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

Good day, ladies and gentlemen. Welcome to the UFO Moviez India Limited Q2 and H1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikram Ramalingam. Thank you, and over to you, sir.

Thanks, Lisan. Good afternoon, ladies and gentlemen, and thank you for joining us today. Maybank Kim Eng is pleased to host the conference call for UFO Moviez to discuss the second quarter and first half of FY '22 ended in September 2021. From the management side, we have Mr. Kapil Agarwal, the Joint Managing Director of the company; and Mr. Ashish Malushte, the CFO of the company. Over to you, Kapil-ji to present your opening remarks, after which we'll have the Q&A session. Thank you.

Yes. Thank you. Thank you so much, Vikram. And greetings, everyone, and thank you all for joining our 2022 Q2 and first half earnings call. And before I start, I do hope that all of you had a great Diwali holiday and got the opportunity to, in our [release centers ], visit cinemas. That's what I'm saying because now the cinemas are open. Okay. Let me start with the highlights of this quarter. With a steady decline in the COVID cases and progress made on the vaccination front, the state government started permitting cinemas to reopen from around mid-July, one by one, but with restrictions on the seating capacity, other protocols, other restrictions, et cetera. However, Maharashtra, which is the major market for Hindi movie, which actually contributes to around 25% to 30% of the all India revenue for any Hindi movie and without which Hindi movie generally don't release, this continues to remain closed. So as a result, no big budget Hindi movie released until it started releasing from July till October, except 1 or 2 movie here and there like Bellbottom released in the meantime without Maharashtra. But since the Hindi movies did not release, the regional movies started getting fair share of their revenues. So in North India, Gujarati movies, Punjabi movies, Bengali movies in non-Southern states, I mean, all these movies, they did good business. So some revenue started for us. And it also contributed to the growth of these regional cinemas. And the other major market that will continue to remain close was Kerala, which was seeing a huge incidence of the COVID cases. So -- but in the Hindi movie circuit, the theaters started opening once the government of Maharashtra declared the theaters to be reopened from October 22. And at the same time, Kerala government also allowed the theaters to open from 25th October. Now in the last 3 weeks, the situation has changed dramatically. And as we speak, majority of the cinemas across the country have opened. There are few cinemas which are yet to open, which are in the process of opening because after remaining shut for almost 1 year, 1.5 years, I mean, they had -- there's a lot of local issues like permissions, upkeep because nobody knew actually when the cinemas will be allowed to open. But by and large, a lot of cinemas -- a majority of the cinemas are open. And slowly and gradually, the restriction on the seating capacity are also being lifted. And a number of states like Telangana, Andhra Pradesh, Karnataka, Gujarat, Delhi, UP, Tamil Nadu, Orissa, Punjab, they've all allowed 100% seating capacity. But few continue with 50% to 70% capacity. The opening of the theaters in Maharashtra was welcomed with the announcement of release of big budget movie. So first of all, Reliance Entertainment, which was sitting on the blockbuster called Sooryavanshi, which was supposed to release exactly 1 or 2 days before the country went to lockdown in March 2020. I think it's scheduled for 24th of March last year and waited for more than 1.5 years to release. So -- and they had another movie called 83. So they've picked up the date of Diwali and Christmas. The moment they picked up, Yash Raj Films was sitting with a slate of 4 movies. So they immediately declared. And then there are the race in the -- amongst the producers because they found that all the big days are going. And now till -- for the next 6 months, actually, if I may say so, practically every weekend is logged with a major movie. And so post-opening of Maharashtra, Sooryavanshi released on the 5th of November. Annaatthe, which is a Rajinikanth-starrer blockbuster and which was released by us on an all-India basis by UFO except for [ Punjab ] state, that released a day before on the 4th of November. And despite all the capacity constraints, the first region itself saw a INR 100 crore business for both the movies on a global basis. And just on an all-India basis also by Monday, Tuesday, they did -- first 5 days, they did over INR 100 crores. So that showed the pent-up demand, the eagerness of the audiences to come back to the theaters, and probably that also shows what is for us in store in future. And now as I said, the movie pipeline for next 6 months, every -- practically every weekend is logged. And very, very good movies like 83, which I mentioned, Gangubai Kathiawadi, Satyameva Jayate, Shamshera, Prithviraj, [indiscernible], all these blockbuster movies, Rocketry. So these are all releasing, and we are involved in releasing some of these movies also in some settings. So looking at this movie slate, we believe that it is going to be a really exciting time for all stakeholders of the film exhibition industry. And the theatrical business may actually revive much faster than what most people thought of or predicted. That's very becoming very clear to us. I tell upon the film distribution side. So you would recall that last time, in the last call, I mentioned that we released 11 movies before the second lockdown happened. So after getting into the business in December last year, in March, we had released 11 movies. And after the cinemas reopened, we have released another 7 movies, Annaatthe being the latest movie. And actually, today, we have released a Malayalam movie called Kurup, which is a Dulquer Salmaan movie. And that we have released, again, on an all-India basis except in 7 states in 3 languages, which is Malayalam, Tamil and Hindi, right, is what we are pleased with. So we have also started witnessing an uptick in the VPF revenue, digitization income. And I think advertisers have been cautious. So we expect that slowly and steadily the advertisers will also come back on the medium. We have already started seeing some advertising revenue from this week -- from last week, I mean, when Sooryavanshi released. Coming to the headline numbers, which you all must have seen for the quarter ended. The consolidated revenue stood at INR 265 million for Q2 as compared to INR 140 million in Q2 of FY '21. But FY '21 was a complete lockdown, and majority of the revenues were only and only from the sale of equipment that -- also in our international market like Middle East. EBITDA loss for Q2 '22 was INR 152 million compared to the EBITDA loss of INR 218 million in Q2 '21. Loss at PAT level was INR 283 million as compared to a loss of INR 307 million in Q2 of '21. During HY '22, the consolidated revenue stood at INR 546 million, as compared with INR 306 million in H1 '21. EBITDA loss reduced to INR 333 million compared to INR 450 million in H1 of '21. Loss at PAT level stood at INR 550 million compared with INR 639 million last year H1. As far as consolidated funds position is concerned, balance at the end of the quarter stood at INR 610 million compared with INR 128.4 million -- sorry, INR 1.284 billion in Q2 of '21. On the debt front, as on September 30, 2021, the net debt of the company stood at INR 425 million compared with net cash of INR 87 million in Q2 of '21. Also, you all must be aware that the Board of Directors of the company at this meeting held on November 3, 2021, has approved a fundraising of fresh -- by way of fresh equity through preferential allotment aggregating INR 968.2 million -- INR 96.82 crores, of course, subject to necessary approvals. We have already sent notice for the AGM, which is scheduled for the 26th of November. These funds will not only provide us with the requisite financial flexibility but also helping accelerating our strategic pricing. All relevant information and communications are, of course, available on our website as well as with the exchanges. Lastly, I would like to take this opportunity to thank all our stakeholders for their continued trust in the company during these unprecedented times. We are fairly optimistic that as the situation improves further, the film industry will recover at a rapid pace, and our business and financial performance will be restored soon. With that, I would like to open the floor with your questions.

