PVR INOX Limited (PVRINOX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the PVR Limited Q4 and FY '22 Earnings Conference Call 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. Thank you, and over to you, sir.

Yes. Thank you, Aman. Good evening, friends. Welcome to PVR Limited's Q4 and FY '22 Post-result Earnings Conference Call. As usual, the call will be initiated with a brief management discussion on the Q4 and full year performance, followed by an interactive Q&A session. Management team will be represented by Mr. Sanjeev Kumar, Joint Managing Director, PVR Limited; Mr. Gautam Dutta, CEO, PVR Limited; Mr. Kamal Gianchandani, Chief of Business Planning and Strategy and CEO, PVR Pictures; and Mr. Nitin Sood, CFO, PVR Limited. Over to you, Mr. Kumar, for the initial comments.

Thank you. Dear all, I would like to welcome you all to the earnings call to discuss the audit results for Q4, 12th March, FY '22. I hope you've had the opportunity to review our presentation and results, which have been uploaded on ours as well as on the stock exchange websites. The year gone by hopefully marks the end of disruptions in account of COVID. The third wave of COVID that started in the last week of December '21 was the shortest in duration. The infection positivity rates peaked in mid-Jan '22 and came down drastically by the end of Jan '22. All the states and UTs implemented restrictions around capacity and night curfew, which impacted cinema operations. This time around, except for Delhi and Haryana, no other state mandated complete cinema shutdown. By the end of Jan '22, the state started to withdraw restrictions, and by the end of Feb '22, almost all the restrictions had been done away with. As on date, all restrictions have been lifted across more than 99% with clean portfolio. Release of new blockbuster contents which has started from first week of November abruptly stopped as soon as fresh restrictions were announced in the end of December. There was no fresh content for the month of January and for the last part of February. Release of blockbuster content resumed from the fourth week of February, namely Valimai, Bheemla Nayak and Gangubai. This was followed by Kashmir Files which was a superhit, RRR and Batman in March '22. Consistent flow of new content ensures that the admissions in March touched the fourth pandemic peak of 90.6 lakhs, an increase of over 38% over December '21 admissions. The company was gearing up for a stellar Q4 when the third wave came upon us swiftly. It was difficult for the company to pay down its fixed cost, primarily because almost all the cinemas were operational, and secondly, because we realized that the recovery from this wave would be equally swift. The company witnessed operational losses at EBITDA level for the month of Jan and Feb, followed by strong profitability for the month of March with EBITDA margins in excess of 20%. The company opened 29 screens across 5 properties in FY '22, and also closed 23 screens across 9 properties on 31st March where leases had expired. A 6-screen multiplex in Rourkela was the first cinema that the company opened in FY '23. It marks PVR's foray in the state of Orissa. The company plans to open 120 to 125 screens in FY '23. Most of these will become operational in the latter half of the year, and the entire CapEx will be funded through internal approvals and liquidity available with the company. Our screen portfolio currently stands at 854 screens across 173 cinemas in 74 cities in India and Sri Lanka. On the results, please note that the numbers I'm sharing are after adjusting for the impact of Ind AS 116 relating to lease accounting and adjustment from the remote supported numbers we submitted to the stock exchange today. For the quarter ended March 31, '22, total revenue was INR 554 crores. EBITDA loss was INR 18 crores, and PAT loss was INR 96 crores as compared to revenues of INR 191 crores, EBITDA loss of INR 118 crores and backlog of INR 272 crores for the quarter ended March 31, 2021. For the 12-month period ended March 31, 2022, total revenue was INR 1,409 crores, EBITDA loss was INR 155 crores, and PAT loss was INR 419 crores as compared to revenue of INR 310 crores, EBITDA loss of INR 424 crores, and PAT loss of INR 656 crores for the 12-month period ended March 31, 2021. We continue to keep adequate levels of liquidity in the balance sheets with over INR 667 crores as on March 31, 2022. A quick update on the proposed merger with Inox Leisure Limited, which was approved by the Board of the 2 prospective companies on 27 March, 2022. The company has filed the draft scheme of amalgamation with BSE and NSE on 30 March, '22. Approval from the stock exchanges and SEBI-related post which [indiscernible] will be filed with NCLT. To conclude, I would like to thank all the stakeholders for their unwavering commitment and support to the business. With a strong pipeline of content that is available for release over the next several months, we are very confident that the business will continue to perform strongly, and '22-'23 will be a bounce-back year for the cinema industry. With these opening remarks, I open the platform for any Q&A. Thank you very much.

