PVR INOX Limited (PVRINOX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of PVR Limited, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankur Periwal from Axis Capital Limited. Thank you, and over to you, sir.

Thank you, Rithija. Good evening, friends, and welcome to PVR Limited's Q3 FY '22 -- '21 post result earnings call. From the management team, we have with us Mr. Gautam Dutta, CEO, PVR Limited; Mr. Kamal Gianchandani, Chief of Business Planning and Strategy, and CEO for PVR Pictures; Mr. Nitin Sood, CEO, PVR Limited; and Mr. Rahul Gautam, SVP and Head of Corporate Finance. As usual, we'll start the discussion -- we'll start the call with a brief management discussion on the quarterly performance, followed by an interactive Q&A session. Nitin, over to you for the initial remarks.

Thank you, Ankur, and thank you, everyone, for taking out time to join PVR's third quarter earnings call. I'll give a brief synopsis of what are the key events which has transpired during the quarter and then maybe we can directly go to Q&A. A copy of our investor update is also available on the website of the company, which discusses the results in greater detail. So during this quarter, the ministry of film affairs permitted cinemas to reopen starting 15th October onwards, and they put a capacity restriction of 50%. So all cinemas across the country could open, but with a maximum 50% capacity. Subsequent to this, various state governments across the country issued their respective notification, depending upon the COVID situation and allowing cinemas to reopen in various states, as a result of which, our cinema openings during this quarter were staggered between 15th October to November and December. As we speak today, most of the cinemas across the country are now open in states where PVR operates, except for Rajasthan and Jharkhand, which until date has not yet decided or given permissions to open cinemas. As part of PVR's portfolio, both these states represent very less number of screens for us. So pretty much the entire theaters open. I think the challenge has been the content availability during the quarter because the cinema opening was really staggered, and it was kind of phased out between October, November and December. We didn't see too many new movie releases, as a result of which revenues were very minuscule. The total admissions during the quarter were only 10 lakh admissions, largely on account of movies like Tenet and Wonder Woman, which were released, and a few small films which released during the quarter. I think as the cinema circuit is now open, and I think the content pipeline likely to evolve over the next 2 months, we'll have a better visibility on how the situation may pan out. But very important piece that we managed to close as we were opening our cinemas was hang on our fixed cost base. We were able to close out a settlement with most of our landlords, and we had sought a rent and a CAM waiver from our landlords for the time we were shut and some kind of rebates post opening until 31st March, until the time we anticipate the business will take time to come back to normal. Happy to report that we've closed out settlement of almost 88% of our landlords and we were able to get large rental waivers and discounts in rent and CAM charges, not only for the period of lockdown, but post opening until 31st March. As a result of which, if you look at the rent and CAM expense that the company has incurred during the first 9 months of the year, it's lower by almost 80% as compared to, I think, corresponding period of previous year, which is really reflective of the strength of the brand and the value that we bring to the shopping centers and malls. Also on all the other fixed costs, which has been a big cost drive to manage these costs as we come out of the pandemic, even though cinemas opened, I think we managed our fixed costs quite well. And the fixed cost during the quarter -- but also substantially lower than what they were in Q3 of last year in spite of the fact that cinemas has started reopening. We've managed a good hang on the costs, and our fixed cost reduction during the quarter was almost 63% lower fixed cost as compared to Q3 of last year. On the cash position and the liquidity front, I think company has proactively managed its balance sheet well. We did a rights issue earlier this year. We also took additional credit lines from our banking partners. As on 31st of December, we were sitting with a cash and liquidity of about INR 370 crores to meet our various obligations and are tight through these turbulent times. The Board of the company also earlier in its meeting held on 18th of December also decided to boost up the capital of the company, and they had passed enabling resolution, which permits the company to raise an additional equity of up to INR 800 crores, the same currently await shareholder approval. And the idea is, as we come out of the pandemic, we want to have a very strong balance sheet which ensures and enables us to maintain the growth momentum. Clearly, I think as we started this quarter, it has started on a very positive note. The South Indian film industry has really taken the lead in releasing films. And the first blockbuster of the year, I think Master, which has got released on Pongal and Tamil Nadu, has done some great numbers. I will let my colleague, Kamal, talk more about it during the call. But clearly, we are seeing in South India, as you release big films, people are back at the cinemas. And clearly, this apprehension that was kind of floating around that people will be reluctant to go back, it's not visible at all. And the cinemas are kind of completely sold out in Tamil Nadu. And entire South India, wherever the film was released, is doing exceedingly well. And we are hopeful that Master will be a case study based on which you will see over the next few weeks, the Bollywood film guys and more South Indian regional guys are planning their release calendar of the films which are currently ready and kind of awaiting release. So that's a broad summary of what transpired during the quarter. I'll hand the floor back to Ankur, and we can get into Q&A.