[Operator Instructions] The first question is from the line of Vikram Ramalingam.

My question is regarding the financial muscle of -- so basically, the top 2 multiplex players and as well as you by virtue of being listed were able to raise capital and obviously increase your muscle power. But what about the nonlisted and especially most of the single screens or small multiplex chains? There are some reports that we keep reading that 10% or 5% have permanently shut down due to remaining shut for the last 1.5, 2 years. So any guidance on that?

Yes. So Vikram, while the multiplexes who are listed were able to raise funding, obviously, the unlisted sector got affected. And -- but at the same time, we note that all these unlisted or small chains or the sector, they are all privately owned. Their overhead levels are much, much lower. The single screens all over the country, they have their own property, unlike the multiplexes who have to take very expensive properties on rental in the malls. They have their own family-owned properties. They manage their theaters themselves, unlike the huge amount of people which are required by multiplexes. So will the multiplexes overhead level and maintenance level is very, very high. And the interest costs are very high, which is not the case with the smaller chains and the single screens all over the country. Having said that, I think your estimate is very right. According to us, overall, 5% to 6% screens will be shutting down permanently. So to that extent, the screen universe will get reduced, although we are also seeing that a lot of people who are single screen, they use this period to actually demolish the properties and convert them -- converted them into 2- or 3-screen properties. So some of these screens are also coming back much improved. But yes, as per our estimate, based on the information available with us, 5% to 6% screens shut down.

Yes. My second and last question is regarding the advertising income. In case of most big TV channels or -- so basically, the TV ads are back, the volumes in case of television are back, and some are saying that it is back to prepandemic levels. Over here, with respect to cinemas in general, so what is the trigger point do you think? Is it allowing full occupancy? Or is it after, let's say, 2 or 3 big ticket movies getting released and their box office -- basically blockbuster hits, and then you expect them to go back to normalcy, the ad volumes?

So TV was always there in the -- during the pandemic. So TV revenues kept going up and down, but they never disappeared. While in the case of cinema, the revenues completely disappeared. So we have been engaged now since the cinemas started reopening. Obviously, nobody was willing to advertise. So we started seeing some advertisement in the Southern states because South movies were releasing, Tamil, Telugu movies were releasing in the last 2, 3 months. And Hindi market, as I said, because of Maharashtra not opening up, no major movie was releasing. But with Sooryavanshi, almost entire market, all states, they have opened up. And you'll be surprised that the weekend collection of Sooryavanshi and of Annaatthe, which is Rajinikanth's movie. Like Annaatthe's collection with even limited capacity in many states was higher than the Rajinikanth's last movie, which was Darbar. So suddenly, the cinema, we are seeing this come back with revenue. Similarly, the collection of Sooryavanshi has been much higher than the last movie of Akshay Kumar, which released prepandemic. So suddenly, despite the capacity constraints, there are a lot of people coming back. Now coming back to your question of advertising. So we have engaged with them. So some advertisement has already -- advertising has already started flowing in the Hindi market as well, which is a major contributor to the advertising scene. The advertisers will be engaged with them. They were very -- they were cautiously optimistic, I would say. So while they started putting some small money, but they said we will wait for the audiences to come back. We are not sure whether there is a fear in the minds of people because there are so much of uncertainty during these 18 months, whether a lockdown will happen, third wave will come, whether people are going to come back. So I think a lot of those questions have been answered. So they're not really looking for the capacities to be restored. They are looking at the footfalls, and the footfalls are happening. So the average footfalls, I would say, are reaching at the same level despite capacity constraints in many states. With constrained capacity, they are comparable with what footfalls were happening in percentage utilization in terms of the theaters prepandemic. So we are already reaching there because now all seats are full. And people are coming back with vengeance. So I think it's a matter of a couple of weeks. People are watching. So we have started obviously increasing our engagement with the theater -- with the advertisers. And it should start seeing uptick, but it will take time. It's not going to go to the pre-pandemic level very rapidly. Secondly, the government also has so far not started spending. Now we are warming up the central government, DAVP, et cetera, also because our revenue, half revenue comes from corporate sector, half -- other half comes from the government. So I think -- and now the election coming, and government should also start increasing the spend in months to come. So I think the next couple of months, we should see significant improvement.

[Operator Instructions] The next question is from the line of Devarsh Vakil from HSL.

Sir, I have a couple of questions. So I have a couple of questions. The first in the money which we have raised, INR 96.82 crores, you just mentioned that you are going to use it for the, I think, strategic something. So can you please give some more color on how you're going to spend this money? Is it going to be used to repay some of the debt, which you have taken? And what kind of capacity are you going to do...

I think there was a very loud sound behind you. I'll address your question.

Yes. Am I audible now sir? Sorry.

No, no, you were very clearly audible, but there was somebody else talking very loudly behind you. That was the problem.

Sorry, sir. Yes, yes. Okay. Now I think it should be better.

Yes, yes. Absolutely, no problem.

So INR 96.82 crores, which we have raised in...

