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

Ladies and gentlemen, good day, and welcome to the UFO Moviez India Limited Q2 and H1 FY '24 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note, this conference is being recorded. I would now like to hand the conference over to Tushar from Ventura Securities Limited. Thank you, and over to you, Tushar.

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to UFO Moviez India Limited Q2 and H1 FY '24 Earnings Conference Call. The company is represented by Mr. Rajesh Mishra, Executive Director and Group CEO, along with Mr. Ashish Malushte, Chief Financial Officer of the company. I would now like to hand over the call to Mr. Mishra for opening remarks, post which we can start question-and-answer session. Thank you, and over to you, sir.

Thank you, Tushar. Greetings, everyone, and thank you all for joining our Q2 and H1 FY '24 earnings call. Q2 FY '24 started on a muted note with no major Hindi releases in the first half of the July month. However, later part of the July saw a release of Rocky Aur Rani Kii Prem Kahaani followed by blockbusters like Jawan, Gadar 2, Jailer, as well as hits like Oh My God 2 and Dream Girl 2 in subsequent months. During the quarter films across languages did well especially the performance of the Hindi movies stood out. Such widespread success of films in multiple languages underscores the enduring passion for the big screen. Cinema enthusiast flock to the traders leading to an increase in advertisers' confidence in cinema advertising, resulting in a substantial upswing in advertising revenue for the quarter. This is evident from 26% quarter-on-quarter growth in advertisement revenue and 120% growth on a year-on-year basis. On the government advertising front, there is positive engagement from state governments and public sector undertakings during the quarter. Overall government advertising revenue grew by 47% from Q1 FY '24 and 167% from Q2 FY '23 despite a lack of spending from central government. I now turn to the key figures for the quarter and half year ended September 30, 2023. Our consolidated revenue for the quarter stood at INR 871 million compared to INR 853 million in Q1 FY '24 and INR 1,078 million in Q2 FY '23. EBITDA for Q2 FY '24 reached INR 177 million, marking a significant improvement compared to an EBITDA of INR 25 million in Q2 FY '23 and INR 163 million in Q1 FY '24. EBITDA margin for Q2 FY '24 improved from 2.34% in Q2 FY '23 to 20.29% in Q2 FY '24. Profitability after tax continued its growth momentum this quarter, reaching INR 33 million compared with a loss of INR 92 million in Q2 FY '23 and a profit of INR 25 million in Q1 FY '24. Regarding the half yearly performance, the consolidated revenue amounted to INR 1,725 million as compared to INR 1,984 million in H1 FY '23. EBITDA for the H1 FY '24 was at INR 340 million, a substantial increase compared to INR 123 million in H1 FY '23. That is a 177% increase year-on-year. EBITDA margin in H1 FY '24 improved from 6.2% in H1 FY '23 to 19.71% in H1 FY '24. On the profitability after tax front, we are pleased to report that we have achieved profit after tax for the first time on half yearly basis since Q4 FY '20 with PAT reaching INR 58 million in H1 FY '24 compared with the loss of INR 117 million in H1 FY '23. The consolidated cash at the end of quarter was INR 929 million, and we had net cash of INR 244 million after considering all outstanding debt. Further during this quarter, we have added 69 advertisement streams on net basis across the prime and popular categories compared to Q1 FY '24. With this positive growth and an exciting lineup of upcoming releases, including Tiger 3 starring Salman Khan; Animal starring Ranbir Kapoor; Sam Bahadur starring Vicky Kaushal; Merry Christmas starring Katrina Kaif and Vijay Sethupathi; Dunki starring Shah Rukh Khan; Yodha starring Sidharth Malhotra; Captain Miller starring Dhanush; Salaar starring Prabhas; and Fighter starring Deepika Padukone, Hrithik Roshan, we are confident about sustaining the upward trajectory in the coming quarters, looking at the exciting lineup that we have in front of us. Thank you for joining us today. And now I would like to open the floors to take your questions. My colleague, Mr. Ashish Malushte, CFO and I are looking forward to a productive and insightful discussion ahead. Thank you.

[Operator Instructions] First question comes from Rahil Shah from Crown Capital.

Am I audible?

Yes, very much.

