PVR INOX Limited (PVRINOX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to PVR INOX Limited Q1 FY '27 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] I now hand the conference over to Mr. Niran Dhumal from ICICI Securities. Thank you, and over to you, Mr. Miron.

Good afternoon, everyone, and welcome to PVR INOX Limited Q1 FY '27 and post results earnings call. The call will start with brief management remarks on the earnings performance, followed by a 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 person. Over to you, sir.

Thanks very much. Good evening, everyone. This is Ajay Bijli. I'd like to welcome you to today's call to discuss the results for the quarter ended June 30, 2026. The earnings presentation and results were uploaded to our website and the stock exchanges yesterday and I hope you've had a chance to review them. Q1 FY '27 was a strong start to the year. India's total box office collections grew 20% year-on-year this quarter, with broad-based growth across metros as well as Tier 2 and Tier 3 markets across a wider set of successful and mid-scale firms and across languages. The strength we are seeing in India is also visible globally. North American box office is running 14% ahead of last year at INR 4.8 billion for the first half of 2026. Its second best first half performance in 2019, reaffirming that theatrical first remains the release model of choice of filmmakers everywhere. The quarter saw strong performances across languages. Hindi Cinema held its ground with titles like Bhooth Bangla, Cocktail 2 and [indiscernible] while it was regional Hollywood content that drove the outperformance. Hollywood found success from non-franchise titles such as Project Hail Mary, Michael and Obsession. Regent Cinema delivered multiple growth on the back of compelling local content such as Raja Shivaji, Marathi, Visant Malala and Karapu in Tamil, amongst others. Our own performance mirrored this momentum. We welcomed 36.6 million guests during the quarter, up 8% year-on-year. Equally encouraging is that guns are spending more with us on every visit with ATP touching of INR 273, which is up 8% and SPH at INR 161 up 9%. When footfalls and per guests spends rise together, it reflects the underlying strength of the cinema going habit and of our premium offering. This translated into a strong financial performance during the quarter on an IndAS 116 adjusted basis, revenues grew 12% year-on-year to INR 1,542 crores, while EBITDA nearly doubled to INR 230 crores. At a 14% margin. This margin expansion reflects the benefit of operating leverage and the cost discipline we have sustained for several years. PAT came in at INR 71 crores against a loss of INR 34 crores in Q1 last year. The standout same this quarter is on the balance sheet, 3 years of sustained free cash flow generation in the Sprint capital allocation have taken us to a net cash position of INR 80 crores as of June 30, 2026. This gives us a complete strategic flexibility. We can now fund our growth from our own cash and close continue on our capital-light part and do so without the weight of leverage on our balance sheet. On the growth front, we remain on track to open around 100 screens over the course of the year through a combination of our lease and capital-light models. Looking ahead, the slate for the remainder of the fiscal gives us real confidence in the cinema has some of its biggest titles lined up, Ramayan Part 1, King and Love and War, among others. Regent Cinema continues to deliver exciting content with titles like Jana Nayagan, Toxic and Jailer 2. Hollywood brings major temps including Avengers:Doomsday, Spiderman: Brand New Day and Dune Part 3, several of which will release in our premium large stream formats. The breadth of this lineup across languages, genres and budgets is exactly the kind of slate that plays to the strength of our network. Beyond the films, we continue to build PVR INOX into India leading out-of-home entertainment destination. Recent live streaming of the IPL and the FIFA World Cup 2026 growth fabulous response across our network, reaffirming that audiences want to experience market sporting moments together on the big screen. This sits alongside our alternate content programming, streaming concerts, live events and curated rereleases along the premiumization of the in-cinema experience and an expanding food and beverage ecosystem. The vision is to use our screens, locations and audience trusts to be present in more moments of people's leisure time not just when a big film releases. We enter the rest of FY '27 with the strongest balance sheet in our history, a diverse content slate ahead of us, a strong pipeline of new screen openings and an industry whose growth is broader based than in years. We are confident of building on this momentum. With that, I open the floor for any questions. Thank you.

[Operator Instructions] The first question is from the line of Avinash Rao, from Novuma.

Two questions. So great revival across all the genes and all the languages. I wanted to understand how concerned are you on no INR 500 crore plus movie in the first 2 quarters. So is that a good thing that it is well diversely dispersed and is that happening because now the overall calendar is something better planned because that was an issue earlier. And if you could tell us on specific of FIFA, how much was the revenue footfall? Is it good overall development for us? Or is it just that it helps from a marketing angle, it helps from a -- if there's a lean calendar, it has, if you could elaborate on that.

