about another 3 to 6 months' time, we'll have a far more clearer picture on this.
Got it. And I just wanted to understand like just a bit of macro where like the past month, we saw a lot of cricket matches, lot of events which were taking place like concerts and stuff like that. So is that eating away from -- like going ahead, do you feel that's eating away from the share of going to cinemas or both are growing side to side in like the entertainment industry?
So, actually, I would say now each medium feeds off the other. In fact, we've also started to screen a lot of concerts and cricket matches. We are also in conversation with BCCI and other bodies to see some of the key matches that we could screen. Concerts is something that we have been screening. In fact, since April till now, close to 4.3% of the total admissions have come in through re-releases, which is the bulk, which is 90% and about 10% through events.
So, technically, this is a piece that we'll be irrigating as we move forward. These are early days, but we feel that each of this idea will feed into the other. If there is a concert like Coldplay happening, it has only limited capacity, whereas if it's being live across all theater or even recorded and played, it is a fantastic revenue model for both cinemas as well as for the concert owners. So, technically, we are working very positively and aggressively with all partners within this space to see how we can converge on this.
Got it. But what I was trying to understand was basically, would you feel that the December month and probably even the other -- October and before that was affected by -- like the footfalls were great, of course, but do you think it could have been higher if like all these concerts weren't to take place?
No, not at all, because a concert's life is about 3 hours. So it cannot -- and that too in a certain city. So, technically, it has no bearing on any footfalls at all.
Got it. Got it. And I wanted to understand, like I saw the other expenses were lower year-on-year and quarter-on-quarter basis. Was that regarding some cost initiatives that you were doing or what is it specifically regarding?
So, we have taken very focused initiatives around reducing our other expenses. There are various line items in other expenses, including traveling, marketing, legal expenses, insurance expenses. In fact, we have renegotiated our insurance coverage for the entire company, and there's been a substantial cost saving that has accrued to us. Again, on the marketing side, we've been very careful around what sort of marketing campaigns we want to run, accordingly, the expenses have been curtailed. As a result of which you're seeing this flattish other expenses line item in comparable cinemas.
Okay. And a final question, I think it was asked before by someone regarding the Devyani joint venture. Did I miss the answer for that? Just wanted some clarity on how...
No. So, what was the question, if you could come again?
Yes, the Devyani joint venture, which you all were looking at the food court. I'm not sure if you all had answered it earlier, how it is and how is it going right now?
Alok, would you like to take that one?
Yes, I'll take it up. And I'm going to tell you that we are having this joint venture under the name of Treat Junction. So that's the name given to the food court. We've opened one in Kota, and it's just been a month since we opened it. The traction is good and the brands over there like KFC, Pizza Hut, Costa, Vaango, they are doing well. But it's too early to talk about it. The traction is there, foot falls is there, and we'll be expanding more in the next coming months.
The next question is from the line of Gaurav Gandhi from Glory Tail Capital Management.
Sir, what is your target percentage you wish to achieve in box office collection of regional movies? I mean, how much share of box office collection of a regional movie you are targeting from its overall business? Currently, as per the presentation for Bollywood movies, it is around 35% roughly that is our share. And for regional, it is around 12%, 13%. So, now as we have good penetration in the southern market, so what is your target? I mean, how do you look at this?
So, I think there is no specific target that we are having. Our overall strategy is to penetrate more in South India. South India is a very lucrative market. And today, despite of the highest regional mix that we have in our portfolio is towards South, the penetration in South is the lowest in terms of multiplex penetration.
So, incrementally new screen additions that we do almost 35% to 40% of new screen additions will be in South India. And South India as a market has been doing consistently well across all the 4 major languages. But yes, I think to answer your question, there's no specific number that we are chasing, but we are prioritizing South as a region.
The next question is from the line of Aditya Sen from RoboCapital.
Sir, I want to understand the occupancy part. Like how -- if I'm correct to frame like this, how many blockbuster movies do we need each quarter to get an occupancy rate of 28% to 30% or rather, what are the factors that would lead us to the 28% to 30% occupancy rate? You can answer it either ways?
So, I think the occupancy is linked to supply of films and performance of films both. Unfortunately, the occupancy in the 9 month period has been trending low, partly because there was a drop in the number of films which were released in both Hollywood and from Hindi film industry. And also partly because of absence of big mega blockbusters from Hindi film industry.