Yes. Rithija, please?

[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.

My first question is on Rajasthan and Jharkhand. So how does the -- these 2 relatively reasonably large states -- it is not a very miniscule state. How does this not opening up act as a reason for the delay of Hindi content? Second, in terms of discussion when you are having with these 2 certain state governments, what is the pushback? Because it's not that they are on the higher side in terms of COVID cases. We all know it has been very high in Maharashtra, which used to dominate, opened up a long time back. So what is the pushback you are getting? And on the 50% rollback in Tamil Nadu, what is your assessment? Is it just a case of a union government wanting to do it first? Or do you expect, in some states or the union government in general are only giving 50% approval that which should be taken out in terms of occupancy?

Abneesh, this is Kamal. The first question, what is the contribution of Rajasthan and Jharkand, is about 6% to 7% as far as Hindi films are concerned, which is a fairly small percentage. You would recall, in the past, there have been films like Padmaavat, which have had issues in Rajasthan and many other states, and they've ended up with big box office numbers in spite of its not releasing. Of course, those were different reasons. But the point I'm trying to make is that, no, this is not a detriment. Hindi films get about 6% to 7% from Rajasthan and Jharkand combined, and the producers would be very happy to go ahead with the release. But this would not be a detriment. I mean there would be other factors, other variables which would help them decide or decide to release or decide to hold back, but this would not be a detriment. The second point -- the second question, what is holding back the state governments, it's very difficult to speak for the state governments. We've been in constant touch with them through our advocacy body, Multiplex Association of India and also through the local cinema exhibition associations. The pushback is mainly because the governments wanted more time and they wanted to -- cases to come down and situation to be much more contained, which it is. And we are equally surprised that the -- these 2 governments have decided to push the opening of cinemas for so long. But that said, we are hopeful that during January both these governments will exceed to our request and would permit the opening of theaters also in these 2 states. Repeat your third question.

And the 50% occupancy?

50% occupancy is something which would have to be decided by the central government. Again, we've been in touch with the government on regular basis, and we -- although we cannot speak for the government, but we remain quite confident that in a matter of, I would say, less than a couple of months, we should end up with a higher ability to sell higher capacity. This what we are hopeful of, but we'll have to wait and see.

Right, that's helpful. My follow-up to what you said is, on the Hindi content release, so when we were in October end, it was expected that by Diwali, which is November mid, we will see good Hindi movie release. But because of Maharashtra, delay in terms of screen openings, I understood that. So then it was expected December end. Now that didn't happen and now we are in January. So one, if the Bengali movies can release and Tamil movies can release, what is the issue with Hindi? Second, we are seeing all forms of consumption, see positive surprise. If you see car sales, jewelry sales, QSR, paint sales, F&B, everything is doing well. And you yourselves have given the data for Tamil Nadu and Bengal. So why is the Hindi content not releasing? I understand international part of the business. But that's also getting delayed, right? So when will U.S. revive? When will Europe revive in terms of COVID status, we don't know. So if you could explain what is the pushback on the Hindi content, good content. I understand small Hindi movie here and there, but that doesn't really spin the needle.

This is a fair question. And our various discussions with the producers -- our sense is that there were doubts about the customer audience sentiment. 50% restriction on capacity was an issue which most people felt was manageable because you could spread the film wide and you [ expect ] to fill in maximum number of shows, as has been the case with Master. And producers felt that 50% capacity is something which they could live with. But they were apprehensive about the customer sentiment. There was a lot of apprehension that people would stay away from cinemas, especially families. But the good news is that Master has -- Master, which is -- which was always expected to do well if we gave 2 massive stars down south, specifically -- especially in Tamil Nadu. But I think the performance that we've seen in the last 2 days has exceeded even the wildest expectation that most people had. The film is turning out to be #2 all-time biggest opener for a Tamil cinema. The biggest opener was Sarkar with about INR 23.5 crores net box office collection in Tamil Nadu. And Master has opened with about INR 20.5 crore net box office in Tamil Nadu. So with the current prevailing circumstances with all the restrictions, the kind of box office the film has achieved clearly validates the fact -- the argument that we've been sharing with the producers and with also our colleagues on the analyst side that there is a pent-up demand and people would be happily coming to cinemas as and when there is a good quality film. So I think that point has been validated, and I think it's a matter of time when producers of big Hindi firms who have ready films with them would come out and announce their dates. We are already in touch with a lot of producers, but I -- we don't want to get into specific names at this stage. We'll have to wait for producers to come out and officially announce dates.

And last question, any savings on rental and CAM? See when you renegotiated pay in October or September, that point of time, the movie content release was envisaged differently. It has been below that expectation because of the Hindi content not getting released. So do you manage some more savings? Or is frozen in March so we don't get any savings? I understand some of this is linked to revenue, so it doesn't really impact too much. But on the CAM or anything which is fixed are any savings on the revenue share also possible because of this delay?

