UFO Moviez India Limited (UFO.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the UFO Moviez Limited Q3 and 9M FY '26 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to point out that this conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company and they involve risks and uncertainties that are difficult to predict. I would now like to hand over the call to Mr. Tushar from Ventura Securities. Thank you, and over to you, Tushar.

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to UFO Moviez India Limited Q3 and 9 Months FY '26 Earnings Conference Call. The company is represented by Mr. Rajesh Mishra, Executive Director and Group CEO; Mr. Ashish Malushte, Chief Financial Officer; and Mr. Siddharth Bhardwaj, CEO, Digital Cinema Network Business of the company. I would now like to hand over the call to Mr. Mishra for his opening remarks, post which we can start Q&A session. Thank you, and over to you, sir.

Thank you, Tushar. Greetings, everyone, and thank you all for joining our Q3 and 9 months FY '26 earnings call. Q3 FY '26 once again highlighted how critical the right content and release timing are for theatrical performance. October saw a steady momentum led by the strong performance of Kantara: Chapter 1, while other releases such as Sunny Sanskari Ki Tulsi Kumari, Thamma and Ek Deewane Ki Deewaniyat delivered mixed results. November was relatively softer, reflecting a muted post-Diwali phase. Films like De De Pyaar De, Tere Ishk Mein and 120 Bahadur saw steady but moderate footfalls, while a crowded slate of mid-scale and regional releases delivered average performances overall. December clearly stood out and drove the quarter. Dhurandhar delivered a strong and sustained run through the holiday period, reinforcing the power of event-led cinema. While Akhanda 2: Thaandavam added regional support and Tu Meri Main Tera Main Tera Tu Meri underperformed, overall momentum improved meaningfully towards the year-end. Overall, Q3 FY '26 saw stable footfall, supported by select [ Technical Difficulty ]. With a stronger content pipeline ahead, improving advertiser sentiment due to the success of Dhurandhar and continued focus on efficiencies, we are well positioned to drive consistent performance and growth in the coming quarters. We have strengthened our in-cinema advertising leadership by exclusively adding Miraj's cinema network, expanding our reach to over 3,900 screens, including 2,500-plus multiplex screens without incremental CapEx. This meaningfully enhances our Tier 1 and Tier 2 market presence and premium inventory. In total, 457 movies were released, including version languages during the quarter compared to 404 in Q3 FY '25 and 462 in Q2 FY '26. On the screen network front, our advertising footprint now stands at 3,783 screens. This includes 2,304 multiplex screens and 1,479 single screens. Turning to the key figures for the quarter and 9 months ended December 2025. The consolidated revenue for Q3 FY '26 stood at INR 1,319 million compared to INR 1,387 million in Q3 FY '25 and INR 1,113 million compared to Q2 FY '26. EBITDA stood at INR 106 million in Q3 FY '26, compared to INR 208 million in Q3 FY '25 and INR 116 million compared to Q2 FY '26. The company reported a net profit of INR 64 million in Q3 FY '26 compared to a net profit of INR 153 million in Q3 FY '25 and a net profit of INR 75 million in Q2 FY '26. Regarding 9 months year ended performance, consolidated revenues amounted to INR 3,522 million compared to INR 3,300 million in 9 months FY '25. EBITDA for 9 months FY '26 was INR 620 million compared to INR 473 million in 9 months FY '25. On the PAT front, the company reported a net profit of INR 204 million in 9 months FY '26 against a total net loss of INR 103 million in 9 months FY '25. The consolidated cash as of 31st December was INR 1,271 million, and the net cash was INR 491 million after considering outstanding debt. Looking ahead, the Q4 began on a positive note with the release of films such as Ikkis, Raja Saab, Rahu Ketu, Border 2, et cetera. The outlook for the upcoming quarter remains positive with several high-profile releases, including Mardaani 3, O'Romeo, Dhurandhar Part 2, Toxic, Peddi, et cetera. With this robust lineup, we remain confident about continuing with the momentum. I would like to take this opportunity to thank all our stakeholders for their continued trust in the company. With that, I open the floor to take your questions. My colleagues, Mr. Ashish Malushte, Chief Financial Officer; and Mr. Siddharth Bhardwaj, CEO, and I will be happy to take your questions. Thank you.