Yes. I mean the movies have become diversified, which is very good. I'm really not that concerned with the fact that there's a INR 500 crore movie in the first quarter. Second quarter is still running only 1 month has gone and we still have a huge lineup of movies coming like Badar, it is toxic coming. So you never know where these moves will go. But the good thing is that mid-scale movies are doing well. And as long as we get our numbers, that's very important. And we had Bhooth Bangla. We had some tailwind of Jurander as well. We have [indiscernible] which is a mid-scale movie. Then we-- Hollywood has done incredibly well with Michael and Obsession, which is a small movie, Project Hail Mary. And in the opening remarks, I said these are franchises. These are like brand new stories and obsession in particular, was a small film, and it did incredibly well. Then, of course, regional firms, Raja Shivaji, Teddy, Vision 3, Karuppu in Tamil, all these movies have played out very well. So I think for us, it's important that the movie should perform. They don't all have to be blockbusters. And as I've mentioned earlier, also for us, the blockbuster is not according to the budget at the points performance, and the performance has been phenomenal. But there's still early days. We still have lots of months left before this fiscal ends. And we also have remind coming the first part. We also have King coming. We also have Love and War, more coming. So a lot of big movies are coming. So is looking good. On FIFA, definitely, it's not just a marketing deal at all because and it wasn't selling up any lean period because it came while big terms are already playing and yet we've got 64,000 people only for the World Cup final. Now what is absolutely phenomenal about this is that a course the average ticket price was also reasonable. I think it was close to INR 380 crores or INR 400. My colleagues on the call can correct that. And also, there was a good and plus this happened at 12:30 in the night. So 12 the night up to whatever, 2 or 2, 3:00 whichever time the large went it's maybe not just a lean period. It's a close period and yet people came in. So -- and it added to our bottom line. And as I said in my opening remarks, I think we are looking at PVR INOX Limited not just to be movies, of course, movies are our mainstay, but also to be a destination for all sorts of out-of-home activities for people to step out for. So I think that's a slight pivoting that we are doing by having lots and lots of things. And I think it paved the way now for sporting events, for musical events, for stand-up comedy shows and it's quite exciting.

My second and last question will be on the balance sheet and way forward. Of course, land map a quarter with net cash levels and clearly, balance sheet has never been this stronger in the last many years. So I wanted to understand any more asset monetization left either in terms of real estate, et cetera. Second, in terms of asset-light model, given now your balance sheet is net cash positive to better participate in the box office survival, would you like to tweak towards lesser low light asset model, given balance sheet issue is resolved? And third, obviously, last 4, 5 years, stock return has been fairly disappointing. Any medium long-term signal to investors on boosting the confidence, investor conference?

Well, that's quite a few questions. So let me just sort out the asset-light model, yes. I mean we've reached our growth, and we've been able to deleverage the balance sheet only because of the asset-light model. And I think that we will continue to do because with the grace of God, we've got a brand now and sweating of the brand is the ultimate testament to the quality of the brand, which is liked by developers. So I think FOCO model, an asset-light model definitely does not impede our growth. Our growth, as I said, we are still going to be doing 100 screens. However, whichever pockets where we need to deploy capital. We will be deploying capital. And so that will not -- asset-light and FOCO model will not come in the way of growing bby 100, 120 screens a year. And so whenever there is a need to deploy capital, we'll definitely do, but we don't have to leverage and borrow for that. So that's one thing that I addressed. What else did you ask about capital allocation. I mean capital allocation priorities remain focused on driving sustainable growth. And the whole focus is on how do we improve our ROCE and ROE. And whatever is best to create long-term shareholder value is what we'll be doing. So very appropriate capital allocation to improve these metrics is the most important focus of the company at the moment. Have I miss anything else?

Any further real estate monetization possible? Or everything is done?

No, no, not as yet.

The next question is from the line of Harit Kapoor from Investec.

This is Harit from Investec. Just 2 key questions from my end. One was on ATP SBH, the growth has been consistently strong Q1 as well despite really strong like of INR 500 crores as the earlier participant was mentioning, just wanted to understand, is there an element of price increase, like-to-like price increase here? Or is it largely driven by mix because Hollywood has also done well, et cetera. on ATP and also on F&B, is it more higher conversion led higher basket size led? Or is it -- there's also an element of pricing decrease here? Gautam, would you like to answer this, please?

