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

Ladies and gentlemen, good afternoon, and welcome to the Q4 FY '21 UFO Moviez Earnings Call, organized by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is recorded. I would now like to turn the conference over to Mr. Yogesh Kirve. Thank you, and over to you, sir.

Thank you, Yashasvi. Good afternoon to all the participants, and thank you for joining in. We at Batlivala & Karani Securities are pleased to host this earnings call for UFO Moviez India Limited. To discuss the results and the business outlook, we have the senior management of the company represented by Mr. Kapil Agarwal, Joint Managing Director; and Mr. Ashish Malushte, Chief Financial Officer. I will now hand over the call to Mr. Agarwal for his opening remarks, which will be followed by a question-and-answer session. Over to you, sir.

Thanks. Thank you, Yogesh. Greetings, everyone, and thank you all for joining us on UFO's Q4 and FY '21 earnings call. Glad to connect with all of you after lapse of almost -- more than a year, actually. I do hope and believe that all of you and your loved ones and colleagues are safe amid this COVID-19 pandemic. Friends, the year gone by has been extraordinarily challenging for all of us and our business in many ways. As we know, with the declaration of shutdown due to the COVID-19 pandemic, cinema business has been severely affected, thereby impacting company's performance also. During FY '21, the company earned [indiscernible] revenues as the business operations were halted since the beginning of the year due to the closure of cinemas. After a prolonged closure, cinemas were allowed to reopen from mid-October 2020 with SOPs and 50% seating capacity. That was also staggered in different states. Due to the constraint seating capacity and weak content pipeline because the tent-pole movies didn't want to release because the cinemas are not open, many cinemas chose also not to re-open. However, once the restrictions on the seating capacity were lifted, southern markets witnessed a huge number of releases, including big-budget films like Master and Vakeel Saab. Excellent response on box office for these movies demonstrated the willingness of the audiences to quickly return to the theaters and enjoy the cinematic experience with their families and friends. While the southern markets were almost back to normal, other markets took more time to start releasing the big-budget movies. However, encouraged by the box office response in southern markets, content owners in Bollywood and other markets also started announcing release dates for their movies by the end of February, early March 2021 after the [indiscernible]. This Included the tent-pole movies like Sooryavanshi, 83, Radhe, et cetera. However, just when it looked like that there will be release of these movies would give the industry a much needed push, the country witnessed the second wave of COVID-19 pandemic, thereby, once again, leading to the closure of cinemas. We have all experienced it. Well friends, the second wave has turned out to be more lethal and has spread across the country in a very, very short span of time. It has severely impacted not only cinemas but other consumer discretionary businesses as well due to the restrictions and lockdowns imposed by various state governments. From a business perspective, due to this massive wave, the journey continues to be difficult and challenging. However, we feel that these challenging times won't last as we clearly see signs of peaking of second wave and is flattening curve. I'm very proud to say that even though the operations were severely impacted, we have taken good care of our employees with -- from the transition to work-from-home culture and have provided all the necessary setup to them for smooth functioning. Wellness and well-being along with the effective communication, collaboration has been the core of all our actions during these times. Our UFO family has stood together and continue to work harder towards a better tomorrow. Having said that, from a business sustainability perspective, the company had to adopt various cost-optimization measures right from the beginning of the pandemic, including reduction in fixed costs and salaries. I would like to take you through some interesting developments on business front. As the lockdown was implemented, and we slowly adapted to the new working environment, we decided to explode new business streams by leveraging our existing resources and infrastructure. The first one is the film distribution business, which is a natural backward integration for UFO. The endeavor is guided by a threefold objective: first, launching fee-based film distribution business with no contact risk; second, building a robust professional architecture, which can effectively handle the film distribution throughout India; third, charging the virtual print fee as a percentage of box office revenue instead of upfront fixed charge to facilitate a wider release of movies. During the short period of 3 months since the launching of the distribution business and before the cinemas shut down again due to second wave, we distributed 12 movies, which is almost 1 movie per week. Some of the movies distributed on an all-India basis were Zero, Ramprasad Ki Tehrvi, Shakeela which was starring Richa Chadda and Pankaj Tripathi, Ram Gopal Varma's 12 'O' Clock; english movie, The Marksmen; thriller called Flight, et cetera. The other movies distributed by us in select circuits, including movies across languages, including the mega Tamil hit, Master; [indiscernible], et cetera. This initiative has been accepted across value chain and has also helped theaters re-open post pandemic with ensured lineup of content because they were stumbling for content at that point in time. Agreements for more and bigger movies were underway before the cinemas were shut down due to the second wave. However, given the response from content owners and our acceptability, as an all-India corporate distributor, we are confident that we are here to stay in this business, and this vertical will start generating steady revenues going forward for the company. Now moving slightly away. I'll take a few minutes on other new initiatives because this pandemic made us realize that we were dependent on a single business that is cinema, which no one ever thought could face such a prolonged closure, bringing revenue to near 0. Therefore, we worked towards ring-fencing the company through diversification into non-cinema-related businesses and set our eyes on the social media and digital. Social media is the fastest-growing advertising medium, and globally, around 6% to 8% of the total spend on digital advertising is by way of influencer marketing. As per industry sources in India, annual spend on digital advertising is around INR 20,000 crores, of which nearly INR 400 crores is spent on the influencer marketing. As per global benchmarks, annual spend on influencer marketing in India should be anywhere between INR 1,200 crores to INR 1,600 crores, while, actually, right now, it is only INR 400 crores. And with more and more advertisers allocating budget for digital advertising, influencer marketing has substantial growth potential in years to