So I think going forward -- and we have seen months and quarters where the occupancy has been very strong. December was, in fact, the biggest -- highest occupancy month for us where the occupancy was upwards of 30%. I mean, going forward with a very strong lineup in Hindi as well as English films, we feel that the momentum at box office will continue and the volatility on supply of films and occupancy that we witnessed over the course of last 2 years, that should subside to a large extent.
Okay. So, if December was 30%, then let's say, if we get 2 very good movies per quarter, then that quarter can give us roughly 28% to 30% occupancy rate. Is that correct understanding?
There is no such formula. Actually, we could have different concoctions. We could have all the films doing mid business but being solid, they would work. You could have 1 mega blockbuster that could work. It could have just a blockbuster film along with some fillers in the other week. So it really depends. It's not such a linear answer to say what would drive occupancy.
But one thing that Gaurav said, having more films and films slotted for every week is really the crux, and that's the reason we are all very positive and hopeful that in the year '25, '26, we will get -- the volume is going up dramatically across both Hindi and English and because of which there will be no gap weeks. The moment we have that scenario are, in fact, [ meaning ] on even blockbuster reduces, because if every film -- it's like a cricket match, if everyone comes in just scores 30, 40 runs, you can still make 200 runs. It's not important that one guy has to come and hit a century.
So while December was a month where Pushpa came and really hit a double ton, but the reality is that if every player or every movie in this situation would come and perform adequately at the box office, we still will get a very, very healthy occupancy rate.
All right. And do we have anything in the re-release pipeline?
Yes. About 7 films are getting released on 7th itself. From Silsila to Jab We Met to Interstellar. Interstellar is one of the biggest Hollywood re-release that's happening. So the re-release pattern has already been carved out. This is a trend which is here to stay now. And there is a specific team which works along with programming, does a lot of consumer research and polling and figures out content that should be re-released. So this trend is going to always stay. And the fact that re-releases contributed close to over 4% of the total footfall is very, very encouraging.
The next question is from the line of Vaibhav Muley from Yes Securities.
Congratulations on a very good set of numbers for the quarter. My question was actually on the Q4 current performance in January. So how has been the response for the movies, key movies like Emergency, which were launched? And what is the expectation for the current quarter based on the lineup that we have? That's the first question.
I think quarter 4 has started off well. January, there were 4 films which were released which crossed more than INR 100 crores, and 3 of them were from South India. South India, in fact, January is a big month. Due to Pongal, many big films are released. Game Changer was a big film, which was released on 10th of January, which did very well at the box office, followed by a Telugu film. There's a film which is running in theaters, again from Tamil film industry, which has done very well called Sankranti. And Sky Force from Hindi cinema has done more than [ INR 20 crore ] in box office, which was released on the Republic Day weekend.
So overall, January has done well. Of course, there are a couple of Hindi films like Emergency that you mentioned did not do as per our expectations. Deva has not done as what we had thought it should do at the box office. But that's the nature of the business, few films don't perform, but some films outperformed expectations.
Overall, going forward, I think there is a very strong lineup. Chhaava is releasing on 14th Feb. Then Captain America is going to be big. Then there are series of regional films. There is a Ajith film which is released today. Then there is a Mohanlal film. Then there is a Naga Chaitanya and Sai Pallavi movie coming which is coming this month.
Overall, the lineup for the month of Feb is extremely strong and March, again, is very strong. So I think this is a point we mentioned earlier as well. The lineup is consistently improving across languages, including regional, Hollywood, and Hindi film industry.
Understood sir. My actually next question was on the management contracts. Our asset-light model that we are following. For the management contracts, if I'm not wrong, P&L won't be on our books, right? But the management fees that we will be generating around 10% of the revenues. Can we assume that this should improve our overall EBITDA margins?
See, overall EBITDA margins, yes, they will improve and ROCE will improve.
Okay. Understood. And regarding our expansion in South, any kind of guidance that you can give on the screen additions given the regional films are doing very well?
Yes, we've given an update on our growth strategy in the investor presentation uploaded on stock exchanges and our website where we have mentioned that we are on track to open 110 new screens this year and a similar number of screens next year. And we have signed about 100 screens under the new capitalized model, which will open over the course of the next 2 to 3 years.
And how many screens of these total are expected to be opened in South market?
I think just to give you a ballpark, incrementally new screen additions will be roughly about 35% to 40% in South India. That's the sort of mix for South.
Okay, sir. And just last one question if I can squeeze in about the screen churn. So we have again closed, I think, 25 screens in the current quarter, making total tally to 67 screens for 9 months. Do you expect this screen churn to moderate going forward or can we expect the churn to remain at the similar levels?
