INOX Leisure Ltd (INOXLEISUR) Q2 FY23 Earnings Concall Transcript

INOX Leisure Ltd (NSE:INOXLEISUR) Q2 FY23 Earnings Concall dated Oct. 19, 2022

Corporate Participants:

Kailash Gupta — Chief Financial Officer

Alok Tandon — Chief Executive Officer

Analysts:

Ankur Periwal — Analyst

Abneesh Roy — Nuvama Institutional Equities — Analyst

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

Kapil Jagasia — Edelweiss Financial Services Limited — Analyst

Arun Prasath — Spark Capital Advisors — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 FY ’23 Earnings Conference Call of INOX Leisure Limited, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Ankur Periwal from Axis Capital Limited. Thank you. And over to you, sir.

Ankur Periwal — Analyst

Thank you, Rituja.

Good evening, friends, and welcome to INOX Leisure Limited’s Q2 and H1 FY ’23 post-results conference call. The call will be initiated with a brief management discussion on the earnings performance, followed by an interactive Q&A session. Management team will be represented by Mr. Alok Tandon, CEO, INOX Leisure Limited; and Mr. Kailash Gupta, CFO, INOX Leisure Limited.

Over to you, Alok, for the initial comments.

Alok Tandon — Chief Executive Officer

Thank you, Ankur. And a very good evening to all of you on this call.

I’m Alok Tandon and with me is my colleague, Mr. Kailash Gupta, the CFO of the company. And we welcome all the participants on this call. Our Board has approved the quarterly results for Q2 FY ’23 and H1 FY ’23, and the same has been uploaded on the website of the stock exchanges and the company’s website.

Quarter two was yet another quarter, which reminded us about the importance of quality of content and how significant its impact can be on the business. But at the same time, we are looking at this quarter as, one, which made us sharper and fitter, having faced New Year challenges since the pandemic began. What is heartening is the performance of the F&B front, which strengthens our belief that strategic efforts, innovativeness and consistency can fetch great results. We reported our best ever quarterly spends per head at INR102, which was largely driven by our rigor on a lot of fronts.

Critical additions to the menu, introduction of seasonal specialties, timely-oriented marketing initiatives, interactive culinary sessions across the country with our chefs and numerous other process innovations have led to the solid performance on the F&B front. I would also like to make a special mention about the launch of our three screen multiplex in Srinagar.

As the first multiplex in the Kashmir region, it is special not only for us, but also for the industry, as well as for the citizens of the state, who have been waiting for an entire generation to experience the magic of cinema. This opening also depicts our desire to remain present across the country and expand aggressively despite of perceptional challenges and difficulties.

Regarding the proposed PVR and INOX merger, I would like to say that as per directions of NCLT, INOX has obtained shareholders approval for merger on 12 October, 2022. We are in the process of filing the second motion petition with the NCLT Mumbai branch. We expect the merger to be completed by the end of Q4 FY ’23.

We propose also to acquire Chennai city’s largest multiplex, Luxe Cinemas. In H1 FY ’23, we have the highest screen addition in the industry of 30 screens. And we, as we speak or as of 16th of October 2022, we have a strong liquidity position and we have INR167 crores in cash and cash equivalents as I said as of 16th of October 2022. We are the only chain that is net debt free. And I would also like to add that we were recognized as the Most Admired Retailer at MAPIC India Retail Awards and also the Best Multiplex Chain of the Year at the IMAX Big Cine Awards.

As FY ’22 was impacted by COVID-19, throughout our earnings presentation we have compared Q2 and H1 FY ’23 with Q2 and H1 FY ’20. Also the figures exclude Ind AS 116 impact. In Q2 FY ’23, the revenue is INR381 crores as compared to INR524 crores in Q2 FY ’20. EBITDA is at INR3 crores compared to INR107 crores in Q2 FY ’20. PAT is at a negative INR22 crores as compared to a positive INR51 crores in Q2 FY ’20.

For H1 FY ’23, the revenue is up, is INR970 crores as compared to INR1,020 crores in H1 FY ’20. EBITDA for six months is at INR134 crores compared to INR199 crores in H1 FY ’20. And PAT is at INR52 crores compared to INR92 crores in H1 FY ’20. In Q2 FY ’23, the footfalls were 116 lakhs compared to 190 lakhs in Q2 FY ’20. Our occupancy is at 17% compared to 30% in Q2 FY ’20, and the ATP has shown an increase to INR215 as compared to INR196 in Q2 FY ’20. Our SPH is the highest ever for a quarter, as I just said at INR102 as compared to INR79 in Q2 FY ’20.