come. So, we signed an agreement with the Collective Artist Network Private Limited to provide social media marketing services. Collective is India's leading talent management agency, having exclusive agreement with around 270 celebrities, from various walks of life such as Bollywood, Kollywood, sports, et cetera. Some of these celebrities are Deepika Padukone, Shraddha Kapoor, Kriti Sanon, Ranbir Kapoor, Tiger Shroff, Kartik Aaryan, Rana Daggubati, cricketer R Ashwin, et cetera, and all these are exclusive agreements with them. In addition, it also has over 5,000 social media influencers on its network. Collective -- this company, Collective, with which we have signed the agreement, it's called Collective. Collective monetizes the social media assets of celebrities and social media influencers on its network through its division called Big Bang Social. I hope I'm not confusing too much, but Collective, we have agreement with Collective, and this division is Big Bang Social. At the same time, we have an experienced pan-India team of sales and marketing professionals to monetize our exclusive in-cinema advertising rights. With the help of Collective, we utilize this pandemic period to reskill team, our sales and marketing team, to expand UFO's reach in this space in addition to our core business of in-cinema advertising. As you all know, social media opportunities are 24/7 business, and we'll only grow with penetration of digital in our lines and digital medium becoming critical for the success of brands. So, this is one agreement that we have signed, and we are now in the process of stabilizing it. Next, we have also ventured into B2C digital space by launching 2 initiatives during this period, which are Zinglin, which is a short video content app; and Plexigo, which is a premium content discovery OTT platform. Currently, these businesses have been soft launched and are at a method stage. However, as we know, such businesses have huge value accretion potential in the long term. So, we will continue to provide updates on these businesses in due course to all of you. Coming back to the core business. The exhibition business industry has laid its hopes on the success of vaccination drive across India, which can help in relaxation of social distancing norms and many act -- and may act as [indiscernible] to the industry. This business stems from the fact that some of the developed countries like U.S., U.K., Israel who have successfully vaccinated a large part of their population have been able to gradually restore normalcy. In the U.S., like, for example, U.S. recently announced that the individuals who have been fully vaccinated are no more required to even wear the mask or maintain the social distancing. So at the same time, good news of people returning to cinemas, and growing box office collections has been coming from across the world, wherever the lockdown have been lifted, like, for example, U.S., U.K., France, China, Middle East. Like last week, I was just reading yesterday that last week, the latest release of Peter Rabbit, The Runway -- Peter Rabbit 2, The Runaway has collected $10 million at the U.K. box office just in 3 days of the first week. These are the best weekend collection since March 2020 and almost at par with the pre-pandemic scenario. U.K.'s exhibition industry is celebrating this promising return to normalcy, wherein, in addition to recovery in footfalls, significant increase in F&B sales was also witnessed. There are also reports of promising presales for the other upcoming movies like Cruella, Demon Slayer and Conjuring. The experience in these markets and even back home in the South Indian market, wherever the restrictions were lifted and tentpole movies released proves beyond doubt that people are willing to come back to cinema, and it is just a matter of time. And all predictions of death of cinema business due to OTT and other platforms have been proven wrong. We do hope that with the success of vaccination drive India too shall bounce back, and theaters will be able to quickly resume operations and start attracting good footfalls. We expect gradual revival in theatrical business, though advertisement revenues may take some more time to recover as BGI spend will return once cinema occupancy normalizes, along with the steady flow of new releases. But that should also come back eventually. I will now quickly take you through the headline numbers for the quarter and the year ended March 31, 2021. Please note that the financial numbers are not comparable to the previous year due to the pandemic-driven lockdown. In Q4 FY '21, as operations had only resumed partial, financial performance continued to remain severely impacted. Advertisement revenues for Q4 were INR 19 million as compared to INR 302 million a year ago. Advertisers, as I said earlier, remained cautious due to the factors like limited content availability, absence of big-budget movies and restricted seating capacity. Consolidated revenue stood at INR 327 million, lower by 70% Y-o-Y. EBITDA was negative at INR 159 million, and loss of PAT level was INR 255 million. For the financial year, the consolidated revenue stood at INR 907 million. EBITDA stood at negative INR 837 million, and PAT was negative INR 1.176 billion. On cost front, for Q1, total direct operational costs were INR 186 million, lower by 55.7%, primarily due to lower advertisement share and lower sales of digital cinema equipment, lamps, [indiscernible], et cetera. Employee benefit expenses were INR 156 million, lower by INR 33 million or -- which is 17.3% as compared to previous year, and other expenses were lower by INR 65 million, which is 30.9%. Total expenses for Q4 stood at INR 487 million, lower by 40.6%. For the year ended March 31, total direct operational costs were INR 764 million, lower by INR 1.299 billion that is 63%. Employee benefit expenses at INR 518 million were lower by INR 338 million, that is 39.4% as compared to the previous year. And other expenses were lower by INR 465 million, that is 50.2%. Total expenses for the entire year stood at INR 1.744 billion which is lower by 54.7%. Lastly, as far -- I mean before I come to the last point, as far as the funds position is concerned, on a consolidated, we had a balance of INR 795 million, almost INR 80 crores at the year-end, on 31st March 2021, while net debt stood at merely INR 146 million, INR 14.5 crores. To buffer of the liquidity position and to meet any unforeseen cash flow during these testing times, the company has also secured an additional long-term working capital term loan of up to INR 220 million, INR 220 million, under the government's emergency credit line guarantee scheme. And this loan is in the process of being disbursed currently as we speak. Lastly, I would also like to take this opportunity to thank all our investors and shareholders for their continued trust in the company during these unforeseen times. We are optimistic that once the situation improves and revenue generation starts and with all the new initiatives, UFO will strongly bounce back. With that, it's been a little bit longer than usual, but I had to give the update because we are talking -- we are meeting after more than a year. So, with that, I open the floor for questions.