Nitin, would you like to take this question?

Yes. Abneesh, most of these rental negotiations with our landlords was to tide over this pandemic period. And especially for cinemas, when we went into the pandemic, everyone was expecting it to be a 2, 3 months issue. As we are coming out of it, it's almost been 8, 9 months, about 7.5 months since the cinemas were closed, another 4, 5 months we are hoping for recovery. So most of the negotiations and discussions currently have been focused around getting a relief for this lockdown period and also until -- for next few months, will be open. And so most of the relief that we've sought for are limited until 31st of March. We've largely managed to get complete waiver of rentals during the lockdown period. And apart from that, we managed to get rebates and discounts until 31st March. And if you look at the numbers, the numbers are quite huge. In the first 9 months of this year, the numbers has been almost are 440 -- I mean INR 444 crore reduction in the rent plus CAM payout, and some more discounts will come in the month of -- in the next quarter as well. So I think the discussions have been focused only around this because when we were negotiating this, expectation was the business would bounce back. If this extends beyond that, then I think we'll have to reengage. But currently, we've been focused on seeking relief to tide over this period.

[Operator Instructions] The next question is from the line of Subhankar Ojha from SKS Capital.

I'm done with my questions.

[Operator Instructions] The next question is from the line of Niket Shah from Motilal Oswal Asset Management.

A couple of questions from my side. First, I wanted to know on the rentals you did highlight within that -- how we've got a waiver and discount until 31st March. How will the rentals really change post 31st of March? So as we go into say, next year, is the rate going to move up because at some point of time the multiple sales are things that I have to also cover up for the lost revenues?

No. In our case, most of our internal negotiations are restricted to the 12-month period. There is no escalation in rentals because of the release that we saw in the next year. There could be 1 or 2 exceptions to this, but largely no change for the next fiscal year.

Okay. So it goes back to the pre-COVID levels as such?

That's right, that's right.

Okay. And is there a change in the mix of our rentals from -- between revenue share and fixed?

As I said, most of the rental discussions have been focused around tiding over this financial year and 12-month period of pandemic. On the existing properties, there is no change as such, apart from the release for this 12-month period. But for most of the new properties that we'll end up contracting now going forward, there could be potential changes in how we structure some of these leases.

My second question was is there a possibility that you might see some of the states coming in, giving you some waiver on entertainment tax? And also a similar question is how will the sharing between the producers and PVR change in the post COVID regime? Do you think there will be some savings there which might come up with that?

I think the government has taken the lead by waiving off entertainment tax in Kerala for a couple of months. We are also getting a similar sense from some of the other states. And at the same time, budget, which is expected to be announced on 1st February, the finance ministry is also -- we've made several representations to the finance ministry, and we are also hopeful that they would give some relief measures or some stimulus measures due consideration when they finalize budgets for the next financial year for the service sector, specifically. So we remain hopeful all around, both from central government and state government. And our sense is that the government will give us a favorable decision. On your second question, on a short-term basis, yes, there would be some changes in cinema payouts to the distributors, producers. But like we've shared earlier, these would not be meaningful deviations from what we've been paying to producers in the past. And whatever changes are there would be temporary in nature.

The next question is from the line of Pranav Tendulkar from Rare Enterprises.

First just please, can you explain the unit economics in the states where actually the movies have started? Like Tamil Nadu and Bengal, probably? Unit economics -- by unit economics I mean ticket -- per ticket realization of people adjusted for the timings, et cetera. Are there any notable changes? That is one. And second thing is that if any other parts of the world, which are comparable to India or developed markets, where movie industry again started? And how is the people response? And what are the changes that you're observing anywhere else in the world? Those are my 2 questions, and thanks for surviving this crisis. I know this was a first for your industry.

Thanks for your wishes. Maybe Nitin can take the first question, and then I could jump in to answer the second question.

Yes. I mean if I understood the question correctly, you're looking for understanding on our ticket pricing strategy and how that has evolved post reopening. Is that correct?

Correct, correct.

Yes, so actually we were obviously -- our key focus during the quarter and the near term is to bring back footfalls, and we are doing all necessary steps, including taking all the safety measures to bring confidence to the customers to come back. And pricing is also one of the factors that we're playing with. Clearly, given in last quarter, bulk of the content was library content, old content. We were obviously running a lot of promotions at lower ticket pricing just to get customers back. But clearly, pricing has never been a concern in our business. We believe that whenever the content comes back, the ticket pricing will move up and customers will be willing to pay. But yes, I mean, we will continue to use pricing both in terms of new content as well as library content, while as the content sort of becomes more smoother to bring back customers. But as you can see, even in current quarter, our ATPs are at about INR 160, INR 164 to be precise, which is still lower than our pre-COVID levels. But there are obviously -- during blockbuster content, that ticket pricing tends to move up quite rapidly. So actually, even to add to what Rahul said, if you look at our ATP during Tenet, one that's [ showing ] now Master, we are slightly higher than what we were operating at the pre-COVID level. So whenever new content, partial content would come, and this is what we saw with advent of 7 or 8 movies during Durga Pooja or -- in October and then we see Hollywood films and now with Tamil films, we are able to charge a same or a bit higher ATPs very easily from the consumer.