I know. I know. I understood. I heard your question. You were clear. So one, as you know that during the entire pandemic, 18 or 19 months, we survived with our own cash, and we did not raise any fresh funding from the equity. And full 19 months, we did not fire any employees. We passed this entire period without any funding. So right now, the whole objective of raising this funding is, one, we just wanted to be -- to have sufficient cash in the bank in case any third wave happens. That is point number one. Point number two, when I say strategic initiatives, I mean, it can be anything because right now, there may be organic, inorganic opportunities available. We have not decided upon anything. It is just money in the bank like we had substantial cash in the bank and substantial leveraging available when the pandemic hit us in March last year. Because of that efficiency of cash and the leveraging, which was available, we could survive the entire pandemic and we have come out of it. Similarly, now we want to have sufficient cash in the bank. We don't want to be constrained if there are any opportunities come because we believe that there will be opportunities available in the market, which we can take advantage of because everybody is not -- may not be having sufficient cash like we have or we had or we have now. So it is just replenishing our equity, cash equity. There is no concrete proposal on the table. As we -- right now, we are busy in reopening, bouncing back. And we will keep our eyes and ears open whenever there is -- any initiatives come up, any opportunities come up. The Board will meet and decide from time to time.

Okay, sir. So second question is regarding the businesses. So I just want to understand 2 things. One, since there was a prolonged lockdown, do we require to spend money to get back to the earlier stage for our exhibition equipment? Will we need to spend money just to get our equipment going again as per the -- they were earlier? First question. The second question regarding the distribution business. For example, this Tamil movie which we have released in the Hindi circuit, whatever -- so earlier, we have decided we are not going to go for the minimum guarantee kind of distribution business. So whatever ticket revenue comes, certain percentage will flow to us. So is there upside in the distribution business? So what kind of margin do you expect in distribution business? You said that [indiscernible] tend to earn more out of those revenues. Is it possible?

So first question first. On the maintenance equipment, one, during the pandemic, as I mentioned in my previous question, that we did not fire any employees. So all of our engineers, all our employees, all our digital people, we were maintaining. So we were also using them actually in the preventive maintenance. So from time to time because these are all electronics. So they need to be maintained. So wherever possible, wherever theaters allowed, wherever theaters reopen. And also after the first lockdown, the theaters did open, and they were open for 6 months. So we did not see any substantial cycle of spending money. And the second lockdown was only about 3, 4 months. So all -- so we kept the machines well oiled, as I may say, kept maintaining them. So there will be no major CapEx. This is all going to be maintenance CapEx. So normal maintenance CapEx. There is nothing much. I mean I would say if I were spending INR 1 crore on maintenance CapEx, now it's because INR 1.2 crores, that 10%, 20% extra, I can't rule out. But there is no major CapEx or maintenance cost, which -- over which I would lose my feet. So that will be the answer to question number one. Question number two, our policy of distribution continues to be the same. We do not give any minimum guarantee. We don't invest in the content. We do not acquire any movies. We are doing a purely fee-based distribution business. We -- and because of our network and access to the exhibitors all over the country and our relationship with them. Generally, now we -- why we are getting so many movies for distribution. Almost one movie a week we are releasing now or whatever is in, whether it's a small movie, whether it's a big movie, whether we are releasing it all India, whether we are releasing it in certain regions, certain film circuit. But it is giving more and more confidence to the producers that UFO is able to provide a far greater access to these screens, the number of screens on which these movie releases is far greater. And collections are more secure because of the UFO's relationship with all these theaters. And continuously, we have to give them movie week after week. So normally, exhibitors don't bother us with the collection. So it is giving more and more confidence to the producers. And this business is expanding. I think eventually, this will become a steady revenue generation business. And we do not intend even in future to invest money in the content by way of MGs or by way of the acquisition of content. That policy remains intact. It's purely fee-based business. That's it.

So the percentage of fee which we get, is there an upside to the success of the film or it is just a fixed percentage, which we get for everything?

These are normally fixed percentages. These are as a percentage of the box office collection. So it's not that if the movie does more than INR 100 crores, I will get 5% extra commission. It is not like this. It is actually normally fixed commission. There's no upside. It's a pure fee-based business. The idea is that without spending any money on infrastructure and people because we've already had these 24 offices all over India. We already had people who were connected with the producer because every producer has to come to us to release their movie digitally. We were connected with all the exhibitors because we service them day in and day out. We go give them the equipment. We maintain the equipment. We give them the release, order of the movie, license of the movie every week, week on week. So we are connected on both sides. So it is very seamless transition, addition of a fee-based business without an increase of any expenditure or without taking any risk.

It was not an absolute fixed fee. It is percentage to box office.

Yes, that's what I am -- no, it was in percent -- no, no, no. Ashish, I can't say that because it sometimes -- so mostly, it is a percentage, x percentage of the box office collection. Sometimes it will be a fixed fee also because if there is some movie which is very small, if we see that we will not be making -- this movie will not collect even INR 50 lakh. Our time is worth something. Okay. I will charge you minimum INR 10 lakh, INR 20 lakh, INR 50 lakh fee. So there may be some cases where we charge a fixed fee also, but normally, it's a percentage. [ Mostly ], it is a percentage of the box office.

Right, right, sir. So third question is regarding this virtual print prices. I think because of the pandemic, we gave certain discounts to our customers. Now is it coming -- are you taking back as -- prices are coming back to the normal earlier you were charging for this digitization? And when do you expect to get normal rates? That's the virtual print price question I had.

Okay. So virtual print, you see, obviously, to bring the cinemas -- I mean, they encourage the release of more and more content. We gave certain concessions, which has started. We gave concession of as high as 100% of the virtual print we give them initially. So there are some movies early. Now as the movies started coming back to the theaters, we started withdrawing those concessions. For example, when last month a major movie released, we reduced the discount from 100% to 75%. This month, we have reduced it to 50%. Like movies like Sooryavanshi and all the YRF movies and other movies which are releasing for November, we have reduced the discount to 50%. So that is number one. That is in the Hindi market. We are also assessing the situation market by market. Like for example, when we saw that Punjabi movies and Gujarati movies, as I mentioned in my opening remarks also are doing best, so I think they don't need concession. They are making INR 20 crores, INR 30 crores of revenue on a INR 3 crore budget movie. So why should we not take our share? So there, we went and, for example, we reduced our discount by 25%. So already Gujarat, Punjab states like Gujarat, Punjab, a 25% discount. Hindi market is at 50% discount. Bengali market is at 0 discount. We only increased the VPF to 100% in the Bengali market. Now since this was the first month, we also had to see the trend. And we have to also see the trend whether people come back, whether movies are making money. Now there is absolutely no doubt that movies are making money. I mean it first began 2 big movies are doing INR 100 crores plus business. Worldwide and in India itself, they were at INR 75 crores, INR 80 crores, INR 90 crores just in the first 3 days. There is no reason -- and people are coming. There's no reason of continuing these discounts. So from next month, which is -- because now we also have a slate of big movies for next 6 months, almost every week is booked. So we will be reducing the discount to probably 0 in the next month or maybe 10%, 15% because Maharashtra -- depending on whether Maharashtra state opens, whether other states open, which are at 50% or 60%, whether they go to 100% capacity by end of the month. So it's a very moving target. We take a decision based on various business factors. So if the cinemas are allowed to open 100%. If not, maybe we will reduce it to a 25% discount for the month of December. If they reopened, it will be reduced to 10% or 0% maybe. So that call we'll be taking. But as I said -- and you can see the trend clearly. Gujarat, Punjab, discount is 25%. Maharashtra from -- Hindi market from 100% discount, we have brought it down to 50%, which will further go down. Bengali went down -- from a 100% discount, we have brought it down up to 100% VPF. And I must say -- I must thank all the producer community also. They have also been very, very supportive of us when -- because they realize, they understand our need, like the need of the theater. So although every producer wanted everything free, but when we explain the situation to them and [ the mean ], they all have been very, very supportive. And they are helping us restoring our VPF.