[Operator Instructions] We have a question from Mr. Vaibhav Badjatya from HNI Investment.

Yes. So, whenever we see all this COVID situation improving and coming back to normal, do we see that the number of active screens that we had earlier versus at the time when everything comes back to normal will be substantially different? Because I'm sure a lot of the small screens and a lot of single-screen theaters might have financial issues post that. So just wanted your thoughts on that, that -- what do you expect on that front as to number of screens that we'll be able to cater to post the things normalize.

Okay. Sure. Thanks, Vaibhav. The pre-pandemic scenario, we had around 9,500 screens in the country. We don't have any official data of closure, but we are certainly expecting that few screens will certainly close down. Right now, we don't have much information officially. But we are seeing that some screens, some bigger screens are facing problems. So, in -- I mean it's very, very difficult to put that number in the absence of any official data. But certainly, maybe I think when we come back full swing, our estimate -- our internal estimate is, although I will not put my last buck on that number, will be at least 400, 500 screens lower. That's our [ ambition ], going by our experience and what we are seeing happening in the market. But it's a purely internal estimate.

Okay. Okay. Got it. And so, if -- so just wanted to understand, on the government revenue part, whenever that comes back, is it linked somehow to the number of screens or it's kind of blanket trade that we receive from the government? And is it based on per screen?

So, the way the government rate works is it is basically -- the rate is for per-show per-screen. This is how the rate is given to us for 10 seconds advertising. So obviously, the number of screens, if there are more number of screens, the advertisement goes to more screens, more shows run. So, we make more revenue. So definitely, by the screen shutting down, the overall revenue -- there will be impact on the revenue as well, corresponding impact on the revenues as well.

Right. And secondly, on -- once -- so there will be -- there are a few movies that will be released whenever things get normalize because there will be backlog of too many movies, which you have previously been making in [indiscernible] closer to completion. So, do you think that the number of -- so the number of shows are anyway limited, right, given the [indiscernible] 24 hours in a day. The number of shows are limited. But if the number of movies are more and the same number of shows, do you think there will be some impact on the revenue because of that, either positive or negative?