[Operator Instructions] The first question from the line of [ Shlipa Saboo ] from Ananta Capital.

My question is for the CEO. So the company has good cash, approximately INR 100 crores on books, and with low working capital requirement and CapEx requirement, we have an asset-light model, right? So if the company does buy back from open market, the ROE, EPS for the investors can be improved because huge wealth has been destroyed in the past. Along with that, we have sufficient CapEx, cash flows available. So what is your take on the same?

Yes. Shilpa, this is Ashish Malushte, CFO of the company. So if you permit, I'll take this call -- this question. So you are absolutely bang on when you have analyzed the financial situation of the company, except just one small correction. The model is not fully asset-light. Partly, we can go asset-light. But most of our things is where we invest into the CapEx that goes into the theater. But having said that, the fact is that we are sitting on INR 100 crore plus gross cash and about INR 50-odd crores of net cash, and this has been the situation for the last 10 years, except 1 quarter during COVID. And yes, philosophically, in fact, when we went public, at that time also we had said that whenever the company will not find a meaningful utilization opportunities of the accumulated cash the same will be used to reward the shareholders. And in other words what we meant was we will not get into any unrelated or a related expensive or risky kind of propositions like, say, production of movie, something like that. And we stood by what we had promised. And between 2016 to 2019, substantial amount of dividend was distributed upward of INR 200 crores to the shareholders. And yes, at that point in time, certainly, there was an -- even at that time, there was an option of doing buyback. However, for whatever reasons attributable to it, we thought it appropriate to reward the shareholders in the form of a cash because probably we were freshly listed. Having said that, yes, there is an opportunity to do buyback, and buyback at the current valuation at which the company is would be a better proposition than distributing dividend. So yes, you're right. The question is whether we are at that stage. In terms of cash availability, yes, but in terms of technicality, which means the P&L supporting buyback or distribution of dividend, we are not at that stage even today because of the accumulated losses that we had, which are slowly behind us now. But maybe the stage at which the company will be in a position to return the monies back to the shareholder in the form of dividend or a buyback would be sometime soon, not immediate, because last year we turned profitable meaningfully, this year we have continued in all the 3 quarters the PAT level profitability. So when this continues for some more period of time, yes, there will be a meaningful accumulation of cash, and at that point in time, buyback can certainly be considered, especially because the valuation parameters and the multiples are at a relatively lower level as compared to industry.

Yes, sir, I understand your point. Just one thing. So can we go for a buyback in a smaller amount, like, say, INR 4 crores, INR 5 crores per quarter? That won't impact the cash also much along with the plans that the company has.

Yes. Again, I'll say that, yes, that can be one of the strategies and one of the ways forward. But all depends on whether your -- I mean, your financials allow you to reach that level. In my opinion, by year-end, we would be. Then whether it should be one go, bigger chunk, distribution of dividend or buyback or doing dividends in a shorter span or buybacks in a shorter span will be a tactical decisions which need to be taken by the Board. But all I'm trying to tell you is that this company has always believed in returning the cash to the shareholders. It could be in the form of -- it was in the form of dividend in the past, and I'm saying it is to the tune of INR 200 crores plus. That is the money that we have returned. What is the exact number?

INR 250 crores.

INR 255 crores were distributed in 4 years. And that is what we wanted to bring it to the shareholders and the investors and analysts' notice that this is the philosophy of the company. Unfortunately, the whole industry went through a very bad patch from 2020. Now luckily, we are out of it meaningfully in last 1.5 years. So yes, once we are again back in that situation, we will take that call. But tactical calls, whether it should be in tranches or at one go, whether it should be dividend or buyback, that would be driven by the Board level discussion.

Okay, sir. Just one suggestion. I think that dividend won't improve the EPS and ROE for the shareholders as much as buyback can do. So just one suggestion from my side.

I fully agree with you on this, more because the level of lower valuations that we currently have, considering the consistent performance that the company is giving.

The next question comes from the line of [ Vedant Bangar ], an individual investor.

So actually, in the last Q2 con call, you had said that we shall not...

Can you speak a little louder, please?

Yes, sir. Can you hear me now?

I would just request you to speak a little louder.

Yes, sir. Am I audible now?