So, we continue to evaluate our portfolio very closely at a property level. I think we have already exited 85 screens last year and already 67 have been exited so far. So, together in the 2 financial years, we have roughly exited about 150 underperforming screens. So most of these screens were located in malls which are dilapidated and [Indiscernible]. But I think to answer your question, the pace in our view should come down, but we will have churn in the sense that we will replace older screens in older malls with new properties or new cinemas opening in better malls in the same location.
The next question is from the line of Umang Mehta from Kotak Securities.
Sir, just wanted some guidance on the CapEx for next year, given that you would have a fair visibility right now given several screens would kind of fit out already?
Yes. I think to answer your question on CapEx for the current financial year, we will be sub INR 400 crores in terms of our total CapEx expenditure versus INR 625 crores that we did last financial year. So there is a 35% reduction in CapEx and next year, while we are still in the process of doing our budgets and other [ Q3 ] planning, but overall CapEx spends will be somewhere in the range of INR 400 crores to INR 500 crores.
We will try to be very, very careful around our CapEx expenditure and be capital efficient, and at the same time, not sacrificing the growth in terms of new screen additions. So the new capitalized model will reduce CapEx intensity and our share of CapEx will come down incrementally.
Got it. And the second question was on rental renegotiation. Could you share some insights as to how many properties are currently seeing rentals consistently about 20%. And how are the conversations going? And a related question was, is there any effort to convert some of the existing screens to new contract? Just checking on that.
So, up till December, we have rationalized about INR 50 crores of rentals from the contracted rental. And to answer your second question, yes, as soon there is an opportunity wherein the lock-in is expired or there is an opportunity or an interest from the developer, we do end up converting the screen, if it is viable, from the straight lease model to the other models that are available.
We take the next question from the line of Raghav Bansal, an Individual Investor. Please go ahead.
I have a few short and quick questions. First, can you explain how the economics of the distribution model works, specifically for movies like Singham Again and Sky Force? How do we ensure we don't make a loss there?
Yes. We've been in this business for more than 20 years, and our strategy is to work with only big production houses with a credible track record. And so we -- our business team has that experience and expertise to assess the track record of the director, producer, the actors and accordingly, we take a call on which films we want to distribute.
Singham is a very successful franchise. And normally, the way it works is that we pay an advance to the producer before the release of the film. And once the film is released and the box office collections are there, we have -- it's a commission-based model. We take our commission, adjust the advance and pass back the balance to the producers.
So the commission is anywhere between 6% to 9% of the total box office collections. So yes, broadly, that's the business model. There is no -- we don't work on outright purchase of rights for any title. It's a purely commission-based distribution model.
Got it. Second, how is the growth and expansion of 4700 BC shaping up? And can it ever contribute significantly to the overall revenue in the coming years?
Yes. I think we are very excited about the brand. It's shaping up extremely well. It is on its course to cross INR 100 crores revenues in this financial year. And it's been growing at a very rapid pace of more than 25% top line growth every year. It's one of the very popular brands across quick commerce and modern retail channels. And we want to scale it up even more aggressively as we move forward.
Great. Third, a lot of times we see occupancy shoot up for movies with lower pricing. We launched dynamic pricing. Are we seeing any benefits there? Or can we be more aggressive with dynamic pricing?
Yes, dynamic pricing does work for us, and we've tried it. And it continues to give us a kind of a top up on ATP on some of the bigger films during weekends. So it has a limited play, and we also want to be very careful in deploying dynamic pricing because it somewhere goes against the grain of what the consumer is expecting.
So while we've tried it, we want to be very conscious of where and how we use it. And typically, in our business, sometimes we don't know how the movies will open up. That's where dynamic pricing plays a very important role, where we open low and if the film starts to getting popular, then at least we do not leave an opportunity or money on the table. We are able to maximize immediately within that show if the content starts to gain acceptance with the consumer.
Right. Finally, one suggestion from me. I'm a regular PVR INOX customer. I go there every week. We need a very efficient, responsive and centralized customer support system for all the clients and feedback and queries that will be very helpful for us.
Sure. Got it.
Ladies and gentlemen, we take that as the last question. I will now hand the conference over to Mr. Gaurav, CFO, for closing comments.
Thank you, all for joining us today. In case you have any incremental questions, you can reach out to the IR team or to Saurabh Pant, and we look forward to your support and keep you updated on the progress, on the strategy. Thank you so much.
Thank you. On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.