And you can see, I mean as you see actually even in Q3, our SPH is now almost back to pre-COVID levels at 95% as compared to INR 100 in Q3. So for us, I think, as we have said that fundamentally, pricing has never been a concern, whether it is for ticket or food. We have to deliver experience which works for the customer. And as long as there are new content coming, no -- pricing has not been a challenge.

Right, sir, but there is a probability that say for [indiscernible] in the utilization could be 50% or 60% capped by regulators. So in that case, what is the pricing that you see? Is it -- I mean it is okay if you even increase the prices, right?

Yes, absolutely. We can -- there is enough elasticity. And one thing settled down with content, we believe that we should be able to at least go up by about 4%, 5% over the pre-COVID levels in terms of the ATP.

Right, sir, right. Right. And the second question about global parallels.

Yes, so firstly, continuing the trend with Master. Master was…

[Foreign Language]

Master has done well, not just in India, but it has done well also in all international markets where you have Indian population, specifically South Indian population. So we do a Malaysia, Singapore pockets of U.S. where cinemas are operational. Australia has done well across the board in the international markets, which goes to show that the behavior of customers this whole tendency to come out and watch a film -- a big film on the big screen is pretty -- it's pretty homogeneous. That's one. Number two, the ban in China to international markets, which have a very strong domestic industry, and in the recent last 3 or 4 months, Japan has seen a huge massive success called Demon Slayer, which is an animation film which has broken -- shattered all box office record. That's one. So that's Japan. And China's similar experience where Eight Hundred, again a local film, released about 2 months back, it's again broken all previous records. So wherever the virus has been contained, wherever government has been aggressive in dealing with containing virus and putting in place safety protocols and wherever people, customers, society has adapted to the new normal. Film and cinemas have bounced back, rebounded fairly quickly, and that's quite visible in Japan and China, 2 specific markets, which also have a strong local industry.

Right, sir. And those regulators are not limiting it to any capacity utilization of their own whims, right?

No. These markets are also regulating capacities. So China has been hovering between 50 and 75. When Eight Hundred had released, capacity restriction was to the extent of 50%. And similarly, Japan has had capacity restrictions. So the numbers that Easterners have done, have been done with the capacity restrictions.

Right. So that would mean that pricing realization would have substantially gone up, right, for that kind of box office selection. Is that right? Or am I wrong?

See, our sense is we don't have the detailed numbers in front of us in terms of the ticket price and the number of admissions. But our sense is that the ticket price was increased marginally and not by too much. It's just the sheer number of people who came out and watched these firms has resulted in a higher box office.

Your next question is from the line of Jinesh Joshi from Prabhudas Lilladher.

I just have one question on our financials. So sir, if I look at our balance sheet, we have some INR 370 crores of cash, if I'm not mistaken. And we are planning the fundraise of INR 800 crores or so. This would take our liquidity to anywhere between INR 1,100 crores to INR 1,200 crores. And if I look at our current quarter operating costs, that was approximately INR 160 crores. And for that matter, even our pre-COVID operating costs per quarter is anywhere between INR 430 crores to INR 450 crores. Now even if we burn INR 450 crores per quarter, which is the pre-COVID run rate, we have a liquidity for 2 to 3 quarters. So in that context, the fundraise appears to be slightly high. So can you just clarify on this math, please?

Yes. So broadly, I think the way we approach the business is we want to always raise capital ahead of when we need it. That's number one. Secondly, there are 3 parts, the broad reasons why we want to maintain a strong balance sheet is that we want to keep the leverage levels low. We had done a QIP in November of 2019 with the objective of reducing leverage, and we had successfully achieved that. Unfortunately, the cash losses during the pandemic have brought us back to the same situation. We believe that as we come out of the pandemic, there will be a massive amount of growth opportunity lying ahead of us. The industry would likely consolidate further smaller operators, and smaller players will get weaker. The bigger operators, like us, will get an opportunity to participate in a greater amount of opportunities. And we want our balance sheet to remain strong as we come out of the pandemic so that we can accelerate growth. So the idea is to keep the leverage level low, have enough dry powder in the balance sheet to accelerate growth. And thirdly, just in case the recovery takes slightly longer than what we are expecting to recover, have enough fortune in the balance sheet to tide over the short-term losses that we may have to bear, and that's broadly the thought process. And as I said, this is currently an enabling resolution. We haven't decided on either the final quantum of fundraise or the timing of the fundraise. So this is just enabling approval that we're currently taking.