For H1 ’23, the footfalls are at 300 lakhs as compared to 363 lakhs in H1 FY ’20. Occupancy is at 23% as compared to 30%. ATP is at INR224, which is a 14% increase as compared to INR197 in H1 FY ’20 and SPH is at INR98, which is a 23% increase as compared to INR80 in H1 FY ’20. Our control over fixed costs has also been phenomenal. We can see on the numbers, and we can compare Q2 and H1 FY ’23 with Q2 H1 and FY ’20 on per screen basis. And we have seen that in most of it, our fixed costs have decreased.

Employee benefit expenses, which include agency manpower also has gone down from INR71.6 crores in Q2 FY ’20 to INR61.6 crores in Q2 FY ’23. On a per screen basis, it has reduced from INR12.7 lakhs per screen to INR9.3 lakhs per screen, respectively, which is a 27% reduction.

Power and fuel, R&M expenses have increased in absolute from INR42.3 crores in Q2 FY ’20 to INR48 crores in Q2 FY ’23. However, on a per screen basis, it has reduced from INR7.5 lakhs per screen to INR7.3 lakhs per screen, respectively, which is a 3% reduction.

Rent and CAM has increased from INR97 crores to INR117.3 crores in FY ’23 — in Q2 FY ’23. On a per screen basis, it has marginally increased from INR17.2 lakhs per screen to INR17.7 lakhs per screen, respectively, which is a 3% increase. This increase is in line with the escalation mentioned in the agreements.

Other overheads have gone down from INR32.4 crores in Q2 FY ’20 to INR29.7 crores in Q2 FY ’23. On a per screen basis, it has reduced from INR5.7 lakhs per screen to INR4.5 lakhs per screen, which is a 21% reduction. Our distributor share for Q2 FY ’23 and Q2 FY ’20 are similar, and our F&B contribution has shown a great improvement. F&B contribution has increased from 75.5% to 76.3% for Q2 FY ’23.

In terms of shareholding structure as on 14th October 2022, FIIs owned about 19.1% of the company. The DIIs owned 23.84%, Promoter & Promoter Group hold 44.04% and public and others own 13.02% of the company. The share price as on 14th October 2022 was INR499.45, which gives the company a market capitalization of nearly INR6,110 crores.

We’ve opened two properties, 13 screens with nearly 2,000 seats in Q2 FY ’23. We opened INOX Emerald Mall Lucknow with 10 screens and 1,550 seats and we opened three screens with 522 seats in Srinagar, Kashmir. At present, we are operational in 18 states and two union territories, present in 74 cities. We have 165 properties, 705 screens and approximately 1.57 lakh seats.

We proposed to acquire Luxe Cinemas located in Central Chennai with 11 screens and 2,688 seats. This is on a slump sale basis and this is subject to legal, regulatory, contractual and customary approvals and the completion of the agreed conditions set out in the agreement. Excluding Luxe Cinemas, beyond FY ’23, we have signed up to the extent of nearly 117 properties, 832 screens with 1.52 lakh seats. And once this entire pipeline is fully implemented, we will have 293 properties, 1,584 screens and nearly 3.18 lakh seats.

In Q2 FY ’23, we had movies like Brahmastra, Thor: Love and Thunder, Karthikeya 2 and Vikrant Rona, to name a few. We have a healthy lineup of movies already waiting for release. We have movies like Black Adam, Ram Setu, Thank God, Sardar, Black Panther, Dhrishyam 2, Vaathi, Avatar, Cirkus and Pathaan. As capex is concerned, in the beginning of FY ’23, we had organically planned to open 77 screens, out of which 30 have already opened. All 77 screens are being funded through internal accruals [Technical Issues] proposed acquisition of Luxe Cinemas would be done through a mixture of debt and internal accruals.

I would also like to reiterate that our liquidity position is very strong and as on 16th of October 2022, we have INR292 crores, which includes an undrawn limit of INR125 crores. Alternatively, we own six cinema properties and our head office. As for the market valuation, if required, we can raise close to INR400 crores by doing a sale and leaseback of these properties. As on 16th of October 2022, we have a gross debt of approximately INR77 crores.