So my first question is with regards to one of the statements I read in the annual report of FY '23. So it was made by Mr. Gaikwad and it said that company will soon reach pre-COVID level financials, right? And the upper trajectory will continue. Now if we look at the financials, so pre-COVID levels, the margins -- operating margins used to range between 27% to 30%, and the revenue was around INR 600 crores for the company. So now by when can we expect such financials again, sir? So what is the company's target? What are the expectations for the company with regards to this? And in the opening remarks, you also mentioned so this trajectory -- this current trajectory quarter-on-quarter should continue. Was that with regards to both the margins and the revenue? That was my first question.

So this is only one question you have. Can we start addressing it?

I have one more. Should I just ask it now?

Okay. So let me try and address this. So I'm not sure whether you're referring to our annual report online meet that we had or about the actual annual report. Nevertheless, the statement made is right. What we wanted to give a guidance to the investor community is that the COVID is behind us now because, as you must have noticed, only our industry was the one which was taking a lot of time to recover after the COVID shock. And finally towards -- when we actually had the Annual General Meeting, around that time, there were clear visible signals of Q1 that the things are falling in place for us. So that is where the statement came that soon we should be going back to our pre-COVID profitability. Now actually, if you see our pre-COVID profitability was driven by -- and in a sense, our profitability of the business is driven by the advertisement performance of the company. And we're very happy to state that in spite of all the challenges, including one major challenge where because of COVID almost 15% to 17% our network theaters closed down. In spite of that, the one segment of our advertisement, which is corporate advertisement did exceptionally well. And we are almost at pre-COVID levels in terms of consumption of inventory in that segment. In terms of profitability, also if you see FY '20 at a PAT level, we closed around INR 39 crores. And this quarter, PAT level performance, if you see, including the exceptional item, is close to -- if you add exceptional items, then the amount is INR 4.5 crores. So what we are trying to explain is that the profitability is also tracking closely the advertisement performance. And therefore, there are very, very clear visibility in terms of that we are slowly -- not just slowly but in a very fast pace going back to pre-COVID levels. The only one major tasks to be achieved, and over there, many things are beyond our control is the nature of the advertisement spend were the central government. So central government, as a segment used to be a significant contributor, almost 50% of our revenue comes from government spend. Of that, 80% comes from Central Government. So almost 40%, 42% of our total advertisement revenue used to come from Central Government. And you know advertisement contributes close to 70% -- 65% to 70% of our PBT. Now this segment has, in a way, completely stopped advertising and almost dropped by 90%, 95%. So we are hoping that slowly the Central Government ministries would start using all the medium, not just in cinema and restart their spends on social media messaging on all the platforms, including digital channel. So once that happens, the remaining gap of INR 15 crore, INR 20 crores of profitability that you see would also get met. So we are surely on track. And as guided, Q2 at least is a very strong indicator that we are reaching there.

Okay. So -- but are you seeing positive -- like positive signs from this Central Government spending scenario? By when is it expected to gain full traction here back to those levels?

So this is something which is really beyond our control, but we have been receiving inquiries and our teams are in touch with the central bureau of communications. And there are -- we are hopeful of regaining some of the central government revenue, but I would just like to stay at this point that what we have started doing strategically is we have also started reaching out to the states in a much more engaged manner, and we are seeing traction from state advertising, which has partially offset the loss that we are seeing on Central Government. So if Central Government starts that revenue, it will definitely be an upside for us. But state governments, we are increasing our revenue earnings. And also, our empanelment which has happened for Caravan, that is showing a lot of positive traction, and we are hopeful of getting some decent revenues from this area also. And this could be from Central Government as well as from state governments and et cetera.

Okay, before I get back in queue, the Qube JV, I believe in quarter 1, you mentioned that in H2 of this year, you will start to see it in effect. So what is going on over there? Has it been completed, the process? And so what kind of impact we will see on our revenues or on any metric, cost savings, profitability? How does it work? Can you please share some details on that.

Yes. So as regard the Qube JV is concerned, while the procedural processes are more or less in place, we are facing certain teaming issues on structural alignment and also operational issues such as registering the companies under a new entity with DAVP and all that. So we hope to sort out this teaming issues, and we will come back to you on an updated status whenever we have some news on that front. But as of now, this JV has not become operational, and there is no impact reflected in our performance on account of the JV as such.