Okay, sir. And I mean, with this fundraise, the potential utilization, will it be towards funding the cash losses? Or -- I mean you also hinted something about inorganic opportunity which can come up. So -- I mean is anything finalized at this point in time? Or -- I mean where are we on that front?

So we are not looking at any inorganic opportunity as of now, so that's not the main reason for the fundraise.

The next question is from the line of Jay Doshi from Kotak Securities.

I've got 3 questions. Nitin, in the opening remarks, you mentioned that fixed cost reduction during the quarter was about 63%. I just want to understand how much of this will sustain when you go back to 36%, 35%, 36% occupancy? If you can give us some color in terms of permanent reduction in costs.

So you will -- again, you will have break down this cost into different elements. There are 2 elements of this cost. One is external cost, which is rent and CAM. Those costs are likely to come back as we get back to the next financial year and get back to pre-COVID levels. On all the other costs that we are incurring, we expect, especially in the people costs and our overhead cost, a minimum 10% to 15% long term reduction in costs. It's very difficult to quantify on the exact number going forward. But as we come out of the pandemic, we think that some of the cost reduction will be permanent in nature, the way we are restructuring the organization. I think specifics will have to be detailed out as we come out because a lot of stuff is work in progress right now. But we believe that we will be able to reduce some of our fixed costs on a long-term basis.

Right. Is overhead cost that you referred to, is a sizable number? And the people cost is something which you know, so what do you classify as overhead, generally?

So if you broadly look at -- I think our quarterly…

INR 90 crores for [indiscernible].

So Jaykumar, INR 90 crores per quarter pre-pandemic. So it is a reasonable number. So INR 30 crores per month.

Understood. And -- okay. That's helpful, Rahul. Second question is, are you seeing -- you just mentioned as a response to previous question that you expect some permanent closure of single screens or stand-alone multiplexes. So are you already seeing a lot of lease deals come your way? And how will it work? Would you sort of get opportunity to buy some of the smaller screens? Or the operators may vacate and you will negotiate leases, you'll have more lease pipeline?

It is too premature to say anything there. I think the situation is evolving as cinemas are reopening or coming out of the pandemic and the discussions with landlords are happening. I think we expect some of the smaller operators -- or smaller single-screen operators to reach -- which -- who do not have the balance sheet to support and come back and restart business to have a problem. And we also think that the real estate developers and landlords will also want to partner over a long term with strong quality operators. This is likely to throw up opportunities in favor of some of the bigger operators. In what form and manner some of this will potentially help in filling up is, I think, slightly early to say. But we are already seeing signs where the smaller operators are under stress, and there is likely going to be a shift of bulk of the growth towards larger operators as we move along.

And what was your view in terms of rentals for the leases that you signed going forward over the next couple of years? Is there any deflationary trends that you're seeing in terms of enough favorable for you on rentals?

As I said, too premature to say. And I think that all of us -- because a lot of retail businesses has come out of the pandemic. And I think the situation will evolve over the next few months. But clearly, I think as an industry -- as a retail industry per se, we'll have to see how the rental situation evolves. But clearly, I think -- we think the situation to be much better as compared to our pre-COVID levels.

Correct. And any -- have you reconsidered or have you looked at your CapEx per screen, and will that change going forward? Or as you resume screen opening, it will be broadly similar to what we are seeing last year? Just trying to understand from a CapEx -- annual CapEx standpoint or -- are we likely to see some improvement in overall cash-generation potential.

No, we don't estimate our per screen CapEx to change materially because we expect -- we want to deliver, I think, the same quality experience which has been the cornerstone of our strategy. And I think how it will evolve in terms of negotiation between landlords, and thus, it's too premature for us to comment on. But we don't see any significant changes in our per screen CapEx intensity in the post COVID world.

All right. Just one final one. I think at least when are -- we're seeing about 10%, 15% of restaurant supply has gone out of the system, at least on the aggregated platforms. And if I recall correctly prior to COVID, you were considering scaling up F&B business by participating on aggregator platforms and SPI Cinemas, I think, it was already onboarded on Swiggy and Zomato. So have you sort of thought a little bit more or done some more work during this pandemic on that front? And should we expect you to -- I mean participate on that opportunity outside of cinemas in the F&B space? Any thoughts, any color on how your F&B strategy will evolve going forward?

Yes, you will see traction. On 18th of this month is when we start off our beta trials on Zomato. And within about 4 to 6 weeks, we'll be scaling this up to many more sites. So clearly, the plan is there, and we will learn as we go, and we will start our journey on the aggregators within this week itself.

The next question is from the line of Karthik Chellappa from Buena Vista Fund Management.