Yes. There will be positive impact because this is how our business model works because we charge certain VPF, virtual print fee, in week 1. In the second week, the revenue is lower, the per-show revenue that we charge is lower. And third week onwards, primarily, we don't charge any fees. So more new movies releasing, competing to release means more virtual print fee revenue for us. And the advertisers also like to advertise more on new movies than on the old movies. And so therefore, the more movies means a positive impact on our revenue, both advertising whenever it comes back as well as this thing. And just to give you some data point, in -- by March, there was a slate of 300 movies, which was all new movies all over the country, which was already declared. So, we were sitting on a slate of 300 movies. Business was really bouncing back from April, although south, as I mentioned in my opening remarks, south saw a lot of big movies and small movies, a number of movies released. But in the northern part, non-south India, they were all waiting and watching sometimes old movie comea. Like, for example, Sooryavanshi was slated to release on 2nd of April, and then it was postponed to end of April, 26th or 27th of April. But from beginning of April, all the cinemas were shut down. And everybody was waiting that when Sooryavanshi, Radhe, 83, they're released, and all -- like Reliance has very openly declared they will not go to be OTT. They will only release it in the theaters like the Sooryavanshi. So primarily, older movies released, we saw, I think -- Ashish, correct me if I'm wrong. I think almost 900 movies, older movies released during just these 4, 5 months when the lockdown was not there.

Yes. The 4 months, December to...

So, in 4 months, like 400 -- 900 movies released. So, there's a huge pent-up demand. There's a huge lineup of content, like, as I told you, 300-plus movies but had already declared their release dates or intention to release. More than 300 movies were there. We were sitting on it. And business was bouncing back, then the second wave hit, unfortunately.

[Operator Instructions] We have our next question from Urmil Shah from IDBI Capital.

Yes. I hope the UFO team is safe. Firstly, I'd like to congratulate on a commendable job of lowering the cash burn. So, first question was on other distribution business, which we have taken an initiative in these tough times. From a 3-year -- 3- to 5-year point of view, what is -- what would be the plan as regards the movie distribution business? And what will be the capital deployment that we would be looking at in this business, given that the ROCE in this business should be really very good?