So can't even expect for this year then?

We are keeping our fingers crossed and let's see how it works out.

[Operator Instructions] Next question comes from [ Rahul Vashishta ] from AKSA Capital.

This is Rishi Maheshwari. Heartiest congratulations on getting back to profits. I think it's been long overdue. Now that your industry has opened up, if you can also brief, there are certain line items of industry or industrial verticals like the distributor revenue or the exhibited revenue which is still tracking negatively versus year-on-year. So if you can give us some sense of what is the path to getting near on growth on those line items as well.

Distribution revenue, I mean particularly a function of how the films perform because as we had been mentioning in our earlier earnings call, we follow a very conservative policy on distribution wherein we don't take any IPR risk that we are not investing in the copyright or anything. So we work largely on commission basis, keeping a low-risk profile on this area. And it's largely dependent on the films that we do. We currently are concentrating on the South language films because Hindi language films are typically high budgeted and expect advances and minimum guarantees, which we steer clear of. And like we did Jailer, for instance, in this quarter, that gave us some revenue. But it is still difficult to predict any profitability on this account. While we drive the numbers, it largely depends upon how the films perform in the market over there.

So Rishi, if probably -- was your question around the CDC, the distribution revenue in our core business?

That is right which is also tracking negatively about 17% -- Yes.

So what Rajesh tried to explain was on the new revenue stream that we have started [ in ] distribution, where we act as a distributor. So the question about our distribution service fees that we generate. So you're right, that is one revenue stream, which is -- now when we see that there has been a traction business coming by on track now. Obviously, we all are keen and eager to see how soon we go back to our pre-COVID levels, right? So pre-COVID we were in the range of INR 115 crore, INR 120 crores of revenue, which we use to generate from this revenue stream, providing services to distributors in -- CDC is what is captured in our annual report. Now this on a run rate -- I mean last year, we were in the range of INR 88 crores. This year, we are seeing a similar run rate. Now what happened was while rest of the like advertisement revenue in that sense, is more determinable depending upon our connect with the advertisers, we directly drive that business. In case of CDC, where we provide services to distributors to take their films in theaters. There are -- one major chunk is how many movies are going to come and what kind of movies are going to come. We are there to provide service but the inflow of the content is not in our control. So while that has more or less fallen in place, to be honest, except we saw major issues in the market until Q1 of this year. Q2 has been really good, even on Hindi market. So from Q2 onwards, we can say the content pipeline is more or less the way it was in pre-COVID. The only one major chunk that has moved is the number of screens for us. So that has fallen by almost 18% in our case, and that directly impacts the total revenue. So what we see is current year, we would be in the same range of the CDC what we clocked last year full year basis. But in the next year, since now more or less film industry is back on track in all its genres, including Hindi. Next year, we should see some increase, at least certain percentages depending upon how Hindi performs. But to reach to that INR 150 crores, INR 120 crores annual run rate from 80 to -- I mean INR 90 crores, INR 95 crores current run rate, we would need to get the new theaters in. And fortunately, this quarter, we are seeing some traction even on that front. So yes, to answer your question, to go back to pre-COVID, we will -- the major impact is on account of reduction in screens. And hopefully, that would also get filled as we progress from here as an industry.

Sure. Sure. I'll come back to the advertisement revenue. Now I understand that you've given a fairly exhaustive explanation on the central government's curb on spending. And I understand it's not completely in your hand. The corporate is something which is a little baffling for me. At this point in time from what we observed of the industry is that there's a general slowdown that's happening. But you've come after a fairly long time of a sleuth of good movies and some of the good Hindi movies, which actually makes the difference in your advertisement. Hence -- and you've also explained in your opening remarks that the lineup is very good. So within that confluence of a slowdown that may continue for a quarter or so or 2 quarters, and the Hindi lineup is becoming better and people are flocking back to the cinema screens. How do you expect this corporate revenue to now punch back in terms of revenues for this year as a whole and next year going forward?