Well, gentlemen and ladies, this was a brief about our quarter, which has gone by. And with that, now we can open up for question and answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama Institutional Equities. Please go ahead.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Yeah. Thanks, sir. So first question is on this Chennai acquisition which you have done. I wanted to understand thought process for acquiring this before the merger because anyway approvals have been coming. Why at this juncture? Because this will go to the merged entity. And related question on Srinagar entry, it’s a very tough market and we know — since decades there has been hardly any presence. Given such high risk of, say, safety and all that, plus consumer behavior in those markets, why take such a risk and how do you see that property doing well from a medium, long-term?

Alok Tandon — Chief Executive Officer

Okay. So, Abneesh, well, the thought process of trying to get Luxe Cinemas is that we have never shied away from expansion, whether organic or inorganic. And you’re right that this will go into the merged entity, but we at INOX are still growing as I always say and we will never ever shy away from any growth opportunity. We got this opportunity in Central Chennai. It’s one of the largest or the largest cinema hall in Chennai with great footfalls. We have got large number of seats and the location is outstanding. So, that is the reason why we went in for this particular property.

When you talk about Srinagar, I know it’s tough for people to come out after 32 years of not having a cinema hall over there and slowly but steadily the habits of people will change over there. We all know, Abneesh, that cinema is like — it’s the cheapest form of entertainment and every Indian loves to watch a cinema hall or loves to watch a movie in a cinema hall. And hence, we thought that this was the best time. We have this opportunity. It’s a management contract, which we have. And I will say that till now the response has been quite good. Yes, there were initial issues, where people were not coming out, but then I don’t blame them. It takes time to break a 32-year-old habit. And I am very sure that in the next couple of weeks or next couple of months, we will have people falling into the cinemas as we have all over the country.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sure. That’s helpful. One follow-on on Srinagar. So it’s a management contract. So any details you can share and who has done the capex, etc.? And would you have more plans for that market in terms of management contract longer term?

Alok Tandon — Chief Executive Officer

Yes. We are always hungry for growth. So the answer is yes, Abneesh. And as it’s a management contract, the entire capex is put in by the owner of the property. And it is also a thing which is between the owners and us that what — who have to spend and what amount. But here let me tell you that the entire amount has been spent by the owners of the property.

Kailash Gupta — Chief Financial Officer

So, Abneesh, in this property, our risk is very limited. You need to understand, being a management contract, we normally get the management fee. We don’t get into the risk in terms of running the cinema, low footfall, high footfall or any kind of illegal — I mean, unwanted activities in the cinema. So our risk is limited, whereas the branding is with the INOX, of course. And being a management property, I mean, the investment is also done by the — I mean the owner.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sure. That’s useful. My last question is on the burning question of the Hindi movies. So when Q2 has started and we were having a similar call for Q1, there was everyone’s expectations that this quarter should be good. Now Q3, again, content on paper is looking good. My three questions are, content is the main issue, I understand that. South movies are doing well. So is there a possibility that content, whatever course correction is needed because now everyone knows, there are issues in the Hindi movies. So is there a course correction happening in terms of the industry?

And second related question is marketing spend on new movies is very low. For example, Doctor G, which got released recently, I hardly saw any advertisement and I checked with a lot of people, the awareness was near zero. So, I think it’s a question of the health of the industry also because so much of impact has been there. So the ability to spend by the producers is very limited. So could you address these two questions?

Alok Tandon — Chief Executive Officer

Yeah. Abneesh, let me tell you there is no issue with the Hindi film industry. Okay. The Indian film industry is doing well. Movies in other Indian languages are doing well, but Hindi, unfortunately, for the last couple of months is not doing well. But still I’m saying there is no issue whatsoever. See, if you look at the routine industry trends, we release about 1,100 to 1,200 titles every year and these are new unique titles. And about 10 out of 100, I’m just now giving you the percentage, 10 out of 100 movies go on to become blockbusters and 90 of those do not perform are the non-blockbusters. But unfortunately what happened this time is that these non-blockbuster movies have got released in the last few months and they’ve just clubbed together. That does not mean that the Hindi film industry has an issue or it will not do well.