Yes. So, thank you, Urmil, and a pleasure talking to you after a long gap. And thanks for inquiring the well-being of the people. Fortunately, everybody in UFO is safe. And as for my data goes, touched with the grace of God, we have not lost a single employee across the company to COVID. All the people got affected, but we have not lost a single person. God has been very, very kind to UFO, I must say. On the distribution business, you see distribution business was the lowest-hanging fruit, and we had been thinking about getting into this business for a long time. So, what was happening was our business is dependent on the survival of cinemas. And we have a lot of multiplex screens, but we have a larger number of single screens and screens located in the smaller geographies. Whenever the movies released, the distributors started demanding very unreasonable terms. For any cinema to survive and make money, they need at least 30 to 35 weeks of new content. Rest they can manage the content overflow of good movies, bigger movies. So, these guys, their smaller screens were not getting that content because the terms, which were dictated by the distributors, were very unreasonable. They wanted a few advances. They wanted them to run the movie for a few weeks, et cetera, et cetera. So ultimately, these guys were -- even if they got the movie, they were not able to make money. Our business is dependent on giving more movie to our cinema so that we will make more VPF, number one. More newer movies going into cinemas means more footfalls, which means we make greater advertising revenue. So -- and secondly, we saw that as a trend, the corporate distributors were disappearing from the country. So, there were hardly any corporate distributors left. And distribution became a very fragmented business. So our thought process was that we are the only company in the country today, including all distribution and cross-distribution chain in the country, we are the only company in the country which has offices in every film circuit, number one. Number two, we are connected with every theater in the country. So, we said, "Why not we become their corporate distributor?" And the reason of the corporate distributors disappearing also was because they used to take very heavy [indiscernible] on the content. They used to invest in the content. So, we took the [indiscernible] decision that we will only do the fee-based business. Like you said, the ROCE will be very high. We will not get into the advances or the business of investing in the content because that can ruin the company. So, in principle, this is no investment in the content. We're only concentrated in the fee-based business. Third, there was a lot of demand for last many years that people said, "Whether the cinema movie works or not, you still charge your VPF from us," which was a fact because we were willing to go into a charging VPF as a percentage of the box office collection. But we did not have any control over the box office collections. So we said that wherever we are distributing movies, we can also -- because the box office will be under our control, so one, we can democratically give it to maximum number of theaters, which we did actually during this period. And every cinema was very, very happy because once cinemas also started getting the movies, we tried to give them maximum ad fee, revenue share basis, no MGs, nothing. That was the cinema side. And on the producer side, we started charging VPF as a percentage of revenue. It took away their problem because when they had to give a partial VPF, they tried to assess where the revenue will come, where the revenue will not come. So, they used to restrict the number of screens where the movies releases. When we moved it to a percentage revenue model, then they were completely de-risked. Then they didn't bother on how many theaters we are leasing the movies. So, we started releasing every movie very, very wide. And we started charging them on -- as a percentage of the box office collection because more wider it goes cinemas get the movie, more footfalls come, we benefit there. And we also -- producer benefits because he's never out of content on account of VPF, which was their major complaint. So, all these -- and then we were a corporate distributor. And the trust factor of the entire film fraternity in UFO is very high. They all trust in the honesty declaration -- honest declaration of the revenue. So, we got very good response. As I mentioned that we released almost 1 movie every week during those 3 months of when the cinemas were open. And we did not hire any people. There is no investment in this business because we don't invest in the content. That's a principal decision. When the movie is ready, come to us. We will distribute it. We'll take it wide. We'll take it to all circuits. Even Hindi movies we're starting to distribute even in the southern market. Southern movie, we started with like Master, for example, the Hindi dubbed version, we distributed in the Hindi market, which normally Tamil movie don't come to the Hindi market, except a Rajnikant movie or 1 or 2 movies here and there. So, we actually tried to take the reach of the move very, very wide without investing in the business and created a win-win situation for us, for theaters because they get the content and for the producers. Wide release, more collection and VPF at a percentage share. So obviously, it's all fee-based business. And lastly, we did not hire any people for that, because all our people, all of our 24 offices all over the country, regional offices, they are in touch with all producers because for [indiscernible] years because producers had to release all movies, take the release orders from them, give it to them and distribute to them. So, we were connected -- very well connected with the entire fraternity. So, it was a plug-and-play for us. It became very easy for us, and we saw great success. And as I mentioned, we started a small -- with smaller movies, but then bigger movies were actually negotiating with us when the second wave hit. So, I think we are here to stay, and this will be a meaningful business for UFO.

Sure. Just given that we would focus only on the fee-based business, so would it be safe to assume that we would be looking at largely the theatrical distribution and a digital television kind of distribution? As such, you will need to invest in the content, and the fee-based model for now does not exist there.

I did not quite understand your question because the way our model works is that when we are sitting with the producer of the movie, then as a -- so one stream is theatrical stream, as you rightly pointed out. That is our main focus. Now as a byproduct of that, what is happening is that we are able to -- when you go to the OTT platform, post the theatrical run, the OTT platforms are sick of negotiating with individual producers. They want to talk to people who can provide them substantial amount of content, multiple movies, a slate of which can provide them. So, we have also started talking to OTT platforms. When any producer which is able to sell their release, they sell directly. But otherwise, all producers don't have access to the OTT platform. So the corporate theatrical distributor, we are also now -- have planned to actually take the movies, create a slate and then approach the OTT platforms where they buy the movie, and we again made the fee on the sale to the OTT platforms and the satellite platforms. So that we have already started the discussion. Obviously, time was too short to -- the theatrical business we established, that was a first [indiscernible] of all. And we are waiting to also start this, and we are already in touch with all the OTT platforms for the post theatrical sale of movies as well as with the satellite channels. So, I think eventually, that will also become another fee-based revenue for us.

Sure. So, my last question is on the capital deployment. So, on the new initiatives, what is the kind of capital outlook planned over the next 3, 5 years? And let's say, on Nova Cinemas and other businesses which were small in the pre-COVID era, how are we looking at it in the current situation?