So as I said, looking at the lineup of the films and also the performance that we have seen in Q2 regarding the films, it drives the advertisers' confidence and a sustained period of some good films definitely keeps the advertisers' attention onto the media. And we really feel that this is going to be helpful in driving our advertising revenue in Q3 and depending upon the lineup of films that will materialize in Q4 also. So we are fairly optimistic about our corporate advertising revenue on this front.

Can we therefore expect, say, about INR 120 crores, INR 130 crores of corporate revenue in FY '25?

To see the way the things have come back on track, that's the area where we would be certainly targeting because, as Rajesh said, Q2 has given a good indication. And I must say that Q2 was a difficult quarter because the advertisement allocation in case of the corporate segment was already done for IPL -- sorry, World Cup, which we all know is a major event. In spite of that, this is a very, very handsome performance in fact, as compared to our peers in a listed environment, whereas they have done 17% growth half year versus last year, our corporate did 56% growth. Now this is only a percentage, of course, it depends on base. So we are hopeful that, that number, which you have just mentioned, looks achievable. There is -- all efforts are in that direction. And as of now, if you actually split my advertisement revenue between corporate and government, you would also get the same fillers that there is a good trajectory, which is already visible in the numbers.

Fair enough. Lastly, on the Q1, where you mentioned that there is -- the JV may get operational by next year. So at this point, Qube is managing its own set of theaters that it were managing earlier and you are doing your own. And there is no -- as of now, there is no synergy that has happened. Is that how I should read it?

Yes, that is correct. Currently, we are operating as individual company levels. We are not leveraging any synergies right now.

Which was the case all along.

[Operator Instructions] Next question comes from Vaibhav Badjatya from Honesty and Integrity Investment.

So in terms of revenues, apart from the advertising revenue, so I think VPF is -- in terms of VPF revenue model, I think it is completely driven by the charges per show, right? And then as the number of shows of the same movie increase the VPF decline, that's how -- if I remember correctly, that's how it is charged, right, VPF?

So yes, complete your question and I'll answer it.

Yes, I just wanted to...

Do you just want to understand the structure of VPF...

Yes. So both VPF and CDC, I mean both their revenue model is what I want to understand.

So in content delivery charge, basically, this is a charge to the distributors for releasing the film in the theaters. We have a per show model also where we charge an x amount in week 1 and a lower amount in week 2. And beyond that, there is no charge from third week onwards for Hindi films. Regional firms will have a charge in the first, second, third, fourth week and from fourth week, it plateaus out. But large films or bigger films also have the option to take a complete open run license, which roughly translates around to INR 20,000 per film, right? As regards to VPF revenue is concerned, the figure that is shown over here is, VPF revenue is a service that we provide to certain cinemas like, for example, if we are owning the equipment or something like that, where in that case we collect the VPF on their behalf. We retain a certain service fee against that. And the lion's share against that is remitted back to the cinema. So VPF is purely a service fee that we charge and content delivery charge is something that we retain 100%. Does that answer your question or any other clarification is...

So basically VPF revenue is purely a function of number of screens. But CDC revenue is a function of number of screens as well as the number of shows?

Broadly, you're right. Broadly, you're right. And I would suggest that if we can do a call one-on-one where we can actually explain the way we have explained to other investors who wanted to know very specifically how it works. But you're right, VPF is theater -- goes as per theater or screens and CDC is per show. But if you can refer to Slide 14 of our presentation, it very clearly distinguishes between CDC and VPF service revenue. In CDC, we did almost 95% PBT margin because there are no direct costs associated with incremental costs and VPF service fee, our margins are lower in the range of 25% to 28%.

Got it. Understand. And sir, lastly, one more question in terms of corporate revenue breakup. So basically, as compared to pre-COVID level, which kind of corporates are advertising with us and how it has changed as compared to pre-COVID level? And as of now, what is the kind of industry breakup for the corporate revenue?