Right, sir. So my last question is suppose things remain on track and things normalized, we have Maharashtra opening everything, say, by March of 2020, everything is back to normal, what kind of we have different segments. So one is the digitization on our distribution segment. We have those trading -- WOLF and trading and other businesses and apps. What kind of revenue potential we have for all these 3 different segments for next year, assuming everything comes back to normal from '22, March '22?

Say distribution business, I have a lot of confidence on because I know the kind of movies that we are negotiating and the kind of bigger -- the movies are getting bigger and bigger. So starting from a very, very small movie. And we have also created a niche where we have now started bringing a lot of South Indian movie, South Indian blockbuster movie of Rajinikanth, Suriya, Vijay, Dulquer Salmaan. I mean all these people are very well known personalities. But their movies were not coming into -- they are not because they did not find any distributor. So we have created carve-out and niche for ourselves. And we are bringing a lot of South Indian movies into North India. And with that, even the size of the movie is getting bigger and bigger. So I think that business should stabilize very well. So far as the WOLF Airmask business is concerned, it's a temporary business. It's a COVID-related business. WOLF Airmask, we are selling as a product to safeguard people from -- to neutralize the virus. I think as more and more vaccination happens, as more safety and security comes. So I don't think that's a sustainable business. That's a business which is a onetime business where will -- which is giving us some cash. And with the help of all the initiatives and our [ initial plans ], that is why without raising any capital, we were able to survive 19 months. So as I said, that should be a steady business, distribution. I can't give a number because this is a function of third parties. We -- but we hope it will be a steady business, and we will move into bigger and bigger movies with more and more collection. And WOLF is, I would say, a temporary business or an opportunistic business, I would say. How -- as long as it continues, give some cash to support ourselves and grow, use that cash for the growth.

The next question is from the line of Rahul Dani from Monarch Networth.

So just want to understand about our Zinglin app. How are we looking at this? And how do you see the OTT platform going forward? Also, my second question is on the Caravan business. Are we looking to reenter the Caravan business? And what is the growth opportunity in Caravan business for us?

Okay. So far as Zinglin is concerned, as I have always maintained, these are still long-term value creation business. Businesses like Zinglin, they need a lot of capital to grow, to acquire customers and create value. We obviously -- from UFO, the idea was that using our existing people, network, capabilities, people who are sitting, why don't we develop something. So Zinglin has been fully developed. It is housed in a separate subsidiary. Very limited capital has gone into development of this app. Now it's in a separate subsidiary. If on its own, whenever it is able to raise funding -- because there will be independent funding of that for them because we don't intend on burning UFO's capital into this app. And this -- so this is long-term value creation business. There is no -- I mean it's a very dynamic situation. We will continue looking for opportunities for people to come and partner and develop it for them. But as I said, it's a long-term value creation business. Nothing in it in the short term. So far as Caravan is concerned, it's not a question, Rahul, of getting back into Caravan. We were always in Caravan business. We are in Caravan business, and we will be running Caravan business. We own the 115-odd vans. And -- but since the whole country went under lockdown, there was no business for Caravan. We are reactivating it now, obviously. We are already engaged with the various sectors. And I think from next quarter, we will start seeing some revenues coming from Caravan.

The next question is from the line of Urmil Shah from Haitong Securities.

Firstly, we want to congratulate you for sailing through very well in the tough times. And the augmentation of capital is also a very good sign. Sir, my question was more on the strategic road map. If we look at, say, 3 to 5 years down the line, how do you see the business reshaping with a good opportunity in the distribution side and also the new initiatives?