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

My first question is on the recent box office performance, especially in the non-south market. So all the key movies like Heropanti, Jersey, Runway 34, et cetera, have decent star cast, and also in terms of marketing, they have not really been behind. But still, the revenues have been well below expectation. And in the past we have seen that when a few of flops are there, then consumer would like to wait and the behavior becomes of -- more of wait and watch rather than rushing to watch movies. So do you see that risk? I understand every week we have a few movies releasing because of the pent-up lineup, but still so much of back-to-back disappointments, is that a concern?

Kamal, would you like to take that?

Sure. Abneesh, thanks for the question. Before Heropanti, Runway 34, Attack, we also had Kashmir Files which performed beyond the wildest expectations. I mean, even the most optimistic expectations were beaten by a huge margin. It is one of those classic super blockbusters, and it's a film in Hindi. And Gangubai -- this whole season of getting audiences back to the big screen started with Gangubai, and that was released in February, but fairly close to April period, just right at the beginning of the season -- of movie season. And again, there, although it was led by a female actress, but because the director is popular, well-known, it was able to attract people. And again, the film exceeded the expectations. You would have normally expected INR 70 crores, INR 80 crores sort of a net box office. The film went on to do almost close to INR 155 crores to INR 160 crores. So our business is of peaks and valleys. There would always be surprises. There would always be films which will surprise us on the negative side, on the downside. And then there would be films which will beat our expectations, most optimistic expectations, and surprise us on the upside. That's the nature of our business. No one thought KGF will turn out to be the second biggest Hindi film all time after Baahubali 2. Kannada films as a regional language is never even been in the reckoning. It's always been Tamil or Telugu, and Telugu more so because of Baahubali and Mr. Rajamouli. But no one thought Kannada films would be able to beat all other regional languages and the film dubbed in Hindi will turn out to be the second largest, highest collecting box office ever. So that's the nature of our business. I think the good news is that people are back in cinemas in a big way. I would spin this argument and give you another perspective that, if a dubbed film with a somewhat unknown start can do INR 400 crores plus box office in Hindi dubbed -- and I'm talking only Hindi, I'm excluding all other languages, Kannada, Telugu, Tamil, Malayalam -- then you can imagine, when a Hindi film, which is rooted in Indian ethos, which tells a story, which resonates with a large number of people and which has a popular face at the helm, it could be Brahmastra, it could be Laal Singh Chaddha, it could be any other film which is coming, it could very well be Prithviraj. So you can imagine what is the potential of a Hindi film which resonates with a large number of people and which has a popular face. I think the business has the whole perception that we had that this is the maximum ceiling. All of those perceptions and myths have been broken. And what we are seeing in April and before that in March, these are very positive developments.

So just one very small follow-up there. So you mentioned Gangubai, Kashmir Files and the dubbed movies of South India, those are differentiated content or, say, more of masala movies? So essentially, movies which are not doing well, say in Hindi, those are more of a metro kind of audience. So do you see now producers addressing that bit? Because clearly, masala, those kind of movies seem to be working rather than too much of a SEC A1 kind of a content. So would you agree to that? And would you see content getting addressed? I understand some movies are coming which would be more of Indian ethos, but do you see that as a key reason why some of these movies did not work?

So Gangubai is not a masala film. It's your SEC AA+. It's what you call typically a multiplex film. Batman dubbed in Hindi is targeting multiplex premium audience. Doctor Strange which has turned out to be the second highest weekend after Spiderman since we've opened -- reopened theaters, is a premium audience, premium segment film. And Doctor Strange has not just done well in the original version, but the Hindi dubbed has also done exceedingly well. So we've had examples on both sides. I think where you're right in saying what you're saying is that the results are polarized. Films which are doing well, are doing exceedingly well. Films which are struggling at the box office are struggling more than expected. But look, we've been off and on, we've been half shut, half open for the last 2 to 2.5 years. There would always be some unpredictability in terms of content that people like and would like to come out and watch it in theaters. But I think it's a matter of time when it will settle down. Right now all sorts of films are doing well. We don't have this concern that only these boilers, commercial films, over-the-top site films as we call them, are doing well. That's not the concern at all. In fact, we see that as a positive.