Got them. Yes. Am I audible?

I thought you're the best person to address the question.

So on the SPS side, we've grown by about 9%, and it's largely split between value and volume. Both have grown. We have a series of promotions run to increase the strike rate at our cinemas, along with the fact that we've taken a price hike for a few items. So I would say the split would be more in the region of about 70 on value and 30% on volume. So that's the way the FDA starts. What was your first question, please?

Similar question on [indiscernible] times.

Yes. So even on ATP, we -- as you know, we have dynamic pricing, and we managed to now keep a very close eye on the sentiment of how the movie is performing. We have a lot of help from a lot of AI systems where they are able to prompt a certain kind of pricing that we need to follow once the films open up. So basis all of that, and it's not as if that consumers who wish to watch a film at lower pricing are not getting an opportunity. So whether it's a Tuesday, whether it's the morning shows, whether it's the front seat, all of that is getting hugely discounted so that we can get garner in more footfalls from one end of the bucket, which is technically time rich cash poor. And on the same end on the weekend, we tend to capitalize on big movies, fresh movies and see if we can take up the pricing up on a dynamic manner and at the same point in time, ensure that the maximum footfalls sort of get to our cinemas.

And just to add to that. We also had movies like Project Hail Mary, Michael. I mean these movies are all IMAX firms. So a lot of because 2 -- almost 20% of our circuit has been premium screens like IMAX, 4DX, I and screen and lots of recliners and In Signia Director, cut Lux. So this also -- that premium customer when he comes and he wants to see the movie without compromises. Obviously, that also takes the ATP up.

Got it. And the second question was on advertising. So what's your prognosis. It's been about quarters that we've seen for 5 or 6 quarters, we've seen very good growth. Overall footfalls have continued to do well. Last year was overall a good year for us. This year has started off well as you mentioned, the pipeline also looks good. What's your prognosis on ad reviver? Do you think brands need to see a little bit more proof of concept to drive this up in line with what your growth is? Or do you believe that there are too many other avenues like platforms, et cetera, where you're needing to spend and hence, this will take a little bit more time. Just some thoughts on that would help.

So first and foremost, you need to understand that when we came into play post COVID, this was one and which literally came down to 0. And then we had to start all over again. No other media in the country had that kind of revival. In fact, if you look at the revival, the revival of cinema and PVR revenues from INR 0 to INR 500 crores has been all in the last 4 years. So it's not only grown steadily for us. It's also amongst all other media categories, we have technically grown the fastest over the last 4 years. So we are galloping. Yes, it would take another maybe a year before we get to the post Covid and go ahead of that. Having said that, media sales largely comes on wake of big blockbuster films because advertisers tend to buy anticipated films. So movies like [indiscernible] 1 and 2 and this year specifically talking about King, Avengers , this ODC has garnered some great numbers, and there is some big titles which are lined up for Q3 and Q4. where we expect huge amount of advertising to flow in. We are also making some fundamental changes within our offering where we are getting more conversation with clients around eyeballs rather than Sun. But this would -- this is a change that is augmented in the market and would take a few more quarters before media planners and buyers start to understand that vocabulary of media buying within cinema. But by and large, I can tell you that cinema advertising the way it's jumped back has got this model, and we are very, very certain that very soon this would be outperforming like other parameters of the categories.

The next question is from the line of Umang Mehta from Kotak Securities.

My first question was on screens in this quarter, we've seen a slightly higher closures. Your guidance of 90 to 100 on a full year basis? Is it on a gross basis or a net business and similarly, then the mix of asset light seems to be higher than last quarter. So would your CapEx guidance of INR 4 billion for FY '27 be revised downward now? That's my first question.

So on [indiscernible] On the screens, I think we are track to add about 90 to 100 gross screens. And while in the first quarter, we did not open any new screens because many of our screens, which were complete -- which had completed fit out for awaiting regulatory license and due to delay of the license receipt, we are expecting a bunch of opening in quarter 2 and quarter 3. So based on the visibility of screens, which are under fit out, we believe that by end of this fiscal in this financial year, 90 to 100 is pretty much possible. I think on the closures, we -- the screens we have closed in the first quarter were all loss-making trees, and they had been more than 18 to 20 years old. But I think bulk of our closures for this financial year have already been done in quarter 1. There will be very few closures for the rest of the year. On a net basis, I think we will be around nearly 80 net screens additions during the financial year '27. On the second question on your CapEx. I think we -- we believe that a very strong response from the market on Capital Light and FOCO, I think that CapEx will be slightly lower than the earlier expected number of INR 400 crores for the year. we feel that it will be in the range of around INR 350 crores, plus we are also prioritizing renovation of a few of our high-value properties, which will -- so renovation CapEx share will be slightly higher this year. overall, it will be in the ballpark of INR 350 crores for the year.