So firstly, thank you very much. I mean, yes, it was a tough period, but I think you will agree with me that this speaks volumes about the strength of -- the financial strength of the company and the way the company has been managed that without raising any funding, we were able to sail through the entire period without actually firing any of the 1,200, 1,300 employees. So we were able to manage that. The strategic road map, as you know, so I think we -- one of the major business that I feel should build up over the next 2, 3 years is, as you rightly pointed out, the distribution business, fee-based distribution business. And the reason also is that there were a lot of corporate distributors in the country and particularly in the market. And all the corporate distributors, because they've made very heavy investment into the content, into the acquisition of content, creation of content, they all lost money because nobody can guarantee whether the content will -- what content will work and what content will not work. You make money from 20 movies and you lose money -- entire money in one movie. So eventually, the -- all these corporate distributors, they shut down. There were a lot of corporate distributors. Right now, distribution has become a very unorganized play in the country. And there is no all-India corporate distributor which is there. Even the known players in the industry, known individual players or smaller or even the big players, nobody has an all-India network like us. And that is where we saw the opportunity. We said let's get into it. And we learned by the mistake of our -- the other corporate distributor, decided not to invest in the content, remain very, very focused on the fee-based business. So I think -- and people trust in the integrity of UFO because the settlement, UFO money, there are a lot of corporate distributor. People were not getting the account for a few months, 6 months, 1 year. Final accounts were not getting. While in our case, we settle every penny very, very quickly. So I think this will bring more and more goodwill. Our existing goodwill -- we get more goodwill and more work. So this is one. And second, long-term initiatives, like we have started an app called Zinglin, which I just addressed. Then there is another app called -- OTT platform called Plexigo. Then there is also the interest continues to be very live in the exhibition business, which was NOVA Cinemaz. So because India has a lot of cinemas -- there are 70,000 screens in China. India, we were just talking 9,000 screens. I mean the 5% screens were shut down. We were at 8,500 screens. 8,500 screens is, what, 6 screens per million of population. That is one. And for a movie-loving country. So we have identified the virgin region where there is no screen in 50-kilometer radius. So models are being worked out, how do we accelerate, create -- semi-urban and rural India does not have any access to the cinema. All the cinemas are in the urban area but -- wherever they are. So a lot of work has been going on, on the exhibition business, which also creates a lot of value for all stakeholders. Imagine a movie which used to -- a blockbuster which used to go to 500 screens in the pre-2005 era. Because of our digitalization, they started going to 5,000 screens from 500. And now imagine if it can go to 20,000 screens, each movie. That is when the collection from INR 20 crores, it moved to INR 100 crores club. And INR 100 crores should move to INR 500 crores or INR 1,000 crores club. So I think providing that infrastructure is extremely important. We are also very, very conscious. So we have been experimenting with that model over the years. We talk about it every time with very limited CapEx. So now again, what we have done is so as to not divert the funding of UFO, we have again housed that business also is a wholly owned subsidiary. So Zinglin, Plexigo and the NOVA Cinemaz. And a very interesting model has been worked out, which is the cinema, town utility center with the banking, medical, et cetera, et cetera, which is the need of the hour in the country and also fits in the policy of the -- vision of the government and the Prime Minister. So all those things are being worked out. Very consciously, we have housed them all in separate subsidiaries so that they are owned by UFO, separate subsidiaries. Very limited CapEx is being done in them just to keep experimenting, and once the experiment is successful, raise individual capital. And obviously, that valuation will come into UFO fully. But the idea is not to divert UFO's cash. UFO will continue concentrating on this core business and growing advertisement, core business, digitization, how to create more models, how to expand that business. We'll continue to expand. Caravan business will continue experimenting on that, concentrating on these in UFO. And other initiatives will be housed in subsidiaries with independent funding. I think I hope I have given a very comprehensive answer to your question.

Yes, sir. That was very helpful. Sir, just a follow-up. Now that your core business also will see a ramp-up and you will have other businesses also where you would want to scale up, so if from the next 24 months point of view or next 2 years point of view, you see -- and if we had to -- I would request you to divide your bandwidth amongst them, so what would the share change over the next 2 years?

These are completely different management teams even today. So what UFO people do, they do. They did during the lockdown when the UFO business was shut. We had a huge infrastructure of 1,200-plus people. We use those people in maintenance. We use the people for creating the new -- these products because nobody had any business and they were being paid. So we just use them for that transition. Now everybody who is required in UFO is back into UFO. And because that is our core business, that is our core strength. And all these projects have been handed over to absolutely individual teams. For example, the NOVA Cinemaz. NOVA Cinemaz has now an independent CEO. The gentleman used to be the CEO of EsselWorld. He is now the CEO of this business. He has created his totally independent team, which is for the exhibition business. There is no concentration on -- or no attention from UFO into that business. Similarly, Zinglin, Plexigo, they all have their own fully staffed. Whichever people were available in UFO, additional people, have been assigned there. They are appointing their own people, raising their own capital. So UFO business is our core business. That is our strength. That is our backbone. Our highest concentration is on these businesses. And this will not be allowed to be affected under any circumstances. So all those businesses are creating their own strength.

Sure, sure, sir. And your thoughts we'd request for. We've seen that the sharing done by the multiplexes, that's changing and is expected to remain so until the end of this financial year with a higher share to the distributors and producers. What does that mean to UFO? On the face of it, you should be actually a beneficiary. Would that be a right understanding?

No. So the content -- the sharing of the content revenue is directly between the exhibitors and the producers. Now since everybody saw very bad times, everybody was struggling to come back. So there was some kind of a transition which had to happen in the industry and some kind of a temporary understanding which had to be developed. So the understanding was in 3 parts. One was the revenue sharing. Now revenue sharing, producers are demanding 60% revenue, much, much higher revenue against 50% or 52.5% revenue, which for the first week, for example, that was applicable. So that was one issue. The second issue was the OTT window because OTT window, the practice was 8 weeks. And producers started selling the movie to make -- to recover their losses, interest costs, et cetera, within the pandemic to 2 weeks, 4 weeks. So some settlement -- some good sense has to prevail, and then the cinema industry started opening. So whatever excitement kept happening, movie going to the OTT platform, 2-week window, 4-week window, day and date, all that happened during the pandemic. Now when people saw, then the producer and the exhibitors and everybody saw that the cinema is coming back and movies are meant for the theaters and the kind of response they saw, they had to sit down and they had to settle it. So they reached a settlement finally. They don't ask in same terms from either side. Yes, let us end this transition. So one, they agreed that till 31st March 2022, they will give generally a 2.5% extra revenue. Instead of 52.5%, first week will be 55%. But -- and second week, instead of 45%, it will be 47.5%. Like this. So they agreed mutually and formally on those terms. That's what we understand because we are not part of that chain, but what we've done from the industry. Second, they agreed that till 31st March and from 1st April '22, the original terms will apply when the industry is back into black. Similarly, for the OTT window, they agreed for 4-week window until 31st March '22. And then from 1st April, the 8-week window will apply. So it's a transition kind of happening. And the third point was the VPF revenue. So everybody was crying, why should we give the VPF at all? And then when we all sat down, all the stakeholders sat down, and we explained to them, and they are very happy. So there is no question, like common parlance that -- and we have explained to them very clearly that there is no sunset of VPF. Like you analysts, when you go talk to a producer, they say we will not give you UFO. I mean they have been saying it for the last 8 years. So I think everybody should understand that VPF sunset has not happened, and it will not happen because we are not part of the film fraternity. We are not sharing the prosperity, downside or upside of the content. We are third-party independent service providers. We are like [indiscernible], but without no other route available. You want to go to the other side, we might all and do it. So we have explained to them. Everybody understands that there will be no -- this thing. So no sunset. So that message has gone very loud and clear during this period instead of sitting every day and fighting about it because they have been doing for the last many years. So now they understand that there will be no sunset, number one. And secondly, we also have them in transition, starting with 100% discount, as I earlier explained. And region by region, we are correcting those discounts. And everybody understands that even in Tamil Nadu and Andhra in South 3 years back, 4 years back, when they had said we will not pay the VPF, we'll pay the 0 VPF. The whole Tamil Nadu industry, the strike continued for 49 days. At Tamil Nadu, they have to pay us the VPF. So I think that is very well settled now overall on the VPF. I mean I'm going an extra mile to explain to your point. I mean you asked me some other point. But as I said, there are 3 points, 3 issues. One was the revenue share between the producer and the exhibitors. Second was the OTT vendor. All those issues have been settled. Third are the VPF. That issue also has been settled. We have had enough discussion who is going to release free of cost even in the month of November. Even Sooryavanshi did not release free of cost. We gave a 50% discount. So next month, discounts will further keep going down to 0 in the next 1 or 2 months. Maybe next one may be another month, depending on how the reopening happens. So all these issues during the pandemic have been settled so that we come -- the business -- the industry can come back to a steady -- okay, steady state affair.