Sure. My last question is on Sri Lanka, so INR 8.7 crores Forex impact. So my question is, what would be your expansion plans in Sri Lanka next 2 years? And in the FY '23 period, how do you see the high inflation and lack of -- low electricity? Those 2-3 issues are there in Sri Lanka market. So how do you see the profitability in Sri Lanka in FY '23, given the current context?

Nitin, do you want to take this?

Do you want me to take that?

Sure.

I think as far as this year is concerned, it's a -– we'll wait and watch. Let's see what happens both to the economy and where the economy is headed. We obviously hope that things get better and improve. The months that we were fully operational, we did very well. We had over 20% EBITDA margin. We've got a lot of support from the developer there, which is Far Eastern group called [ Shangri La ]. So we're getting a lot of support and stops from their developers. They are very understanding both with respect to the pandemic and now what's going on with the economy. So we're just waiting and watching, let's hope that things get better in the next 6 to 8 months and the business comes back. And as of now we're just focusing on this one property and seeing where things go and not looking at any expansion yet.

The next question is from the line of Aaron Armstrong from Ashmore Group.

Three questions from me, please. Firstly, in terms of ticket pricing, the trends were very strong last quarter. Could you talk about the outlook for that for the coming quarters, please, whether it can remain at these elevated levels? And secondly, in terms of on the rental side, we've had some anecdotal reports of more operators looking to catch up some of the revenue that they lost during lockdown. And if you could give any comments on that side of things, please, in terms of whether you'll be paying any kind of catch-up elevated revenue to landlords? And then thirdly, any kind of timing you can give around merger completion and the approvals that we're still waiting for? How long you think that could take?

I'll take the ATP answer first. Technically, we've been out of business for over 2 years. And so whatever growth we have taken on ATP is largely on account of inflationary cost at all ends going up. And now that we've been operating at whatever rate, we intend not to take any pricing up. This is largely going to remain where it is. And we are wanting to maximize footfalls as we go further. And there's a complete acceptance as far as the new ATP norms are concerned. And technically, no plans to take the ATP up, and it will remain at the same level. And -- but we are very confident that we'll be able to maximize footfalls with this strategy going forward.

Aaron, on your second question about the rental catcher, all our deals -- bulk of our deals, I would say, 98% to 99% of our deals had limited time period, long-term discounts available to us during this 2-year period of pandemic. There is no catch-up on rentals with most of our landlords going forward. There could be 1 or 2 exceptional cases where we may have some bit of a higher revenue share during the next 12-month period. But I would say 97%, 98% of the cases, there is no rental catch-up. And effectively, we are going to pay fully contracted rentals in accordance with our contract now, which we've also done in the month of March as we came back to full operations. Last question was on merger and time line. I think that we can only share indicative, broad time line, because part of it is not in our control. But just to explain, we filed the scheme post the announcement with the stock exchanges for approval on 30th of March. This process normally takes anywhere between 2 to 3 months before you get approval from stock exchanges and SEBI. Post that, you file the scheme with the National Company Law Tribunal, which I understand the processes could be 6 to 8 months. We think that we should be able to manage the whole process indicatively in a 9-month window as things stand. So hopefully, in beginning of Q4, we should hopefully see the merger -- all formalities being completed. That's the indicative time line that we are looking at, that end of December or some time in Q4, hopefully, we should be able to complete all the legal formalities with respect to the merger.

Could I ask maybe one follow-up, please, just on the merger time line? So the process of the merger not requiring certain approvals because the 2 companies now fall below the minimum revenue threshold due to the pandemic lockdown. Do you think that, that's something that the regulator will view favorably and in which case, you have a very high level of confidence that this will be approved in the 9-month window? Or do you think there could be some ambiguity, there could be some pushback from the regulator? And in which case, it could take more time or there could be a small probability that the merger doesn't go through?

Yes, to be honest, it's quite hypothetical. When we announced it, the scheme -- we said, based on the advice that we received from counsels, we don't believe that this requires any competition regulatory approval, based on the threshold that we have. And if we hear anything from the regulators, we'll adequately respond to them. So it's slightly difficult to comment right now. We haven't heard anything as yet from the regulator, if any. And if we do hear back, we would respond to that. And yes, in that case, the time lines could get impacted, but it's quite hypothetical at this stage for us to comment.