I have 2 questions. Firstly, if you notice, at least in the last 9 months or so, even big star movies have started going exclusively to OTT, and this is not confined to Hindi alone. This probably even extends to Tamil, Telugu as well as probably even Malayalam also. So how do you hope to assess these risks where potentially big star films, which would have otherwise released in cinema, are incrementally getting comfortable to do a direct OTT release? And in such cases, in your interaction with producers also, how do they compare the ROI between theatricals and direct OTT release?

It's a good question, Karthik, and it's a fair point you've made. That said, what has happened in the last 6, 7 months with a good number of -- a decent number of mid-sized films and a few large films going directly on streaming is something which will have to be seen within asterisk because there were investments involved and Indian production sector is fairly fragmented. So producers had a running meter of cost of money, which was building up, and a lot of people felt that this was an opportunity to exit, get the principal back and also make some money out of it. Our various interactions with the producers, and, also some of the subtle signals that we are reading from the market when you look at the active fee or the number of films which are going into production or the cost of production, which is being envisaged by the producers, there has been absolutely no reduction, which clearly goes to show that producers, in their mind, are factoring in a theatrical release for the films, the new films which they have started to produce. Actors, there is no reduction in the fees. So clearly, actors also expect their films to go on to the theatrical platform. From a producer's point of view, the metric that you spoke about, the return on investment metric. Clearly, ability to take multiple bites out of the same food is a better strategy just to take it first on the theatrical platform and then take it to the other distribution platform. That strategy is an age-old strategy which has worked well for the entire ecosystem. Producers definitely prefer that strategy over releasing it directly on streaming. And this applies more to big films where the yield or eyeballs in theater, it's still the highest, as compared to all the other distribution platforms. And theatrical, in any case, is pretty much the only pay-per-view platform which is available in the Indian ecosystem. So for all of these factors, as far as the ROI metric is concerned, producers definitely find it much more lucrative to make a film theatrical and then release it on other distribution platform. That said, because we have multiple streaming platforms, and each one of them is competing with not just cinemas, but also with their peers in the streaming platform space. Clearly, we'll have appetite for new film. And to that end, we expect that this production facility will expand their portfolio. Streaming platforms will continue to give some films for direct-to-streaming release. But that would not come at the cost of the number of films that we're releasing in theatrical in number of -- pretty much around the same number we'll continue to release in the theatrical platform. Producers will produce more and need this incremental appetite or demand from the streaming platforms. So that's the way we see things playing out in future, and we believe both these distribution platforms will coexist beautifully, and in fact will feed off each other. And producers will have liberties now to make more films, better quality films and perhaps make much more money than they were making earlier.

Sir, my second question is the similar listing, but from a consumer point of view. So if we look at, let's say, the ticket prices right now on a blended basis. Let's say, if you guys are running at about INR 150, INR 160. And on top of that, if you put a spend per head of about, let's say, INR 60 INR 70, that's about INR 200 per head. And if a family of 3, let's say, were to go to a movie -- I'm counting out the experience part of it because that's also an important factor, I agree. But from a pure value equation, if you're looking at, let's say, 600 plus, and if I were to look at the price points or the packages that the OTTs are offering, on a monthly basis, it's very, very compelling. It's almost that if you have, let's say, one decent movie in a 2-month window and a good web series, it's already good value for money. In that context, I just want to have 2 questions. Number one, does this mean that the share of the top 10 movies or the share of the top 15 movies in the box office will continue to increase because people will ration their visit to the cinema halls? Number two, does this in any way inhibit your own pricing power in raising prices for tickets in states where it is allowed?

Your first question, whether the top 15, 20 grossers will continue to expand their proportion in the overall box office or the admission numbers. We don't think so, because we've looked at the data of the last 7, 8 years, and this number, although it has increased in a very steady fashion, but the increase has been fairly small. And the reason for that is that there are big films and then there are films which turn out to be big films after their release. There are these sleeper hits, which do exceedingly well at the box office and exceed all expectations. And frankly, that's the DNA of film business, right? I mean producers are in this business because they have this portfolio of both -- they think more like a venture capital fund where maybe 1 or 2 films will perform disproportionately well as compared to the other films in the portfolio. And those 1 or 2 films will make up for lack of performance by the other films. So disproportion is not going to change dramatically simply because India, as a market, is ripe for content-based films as well as blockbusters. And so there are these big production, big star films. But then there are also smaller films, which do exceedingly well at the box office after the release. We don't think that phenomena, that practice, will change. People will keep sending out new content with exceptional talent which is not yet established, but content which is so compelling that it will do well at the box office. And as a result, the proportion of the top 100 films, the bucket that we normally look at as compared to the overall releases, that will remain pretty much at 78%, 79% of our overall box office or admissions. And that's been the case in the last 7, 8 years. We expect that to continue over the next 3, 4, 5 years also. The second question was -- can you repeat the second question?