Sure, sure. So the percentage share for the distribution part, that has not increased. It's more or less similar to what it was earlier, to sum up?

I didn't understand that. Percentage share for distribution?

So for your distribution business, the percentage of the box office collection, which was earlier, that's what remains as of now as well with the producers getting a higher sharing from multiplexes, that has not resulted in a higher increase for you, right, to sum up?

I still did not understand. But is it too -- so one is, what is the distributor share? Are you talking about the distribution commission or what?

Yes, sir. Yes, sir. I meant the commission percentage.

Commission percentage, these are all very standard the businesses for -- which are running for donkey years, Urmil. And these percentages are fairly standard, which depend -- which vary depending on the scope of work because one we are also able to do in the distribution business, where we also bring advantage, apart from networking with the exhibitor, apart from ensuring that the collections do happens because exhibitors have to pay to us week on week, we also throw in our advertising inventory so that we can promote these movies, which is now becoming a norm slowly because we can promote the movie. So we can charge a percentage or 2 extra. So that way, our advertising inventory also gets pushed with the distribution business, which people have started seeing the advantage. So depending on the scope, what we are asking us to do. We have -- also now what we have done, Urmil, very interestingly, since we don't want to take risk on content, the risk is of 2 types in the distribution business. One is the risk of -- the content risk that I give MG for content or acquire content or invest in the content or make -- start making movies, become the producer of the movie. That is the risk of the content. So that is one risk in distribution business. The second risk is the P&A risk, which is the advertising cost, which is substantial, which could be INR 5 crores, INR 7 crores, INR 8 crores per Hindi, per big movie. Now obviously, that is also a risk because if the collection doesn't come. And often, there is a requirement in the market where people ask us that as a distributor because that also has been affected in the past, that the corporate distributor used to spend big money on the promotion of the movie, which is the P&A cost. So there was always the need that if you want to grow Hindi in the distribution business, you also have to start money on the P&A, the print and advertising. And obviously, that is not our capacity. We don't want to take risk. So now what we have done interestingly, we have tied up with a couple of companies who are becoming our P&A partner. So while we distribute movies, either we co-distribute along with them. And these are different sizes. So if I have to put -- I don't have the authority to name the people right now. But if I have to put up P&A of, say, INR 50 lakh, then I go to the smaller partner. They put INR 50 lakh. They take a percentage of my distribution commission, and we recover this money on a LIFO basis out of the collection, first pay their money before any money goes to anybody else and pay x percentage of my commission to them. And where the P&A could be INR 5 crores, INR 8 crores, INR 10 crores, then we have tied up with the bigger partners who are willing to invest because of our strength along with us. And sometimes they are becoming co-distributors, sometimes they are just putting money on the P&A because they know that when the distribution happens, money will be recovered. Their money is not going anywhere and UFO will be able to settle their dues. So in just a very short time, we have not only gone into distribution business. Now we have the tie-ups. With the help of the tie-ups, now we have started pitching bigger movies. And that is where I was saying that eventually, I believe that from next year, I think the contribution of distribution business will start increasing. And actually, if I become an all-India distributor and start releasing, say, 2 movies a week, we are already doing one movie a week, whether small, where big, if we start with 2 movies, we have 100 movies in a year. that's a huge business, can be potentially a huge business, can give you substantial bottom line and without any additional expense and risk. So that is what we are doing.

Sure, sure. Sir, last question, if may...

Sorry to interrupt, Mr. Shah. Sir, may we request that you return to the question queue? There are participants waiting for their turn. The next question is from the line of Ankit from Bamboo Capital.

Sir, I'm new to the company. I have 2, 3 basic questions. So on the VPF side, how much in terms of the VPF used to contribute to our revenues pre-COVID? And how do you see this VPF coming back to, let's say, 100% over the next near to medium term?

So as I've already explained, I think, in the second part that when do we expect it to come back to 100%, I think it's a matter of 1 or 2 months. If a third wave doesn't happen, another lockdown doesn't happen, the movies which are lined up and all the -- so I think that was a question I already answered that maybe next month, maybe month after next, depending on when all capacities get restored. In the next 1 or 2 months, VPF should ideally come back to a normalized VPF, which is 100% VPF, unless there is some external factor in the country or elsewhere which happens, which stops the release of the movie, prohibits release of the movie or whatever. So that question is very, very clear. There is absolutely no doubt. And actually, the VPF revenue may be higher than the normalized revenue because we charge VPF generally to pay per show we charge in UFO, that we charge only for first 2 weeks of the movie. And when the movie goes to third and fourth week, we run it free. We don't charge any VPF for third or fourth week on a per show basis. Now there is such a huge slate of movies for the next 6 months that every week there is a new movie coming, which is really pushing out the -- which we'll not allow except for some big blockbuster. It will not allow the previous week movie to overflow the third week. For example, after Sooryavanshi, now on 19, there is Bunty and Babli coming. On 26, there is Satyameva Jayate 2 coming, which is John Abraham. And there is Antim is Salman Khan, which is coming. Now these movies, Antim and Satyameva Jayate 2, will not allow Bunty and Babli to overflow to the second or third week. Too much. So when -- the Hindi movies released, the more money we make because we charge only once for 2 weeks in the Hindi market, for example. So I won't be surprised that the VPF revenue gets restored and we may get, on a monthly basis, higher VPF revenue once it is restored than normally we would have done in previous years. Because 3 movies together -- right now, so many movies, they are all following each other within 2 weeks. So -- and that is all this fear that people were -- had returned the obituary of the film cinema business during the lockdown. I participated in so many debates that -- whether the cinema will survive, OTTs will kill cinema. So the obituary of the cinema, which has been done many times from the advent of TV and videotapes and CDs and OTT. And I mean the business is coming back faster than expected. And Ashish, do you want to answer the question of the percentage of revenue? So I mean I think telling about the 2019 or '20.