Next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

Sir, just 2 questions. One is just to get some clarification, the 20% margins which you called out for in the month of March, they were pre Ind-AS, right?

Yes.

Okay. And given that these are pre Ind-AS margins, I'm assuming that the ad spend recovery in the month of March would have been very good versus pre-COVID. That's a fair understanding? And also, if you can comment on the forward outlook for that?

So ad spend recovery in the month of March was not even 50% of the...

It was around 40% of pre-COVID, and it would take another quarter at least for us to get back within the pre-COVID numbers. So we believe that the journey on recovery is another 3 to 4 months away, where we could start to sort of look at the similar numbers around pre-COVID.

And then what explains the 20% margins in the month of March, sir?

Yes, very strong footfalls at the cinemas. Still some of the cost cuts and the cost efficient...

Controlled cost, very good footfalls. ATP was strong and so was SPH.

And would your exit SPH and ATP be higher than your company average SPH and ATP for the quarter? That's a fair understanding for the month of March?

Yes, absolutely.

The next question is from the line of [ Arpit Shah from Deep Research Capital ].

I just wanted to know what kind of revenues you were generating from the properties which you could acquire -– the 9 properties?

The Cineline properties which we closed on, contributed approximately 2% of our revenues pre-pandemic, and a similar contribution to the earnings.

They have restarted the cinemas under a new brand, right?

Correct. That's right.

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

Sir, if you can talk a bit about your tie-up with Oma Cinemas. Will we have to pay any kind of royalty for design know-how? And also given the fact that these cinemas will have a pod concept, will it result in any kind of loss of fees? And lastly, if you can also share what can be the CapEx per screen over here? Will it be materially different than what we have for premium teams?

Is Pramod there or...

No, Pramod is -- I don't think is there on the call.

Okay. It's basically just the upfront cost as far as I know. We just concluded the deal with them. And I think, ideally, we wouldn't want to look at a conversion at this stage. A conversion of existing team is very, very new and very -- on the layout really right now. We're just really evaluating various options in various places where we can introduce those concepts. So we don't know for sure if there will be any fees losses or there will be -- in fact, we'll be able to manage to get more fees for better seat efficiency, but we really haven't even started working any layouts yet. But we would look at probably reducing this in a new multiplex and not in a retrofit. So in a retrofit you may have those worries of losing fees. But in the new projects, we will be able to accommodate the formats and at the same time, not lose any fees.

And the CapEx part, and also the design part with respect to royalty and all?

So let me answer that. In this case, this is an architectural concept. There is no long-term royalty table. We'll be paying them for the services for designing the unique concept and putting that in place for each property level. So there is no long-term financial impact apart from exclusivity in being able to introduce that concept for the Indian market. And currently, I think it's a fairly early stage where we are going to identify our location and then develop a design concept which can be executed in that location.

It's also very early stage to even determine the CapEx per screen. We sort of -- only sort of -- as I said, we're only in the deal, not even 10 days ago.

One last question from my side. I think we opened our first multiplex in Orissa some time back. So since we have debut in the state, what steps are we taking in terms of branding? And any specific reason as to what took us so long to kind of enter this market? Was it lack of malls? Or any specific reason which you would like to highlight?

Rourkela was actually signed with a very established developer there, Forum group, based out of Calcutta. And of course, as you know, from signing to opening it -- so while any which ways -- and of course, as you said rightly, it was the best of any retail development for the longest time. But the first and the best mall that came up in Rourkela, Forum Mall, we signed, and which invariably got delayed by 2 years because of the pandemic as well. So we have started work on that property 2 years ago before the lockdown. And then we restarted post opening, both the mall and as a work even those stopped. And obviously then we managed to completely and open it in April, and it's showing good numbers initially. It's only been less than 4 weeks since we've opened it now and it's showing some promising numbers. And we have another one coming up in Rourkela where we'll start work. We haven't started yet. We'll start work there as well in a couple of months' time.

Sir, one small clarification. This INR 8.7 crores of loss that we have reported from Sri Lankan operations, is this a noncash charge or actually cash loss?

No. This is a noncash charge. Part of our investments into our 100% subsidiary are structured in form of a foreign currency loan, and as a result of which we need to book a reinstatement loss on the loan as the currency depreciates. So this is a noncash charge. This is only an accounting charge required.