Yes. So in fact, now that we are discussing, I'm realizing that we should start giving -- providing the sort of a broad indication of kind of the industry-wise distribution of advertisement spend because now the advertisement revenue is going up. So going forward, we'll try to make that effort. So that you have a clear indication of what are the different kind of industry spending or utilizing our platform. But -- so what happens is, so you will have, say, a television industry trying to -- or the channels, various channels trying to spend. So that used to be a good chunk pre-COVID. Now maybe it is taken over by some of the OTT channels. But broadly, what we have seen is the segments of the industry are more or less same, not that some of the industries have completely stopped. And now that some of the industries have completely -- I mean, started using it of fresh. So what has happened is overall spend within that has dropped. So the efforts are to get back those advertisers to spend more. So in a way, it is positive that -- it's not that you have just lost a particular type of advertising industry -- I mean, advertisers altogether. So nevertheless, I right now don't have the exact split of the segment-wise bifurcation. So I'll try to collate it and then we can share it with you pre-COVID and this H1.

Sure got it. Can I squeeze one more? Or should I come back in the question queue? I'm not sure.

No, no. Please go ahead.

Okay. Sir, lastly, in terms of JV, you said that there are some [ legal ] issues that you're facing in terms of structuring and how to operationalize everything. So do you think that these issues are more structural and can have -- can kind of lead to some risk to the whole arrangement itself? Or do you think it is just kind of some technical legal issues?

So there are no legal issues. Basically, as Rajesh mentioned, it is more to do with operationalizing the JV once it starts. As you must appreciate that it's a major jump and change for both the organizations who are very diligently and seriously work towards making it happen. But at this stage, we -- both of us want to make sure that once we start operating in the advertisement segment primarily as one unit, there are no operational issues at that stage. So in that sense, what we try to summarize, we're saying is there are issues which we're trying to resolve, which are primarily towards operationalizing this JV as a 1 unit. So this is where it is. Fortunately, there are no legal issues because legal issues then straightaway raise a concern, what can happen. So there are no legal issues at all. Operationalization issues is something which is a good problem to have because then what happens is really both the parties think through to find the best solution so that once we get going, things are much, much cleaner and straightforward. But this is where we are. And yes, there is some time that has been taken. But the efforts are on to get to the resolution point. And that's what Rajesh said that, in fact, the moment it happens, we are obliged to inform the investors about the updates and which we'll do because it is a critical one.

Next question comes from Bharat Mani from Moneybee Investments Private Limited.

For quarter 3, with the start of the World Cup, do you see the demand being subdued in this quarter? Or how do you see it shaping up?

So I assume your question is primarily towards the demand for advertisement offtake of our network?

Yes. Yes.

So fortunately, what we have seen post COVID is the good movies are getting the advertiser interest back in a real big way. Like last quarter, there were 2 big movies, both of them really did well. And in that sense, World Cup issues were more in Q1 because that -- Q2, where the allocation was a problem that time. Q3 what happens is, fortunately for all the media networks, Q3 is good because it's a festive season. So advertisers are also inclined for their business reasons to start spending more. So we don't see World Cup as a challenge in Q3. The content would certainly be a question. Fortunately, we have some good lineup. If those good lineups translate into a decent performance, then the advertisers' interest would remain intact in this medium and all the players, including us, PVR, INOX, we all will be beneficial, including Qube.

Next question comes from [indiscernible].

I just wanted to understand what is our EBITDA margin from all the 3, that is advertisement, distribution and exhibitors?

What you see as an EBITDA margin is rightfully the mix of all these 3. And it is -- I will try to simplify it for your understanding -- I mean, understanding of most of the investors who want to figure out how the business progresses from here on. So we have our core offering, which is where we provide services to distributor community and exhibitor community. That is the digital cinema services. We get rental revenue and advertisement revenue and that is my core offering. And for giving that core offering, I have all my costs which are required to be incurred, okay? So what happens is without advertisement, I generate a very small profitability, okay? But the most interesting part is unlike some other medium where the entire business is dependent on advertisement. There's no other revenue stream. Case in point, let's say radio, okay? Nothing wrong with the medium, but I'm just trying to distinguish between the 2. Over there, 100% dependency on advertisement. That is what very systematically this very new initiative of UFO, which was promoted way back in 2005, thought of having not just dependence on advertisement. So to answer your question, my profitability from the 2 segments put together what we call digital cinema services will be really small, which is a good thing because the most important part is that contributes to revenue. Now what it is left is advertisement. Advertisement, as a business offering is such that it is completely top up on my services. So which means I can get advertisement, I may not get advertisement in period like COVID. So in this situation, when I get the advertisement revenue, incremental advertisement -- of the incremental advertisement revenue as high as 65% to 70% will go into my EBITDA, stroke PBT. Now this is the way one should see from here on how the progression would happen. So for this quarter, if my EBITDA margin is, say, 19.1% and for -- or almost 19% for H1. Then -- so it was 19% in Q1, 20.3% in Q2. And for H1, it is 19.7%. Nothing is significantly going to change on my cost aspect. If the theatrical revenue, which I tried to explain in the previous discussion about CDC, if that remains where it is, the only thing that is going to move the needle is advertisement revenue. Over there, again, this is 19%. Every incremental rupee earned would get us at least INR 0.60 to INR 0.70. So that is how my overall EBITDA from that level will start moving up faster. That's the beauty of the business model that we have.