Correct. So if I tell you the '19/'20 numbers, and these numbers are available on the website in the form of our earnings presentation. That is the relative revenue mix. But for your quick reference, I will tell you that in FY '20, we had 31% of our consolidated revenue coming from distribution revenue distributors. And that percentage was 29% in FY '19. The breakup in detail, you will find, for example, if you go to the earnings presentation of FY '20 on Slide 6, this presentation, these details are there. And similarly, you can keep referring to every quarterly or previous period presentation. This is a specific slide which gives not just a broad 31% but components of that also in detail.

Sure. And this -- what will be the impact of -- we are even seeing that the movie ticket trades for multiplexes and even in other cinemas has been -- other cinemas has been increased quite a bit. So does it impact our revenue shares as well? Or does VPF depend on increased movie ticket rates or it doesn't?

No. There are 3 different models of VPF, which are prevalent in the market. And none of them is dependent on the collection right now, on the collections generally, unless we'll launch another model on the collections or the ticket prices. One model is you pay a onetime VPF and that's it, run on the movie for the life of that particular location. So one is that, that is a risk of the producer. If he pays which is much higher, a fixed amount. If he pays that and the movie doesn't work, he ends up paying us higher. For us, it averages out. The second model is that you pay on a weekly basis, that you pay for the first week, which is mostly in South. You pay for the first week. You pay for the second week. You pay for the third week, which keeps sliding. So pay onetime or pay weekly. Obviously, cumulative amount which he pays, if he pays weekly, is far higher than the fixed amount. And the third model is on a pay-per-show basis. Every time a show of a movie run, you pay a fixed amount. For example, if you -- in Hindi market, it's, say, INR 425 for the first week. So for every show, you pay INR 425. For the second week, it is INR 360. Every show you run, you pay INR 360. Third week onwards, there is nothing. So there are 3 models which are prevalent normally. And none of them is dependent on the box office collection or the ticket price. But higher ticket prices in our distribution business, it will probably help us because that is a percentage of the box office collection, the distribution commission that we get, not on VPF.

Sure. So if we look at FY '19 numbers and we look at the breakup, so you had INR 230 crores, INR 240 crores revenue from advertisement. You had the VPF contributing, let's say, [ INR 160 crores ], INR 170 crores. Then you had rental income and sale of products contributing substantially to UFO. So let's say when everything normalizes hopefully and there is third wave, does any of our segments get impacted if there is -- because of the pandemic in the long term? Or all these segments will come back, will normalize or even see some improvement over the next year or 2?

So I'll tell you 2 revenue streams are fairly steady, which is the VPF and the rental. So VPF and rental are pretty much fixed. You will not see much change year-on-year. Of course, if you compare the VPF of 2019 with 2020 or '18 with '19, you will see a change because there was a sunset clause in the Hollywood Studios agreement. So between '16 and '20, that's -- slowly that waterfall impact happened of our sunset agreements, which I'm sure you must be aware of. And if not, then our IR team will be separately willing -- happy to -- engage with you and explain that issue for you. But now once the VPF is there, overall VPF is pretty much it is fixed, that it gives you -- say, for example, INR 10 crore or INR 11 crore revenue every month, it will continue giving that revenue. When the combination of the films change, for example, that revenue will be slightly higher once we go back to 100% and there is a lineup of blockbusters every week or big movies every week, which are pushing down the -- pushing out the older movie where third week onwards, we don't charge VPF, so we may end up making slightly higher. That is number one. Number two, so far as the rental business is concerned, rentals are fixed, pretty much fixed for years. So many theaters, so many equipment, you will see slight variation depending on what kind of projector you have, if somebody is changing the projectors. But I think on the macro level, that will be a kind of a fixed account. The VPF and rental behave like this. Advertising, obviously, there is variable -- variation. So if you -- there was INR 238 crores, I think, if I correctly remember in '19, which dropped to under INR 160 crores in 2020 because government didn't spend money. Caravan business didn't happen. So that value. And the fourth stream is the equipment sale. Equipment sale is not our business model in India. So we don't sell equipment. We sell only consumables, which is lamps, which is also part of this. And those lamp sales is pretty much steady business that so many projectors, one lamp goes for so many hours, they keep buying the lamp, which is pretty steady. Again, like VPF and rental, it's fixed business, and we have certain margin on those rentals. But equipment sale is mostly happening in the Middle East. And that is when any new markets open. For example, in the last 2 years, Saudi Arabia market opened during the pandemic. So we did a lot of equipment sale in Saudi Arabia. Once that market is saturated, there will be no equipment here. So this will keep going down, and it again happens on a certain fixed margin. So that is how it is.

Okay. Okay. And sir, last question on the cost side...

Sorry to interrupt. Mr. Ankit, may we request that you return to the question queue? There are participants waiting for their turn. We'll move on to the next question. That is from the line of Urmil Shah from Haitong Securities.

I had just one question pending and subparts to it. So Ashish, what would be the promoter shareholding after the fund raise?

So the proposed fund raise, the promoter stake would be 23%.

Sure, sure. And again, this is linked to the fund raise and also slightly strategic in nature. And we have a lot of businesses which we have initiated. And what would be the thought of maybe focusing on few and scaling them up rather than having multiple moving parts? So just your thoughts on that.