Yes, yes. Please go ahead.

Sir, in the Q2 con call, you had said that we shall not expect the same numbers in the Q3 as they were in the last Q3, as in December 2024 numbers shall not be compared to this -- we shall not expect the numbers this quarter because last year December quarter had a very massive release called Pushpa 2, which enhanced the numbers to a certain extent. So this quarter as well there was this release on exactly the same day, 5 December. So we had the same number of days to cover those numbers in form of Dhurandhar. So the numbers didn't quite match the last year's quarter. So can I know the reason why? Because the quantum of the higher grosser was almost the same this year as well? Would like your take on that, sir.

I appreciate your astute observation on this point and also with reference to the last quarter Q3 FY '24. Only thing is a couple of differences over here was that this year the Diwali releases didn't pan out. Normally, the releases during Diwali time they work and they give us much better returns. So that was one reason. Dhurandhar, yes, you're absolutely right. It did work very well. Only thing is between Dhurandhar and Pushpa 2, the primary difference was that Dhurandhar was a single language film released only in Hindi language, whereas Pushpa 2 was a multilingual language, which released in Hindi, Tamil, Telugu, Malayalam or Kannada, all these languages it released in. So it had a much wider footprint, and that delivered the numbers -- much higher numbers for Pushpa 2 than it could do only for Dhurandhar. So this is the 2 primary differences that you see.

Okay. So if I can add on to this. One thing which Siddharth would be able to better articulate, which I will leave it to him, is about the point that Dhurandhar, when it was released, it had a limited hype when you compare it with Pushpa 2. And most certainly Dhurandhar became a great hit once it was released, but the allocation of the advertisement resources that happened is based on a hype as pursued by the advertisers. So therefore, just to take a corollary, Pushpa 2 would have got a better advertisers' attention than Pushpa 1. And of course, Pushpa 2 was considered to be one of the super hyped and super expected, doing better movie. But Pushpa 2 has a better outlook from advertisers' point of view versus Pushpa 1. And same would probably happen for Dhurandhar, which probably Sid would take up. But before that quickly, second thing that has happened is the government and -- state and central government vertical that we have within the advertising, which used to be INR 100 crores plus till 2020, that had come down to the range of INR 30 crores last year, full year, and that continues to underperform. So on a quarter-on-quarter basis, the government segment has reduced by about INR 4 crores, if I'm correct. So that has been a major reason why during the quarter the performance on the advertisement front looks challenging. And then this explanation about Dhurandhar, which probably Sid will be able to explain in more detail.

Yes. This is Siddharth. So as Ashish just -- Ashish and Rajesh just mentioned, there are 2 different genre of movies, one is more national and another one limited to Hindi-speaking markets, so which provides lesser opportunity for advertisers to take advantage of. And second, Pushpa 2 was eagerly awaited for over a year, more than a year, and advertisers were -- there was a lot of excitement pent-up, which came out when the movie was released at the end of the year. right? So it worked on the hype of more than a year. Whereas, Dhurandhar, like any other blockbuster -- anticipated blockbuster, carried the –- the buzz was there in the market, which we took advantage, and the word of mouth spread and it turned out to be the biggest blockbuster Hindi cinema has ever seen. I'm sure it will create a similar hype for Dhurandhar 2, which is due for release within this fiscal itself. So you can anticipate equal, if not more, response from advertisers in the month of April -- sorry, in the month of March, mid-March, and the results of that should show in the next quarter.

Okay. Okay, sir. So one more thing...

I don't know if I answered your question [indiscernible].

Yes, sir. Yes, sir, very, very elaborate. Sir, one more thing I need to ask. Sir, our margins of the past 5 or 6 quarters have been a little erratic. I mean, they've swung from 22% to 12% to again 16%. So what's the normal trajectory of margins that we should expect in the future, operating margins I'm talking of?