Okay. Thank you sir for such a detailed explanation. One more thing. I just wanted to understand our revenue has gone down, but the EBITDA is up. What is the reason for the same? And whether the current EBITDA margin is sustainable?

I'm glad you asked this question because we were also immediately surprised when we saw this kind of a reduction, but very simple answer. One is that my -- you have mentioned about 3 revenue streams in your previous question: rental, distribution services and advertisement. There is one more, which is part of my core offering, which is sale of equipment where we provide the projectors and servers or sell projectors and services to theaters and sell consumables such as lamps to theaters. So the consumable sale is more or less predictable, but the sale of equipment, primarily in the international market, in UAE, where we have a very strong presence. Over there, there has been a very severe reduction in year-on-year -- I mean, quarter-on-quarter as well as year-on-year reduction in sales. So the gross top line, if you see a major impact is -- so the one major impact is equipment sale and all of that is in Middle East, but that translates to only 18% margin. Therefore, you might see a top line going down but the margins are not going down that much. That is almost INR 16 crore to INR 17 crore reduction year-on-year, right? And second and very interesting reduction is in my distributor business -- distribution business, where we started this business just 4 quarters -- 5 quarters back, where without taking P&L risk, we are distributing the films -- smaller films into the -- into various theaters across the country. Over there, what we do is like what other distributors do, they buy it from the producer and they sell it to the theaters. Now from accounting side, if you see the post GST implementation, whatever is sold to the theaters is accounted as income and whatever is bought is accounted as an expense. In the past, it was an option of accounting in net in all cases. Till last year, we were required to account it on a gross and net level. Post which, we are required to make some changes in the contract because of which we could now start presenting this number as a net number. So there is an impact of as much almost INR 10 crores, where last year, we had a top line of INR 10 crore and an expense of INR 9 crores. Both have gone down this quarter. So what you're doing right now is you're only seeing top line. Therefore, you see an impact of reduction of that almost INR 10 crores reduction quarter-on-quarter is only on account of this distribution business. Why I'm highlighting it is, over there the margin is just 3% or maybe 2%. So therefore, the reduction in top line doesn't really impact the profitability that much in almost both these lines. So there was 2 significant reductions in both Q2 versus Q1 and on a Y-o-Y basis.

[Operator Instructions] Next question comes from Vipul Kumar Shah from Sumangal Investments.

Sir you said your distribution revenue has gone down because of the number of screens have reduced, right, sir?

Yes. The CDC revenue because, unfortunately, distribution comes twice, one is where we are acting as a distributor and where we are providing services to distributor, which is my core offering, which is the CDC revenue. That has primarily gone down for 2 reasons: reduction in screen count by almost 18% as compared to pre-COVID; and second, the Hindi film market was not completely back on track as yet, which we all know. It's just last 2, 2.5 months, people have started talking, especially in cities like Mumbai, about theatrical viewing. And before that, people were just discussing whether theaters are over and out and whether everybody will shift to OTT. But fortunately, what we were expecting has happened and happened really fast in just 1 quarter, things have changed. So these are the 2 reasons why my revenue is down.

You also have certain big films releasing in that quarter, which have a longer run time. As explained in this call itself that after 2 weeks, you don't get revenue on that per show model. And even in the flat fee model, what happens is if a film runs for 2 or 3 or 4 weeks, then you're not getting additional revenues in the second, third, fourth week onwards. That becomes another impact. And one impact also that is the legacy impact is of Hollywood films releasing. So we had a couple of big Hollywood films releasing in the quarter like Oppenheimer and Barbie and all, where no CPF revenue is earned, and that also creates an impact. So these 2, 3 things have a combined effect of pulling down the CDC revenue.