So that is exactly what is happening. So as I said, the entire management team is divided. Like for example, me personally, Urmil, I do not work on any of these new projects. I do not work on any of the new initiatives, which is NOVA Cinemaz or Zinglin or Plexigo. I do not spend even 5%, 2% of my time on that. These are all driven by Mr. Sanjay Gaikwad. Mr. Sanjay Gaikwad has a limited role in the day-to-day operations of the company. So whatever expansion is happening within the UFO Moviez, expansion of the existing business that I run, for example. So in the distribution business we started, it is an extension of the existing business, I'm managing it. The whole management team is here. Now there are 3 basic initiatives, which is Plexigo, Zinglin and [ EUC ]. These are very different kinds. Highest concentration is on the lower cinema business because that -- we have spent years in perfecting that model. We believe we have reached some point now and that business may actually update. But it is not that you are spending all your time or you are diverting the attention from running the UFO business. So there are 3 initiatives which are in place in 3 different subsidiaries. They will find their own path eventually without any major investment from UFO. UFO is only making a start-up investment, which is INR 2 crores here and there. That's it. I mean I think in all these projects together, we have not invested even INR 10 crores in the last 2 years. So that's what I'm saying. While to maintain the company, we have spent INR 300 crores last during the pandemic period. So these are only being what you call -- all these projects have been initiated. So don't worry, there is no attention of the current management going into these projects. Every company has to have the existing business. You have to invest some time and some money in future. These are those futures, and they are being handled very, very carefully that we -- there is no diversion of attention from the existing business to invest in future, and it's very well balanced within the company.

Sure, sir. But just as a humble suggestion that at whatever time you find it appropriate, from a minority shareholder point of view, it would be good that we have less number of businesses and both management and capital bandwidth goes into scaling them out. Just a suggestion.

Well, I take your point, Urmil, but I've already explained to you that both these things are taken care of. If I'm telling you that I have spent INR 300 crores in last 19 months since the pandemic and out of which all these new businesses less than INR 10 crores has gone. So I think by scale itself, I explained to you that there is no divergence of money or capital efficiency, which is being compromised for the core business. Similarly, I explained to you about time also, but I take your point, too. Thank you.

The next question is from the line is from the line of Manan Patel from Airavat Capital.

Sir, first question is on the distribution. So I understand that VPF is largely paid by producers and sometimes by distributors as well. So when we distribute -- when we go into distribution, will it affect VPF in any way? Like as in combined sales or something, you might have to reduce VPF or something? I just wanted to understand.

No, it does not. VPF comes from the revenue collection. VPF is a fixed charge, as I explained under the 3 different models, which I explained to you a short while ago. So VPF gets charged that way. The only reason you can lose VPF as a distributor is that suppose the VPF is INR 50 lakh for a movie and the move flops so badly that it does not do INR 50 lakh collection. Then you may lose [Foreign Language]. But normally, I mean, it will be our management failure if we pick up movies which does not even become VPF. So typically, a VPF should be 2%, 3% -- say 10% of the collection hypothetically. If it is 10% of the collection, and that means you are expecting a 100 collection, out of which 10 is VPF, you will lose VPF only if you actually collect only 5. That means you have picked up such a wrong movie or you have distributed so badly that you are -- against your anticipation of 100, you are collecting 5 revenue. That is somewhere your own management failure. So that doesn't happen. So VPF is always recovered. So we always have a right of -- so out of the collection, first, the P&A is recovered if a third party is investing the P&A. VPF is recovered. Our [ retail ] revenue is recovered. And then only the overflow goes back to the producer. This is how it's done.

Understood, sir. That's very helpful. And the second question is, again, on the dilution front. Sir, I understand this is a very big dilution, almost 30% dilution. And the new investor stake will be higher than the promoter. So unfortunately, due to a lot of reasons, we have not been able to create shareholder well. And on top of that, we are diluting at a point which is sort of low point of the industry and the stock price as well. So couldn't it have come at a better time? Because we are seeing a lot of upside in terms of business over the next few months. And we could have done it at a much better time when we have specific strategic initiatives in place so that it would have affected all the shareholders, including promoters, a lot less. So what are your thoughts on this?

I completely agree with you. What you are saying is absolutely in place. The issue in front of us was when we started the process of fundraising 4 months back, there was a huge sort of third wave hanging on our head and an extended, prolonged lockdown. We are very comfortable last year when the lockdown happened. We said, oh, we have enough cash in our bank account. We have absolutely no problem. Everybody expected that the pandemic will last 3, 4 months. July, August 2020, the cinemas will be open. They did not open. They finally opened in October. October to January, there was no major release. Then in March, major releases started. April, again, the lockdown happened. That was a [ route shot ] to us. We have not provided for it. Nobody has thought about it. Nobody in the world -- Manan, it's after 100 years such a thing has happened. So it will be in the living memory of the existing generation. There was no history or there was no experience available. So when the second lockdown happened, still we expected that second lockdown will happen 1, 2 months. When it kept prolonging and it was worse than the first lockdown and the pandemic was the -- the world is in lockdown. Then we decided that what if this lockdown continues will March next year, can we survive? The answer was no because we did not have so much of cash. We survived 19 months. That is when we had to -- we said instead of losing the company, it is better that you raise some capital, even at the cost of higher dilution. When those commitments were made, the lockdown was lifted. So we said, okay, let us use this cash now, at least 4 strategic initiatives for further growth of the company, which we will decide in future. And the promoter point of view was that instead of holding a bigger chunk in a different company, have a smaller chunk in a much larger company and do the value creation for everybody. So this is the whole idea that hopefully, with new strategic initiatives with our -- whatever we are doing, we do a shareholder value creation somewhere despite -- from 2015 when we did the IPO till 2020 before the lockdown happened, our combined cash earning pretax was INR 800 crores, INR 600 crores post-tax earnings. We have given INR 255 crores, 755% dividend in those 5 years. Despite such strong fundamentals, the stock price has not supported us. I wonder why, why INR 625 IPO has come down to INR 90, INR 80, or it came down to INR 150 pre-lockdown. So we have been putting our effort. We have been earing cash. Just because some rumors are there in the market, the community based down the stock that producers says that I will not earn the VPF. So this company will shut down. How can the company shut down? So that was the whole thought process. We started anticipating a third wave and for the -- we needed capital for the growth. We did not want to be in a situation that suddenly third wave happens and we have no cash and the company folds up. And even if the pandemic doesn't happen or the third lockdown doesn't happen, we have no money for expansion because it is how the shareholder value will be created. So this is a sacrifice that the promotor has done in the interest of the larger shareholders.

That's very helpful. And is -- I read in the announced notice for AGM, there's not going to be any management change. But are they going to infuse any Board members in the company?

They will have a Board position of the company.

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Vikram Ramalingam for his closing comments.

Thank you, Lisan. And thank you, ladies and gentlemen, for attending the call. On behalf of Maybank Kim Eng, we thank the management of UFO Moviez for this call. Good day to everyone.

Thank you. Ladies and gentlemen, on behalf of UFO Moviez Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.