Remember, it’s a 100-year-old industry and there are times where things don’t perform. It’s like in any business. But for our industry for the last five months, six months, movies have not done well, which is in Hindi. However, at the same breath, I’m saying Kashmir Files did very well. Gangubai Kathiawadi did very well. Bhool Bhulaiyaa 2 did outstanding numbers. But yes, there are four, five marquee movies, which everybody was thinking would be 10-folds, did not perform at the box office. So that’s how it is. Things in Q3 could change.

You spoke about whether the Indian film industry or the Hindi film industry, there is no publicity now. Well, Doctor G, may be one or two — may be a case where there was no publicity, but I saw a lot of publicity for Vikram Vedha. I’m seeing a lot of publicity today for Ram Setu. We are seeing publicity for various Hindi movies, which are coming. Maybe one or two have not publicize, which does not mean that people in the Hindi film industry have — now are not going to advertise at all.

It’s just a matter of prerogative of the distributor or the producer and the thought that it makes sense not to just paint the city with hoardings of Doctor G all over. That’s their business call. But let me tell you, we as multiplex operators and INOX in particular, we had a lot of, I would say, chatter about the movie on social media. We did a lot of advertisements on emailers, on Twitter, on Facebook and various other platforms. So, this is where we are that not every movie is promoted by the distributor because it’s his call, but we as an exhibitor go all out to promote each and every movie.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sure, sir. That’s very helpful. That’s all from my side. Thank you.

Operator

Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher Private Limited. Please go ahead.

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

Yeah. Thanks for the opportunity. I have a question on this acquisition, which we have made very recently. Can you share what is the price tag we have paid to buy Luxe Cinemas and whether the cinema is profitable or not? And just basic headline numbers on that front will help? And also when is the transaction expected to complete? You also intend to take some debt to fund this acquisition. So what will be that amount as well if you can share this number?

Alok Tandon — Chief Executive Officer

So, Jinesh, we are looking at the acquisition to be completed in the next couple of weeks. And I will not be able to tell you about the acquisition number. But yes, it is a positive EBITDA property. It’s doing very well and that’s the reason why we wanted to have it. So that’s the answer, if I can — I cannot give you more details. I can just tell you that it’s a positive property, it’s a property which has great footfalls, great location and it’s a marquee property.

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

Okay. Debt number, will you be able to share? Is it possible because [Speech Overlap]

Ankur Periwal — Analyst

Which number?

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

Debt number. We have stated that we may take some debt to fund this acquisition.

Alok Tandon — Chief Executive Officer

No. No. I’m sorry. Okay, you do a debt. See, again, that is something that we could debt — we could take some debt for that, but we’ve also said it’s debt and internal accruals. So it’ll be difficult for me to say that number, please.

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

Okay. And secondly, on this agreement with ICC to screen the T20 matches, I mean, is this agreement exclusive in nature or other cinema chains have also entered into a similar tie-up? And subsequently, will we have to pay fixed fees to showcase the tournament or it will be on a revenue-sharing basis?

Alok Tandon — Chief Executive Officer

Okay. We are not paying any fixed fees. So that’s the direct answer. It’s on a revenue share basis. And what I’ve come to know that, yes, we have signed this agreement, but it’s not exclusive. So other chains also will be showing the matches if they have signed up the contract with ICC.

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

And typically for these matches, is the ATP at par with movies or is it lower or higher?

Alok Tandon — Chief Executive Officer

Well, well, well, you’re talking about the occupancy?

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

ATP, ATP, ticket price.

Alok Tandon — Chief Executive Officer

ATP is always higher. ATP is higher. Occupancy is higher. So, I would say both metrics are higher for the matches, which we will show of any alternate content that we have. That’s always higher than a normal movie.

Jinesh Joshi — Prabhudas Lilladher Private Limited — Analyst

Okay, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Kapil Jagasia from Edelweiss Brokings. Please go ahead.

Kapil Jagasia — Edelweiss Financial Services Limited — Analyst

Thank you for taking my question. Sir, I wanted to ask about the occupancy levels. Now, we are yet to attain the 30% level after the COVID hit — the pre-COVID level, which we used to attain. So my question is, would this 24%, 25% occupancy, is this the new normal for us going forward because as we understand that even the screens have been at a decent pace?

Alok Tandon — Chief Executive Officer

Well, if I look at the occupancy, we had nearly touched 30% in Q1. Yes, Q2 is less. I don’t think this is a new normal. We all know that occupancy is related to the content which we are showing. And we have some major challenges with the content in Q2. So the current occupancy levels are not the new normal. We should hit 30% soon and we all are, as I have said, looking forward to the lineup of Q3, where we can talk about some great movies which are about to be released and people shooting back to our cinema halls, Kapil.

