Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PVR INOX Ltd (BOM:532689, Financial) welcomed 32.6 million guests in Q4 FY24 and 151 million customers in FY24, indicating strong customer engagement.
- The company achieved significant operational savings from the merger, with total EBITDA level synergy of INR185 crores to INR208 crores.
- PVR INOX Ltd (BOM:532689) generated free cash flow of about INR116 crores in FY24, demonstrating effective cash management.
- The company plans to open 120 new screens in FY25, focusing on South India, indicating strategic expansion.
- PVR INOX Ltd (BOM:532689) formed a strategic partnership with Devyani International Limited to develop and operate food courts, potentially increasing pre-ticketed F&B revenue.
Negative Points
- The company reported a PAT loss of INR90 crores in Q4 FY24, despite an increase in revenue and EBITDA compared to the same period last year.
- Q4 FY24 was the weakest quarter due to a lack of appealing content in Hindi and other languages, and limited Hollywood releases.
- The ongoing general election impacted the flow of new releases, affecting the current quarter's performance.
- PVR INOX Ltd (BOM:532689) plans to shut down about 70 underperforming screens in FY25, indicating challenges in certain locations.
- The company faces a volatile market with fluctuating occupancies and ad revenues still trending below pre-pandemic levels.
Q & A Highlights
Q: What are the reasons for partnering with Devyani International Limited, and what benefits do you expect from this collaboration?
A: Sanjeev Singal, Co-Founder, Executive Director: The partnership aims to pivot towards pre-ticketed F&B business, leveraging Devyani's established brands like KFC, Pizza Hut, and Costa Coffee. This collaboration will help us capture more of the customer wallet and negotiate better rental deals with developers. The initial plan includes opening five to six food courts this year.
Q: How will the asset-light model work, and what impact will it have on CapEx and rental expenses?
A: Nitin Sood, Chief Financial Officer: The asset-light model involves reducing CapEx intensity by 30% to 50% over the next few years, with developers co-investing in new screens. This will pivot towards higher revenue share agreements with landlords. The focus is on reducing CapEx by 25% next year and progressively increasing the proportion of screens under this model.
Q: What is the rationale behind closing 70 screens, and how does it impact your overall strategy?
A: Nitin Sood, Chief Financial Officer: The closures are focused on underperforming screens in dilapidated malls. This strategy aims to cut operating losses and shift consumers to better-performing locations. It's a continuous process to optimize the portfolio and improve profitability.
Q: Can you provide more details on the FOCO (Franchise-Owned Company-Operated) model and its implementation?
A: Sanjeev Singal, Co-Founder, Executive Director: The FOCO model involves developers investing 100% in both immovable and movable assets, while we operate the cinemas. This model will be selectively implemented in high-potential locations, both in metros and smaller towns, to ensure sustainable returns for both parties.
Q: How do you plan to manage the impact of the ad-free movie campaign on revenues?
A: Sanjeev Singal, Co-Founder, Executive Director: The ad-free experiment is currently running in seven cinemas. The goal is to attract time-sensitive customers willing to pay a premium for an uninterrupted experience. The experiment aims to offset ad revenue loss through higher ticket prices and additional shows during peak periods.
Q: What are your plans for reducing debt and improving the balance sheet?
A: Nitin Sood, Chief Financial Officer: We plan to reduce CapEx by 25% and use free cash flows to pay down debt. Additionally, we are evaluating the monetization of real estate assets inherited from the INOX merger, which could generate INR 300-400 crores. The goal is to reduce leverage by at least 50% over the next 12 to 18 months.
Q: How do you see the competition evolving in the multiplex industry, and what is your strategy to maintain market leadership?
A: Sanjeev Singal, Co-Founder, Executive Director: Competition is expanding, especially from regional players. Our strategy involves leveraging our brand and market leadership, adopting capital-light and FOCO models, and focusing on profitable growth to maintain our position in the industry.
Q: What is the current status of the Passport scheme, and how is it performing in different regions?
A: Sanjeev Singal, Co-Founder, Executive Director: The Passport scheme has around 80,000 enrollments, with 35% from the South. North and West are also showing strong uptake. We expect the scheme to perform better as the movie pipeline improves, potentially becoming a game-changer for us.
Q: What are your expectations for the FOCO model's contribution to new screen additions in the coming years?
A: Sanjeev Singal, Co-Founder, Executive Director: This year, about 15 screens will be under the FOCO model. We expect this proportion to increase to 20-25% next year and continue growing, with the model gaining precedence over the next four years.
Q: How do you plan to manage the impact of the ad-free movie campaign on revenues?
A: Sanjeev Singal, Co-Founder, Executive Director: The ad-free experiment is currently running in seven cinemas. The goal is to attract time-sensitive customers willing to pay a premium for an uninterrupted experience. The experiment aims to offset ad revenue loss through higher ticket prices and additional shows during peak periods.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