Yes, my second question is whether this in any way inhibits your pricing power to probably take up ticket prices in states where you are allowed. Excluding, let's say, the first 2, 3 days of release window for a star movie. Like, let's say, for Master. Excluding that business, inability of pricing power?

Well, along with Master, we've also had some smaller Tamil films which released yesterday. The film called Eeswaran, which [indiscernible], that's a small film. But again, doing exceedingly well at the box office. There is a new film, called Red, which released also yesterday, which has also done exceedingly well, it will do quite well. Our pricing power and you -- when you were giving the backdrop to your point, you said if you set aside the experience, but that is the most critical part of our business. The way people are wired, the way we've grown up, we are all used to out-of-home entertainment and it's all part of the entire ecosystem. We don't look at people or this market as streaming or cinema situation. We look at these 2 as an and situation where people would go to cinemas, people would also go streaming, spend a lot of time on streaming and now that time could be at the cost of [ eating ], it could be at the cost of sleep time, it could be at the cost of television, other channels. We don't know. We'll see how things play out. Also, please don't forget that when films release in theaters, they are exclusive for some time. For a couple of weeks, they're exclusive in theaters. And films, because they're part of the social fabric, they create a discussion, and cinema, especially when films release in cinemas, there is creation of an event, and people like to participate in the events that are perishable in nature. People love to go and watch it in the first 3, 4 days of the first week or maybe the second weekend. So if you legally want to watch a big film or a small film, which you heard some compelling reviews of, you'll have to go and watch it in cinemas because it won't be available on streaming platforms. We are not looking at a situation where streaming and theaters will release the same film on the same day. That situation is something which we're not foreseeing. So there would always be some exclusive period within which the films would be available only in cinemas.

The next question is from the line of Dheeresh Pathak from Goldman Sachs.

For the 9 months -- for the -- sorry, for the 3 months and for the exit month, what was the operational cash burn?

Yes, so our -- if you look at our EBITDA loss, it's about INR 108 crores for the quarter. So that's about INR 35 crores, INR 36 crores for the month. That's the cash burn. Our fixed costs for the quarter was about INR 159 crores.

Okay, so come -- starting April 2021, when there are -- the concessions on the real estate go away, so your fixed cost from INR 52 crores per month would then become like INR 100 crores per month, right? Because you'll have no concessions on the real estate?

Yes. So I mean as Nitin mentioned during the call, our rent CAM utilities, these will go back to pre-COVID levels because those are contractual or regulatory payments to be made. For rest of the costs, we are expecting a sort of a long-term sustainable reduction of between 10% to 15%.

Okay, 10% to 15%. No, I was just working on the math that you've given on Slide 14. So you're showing INR 52 crores per month and there was a INR 450 crore rental reduction for 9 months. That is like a INR 50 crore benefit you got on the rent, right? So if that goes away and if I add that, so roughly, I'm getting like -- I was trying to do it like that. So is this…

If you look at our Q3 FY '20 number, that INR 450-odd crores of quarterly fixed expense…

That is INR 144 crores per month in that pre-COVID quarter.

That's INR 144 crores per month. Yes. Out of that, if you look at rent, CAM and utilities, that's about 55%, 50% of revenue -- of our costs. I'm thinking about the balance cost, which is INR 106 crores of people costs and INR 90 crores of other overhead, on this part is a 10% to 15% reduction.

10% to 15% reduction. Understood, understood.

The next question is from the line of Vikram from Maybank.

The ceiling on footfalls -- is there a ceiling on footfalls in the malls or shopping complexes?

No. There is no ceiling on…

There is no ceiling.

Malls or shopping complexes. There is a ceiling in terms of capacity utilization in cinemas to the extent of 50%.

Yes. My -- why I ask this question was my personal experience and also as per some of the reports, the footfalls in malls are only down by 20% of pre-COVID levels. Is there any kind of mapping or color or any analysis that you will be able to provide, especially in case of malls, which have higher footfalls -- are seeing higher footfalls in the malls, are seeing higher footfalls in theaters or the high-end malls are seeing more footfalls? Any kind of analysis, any kind of color on that? That would go a long way.

Gautam, do you want to take this?

Not really. We've not been able to find a correlation between the footfall to malls to conversion to cinema. I think largely, our spaces would be driven by the content. So whenever we've seen now a film like Master release, 80% of the footfalls being generated by the films are also feeding into the malls. So it's really a question of getting a powerful, strong content. And we believe that, that in itself will be the main driver of footfalls to the cinemas.

And again, Vikram, just to add to what Gautam said, we've been reading what various mall operators have been saying in terms of footfall. And they seem to be stating between 75% to 80% of pre-COVID footfalls are back. Now that is despite of footfalls not coming to cinemas as yet. So I think as more content gets lined up, the footfalls for cinemas will improve and sales, they will also reflect in the mall footfalls.