On the digitization income, it was INR 108 million in H1 '23 has come down to INR 82 million.

Yes, you're looking at 6 months number or a quarterly number?

No, no 6 months number. This is Slide 9. So that income -- per screen basis, if I compare pre-COVID, is it same or is this...

Can I just interject because if your question is around digitization income, that has got no linkage with number of shows and number of theaters that the movie plays out. That is purely the revenue that we generate by processing the content on E-cinema network and on our D-Cinema network, okay? So this is more like a per movie revenue. And over there, there was a one loss of client and because of which there has been a reduction in this particular digitization revenue line, which we used to earn till Q2 or middle of Q3 last year. Post that, the revenue from that particular client, we have lost. And as a result of which, you see a reduction in the digitization income. But this digitization income, which is relatively smaller because it's in the range of INR 10-odd crores versus my CDC income, which I tried to explain in the previous question.

And regarding your JV with Qube, I think you had -- you had proposed a JV with Qube before COVID and that was called off due to, I think, cash in our stock price. This is the same Qube?

Yes, it is a same Qube, but some quick fact corrections. It was not a JV at that time in FY '17, and we tried this was more of a merger effort. It was unfortunately didn't go through because of a negative order from NCLT, which was uncomprehendable by that order came. So we went to NCLT and we won at the NCLT level. However, that 5 months of gap in between change the whole perception, there was one major financial investor, ICICI, who, after the NCLT order, unfortunately, had to back out from the deal and as a result of which though NCLT order came positive, we couldn't complete the transaction. And this is important that I clarify this point because the fall in share price was not the reason for merger not going through. In fact, because merger didn't go through, there was a fall in share price. But yes, it's the same party, very strong technical -- I mean, technology player down South who have a very strong network, and it's the same party.

So this time around, this is a JV, not a merger, right?

Exactly. It's a JV on a very specific areas, which were highlighted in our earnings call last time and also a detailed disclosure is given in the exchanges when the JVs were entered in.

Okay. But I would like to have a one-to-one call. I'll contact your investor relation team.

Next question comes from Darshil Pandya from Finterest Capital.

Just one question. On the promoter pledge, when can we expect the pledge to be released? Any timeframe or something?

I'm glad you asked this question. So UFO is, what we've seen in the recent era where you have startups eventually, the promoters of the startups end up having a very small stake. UFO, I would say, was an early start-up in 2005, where a first generation entrepreneur, Mr. Gaikwad and his partner, Mr. Hete started this company and we required a lot of investment, so they diluted, diluted, diluted at the right time. They also invested when company added money. Eventually, they also held a corporate support and therefore, Apollo Tyres Group through their offshoot, Apollo International invested in UFO. And they were our in a way promoters when -- I mean when we went for listing, we had set of promoters, one, which is Mr. Gaikwad and Mr. Hete, who were the founder of the company; and Apollo, who entered in the very, very beginning, also was categorized as promoter. Right now, the pledge that you see is the pledge of the holding by Apollo and none of the holding of Mr. Gaikwad and Mr. Hete, which is Valuable Group, is under a pledge. So optically, it looks like promoter has pledged the shares. But to be fair, Apollo International got categorized as a promoter at the time of IPO because of the regulations. Otherwise, it was more like a sort of an investment for them. And probably, therefore, for the other businesses, they must have pledged these shares. And at this stage, UFO management doesn't have any idea about that pledge and when it is likely to go off. But the founder promoter group, his entire stake is intact and nothing is pledged out of that. This is the which I wanted to provide on this call.

All right. And any plans to increase the promoter holding?