Understood. Very helpful. And the second question was for Mr. Bijal. So I think on the interview yesterday, you mentioned about 1,000 screens over the next 5 years. So are we seeing the backup beyond F '20, 7, 28 onwards, should we expect an acceleration in cream addition?

Yes. I mean -- sorry, I had got disconnected, and I'm back now. Basically, I said that because we are looking at -- I don't know whether Garahas already covered that. We're looking at the Tier 2, Tier 3 markets now. population where anything more than 150,000 people are there. And of course, there are other criteria that we've got as well to make sure that people have the demographic is correct and they have the spending power to come to our cinemas. I think that there are so many cities still, in our view, almost 300 cities in Tier 2 and Tier 3 markets, which are still under serviced. So I think we'll be opening our first 1 very shortly in Masa future. And I think that's the reason why I mentioned that I think that once we penetrate to these towns, then every looking cranny and bring the PVR INOX experience over there, I think growth will further accelerate. And there, again, the response that to getting from the developers, local developers over there is also of a focal and CapEx-light model, asset-light model, so which again will not be a strain on our capital intensity, but the growth will be I think, fast tracked from -- it's already there, but it's going to get faster from next year on even more.

The next question is from the line of Vivekanand S from Ambit Capital.

So you -- since the time of the merger, your screen count has increased by around 100. And most of the new screens have come in south, right? Our concentration to southern markets has gone up to maybe 34%. Yet when I look at the footfalls or walk-ins over, let's say, any rolling 12-month period. It's remained practically in the INR 14 crores to INR 15 crore range. I want your take on why the footfalls have remained stable while these screens have the screen skew has increased towards markets with structurally higher occupancy? That is my first question. The second one is for the color on capital allocation. Just trying to understand if you will be putting in any more money into areas like branded food courts because you still have a JV with Divani, are you going to commit any extra CapEx there? And also, any other areas that you're eyeing which you mentioned in your opening comments that you want to be the preferred destination for outdoor events. So is there any CapEx that is earmarked for those areas?

Yes. So your first question was about since the merger, how many screens have we added? I think we've added, I think, at the time of merger, Goro, please correct me, I think we got about 1,450 or something roughly and now we're at -- so we want about 300-odd screens, right? -- net additional -- we were about 1,650 screens, and we are at about 90 today.

We were about 1,650 screens, and we are at about 1,790 screens today. We are -- on a net basis, we have added about 150 -- close to about 120 screens over the course of last 4 years.

Yes. So questions that your question is why. If you look at PicoBit, of course, if that's what you're asking, that we were getting about, I think together about 16 million -- 160 million people to our cinemas roughly. And -- but if you look at the last trajectory is in the right direction. So 150 million people that we bought in the last fiscal is the highest number of admissions we've ever got in terms of our basically post COVID. So I think -- but it's all inching up. Every year, it's going up because there were very identifiable reasons why suddenly, those kind of numbers that were coming to that are not coming and primarily because of the fact that there was movies and all -- less number of movies are coming, then there was a Hollywood strike that happened in the mid. So there was a highly identifiable. Reasons why that kind of -- plus there was -- some of it were going directly to OTT. That's all come back now. The windows of 4 weeks now they come back to 8 weeks. The consumer has finally -- he was always there, but now he's realized that the only best experience in Watson tactical, not just for big tent pole movies but also for smaller moves, which we've already seen last year with a and all and now goalie obsession. And even the sinaternity has now decided that first, they will come to the cinemas only and only TV shows are coming to OTT. So all these factors played a role in the per screen occupancy is coming down as compared to -- but now all that is behind us now, and we are seeing that the kind of movies which are getting made the number of INR 100 crores to INR 200 crores bracket of firms, 200 to 500 crore bracket movies, 500-plus bracket movies. All these moves are -- nobody has seen these kind of numbers precoded. So given all that, I think it's a matter of time that we reach those occupancy levels. However, at the same time, what we've done is that since we are very focused on getting the margins that we were getting peak over, we've really had a very strong control on our costs. So line by line, whether it's utilities, whether it's manpower, whether it's rental, any other -- whatever costs are there, even POGs if you look at our COGS on food and beverage has come down. So we are saying that even at lesser occupancy levels, even I say 27%, 28%, we should be able to achieve the margins that we were achieving earlier. So the focus is both on the denominator being reduced and the numerator increasing, which is even by you see a lot of promotions that Gautam has already mentioned, of getting more people in. So the trajectory is right. We haven't arrived there, but we are in the right direction and right momentum. So that, I hope, answers your first question. The second 1 is definitely, we believe we've got 15 million square feet of space that we are under lease in our cinemas. And we believe that we can sweat the asset by beyond just showing movies and which is the reason why we are showing all these things plus -- the food [indiscernible] JV is going strong. Devani is a great partner. But again, we are opening -- we've opened 3 that we'll be opening many more are in the pipeline. And that again, basically repositions our company as not just a cinema, but also offering something pre-ticketed food and beverage offering. We're looking at other -- evaluating other out-of-home entertainment options that either can be done within our cinema by repurposing certain cinemas or taking maybe some additional space and which also then become very attractive for the youth, which goes out to the malls and wants to be entertained out of home. So there is a conscious effort to have moving definitely as our mainstay, but also pivot a little bit. into more out-of-home entertainment formats that can stand the test of time.