Kapil Jagasia — Edelweiss Financial Services Limited — Analyst

Right, sir. So sir, just taking this 30% occupancy ahead, have you thought of reducing the number of seats going forward, which would also reduce the capex for you and also improve the return ratios?

Alok Tandon — Chief Executive Officer

So it’s not a thought that we have to reduce the number of seats per screen, but if we have luxury screens, couples, automatically, the number of seats are reduced. So it’s not — we don’t want to save capex by reducing the number of seats. In fact, if you look at our luxury screen, the capex is more and the number of seats over there, per screen is lower than what we have in a regular basis. So it’s got nothing to do with reducing cost.

But, yes, with all new formats now coming in, I would say that the number of seats per screen has reduced unless it’s an IMAX. Because in IMAX, we would like to go in for more number of seats, more than above 300. But in other formats, whether it’s INSIGNIA, whether it’s MX4D, whether it’s LED, whether it’s ScreenX, we would like to have a fully viewing and comfortable viewing for all our guests to have luxury in those cinema halls. And that’s the reason why we will have less seats per screen in different formats.

Kapil Jagasia — Edelweiss Financial Services Limited — Analyst

Right, sir. And sir, my other question is like, how is your advertising income recovery shaping up like? Almost like one month of this Q3 has gone by. So would you still stand by full recovery in H2 or is that getting delayed?

Alok Tandon — Chief Executive Officer

Well, advertising income, we are about 65% to 66% of FY ’20 levels. We were hoping that Q2 would be a shade better, but it’s in line with Q1 because of the movies. We all know that some of the marquee 10-fold movies did not performed well at the box office. But Q3 is looking good, but I don’t want to talk about a number. Q4 going forward with — again with great movies, there is a lot of interest being shown by the advertisers. So, I think that things will improve over a period of time, Kapil. And yes, there has been a delay of about a month or two because the movies did not do well and our estimates went haywire. But Q3 and Q4 look promising as we speak.

Kapil Jagasia — Edelweiss Financial Services Limited — Analyst

Okay. Okay. Thank you. Thank you for answering my questions. All the best.

Operator

Thank you. The next question is from the line of Arun Prasath from Spark Capital. Please go ahead.

Arun Prasath — Spark Capital Advisors — Analyst

Thank you for the opportunity. Firstly, if you can focus on costs, I think last year we guided that there will be some permanent cost savings because of the certain measures taken by the company during the lockdown period and we can see some of that in the first half fixed costs. On a per screen basis, there is a reduction probably except rent. So can you give little bit details on how this was achieved and is it sustainable? And if it is sustainable, can we expect some more reduction coming our way even before the merger is going to come into place?

Alok Tandon — Chief Executive Officer

So Arun, you’ve seen the way we reduced our operational fixed costs, whether it’s in manpower or whether it’s in power and fuel and R&M or other overheads. So, I think the hard work we did when all the screens were shut that we formed groups in our company to look at every P&L item with a fine-tooth comb. I think that’s yielding results today. So whether it’s the employee benefit expense, which has gone down from INR12.7 lakh per screen per quarter to INR9.3 lakhs, or if I look at the power fuel and R&M, that gets come down by 3% to INR7.3 lakhs per screen or if I look at other overheads, which has drastically come down to INR4.5 lakhs per screen in Q2 FY ’23. I think that all our measures are now yielding results.

In a steady state, yes, we will see a decline compared to FY ’20. But if you look at FY ’24 or ’25, and when we compare to today’s numbers, there will be a marginal, marginal saving. Because all that saving is already now taken care of, whether it is multitasking by our team members or whether it’s initiating of energy saving devices and energy saving methods or any other way of saving overheads. So that’s something where we are pushing the pedal hard. We are ensuring that whatever we had committed, we live up to that and even our teams are performing in such a way that their internal targets which they were given are being met now.

Arun Prasath — Spark Capital Advisors — Analyst

So does it mean that they are largely achieved and not much is left in the cost savings front?

Alok Tandon — Chief Executive Officer

No, no, no. It’s not like that. We have achieved a lot and we will continue achieving. But if you want to see a drastic reduction quarter-on-quarter that may not happen because now the base itself is low. Remember this, the base itself is low and going forward, you will see reduction but not to the drastic extent which you’ve seen today.