So, all the new initiatives, which I told you, which I mentioned about the social media platform, influencer marketing, that our existing team is doing. Our entire -- we have reskilled our advertising team, and advertising team is very excited because that's a huge potential. So the advertising -- same advertising team which was selling to the in-cinema advertising are also now going to be bundling this product as well as going to the newer clients because we already had a base of 2,000 clients -- 2,000-odd clients all over the country. So that is something -- there is no investment in that. Other initiatives like Zinglin, Plexigo, that social media, the digital platform that we have created, we have created everything internally with very, very minimum investment. All -- everything -- most of the software have been developed internally because all people were there, and we are a technology company. So, all work has been done internally with minimum investment. Coming to Nova, that business is completely halted. We are currently not making any investment in that because right now, our focus is cross the finish line because there will be many businesses. And as you can see, our cash position, despite having been under the lockdown for almost -- earlier for 9 months and then again for 2 months now, 11, 12 months, having been locked down, we still carry healthy cash, and we have been able to managed by cutting cost and arranging cash and utilizing our working capital. So, our focus is on conserving cash, cross the finish line, re-establish the business then investing in the new projects. So, Nova Cinema is completely on hold. I mean in the ongoing projects, INR 5 lakh , INR 10 lakh investment here and there is a different thing, but no major investment is going into those projects.

Sure. Sir, are we re-looking Caravan in the current situation?

You see, Caravan, we don't have any investment, any further investments. To Caravan business, already the -- we already have 100-plus vans, 110, 112, 115 vans. And those vans are currently parked. We are now exploring opportunity for -- we are even talking to governments that can reuse these vans for vaccination because country was shut, So, there was no movement. That is where we could not utilize them. But there is no plan to re-look at that business. I think that business has potential. And given the right circumstances, we are already in touch with various players and the retailers for deploying those vans post -- once the lockdowns are lifted.

[Operator Instructions] We have a question from Mr. [ Shiv Prasad ].

Of course, I'm following UFO since some time now. And of course, as told by somebody else, we, of course, congratulate you on reduction of the fixed cost and not actually cutting down on the manpower and all that. That's really a good gesture, I would say. Okay. My question is like, of course, what I understood from your initial brief was that the single screens and -- the single-screen business which might get affected by a few percent here or there. And also, I want to know is how about -- okay, single screen is one business. So, what about the multiplexes? That's number one. Then I also understand that it's not on the footfall, your revenue, what is generated. It is more on the per screen, per show. But what if we have blockbuster movies like INR 100 crores, INR 200 crores, INR 300 crores, INR 500 crores, et cetera? Do you also get benefited out of it? Or do you have any margins which come to you as a share from such movies? And then in your initial brief, you were talking about the Collective social media platform. I want to understand a bit more on that, probably. Are we too slow in understanding what you wanted to highlight over there? And something on the star names you were taking. What is the correlation?

Okay. Okay. Good question. First of all, thank you very much for appreciating that we have not fired any employee, and all the workforce we have kept. We have senior people who have taken huge cut. And we actually made sure that the lower cadre, they work with minimum cut. So, the wage cut for minimum cadre was as low as 10%, while at the highest level, meaning Mr. Gaikwad, who's the Managing Director, even today, we are not taking any salaries. We are at 100% cut because we can sustain ourselves, but our salaries can pay dozens of people. So that is the kind of -- and the senior management took almost 40%, 50%, 60% cuts voluntarily. So that was, I think, a very, very good gesture, and everybody is still there. Hardly anybody has thought of leaving the company. So that gives me a great feeling. Since you mentioned it, I said, although it was not your question, I thought it will give me a good feeling to actually mention it. Yes. So far, as the single screens, multiplexes, when I said 400, 500 screens, I was not distinguishing between single screens and multiplexes. I was actually saying in our internal estimate, 400, 500 screens were being shut down. That included even the smaller multiplexes. And the -- so there are larger chains like PVR, Inox, Cinepolis, then there are mid-level chains who have 40, 50, 60 screens. And then there are very small multiplexes, which are individual, standalone multiplexes, 3 screens, 1 or 2 locations. Some stress maybe there in the lower screens. In the middle segment, I think there will be consolidation. The bigger chains might buy them out if they can't sustain themselves, although general feeling which I'm getting in my interaction with them that nobody wants to sell out. Everybody is very confident about the future of cinema business, and we are -- and everybody has cut down costs like us, and everybody is just keeping head above water. So only some screens will shut down, as I said, maybe 5% of the overall -- 5%, 6% of the overall screens. So that also included that screen. What was your second question before you came to Collective?

Yes. In this -- about the blockbuster movies.