Sure, Ajay. Very helpful. Just 2 small follow-ups. So on the first answer you gave, I'm just trying to understand better in terms of regional occupancy trends because you've broken up the screen count across the -- across 5 key geographies. So since your business has skewed more to the south. My understanding was that the out audience typically tends to have higher occupancy because low for movies is a lot more in the south or perhaps craze a lot more in the South than the rest of the country. Is that still the case? And if you could just touch upon, let's say, occupancy trends across the cuts that you make regional as well as the CT or distribution, I think that would be very helpful. The second follow-up is -- as far as those initiatives you gave, is there a budget you have in mind of capital expenditure that you need to undertake in fiscal '27 and '28 to make these goals translate into revenues?

Yes. So India is such a diversified country and which is the reason why the market, we don't go anywhere beyond the Indian market, barring that one cinema that we've got in Sri Lanka because and the way PVR make sure that our screen spread is all across the countries but depending on one language at any given time. So 600 of our screens are already in the South, and then we have a fair distribution invest and North and Central and East. So this is the duty of the way our circuit is placed and spread across the country and also the way the content pipeline comes out, definitely south the moviegoing culture is stronger, but that's not the only reason we are growing there. We're also going there because still the single stream penetration is the highest in the South. And therefore, all over the rest of the country, single screens became lesser and shopping centers and malls came up where PVR INOX protects multiplexes. And now similar opportunities are now coming in South because as I said, significant penetration was much more over there. And so that's the reason why you see a skew towards South, it's more due to where the opportunities are available. Otherwise, there's nothing wrong with even the other regions where if an opportunity comes like -- we just opened in Delhi, and Elegante mall, and it is doing phenomenally well. Similarly, we've got a couple of projects in [indiscernible], one in Gurgaon, one -- we opened in Midtown and Motive, which is doing very well. So there's no necessary that it has to be south. But yes, definitely, it's a very -- it's a prime market and underscreened market. From multiplex point of view, so we have a SKU there. That is one part even like to elaborate a little bit more like people like developers like Nulu [indiscernible] many of their malls, the ad, they're going to be opening one in a mall in a development called utopia or there very shortly. Hyderabad has got lots of opportunities. So wherever good opportunities come, we open our cinemas there. And as far as capital allocation for these activities is concerned, we definitely have a capital budget. I don't know offline, how much it is. Gaurav youcan tell me, but it's -- obviously, we can't run the company without budgeting for any CapEx that we do. Gaurav, can you help me out there?

Vik, I think the overall number of INR 350 crores for the year includes everything, including our investments in the food court joint venture plus the other initiatives. But in the overall scheme of things, the investments in food court is much lower because it's less CapEx-intensive business in terms of the assets involved there. and therefore an overall theme of things, it's not a very material investment model.

Sorry to interrupt, sir. Your voice is not clear.

Can you hear me?

You're clear now.

Yes, I was just saying that -- I was just saying that our overall investment in food court business is part of our CapEx outlook for the year of INR 350 crores. And not a very material numbers from overall scheme of things at a company level.