There was an opportunity instead of distributing dividend at that time, COVID hit us if we had gone for buyback, probably promoter stake would have gone up. The problem is that promoter, as I mentioned to you, the founder promoters come from a very humble background and they are first-generation entrepreneur. All of the investment is in -- effort and investment is in -- primarily in UFO. So when UFO started seeing worse days, fortunately, we are out of it now. For a pretty long period of almost 13 months of COVID, they also had a problem. So at this stage, to expect that the founder promoters would be able to increase the stake by investing in the company, though it is -- I mean it is really attractive at this value. It was attractive on last year. It is difficult because of the constraints that I explained. But I must tell you that when in 2009 company needed funds, there was an infusion to the tune of INR 90 crores, which was done in this company by the founder promoters from their other business sales that they had done. But at this stage, I don't see that there is a possibility where the founder promoters will be able to increase their stake. More importantly, there is no lean on their shares, and they are completely committed and have always shown the commitment in the past.

Next question comes from Aditya Sen from RoboCapital.

Sir as we have elections in the coming year. So accordingly, should we expect an uptick in the revenue spends by the Central Government? And ultimately, should that lead us to INR 200 crore revenue run rate in the advertisement segment?

INR 200 crores would be a dream come true.

That's just the pre-COVID number, even lower.

That was overall combined, corporate government and everything number. But yes, with the upcoming elections, we hope to see an uptick from State and Central Government and even possibly political parties advertising. And there should be some opportunity over there, but definitely not in the range that you are suggesting.

To just clarify we are assuming that your question is INR 200 crores of corporate advertisement run rate because...

No, total.

Total may reach there. If what you are saying is government -- because of the entire election year phenomena, if the Central Government decides to start using this medium again, not just in-cinema advertisers like us, but even other mediums like radio or print would be beneficiary. And if that happens, there used to be INR 1,400 crores budget of Central Government alone. So if that happens, most certainly because -- as of now, what we are all doing is we are trying to see that Central Government will be 0 and how to mitigate that risk. So if your first question was if Central Government starts looking at it positively, I'm extending it, which means if it start spending INR 70 crores, INR 80 crores, INR 90 crores on our network that they used to spend in the past. In fact, it was INR 100 crore plus. Then most certainly INR 200 crores is achievable. Because right now, INR 80 crores is a run rate, annual run rate of corporate, which used to be INR 95 crores in pre-COVID.

Yes, sir. Okay. And are we looking forward to maintain this same margin of around 19% going forward for FY '24 and FY '25 also?

Yes. And with advertisement revenue increasing, this should start slightly moving up.

Are you moving upwards to any ballpark number, 20%, 21%?

There's no point giving ballpark number because for that, we need to have a ballpark number of the revenue. Every incremental rupee gives me 65% margin. So if anybody can do maths.

[Operator Instructions] We have a follow-up question from Vaibhav Badjatya from Honesty and Integrity Investment.

Just a small follow-up. So in terms of reaching pre-COVID level of advertising revenue, obviously the Central Government revenue is important. But in terms of the rates that we charge to our advertisers, would that be also heading because the number of screens have gone down as you said back around 15% to 20%. Should I believe...

Sorry, you'll have to speak again because one critical portion of what you are speaking, we missed out because we have the connectivity issue.

So what I was trying to say is that in comparison to reaching pre-COVID level of financials, you highlighted a couple of headwinds. But in terms of -- because of the number of screens have gone down as compared to pre-COVID, don't you think that charging same rates per minute of advertising would also be a headwind because, obviously, the number of screens have gone down, number eyeballs accordingly will have gone down. So do you think that, that would also be a headwind?

It would not be a headwind because what we are seeing is if the number of screens have gone down, the product mix of the screens has improved. So what has happened is the more vulnerable screens that is the single screens and all, that is the ones that have largely closed down. But the screens that have got added across the last couple of years, is more of the high-quality premium screens. These are the ones, the new ones which are coming up or the ones which are getting renovated. So brownfield, greenfield put together. The quality of the product mix is improving. So there is no reason why because of screen going down, the rate should go down. And in fact, as the films are improving and the advertiser confidence is increasing in the medium, we have seen an uptake in the spot rate that we charge. And pretty soon, we hope to come back to the pre-COVID levels and maybe even go beyond that also.

[Operator Instructions] There are no further questions. Thank you. Now I hand over the floor to Mr. Tushar for closing comments.

Thank you. On behalf of Ventura Securities Limited, we would like to thank the management of UFO Moviez and the participants. Good day.

Thank you, Tushar. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. You may disconnect your lines now. Thank you and have a good day.