Blockbuster movie. Yes. Yes. So Indian blockbuster movies, our business model is a beautiful business model. So one -- the way it works is that, as you rightly pointed out, [ Shiv ], that we charge on a pay-per-show basis. And pay-per-show, we charge certain amount in the first week, a lower amount in the second week, and third week onwards, we don't charge. Now by implication, you would think that if there is a blockbuster movie which is going for 6 or 8 weeks, I'm not making any revenue after 2 weeks. But our business model is a beautiful model because if there -- we wish movies to go to third, fourth, fifth week, have the blockbuster because when a movie is a blockbuster, we make more advertising revenue because they are greater -- you say a movie will go -- become a blockbuster only when they have greater footfall. There are more people coming to the movies going week-after-week. So, what we do is that on such movies, although we don't charge a virtual print fee, but we make more money on the advertising revenue. So that is how the -- there is a natural hedge in our business model. And while the VPF goes down, so first 2 weeks, if the movie doesn't work, they pay us a fixed per-show price. The movie goes out. If the movie doesn't go out, that means it's a blockbuster movie. It's a movie doing very well. So, it is basically -- it gives us higher advertising revenue. So maybe a natural hedge there. Coming to your third point of Collective. Collective is a talent management company who have approximately 270 staffs, performers from music industry, from actors, like I took all the names, which you said, what is a correlation. So, they have exclusive -- they are exclusive talent manager to these stars. So these stars have to do anything, whether they have to sign a film, but then they have to sign -- appear in a show, whether they have to do an endorsement or whether they have to post something on their social media. So, everything has to go through Collective, and Collective makes a commission on that. Every deal has to be done through them. Plus, they have 5,000-plus influencers [indiscernible] Collective during the pandemic over last 1, 1.5 years because social media and [indiscernible] business is growing in the country, and I talked about the potential as well. So, these people are a great company in talent management. They also sell, but we only sell advertising. So, we have a team, pan-India team of experts who have been selling advertising. As you know, '19 -- I won't talk about 2019, our advertising revenue was closer to INR 240 crores. So, we are very well connected with 2,000-plus clients. So, these guys have the talent. They have the influencers. And for all the social media marketing, the most influencer marketing, we have signed an exclusive agreement with them. Where they were servicing certain clients, those clients will remain with them. Rest, everything will go through us. And then we will be doing the social media marketing, which means we will go to the advertisers, and advertiser has to sell a product. They want a set of social media influencers to talk about their products. Suppose you are launching a health product, you want the influencers who are from the nutrition industry, the nutritionists, the body builders to talk about the product on their social media. So, this is a growing business. This is a global business, influencer marketing. So, we have signed an agreement with Collective where we will be selling the social media of these celebrities as well as the 5,000-plus influencers. And the thing in our mind was that during the pandemic, the cinema business shut down, and we came to the ground completely. We said we should also ring-fence ourselves and get into this -- the digital business, the social media and the digital business. So that is where all these initiatives we took. So, this is the kind of agreement. And every time you sell something, you make money on that. And again, it's a pure fee-based business. We are not investing anything in it. We don't have any fixed cost because our existing people are going to do it. And tomorrow, if this business grows big and we have to hire more people, most welcome. I hope I answered all your questions.

[Operator Instructions] We have a question from Mr. Vaibhav Badjatya from H&I Investment.

My questions have been answered.

[Operator Instructions] We have a question from [ Sharat Singh ] from [ Singh & Company ].

Sir, just some clarification on the Collective business. So here, essentially, you will be sourcing the adverts for the Collective clients. And how will we earn through these adverts? I mean will we be selling these adverts and making a cut in the middle? Or how does it work?

No. No. The way it works is it's a very transparent business. So, every time any advertisement is sold, so as per the agreement between Collective and the social media influencers, so whatever is the revenue, they get a percentage. And that percentage is going to be shared with us, although we also have the opportunity to top up that pricing, and we can -- as per agreement, we can charge more. But it's a very competitive business. So ultimately, we'll be making a commission on every advertisements.

Okay. And these advertisements will be sold to the various social media platforms and the television channels, I suppose.

No, no, no. These are the advertisers. So you -- any product company, any service company, anything, like we sell the advertisement for in-cinema, whether -- I mean for any consumable product, consumer goods, any clothing products, so like the advertisement that you see in the cinemas today, as I said, you want to launch a pet brand, you want to launch a clothing brand, you want to launch a nutrition -- a health product, so any product. I mean whether it's a bakery, I mean all kinds of advertisers, right from -- whether it's a Unilever, whether it is Coke, Pepsi, anything. So, the advertisers actually -- who advertise on the cinemas, who advertise on TV, who advertise on social media, who advertise on digital. Those are the advertisers who will be our clients. We'll be selling it to them. And as I said that we only have a -- but we have touch points with over 2,000 clients within UFO itself who we have been selling the in-cinema advertising anyway.

We have our next question from Mr. [ Manish Manchanda ].