The next question is from the line of Sanjesh Jain from ICICI Securities.

Two questions from my side. First, on the ATP. So Inox has also reported the numbers. Just comparing the 2 companies, there is a divergence in terms of how the ATPs have moved. The ATPs have improved for us while the Inox has declined on a sequential basis. Can you explain or help us understand the ATP increase for us? Is that we have taken a price increase and Inox has seen the similar pricing? What is the reason for the ATP -- because SPH, we are on the same trend as they are. So can you just help us understand the ATP? And if you have taken the price hike, what is the kind of price increase have you taken?

So let me correct you here. Even the SPH growth for PVR is much healthier than what the competition could manage. So on both the ends, be it ATP and SPH, I think we've been able to record slightly better numbers. But now coming to your question on ATP. ATP is actually a blended mix of what the operators manage with content, timing, premium versus non-premium, and the kind of content that plays out better within the circuit. So I think PVR could manage a healthy mix between the premium offering to a consumer and could maximize on that part of the game. And I think SPH as well we've been consistently working on this piece and managed to record a good healthy number. And we feel that this is -- we're here to now stay and it will only get better from here.

So what I understand is that we have not taken price increase. It's just the mix, and the mix is more towards premium. And going forward, this is the ATP we should be looking at, even for FY '23?

Yes. The only thing -- as I said, sometimes the kind of films that do well, the mix of Tier 2 and Tier 1 market mix -- for us, south performed well. So each chain has its own strength, and the way they program content has a bearing on ATP because ticket pricing is a -- what you see an average ticket price is a blended answer to what we've managed to do with ticket prices. And for us, that formula has kind of worked a little better.

Second question on the distribution margin. Again, there is a divergence trend between the 2 players. For us, on a sequential basis, the margin has declined, while the competition, it has increased, while we have done better on the ATP side, but the flowthrough has been slightly inferior for us. What explains that?

So we would not like to comment on the comparison because this is all sensitive data and information that we would not be comfortable sharing on the public platform. I would only say that in Q4 -- because Jan and Feb were disrupted months where cinemas are open, but content was not really coming new content -- I mean, very difficult to analyze it the way and the manner in which you're looking at it. I think if you wait for another quarter, look at April, May, June period, which is Q1 of the current financial year, you will get a better sense of where the film hire and the other competitive variables are moving.

But just to understand for next year or 2 years…

Yes.

How should we look at the distribution margin? Should it be back to the historic level, pre-COVID levels? Will that be a fair assumption? Or for a time being, we will accommodate -- as we said earlier, it produces -- because they have waited a lot for the movie releases. How should we look at the distribution margin for FY '22?

So the accommodation strategy has -- it has stopped in March. We are back to historic levels as far as the sharing percentage goes. The only moving part now is -- because we have variable sharing percentages in different languages, what I mean is in Telugu, Tamil, Malayalam, Hindi, Punjabi, Hollywood films, we have a different sharing arrangement with the distributors. So depending on which language performs better, the blended film hire percentage could vary. But the sharing percentage, we are back to historic levels.

The next one is the shows per day. In the April, are we back to the 2.7% to 2.8% shows per day, and the entire inventory is available now with the normalization?

Yes, we are back to our normal average shows. And I think the average is slightly higher than 4.7%. It's 5-plus. And except Jammu where we have a capacity restriction, in India, no other state has any capacity restriction. And of course, in Sri Lanka, there is a small restriction of capacity. We are permitted to sell 75%. So apart from that, within a chain, there is no restriction in any other state or any other territory.

On the distribution business, you did mentioned in the previous call that we will be stepping up on that business, on the film distribution. How are we looking at the film distribution business for FY '23?

Nitin, do you want to comment on this?

This is the PVR Pictures part of the business you're talking about?

Yes, PVR Pictures. Right.

PVR Picture, Kamal, do you want to talk about this?

Yes. So we continue to build on our distribution business. It saw a sharp recovery in financial year '22. We were fortunate to have a couple of films releasing, couple of big films which came out theatrically. We were able to move a lot of our Hollywood foreign language inventory to various streaming platforms and television stations. All of that resulted in a very sharp recovery in our distribution business. We were pretty much back to where we were pre-COVID. I mean, we could have done better if there was no COVID impact in the beginning of calendar year '21. We could have done better in terms of top line and most likely bottom line. But I think we made a very sharp recovery given that exhibition was still struggling. We are extremely buoyant on distribution business. We're getting many opportunities. Fortunately, PVR has a very strong brand equity amongst all content partners. We have seen a very solid distribution service platform. We get many opportunities. So it's our endeavor to scale up this business manyfold, and you would see a lot of action, a lot of steps in that direction, but we would speak more about it as we move forward.