Okay. So when you look at operating margin and it moving erratically, the erratic movement would only and only because of the movement in advertisement revenue. And the reason for that is there is a sizable fixed cost associated with the advertisement revenue in our case, which is the sharing that we do with the theaters, which is called advertisement revenue share, as I said in the books. Now that is a -- annually, it is in the range of about INR 75 crores, of which almost 80% is fixed. So what happens is when you have a -- Q3 of last year, my margin from advertisement revenue shoots up because this cost being fixed, more or less being in a near fixed scenario. But when that advertisement revenue on an annualized basis comes to a lower level, say, against INR 160 crores annualized, it comes down to INR 100 crores annualized, then the margin contracts from INR 75 crores annualized to INR 25 crores annualized. So that would directly translate into -- now this is one key margin, because rest of our business is quite predictable. My both revenue streams from distributor fee revenue and my theatrical revenue is relatively predictable and the expenses are also predictable. So there is a certainty to the kind of margins that we will draw from this segment -- it's not a segment, but this section of my revenues. But the only differentiating factor is my ad revenue, how it pans out. And that exactly -- now if you go back and try to correlate with the ad revenues, you would see a similar kind of a movement in my margins. One small addition, there would be a betterment in the margins when you see my sale of product revenue going up in a particular quarter because that generally fetches me around 21% to 22% average margin. So these are the 2 factors. If you link it with the numbers that you analyze, you will probably get the answer. And if there's anything still outstanding, then we are very -- we'll be happy to discuss your questions.

Okay. Sir, one last question. So in March '21, as in the year FY '22 and FY '21, we had accumulated losses of more than INR 200 crores if we combine both the years basically. So sir, why are we paying taxes? I mean, we have accumulated losses of more than INR 200 crores in those 2 years. So shouldn't be negating the tax rate till the time INR 200 crores is compensated?

Good question. Many investors may have this point, but the answer lies in accounting principles. So what you see as a tax expense is not a tax payout, okay? So there is a concept of deferred tax sitting in the balance sheet. So basically, the books of accounts say that whether you have profit or loss, that period profit or loss must represent a true picture. And therefore, when we were incurring losses, you would see that if you open those numbers now, the loss before tax and loss after tax, you will find the loss after tax being lower than loss before tax. Obviously, nobody is paying me taxes, but still why my loss before -- after tax is lower, is we create a fictitious assets called deferred tax asset in the books, which primarily says that whenever in future you'll make the profit, you will reduce this deferred tax asset fictitious. And in that period, though you don't have to pay tax, in the books of accounts, you will show that there is a tax payment. This is an accounting principle. So therefore, when you see in the current period there is any tax hit in the books, that doesn't mean that my tax hit translates into cash outflow. What it means is correspondingly, my deferred tax assets sitting in my balance sheet will go down, and now if you see my -- of course, for Q3, you will not be able to see, but Q2, if you see the balance sheet is reported, even year-end balance sheet would be reported, you will see the deferred tax asset going down. Still -- since we are on this point, still there could be one question, then why there is an outflow in cash flow for tax? That is because -- purely because there are TDSs. So even though I'm not liable to pay any tax, when I render service, the service recipient is supposed to deduct tax as per the provisions of Income-tax Act. So although whether I'm making profit or no, he's supposed to deduct tax. We obtain a lower deduction certificate, so the tax deduction in many cases goes down. But that amount gets treated as TDS paid by us, but that entirely comes as a refund from government. So long story short, till the time I'm recovering my losses of those 2 years, I am not required to make any payment of taxes in cash flow But in books of [Technical Difficulty], my PBT or loss before tax was reduced artificially, deferred tax asset was created, and that gets written back as I start making profit. So this is simply accounting thing. We don't pay any taxes from cash.

Okay. I wish you a great year ahead and you've been a great help.

We have the next question from the line of Mr. Sagar, an individual investor.

Yes. Really happy how you have grown the company [Technical Difficulty] company is turning around...

Sorry sir, your voice is cracking a little bit.

Sir, I think your voice is a little bit cracking, so...

Yes. I'm audible now?

You are audible, but we lose you in between.

Okay.

Can you continue? Yes.

Yes, yes. Yes. So am I audible now.

As of now you are.

Yes. Sir, for [indiscernible] want to know that how the advertising revenue comes from [indiscernible]. Sir, can you share the percentage of the advertising revenue that comes from [indiscernible] movies on an annual basis?

I'm really sorry, we are not able to hear you. If you bring a clearer signal patch because -- a few words here and there we can hear, but not the entire sentence.

Sagar, there is an echo from your line as well.