Kailash Gupta — Chief Financial Officer

So Arun, this cost, if you see, this cost reduction comes despite the inflation which is kicking in and hitting us everywhere. I mean, while you see a 3% or 4% reduction on the electricity, but it has already the — have the impact of the higher diesel prices as well as the higher electricity tariffs. Effectively, the reduction is much more. So despite inflation, if we are able to hit this much, I mean going forward, it’s very difficult to commit any number or comment on that because if the inflation continue to happen the way it is happening currently, further reduction looks like very, very difficult and challenging.

Alok Tandon — Chief Executive Officer

And this reduction has taken place, as Kailash rightly said, we are comparing ’23 numbers with FY ’20 numbers. So let’s be cognizant of the fact that it’s been three years — after three years, we are talking about numbers, which have reduced from what we had in FY ’20.

Arun Prasath — Spark Capital Advisors — Analyst

All right. All right. That’s helpful. My second question is once again coming back to the ad revenue. We understand that it usually comes with a lag, right? So by that account, post a fabulous Q1, we should have seen a little bit more recovery, but that has not happened in Q2 for various reasons, but this lag effect is not reflecting in Q2. Any reason beyond the content, poor quality because at least on the back of the good Q1, there should have been some kind of advanced contracts, which should have come in our way, right?

Alok Tandon — Chief Executive Officer

So, Arun, you’re right, it should be lag. But Q2, all marquee movies did not perform. And the clients or the advertisers told us that it’ll be nice that whatever contracts they have — because we knew that there were no people coming in, the footfalls reduced. And if somebody gave us a contract for two weeks, he kept it only two weeks, he did not advance it for the third week. So that’s how it was. We all know that advertisements is dependent one on lag, as you rightly said, but number two, also on the buzz around the movie, on how a movie performs in the first week, then the advertiser may give you contracts for the second, third, fourth, fifth week.

Here, we got it only for a few weeks, but not for a larger or a longer period of time as we would have expected. What saved us and still we did about 65% to — about 65% of FY ’20 level is the long-term contracts that we had and those are the contracts why we could at least get 65% to 70% of FY ’20 numbers. But we’ve seen a little bit of change in Q3. People are talking about advertising and especially for marquee and big movies. And as I said earlier that I am hopeful that Q3 and Q4 would be different than Q2.

Arun Prasath — Spark Capital Advisors — Analyst

Understood. Just on this ad revenue a little bit. I understand the volume or the inventory fill-up rate would be lower because of clients don’t want to show anything in their poor footfall period. But how about the yields? Yields are better, or is it in line with the inflationary trend? Or is it slightly still subdued?

Alok Tandon — Chief Executive Officer

Well, it’s in line with the inflationary trend. We have seen that the yields are slightly improving. It’s not that it’s absolutely flat. It’s slightly improving. But yes, you are right that the volumes are less and the time consumed is less. And hence, there has been a hit on the entire advertising revenue.

Arun Prasath — Spark Capital Advisors — Analyst

Understood. Understood. Finally, on this — on this transaction, Luxe transaction, I think I — we understand this property is a great property in a very popular mall. And even you mentioned that unit economics is very favorable given that they are positive. So that means are we paying far above the replacement value or market value? Or why the promoters of Jazz chose to sell it out when the property is very profitable? Any clue on that?

Alok Tandon — Chief Executive Officer

So Arun, I will not be able to tell you why the Jazz promoters want to sell it. I’ll not be the right person to answer that because even I don’t know. But yes, it’s a competitive price we’re paying and in line with what we normally at INOX would pay for any property.

Arun Prasath — Spark Capital Advisors — Analyst

Okay. So is it more or less in line with the past transactions that we have witnessed in the Indian multiplex industry?

Alok Tandon — Chief Executive Officer

Yes. Yes. So INOX is much, much — I would say, it’s in line with what INOX has paid. And I don’t want to say that whether it’s lower than that or whether it’s higher than that, but I would say it made financial sense for us and hence, we went in for signing this deal.

Arun Prasath — Spark Capital Advisors — Analyst

Understood. Understood, Alok. Thank you very much. Very helpful.

Operator

Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Yeah. Good evening. Thank you for taking my question. Picking up from my side, first, on the proposed merger. [Speech Overlap]

Operator

I’m sorry to interrupt, Mr. Jain. Can you please speak little bit louder? We cannot hear you clearly.