[Operator Instructions] Our next question is from the line of Vipul Garg from Kotak Mahindra.

Sir, actually, you told that you will be going for a top-up for the 120 -- 125 [ crews ] during FY '23. So what would be the CapEx amount per se?

Yes. Our annual CapEx outlook this year will be between INR 350 crores to INR 400 crores on new built screens plus also maintenance CapEx on existing screens. So we are looking at annual outlook of anything between INR 350 crores to INR 400 crores this year.

And what would be the debt levels at present, about INR 1,400-odd crores?

Gross debt is about INR 1,500 crores. Net debt is about INR 900 crores.

And would you be able to share the debt and cash number for Inox also or not?

I can't comment on Inox numbers as of now. This is public domain. You can refer to their website.

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

So I just wanted to check on 2 things. One was, during pre-COVID period, you had made certain structural cost saving measures across the OpEx line. At that point, I think you mentioned that X rent –- you are looking at a like-for-like cost reduction of about 10% across all lines. Just wanted to know in the current context where the inflationary environment would probably get within your employee cost line and you would have to ramp up cost? Does that like-to-like 10% reduction kind of numbers still stand or it could be lower in a fully operational business?

A fairly valid point you've said. And if you refer to Slide 18 of our presentation which basically shows an outlook of how we've been managing our costs so far, I think even in Q4, if you look at -- let's start with the people cost. Our average run rate of cost in FY '20 on people cost was roughly INR 100 crores a quarter, which in Q4 this year is INR 81 crores. It's still 20% lower. We've kept our headcount low as compared to pre-pandemic, and we are reasonably confident that we will be able to operate next year. On a same-store level, a lower headcount than what we are operating in pre-pandemic. However, as you rightly said, there is a wage inflation already in place. I think we've already seen up to now almost 11% to 12% hike in average cost as we compare to FY '20 on account of minimum wages and cost inflation. And there is likely to be even further inflation this year as the business bounces back. We have not given significant increments et cetera to the team. So some bit of inflation is going to play out for sure. But I think -- we think that some of it will get recouped by the higher realizations that we are doing. But our costs should still be closer to what we were doing in FY '20, in FY '23. We may not be possible to get full 10% savings over FY '20 given the inflation, but I -- we still think that we'll be able to keep this cost at FY '20 or below levels even in FY '23.

Second question was on the screen addition. So this pick up from 80-odd screens to about 100, 125 screens, is that just a function of pent-up access at the developers end, which probably you were not taking or not getting completely due to COVID, and this kind of come in one shot. Is that the way to kind of read it?

Yes. A lot of the development itself also stuck due to lockdowns and COVID, and the malls weren't ready, but now the malls are ready. And therefore, we're taking the handover and start work on them. And also, we have a lot of large format ones here, which is accelerating the numbers with screen count. We have 8 screens to 10 screens. We have even a 12-screen complex coming up, some -- what we call big complexes. And so those will -- those are actually adding up to the numbers -- number of screen openings for the year.

And just a follow-up on that screen addition part. It seems like a larger share is South India for this year. So is this that coincidental in terms of what properties are coming? Or is it more of a planned thought process, at least for FY '23?

No. I think we're quite set all -- very evenly all over the place. I think the ones in South India, maybe 1 and some few are -- they're just more large format because, as I said, more screens, 8 to 10 to 12 screens because of the acceptance of multiple language terms. Otherwise, we have Gujarat, Gurgaon, Pune, even the East India again, Rourkela. It's pretty well spread out across the country.

The next question is from the line of Girish Pai from Nirmal Bang Securities.

Just want to discuss potential CCI environment, the merger deal. Is there a time line within which CCI has to raise any objections, if any, post which it becomes kind of a time barred situation? That's point number one. Second, if there is CCI involvement and there is a divestment of screens that is required from your side, is there a certain minimum threshold you're looking at beyond which you would probably want to kind of go ahead with the deal? Those are 2 questions I want to ask you.