Fair enough. My second question is on the loyalty program. Is there anything special being done? Because it was sort of introduced just a few months before the lockdown, and it did generate quite a buzz amongst your patrons. So -- and then of course, there was a lull because of the lockdown and even now. So any initiatives, special initiative that you've taken to attract or basically ask them to come first because they are already your loyal patrons?

The loyalty is seen as a great tool for the operations today. We work very closely with the -- our data base and the loyalty program simply to drive not only awareness -- the first level, when we opened cinema was about awareness about what all we have done and how safe cinemas are. We've also been able to sell a lot of gift cards over our loyalty program. It's just a matter of now waiting for content to drive them. But films like Tenet and Wonder Woman, we were able to do a lot with our loyalty program, and garner some decent amount of footfalls through the campaigns we ran on the loyalty.

And my -- and just my last question. So in the Western countries, especially the Europe and the Americas, we are seeing a little bit of yo-yo-ing on the COVID numbers in general, and what kind of effect -- so earlier, in fact, U.K. was opened -- the screens were opened for a longer duration and then they shut. And again, the numbers have risen. So what's been the trend or the experience there? And what's your view with respect to India in that case? Anything that you've seen over there? Because of the yo-yo-ing, basically, the numbers have -- luckily, India has seen more of a secular decline in the number of cases. So I'm just wondering if -- in case the numbers do spike up in our country.

We've been in touch with the exhibition community in other countries on a regular basis. And it is really unfortunate that some of the countries, in spite of all the resources, in spite of having a much smaller base of population -- I'm excluding U.S. when I say this, have struggled with the virus, and now have second and third waves of virus troubling the society as well as the economy. Fortunately -- and we can speak more for India, less for the overseas countries. Clearly, what's happening in the overseas countries is all over the news channels, and we are all watching it with a lot of disappointment. And it also creates some level of negative apprehension in our mind. But fortunately, our government has acted in a very decisive fashion, and I think we'll have to send the credit that in spite of having one of the largest populations in the world, in spite of having meager resources, in spite of having a very federal decentralized structure, the government has done a fabulous job in ensuring that the cases come down. And they've also opened the economy in a staggered, but in a very decisive fashion. And various interactions that we've had with the government at different levels, they've assured us that this reduction of numbers is here to stay and the chances or likelihood of a second wave or a third wave -- although it's impossible to predict if that will happen, but from government's point of view, we've been given a lot of confidence that it's unlikely these waves will come back. And also to that end, they've given us assurance that they would not encourage any sort of lockdown as we move forward.

The next question is from the line of Hussain Kagzi from AMBIT Asset Management.

My question is with regards to F&B. So can you give some color on the F&B spend? Is it -- so I wanted to understand whether we've opened up F&B in all the theaters that we've opened up? Or is it selective on that side?

We've opened it in all sites, except for the fact that in Maharashtra, we are serving F&B to be consumed in the foyer and because of which patrons are unable to carry their food articles inside the auditorium. But beyond that, we are also operating on a bit of a curtailed menu so that we could sort of serve many more people and keep the strike rates intact. Beyond that, all SOPs are being followed. And so actually, PVR is going slightly beyond the SOPs to ensure that food safety and any kind of other hygiene processes are well maintained.

Okay. Okay. And apart from that, I just had one other question, which was with regards to -- like I just wanted to get a sense that what, according to you, would be the worst case scenario going ahead? I mean there's no doubt that we have enough liquidity to survive this thing. But suppose, say for [ spend ] this quarter and probably for some part of the next quarter, we are not allowed to go beyond 50% occupancy, then what would be the way ahead? Like I just wanted to get a sense from what would be the worst case scenario for you guys.

So like I think we survived the first 9 months and 3 quarters of performance has demonstrated our ability to manage our fixed costs really well during this time. And as -- and this is for a period when we were shut. As we reopen, the hope is that we will keep some of these costs under check, and hopefully, the revenue, that will start kicking in. With the new film releases, we'll ensure that we get back to -- at least stop the bleed over the next few months. So clearly, I think going forward looks much better. We think the worst is behind us. And hopefully, I think the cash burn over the next few months will be lower simply because I think we will also have some bit of revenues to take care of some of the incremental costs with opening. So that's broadly the thought process. And on top of that, as I said, we've maintained a decent amount of cushion on liquidity front. And we want to bolster that further. And that's the way we're thinking about the business.

Thank you. Ladies and gentlemen, due to our time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone, for taking out time for the call. I -- If I have not been able to answer all the questions on this call, you guys can reach out to either Rahul or me directly, and we'll be happy to set up a separate call to address any questions that you may have. And thank you very much once again for taking out time for this call.

Axis Capital thanks the management of PVR Limited, and thank you, everyone, for participating in the call.

Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.