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[Foreign Language] And we are a company with a heart. So, we always take care of our people, and I'm very proud [Foreign Language] because we are a company with a heart. So, we take care of the people. Now so far as your first question is concerned, [Foreign Language] Cinema business is a mission-critical business. [Foreign Language] Third, in view of this, [Foreign Language] Now so far as the PVR, Inox, Cinepolis are concerned, [Foreign Language] Third question, [Foreign Language] So obviously, vaccination [Foreign Language] cinema business is mainly city-centric business, not village-centric business. [Foreign Language] Third, last question about the cash flow. Cash flow, [Foreign Language] Despite that, we have survived 14 months with all the people, and we have enough cash going forward, [Foreign Language] For a reasonable period, we have sufficient cash available [Foreign Language] Management is very proactive. [Foreign Language] We are enough cash flow going forward, and we are managing it very efficiently.

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[Foreign Language] Secondly, [Foreign Language]

Sir, my last question, [Foreign Language]

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We have our next question from Mr. [ Manan Patel ].

Yes. And many congratulations for keeping all the employees in this difficult phase. Sir, my question is slightly on a longer-term basis. So, if I see the financial performance ever since your IPO, the revenues have been sort of flatlining or operating profits are also sort of declining. So, I understand that media entire industry has been going through a disruptive phase. So, I wanted to understand your perspective on this industry over the next 5 years. And in shorter term, like how long can it take us to get back to INR 500 crore to INR 600 crore revenue range? And in the longer term, longer run of 5 years, how do you see UFO Moviez panning out?

[Foreign Language] Despite all our efforts, there had been a lot of external events which have affected the cinema business, advertising business. For example, the demonetization of [Foreign Language], which affected for the next couple of years. [Foreign Language], although the plans were very different. That is number one. Number two, [Foreign Language] Everybody wants to go out. I also want to go out. I also want to socialize. We are all social animals. So, there is absolutely no doubt in the future of the industry. Third, [Foreign Language] Look, this has been predicted for last 10 years. [Foreign Language] Existing business is solid business. We are in infrastructure business. Infrastructure belongs to us. We have invested INR 600 crores, INR 700 crores, INR 800 crores in the equipment. We have the ability to maintain the equipment. Individual theaters cannot maintain the equipment. We cannot replace the equipment. We have the financial ability to replace the equipment. They cannot. Because of the equipment, they earn advertising revenue, which we monetize for them, because we collect advertisement revenue of 3,000, 4,000 theaters, which we sell, [Foreign Language] That should give us a very steady revenue and the bottom line eventually, just on the Collective agreement, yes, social media marketing. But this should eventually establish the all new-business take time, although distribution has not established very quickly. But every business takes time. [Foreign Language] I don't think I have any authority to predict future, but all I can say is [Foreign Language] Businesses are coming back. This all depends on the pandemic situation. [Foreign Language] 5-year level, solid business plan in our view. We are very confident. And with new businesses, revenue should restore and go up. [Foreign Language], March, May, we were very happy because business was coming back very speedily. In April, May, the situation changed our way. That is more a macro question. So, we will wait and watch.

Understood. Sir, that's very helpful. So, I completely understand [Foreign Language]. So that's why I was like 5 years [Foreign Language]. And sir, my last question is -- yes. And my last question is regarding -- you said that top line [Foreign Language] INR 600 crores, INR 700 crores per investment, [Foreign Language] in this machine. So, I wanted to understand, what is the maintenance cost per annum of the entire infrastructure that you have set up, as in to maintain that entire infrastructure, including some replacements and all that? So [Foreign Language] annual, what would be the cost?

[Foreign Language] One is the operating cost. Operating cost is the cost of engineers, cost of spares, et cetera, which is part of our balance sheet, which you can look at it. Second is the replacement. Now the investment cycle is over many years back. And if you would study our balance sheet, our CapEx has been very steady in last 3 to 4 years at INR 40 crores, INR 50 crores. [Foreign Language] steady state. [Foreign Language] This year, of course, there was hardly any CapEx because cinemas were not operating. So, this is basically, these are the 2 costs elements.

I now hand over the call to Mr. [ Yogesh Kirve ] for closing comments. Over to you, sir.

Yes. So, we would like to thank the management of UFO Moviez for giving us the opportunity to host this call. And we would like to thank all the participants for taking out time for the call. We wish you all the very best. Thank you.

Thank you. Thank you, everybody.

Thank you.

Thank you.

Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using iJunxion Conference Service. You may please disconnect your lines now. Thank you and have a great day.