Please let me respond to your second question first. The second question is quite hypothetical, and we haven't even thought about anything like that, so we would refrain from commenting. On the first point, until what time CCI can intervene, I am not aware of any specific guideline. But our understanding is, mergers are typically -- fall under the merger control guidelines. And effectively, if you need an approval, you need to apply to them and seek an approval. If you don't need an approval, you don't need to file with them. So to be honest, I'm not aware of any time lines, but if you are -- I'm guessing, the stock exchanges and SEBI approval, once it's in place, will be the basis for us to go ahead and file in the courts.

Just one more question regarding the CCI thing. You had a experience with DT cinema situation where you had to divest 7 screens out of 39 screens, of which 1 was -- I think 1 was in a property in Saket. What in your opinion determined that particular situation where you had said that you need to divest 6 screens in Saket? Is it a micro market monopolistic situation that you saw?

The starting point of that question is whether a transaction is notifiable or not notifiable. And in the case of the transaction, when we are acquiring that business, that transaction was notifiable. In the present case when we are doing this transaction, this transaction is not notifiable according to law. So both the situations are not comparable.

The next question is from the line of Jaykumar Doshi from Kotak.

First off, bookkeeping question on theatrical window. Now that the business has normalized, is there a understanding with producers in the Bollywood to move back to, let's say, 8 weeks of theatrical windows?

Yes. We will be returning to the erstwhile 8-week window by end of July.

Second…

This is for Hindi films. For different language films, it will be a different arrangement. But for Hindi films, which is our staple diet, we will revert to 8 weeks at the end of July.

Second is, I was a bit surprised when you sort of mentioned that advertising revenues would take 3 to 4 months to recover. I was hoping that the way April has shaped up from a box office perspective, ad sales would have -- ad revenues would have largely recovered. Now what is the challenge you are facing on the ground? And if you could elaborate a little bit on it? Does it mean that FY '23 ad revenues could be lower than FY '20 or at best match FY '20 levels?

First of all, yes, the -- it is most expected that actually advertising revenues will be lower than the pre-COVID level, number 1. Number 2, now coming to the question of why it's taking time. Because you need to understand cinema as a medium is the fourth or the fifth priority for a media planner. So technically, we've been off radar for close to about 30-odd months, and it will take time before planners -- and typically, a plan gets made about 3 or 4 months prior to a big launch, and that's where most of our -- bulk of our earnings happen. So we are back on the radar. We got a fairly decent recovery in March. But having said that, we are waiting for some big blockbusters, the good news around KGF, RRR, Gangubai. It's only helping matters. And now with Doctor Strange doing well at the box office, we still believe it'll -- it's a few weeks away. But very, very confident that within about 3 to 4 months, we should be back on track.

What is your mix between local advertisers and slightly larger, more organized players?

So technically, the split is about 60%-40%. We still cater 40% to retail and small businesses. 60% is largely on big businesses and which is Gaana -- through agencies and the corporate offices.

Are you seeing a better recovery in either of the 2 or it's broadly similar?

Actually, yes. The retail is much better. They warmed up too because their stores are in the mall. They can already see a huge amount of recovery. They can feel the pulse a lot better. So that retail recovery in -- specifically in South is very, very good. In fact, if you look at market, South has done well and has recovered fairly well. North as a market is second in line, but it's actually the West region, which is -- which has a bulk of contribution to make. It's taking a little more time because there you have the maximum corporate business flowing in, and that's taking some bit of time.

The next question is from the line of Mayank Babla from Dalal & Broacha.

I have 2 questions. My first one is particularly about footfall. Sir, I needed your help in understanding that despite having a larger screen base compared to our competitor and more -- being more diversified, is there any other specific reason why there was a hit in footfall this quarter compared to last quarter?

Can you repeat your question, the last part? Not very clear.

Yes. Sir, my question was, why was the footfall -- why were the footfalls marginally down quarter-on-quarter basis?

You mean Q4 of financial year '22 as compared to Q3?

Yes.

Because Jan and Feb we didn't have releases, whereas in Q3, we started getting sales in October, and we had sales slight till the end of December. So there were more productive weeks in Q3 as compared to Q4. Nitin, do you want to add something? Maybe I'm missing some point.

No, we covered that. With Q4, basically, the Omicron wave hit, third wave...