Sanjesh Jain — ICICI Securities — Analyst

Is it good now?

Operator

Yes. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Thank you. So first question is on the proposed merger and if we are closing this in next few weeks that means before INOX-PVR merger, Luxe will be in the INOX portfolio. How is this going to change the merger ratio between the PVR and INOX, which we have announced earlier, which is the 10:3 ratio?

Alok Tandon — Chief Executive Officer

Sanjesh, nothing will change. Everything will remain as the same, 10:3.

Sanjesh Jain — ICICI Securities — Analyst

Everything will remain same?

Alok Tandon — Chief Executive Officer

Sanjesh, because it is already funded through either internal accruals or debt, which is already a part of the purchase consideration or the valuation report which is — which was there for the INOX-PVR merger.

Sanjesh Jain — ICICI Securities — Analyst

So is it fair to assume that this merger is happening at the same valuation at which PVR-INOX have done the share-swap? So it won’t change materially. What has to be a net cash will become a asset for us?

Alok Tandon — Chief Executive Officer

Yes, yes. You are right.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. Thank you. The second question is on the occupancy side, 17%, not a great number to look at. But I know not much in our control there. But is there anything that proactively INOX can do like sending — if we know that the occupancies are not filling, we have a loyalty program, pushing more discount coupons in these movies to see that we can bring up some occupancies there? Any effort that we have done proactively to see that the occupancy rate goes? Or there is absolutely that INOX can do anything post the commercial have agreed and we have to live with the occupancy which finally comes to us?

Alok Tandon — Chief Executive Officer

So, we’re doing a lot of stuff to increase our occupancy, Sanjesh, a lot on the marketing front, whether it’s directly communicating with our guests, sending them emailers, sending them WhatsApp messages, having some schemes. Our three tier loyalty program is doing very well and we’re getting a lot of traction in that. We’ve seen a lot of repeat guests because of the programs that we have in our loyalty program. So, we’re doing a lot of stuff, where we are trying to get people back into the cinemas, especially during a period when the content is nothing great. Q1, we had some great content. So people were coming as it is. But we are really deep diving into the data we have, the consumer data we have in our loyalty program and pinging all our guests. So that’s one.

Number two, to get people, we are doing a lot of stuff in the lobby, a lot of marketing activities, so that every time they come to a lobby, they see something new happening and they find a difference. So it’s not only coming to watch a movie, but also to be entertained. For example, if there is a movie decoration of that particular theme using the name of the movie in the lobby, all those things we are doing. And number three which is important is that we are trying to have a lot of pull by having a lot of F&B specials.

So, we have our chefs going all around, having culinary sessions, inviting people, telling them the recipes, showing what the chef is cooking and beaming it on the LEDs, which are in the lobby. So making it very, very interactive. So when people know that going to INOX, they will have something different, also apart from seeing a movie. So lots of activities, Sanjesh. And I would say in a quarter which did not have great content, we had 116 lakh footfalls and that’s because of our marketing initiatives also.

Kailash Gupta — Chief Financial Officer

And Sanjesh, just to add what Alok is saying, I mean the things which was in our control apart from the marketing and attracting customer was the costs actually and there we did a great job, which is visible from the numbers.

Sanjesh Jain — ICICI Securities — Analyst

No, no, Kailash, very appreciated on the cost side. I think we have done a fantastic job better than this year. No doubt in that. And Alok, what you just told me, it’s all about — it’s a pull factor. I’m telling once the patron come into the cinema, all those experience does matter and that gives a very differentiated experience. So my question was more, how are we getting them in? I know when there is a great cinema, the effort required by us minimizes and there is an automated pull factor. I’m telling when we know that in first two days the reviews have been not great. We have been seeing deteriorating occupancies. Are we doing anything proactively to increase? Or there is absolutely no scope for it?

Alok Tandon — Chief Executive Officer

So Sanjesh, that’s why I said, that’s where our marketing loyalty program comes into play. When we are writing to every guest, we are communicating with every guest to come out and watch that particular movie. So what I spoke about various activities and various promotions, which we are doing is by deep diving into the data of our loyalty program and writing to guests, talking to them directly, having various schemes for them to come and watch a movie. So that’s something which we are doing proactively to ensure that they come out and watch movies with us.