Yes.

End of December to -- all the way to Jan end, and capacity restrictions were imposed in Delhi and Haryana, which are of course the very big markets for Hindi movies, no new film got released until the third week of February. So all of Jan and most of February, no new movie was released. Movies started getting released only after the restrictions were lifted, such as Gangubai and all. And then those -- that week, 10 days of February and full March is where we actually had recovered and genuine footfalls.

And my second question was regarding the -- does the promoter have any pledge of around 6% to 6.3%?

Yes, there is a please of securities. They have taken some short-term borrowings. Yes, there is a small pledge of shares.

Sir, this was in the March quarter itself, is it? Or it was before this quarter?

This was in the March quarter.

The next question is from the line of Arun Prasath from Spark Capital.

Sir, my first question is on the screen opening which you indicated as around 125 about -- in the coming years, annually. So question is, is this restricted because of the fact that you wanted to open only up to the internal accruals? Or is it more because of the mall developer handing over the property?

So this is because -- this is the list of pipeline of screens that we are executing. We are executing a little more, to be honest. But we are -- because sometimes the screens get delayed on account of developers' execution as well. So the number of screens under fit out will be more than what you see, what we'll end up opening. But yes, we hope that these many will definitely open during the course of the year.

So in the medium term, would -- the mall pipeline will be the constraint? Or do you see any issue in that?

No, we don't see any constraint in that. We see active mall activity on the ground. Lot of new screens moving towards execution. And we will also be moving to a lot of new cities, in the next few years adding a lot of Tier 2 and Tier 3 cities which are beginning to see development of retail infrastructure now and that will also be a big focus area for us.

My second question is on the cost of debt. Your current cost of debt is north of around 11% range. It's at around 400 to 500 bps above the G6. Do you see -- with the balance sheet strengthening, do you see this threat coming down? And what extent do you -- can we expect this reduction?

Yes. Our average cost of debt, just to clarify, is close to 9%. I don't know where you got the 11% number from. If you were looking at the interest cost that is... [Technical Difficulty]

So ladies and gentlemen, it seems that we have lost the line for the speaker. We would request all the participants to please stay connected. Ladies and gentlemen, we have the line from the management reconnected. Sir, over to you.

Sorry, I was just answering the previous question. Just to clarify, our average cost of debt is not 11%, but it is close to 9%. The interest -- the overall interest cost charges that you see in the P&L, also includes bank charges, et cetera, that are applicable on the credit card usage that we pay to the banks, and also has an impact of Ind-AS adjustments which are pertaining to front accounting of convenience fee, income, et cetera, so -- which is a noncash charge. So our average cost of the debt is close to 9%. Also, as during the year, like I said, we intend to fund all our growth through internal accruals and liquidity that we have in hand, [indiscernible] free cash flow generation from the earnings that will go on to reduce leverage. I think our leverage is ideally peaked now. And as we get into earnings and cash flow generation from the business, hopefully, this should start coming down from these levels.

So do you see the cost of debt coming further down from this level?

So we are in a high interest rate environment now as we enter this year. So it's difficult to say. If there is any refinancing opportunity, clearly, it will happen at a lower cost than what we borrowed during the pandemic, for sure. But given the increase in interest rate during the year and the impact of it in this existing portfolio, I don't see any material changes in our average interest cost from here.

We'll take the next question from the line of Jaykumar Doshi from Kotak.

Just a quick question. When does your convenience fee contract with BookMyShow and Paytm expire? And are there any discussions around renewal of the same?

Both the contracts were set to expire in 2021, but because cinemas were shut, the contracts were extended, and they will expire in 2023 calendar year, different dates. As you know, SPI, which is now merged into PVR, they've also had first file preexisting contracts prior to the merger. So those states will also fall sometime towards the end of 2022, '23. As far as on the discussion front, I would not like to get into these details.

Essentially, it's still 2, 3 quarters away, 3 to 4 quarters away?

It is still a few quarters away.

Ladies and gentlemen, due to time constraints, that would be our last question for today. I now hand the conference over to Mr. Nitin Sood for closing comments. Thank you, and over to you, sir.

I would like to thank everyone for taking your time for our call. And if we have not been able to answer any questions during the call, feel free to reach out to me or my colleague Saurabh, and we'll be able to individually do around one-to-one. Thanks once again.

Thank you very much. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.