Sanjesh Jain — ICICI Securities — Analyst

Any learning from the National Cinema Day, the INR75, I think was phenomenal. PVR reported that they had 72% [Phonetic] occupancy. Any learnings from that we can implement in a quarter, where we are seeing a very inferior response for the content?

Alok Tandon — Chief Executive Officer

Yeah. Well, learning is that it was more of a celebratory thing we had that day. Learning is that, yes, you should have — we had lots of footfalls over there. We had nearly 5.5 lakh footfalls and the ticket prices were only INR75. But the learning is which we always say is that sweet spot between footfall and the ticket price, it is important, so that the GBOC is maximized. And we always believe in that, that there has to be a sweet spot between footfalls and the ticket price to get the maximum GBOC. I wouldn’t say learning, but the advantage we had was that we got new segment of people who could experience the INOX luxury, the INOX service at a reduced rate, whether it was the rate of our regular screens or whether it was our INSIGNIA screens or whether it was any format.

So, we got a new set of guests who walked into INOX and experienced that entire thing, which I think will help us in the long run because that will create stickiness and that’s important. So that’s how it was. I would say that it was more celebratory rather than we judging and we finding out that how it benefited us. It benefited us, as I just said by opening up new set of customers for us.

Sanjesh Jain — ICICI Securities — Analyst

That’s fair, Alok. Thanks for answering all my questions. And best of luck for the future quarters.

Operator

Thank you. The next question is from the line of Rishabh Gandhi [Phonetic] from Metaverses Equity Fund [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hello? Am I audible?

Alok Tandon — Chief Executive Officer

Yeah, you are.

Unidentified Participant — — Analyst

As we know that this theater industry is highly affected by OTT platforms, so are you planning something for that?

Alok Tandon — Chief Executive Officer

Well, I don’t know what you mean that it’s highly affected. But let me tell you OTT and cinemas will coexist and that’s how it is. Today, what we watch on a cinema hall is totally different than what we watch on an OTT platform. You watch docudramas, web series, a movie, which you have missed in an hall on an OTT platform because of the windowing and the time lag between the movie when it hits the screen and it comes on OTT. So it’s a thing, which — that’s the reason why you watch an OTT. But you go to a cinema for an experience. You go to a movie hall for a larger than life experience, to see the movie in a great environment, to have crystal clear projection and uncompressed sound, to enjoy, to celebrate with the family and friends.

So, I think that OTT and cinemas cannot be clubbed. They both will exist — coexist and they will have, I would say, the same set of audiences, but cinema is more appointment viewing, OTT is not. So it depends on what you want to do, you will watch on OTT or think of on OTT or you would watch a movie in a cinema hall. I don’t think that is affecting. The positive I feel that the quality of content will surely increase in a cinema hall because we’ve seen some how our taste buds [Phonetic] with quality and quantity is concerned in an OTT has changed. And that will rub off in the content for the cinema halls. So, I only see a positive rather than a negative. And I want to just finish by saying that both of them will coexist and they are no threat to each other.

Unidentified Participant — — Analyst

And my second question is that you’re targeting 77 screens and completed 30. It will…

Alok Tandon — Chief Executive Officer

Pardon please, Rishabh?

Unidentified Participant — — Analyst

Hello?

Alok Tandon — Chief Executive Officer

Yes, yes. Go ahead, please.

Unidentified Participant — — Analyst

Yes. That you are targeting 77 screens and you already — 30 already opened.

Alok Tandon — Chief Executive Officer

Absolutely.

Unidentified Participant — — Analyst

So how much time it will take? How much time it will take?

Alok Tandon — Chief Executive Officer

Well, another six months to open 47 screens. So 77 — we’ve already opened 30 out of 77.

Unidentified Participant — — Analyst

Yes.

Alok Tandon — Chief Executive Officer

And we have another six months to go and open the rest. And we are very, very hopeful, Rishabh, that we’ll be able to close and open those 77, those extra 47 screens.

Unidentified Participant — — Analyst

Okay. Thank you, sir. Thank you from my side.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Alok Tandon — Chief Executive Officer

Well, thank you. Thanks a lot for taking interest in the company and we are very hopeful that Q3 should be good for the entire Indian cinema industry. And there should be some great numbers that we will be talking about and we all are looking forward to the exciting lineup of movies, which are there in the coming quarters.

Thank you very much.

Operator

[Operator Closing Remarks]