PVR Limited (NSE: PVR) Q4 FY22 Earnings Concall dated May. 09, 2022
Corporate Participants:
Sanjeev Kumar — Joint Managing Director
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Nitin Sood — Chief Financial Officer
Analysts:
Ankur Periwal — Axis Capital — Analyst
Abneesh Roy — Edelweiss Financial Services — Analyst
Aaron Armstrong — Ashmore Group — Analyst
Prateek Poddar — Nippon India Mutual Fund. — Analyst
Arpit Shah — Deep Research Capital — Analyst
Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst
Sanjesh Jain — ICICI Securities — Analyst
Vipul Garg — Kotak Mahindra Bank — Analyst
Harit Kapoor — Investec — Analyst
Girish Pai — Nirmal Bang Equities — Analyst
Jaykumar Doshi — Kotak Securities — Analyst
Mayank Babla — Dalal & Broacha — Analyst
Arun Prasad — Spark Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the PVR Limited Q4 and FY ’22 Earnings Conference Call 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. Thank you, and over to you, sir.
Ankur Periwal — Axis Capital — Analyst
Yeah. Thank you, Aman. Good evening friends. Welcome to PVR Limited Q4 and FY ’22 post results earnings conference call. As usual, the call will be initiated with a brief management discussion on the Q4 and full year performance followed by an interactive Q&A session. Management team will be represented by Mr. Sanjeev Kumar, Joint Managing Director, PVR Limited; Mr. Gautam Dutta, CEO, PVR Limited; Mr. Kamal Gianchandani, Chief of Business Planning and Strategy, and CEO, PVR Pictures; and Mr. Nitin Sood, CFO, PVR Limited.
Over to you Mr. Kumar for the initial comments.
Sanjeev Kumar — Joint Managing Director
Thank you. I would like to welcome you all to the earnings call to discuss the audit results for Q4 12 month FY ’22. I hope you’ve had the opportunity to review our presentation and results which have been uploaded on ours as well as on the stock exchange websites. The year gone by hopefully marks the end of disruptions on account of COVID. The third wave of COVID has started in the last week of December ’21 was the shortest in duration. The infection positivity rates peaked in mid Jan ’22 and came down drastically by the end of Jan ’22. All the states and UTs implemented restrictions around capacity and night curfews, which impacted cinema operation.
This time around, except for Delhi and Haryana, no other state mandated complete cinema shutdown. By the end of Jan ’22 the states started to withdraw restrictions and by the end of Feb ’22 almost all restrictions had been done away with. As on date, all restrictions have been lifted across more than 99% of the screen portfolio. We believe the new blockbuster content, which has started from first week of November abruptly stopped as soon as fresh restrictions were announced in the end of December. There was no fresh content for the month of January and for a large part of February. Release of blockbuster content resumed from the fourth week of February, namely Valimai, Bheemla Nayak and Gangubai.
This was followed by Kashmir Files, which was a sleeper hit, RRR and Batman in March ’22. Consistent flow of new content ensures that the admissions in March touched the post pandemic peak of 90.6 lakhs, an increase of over 38% over December ’21 admissions. The company was gearing up for a stellar Q4 when the third wave came upon us swiftly. It was difficult for the company to pay down its fixed cost primarily because almost all the cinemas were operational. And secondly, because we realized that the recovery from this wave would be equally swift.
The company witnessed operational losses at the EBITDA level for the month of Jan and Feb, followed by strong profitability for the month of March with EBITDA margins in excess of 20%. The company opened 29 screens across five properties in FY ’22 and also closed 23 screens across nine properties on March 31 where leases had expired. A six-screen multiplex in Rourkela was the first cinema that the company opened in FY ’23. It marks PVR’s foray in the State of Odisha. The company plans to open 120 to 125 screen in FY ’23. Most of these will become operational in the latter half of the year and the entire capex will be funded through internal accruals and liquidity available with the company.
Our screen portfolio currently stands at 854 screen across 173 cinemas in 74 cities in India and Sri Lanka. On the results, please note that the numbers I’m sharing are after adjusting for the impact of Ind AS 116 relating to lease accounting and are different from the reported numbers we submitted to the Stock Exchange today. For the quarter ended March 31 ’22, total revenue was INR554 crores. EBITDA loss was INR18 crores and PAT loss was INR96 crores as compared to revenues of INR191 crores, EBITDA loss of INR118, and PAT loss of INR272 crores for the quarter ended March 31, 2021. For the 12-month period ended March 31, 2022 total revenue was INR1,409 crores, EBITDA loss was INR155 crores and PAT loss was INR419 crores as compared to revenue of INR310 crores, EBITDA loss of INR424 crores and PAT loss of INR666 crores for the 12-month period ended March 31, 2021.
We continue to keep adequate levels of liquidity on the balance sheets with over INR667 crores as on March 31, 2022. A quick update on the proposed merger with INOX Leisure Limited, which was approved by the Board of the two perspective companies on March 27, 2022. The company has filed a Draft Scheme of Amalgamation with BSE and NSE on March 30, ’22. Approval from the stock exchanges and SEBI is awaited post, which the scheme will be filed with NCLT. To conclude, I would like to thank all the stakeholders for their unwavering commitment and support to the business. With a strong pipeline of content available for release over the next several months, we are very confident that the business will continue to perform strongly and ’22, ’23 will be a bounce back year for the cinema industry.
With these opening remarks, I open the platform for any Q&A. Thank you very much.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] First question is from the line of Abneesh Roy from Edelweiss. Please go ahead.
Abneesh Roy — Edelweiss Financial Services — Analyst
Yeah, thanks. My first question is on the recent box office performance, especially in the non-South market. So all the key movie like Heropanti, Jersey, Runway 34, etc have a decent star cast and also in terms of marketing, they have not really been behind, but still the revenues have been well below expectations. And in the past we have seen that when a slew of flops are there then consumer would like to wait and the behavior becomes of more of wait and watch rather than rushing to watch movies. So do you see that risk? I understand every week we have few movies releasing because of the pent-up lineup, but still so much of back-to-back disappointments. Is that a concern?
Sanjeev Kumar — Joint Managing Director
Kamal, would you like to take that?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Sure. Abneesh, thanks for the question. Before Heropanti, Runway 34, Attack, we also had Kashmir Files, which performed beyond our wildest expectations. I mean, even the most optimistic expectations were beaten by a huge margin. It is one of those classic sleeper blockbusters and it’s a film in Hindi. And Gangubai — this whole season of getting audiences back to the big screen started with Gangubai and that was released in February, but fairly close to April period, just right at the beginning of the season of — movie season. And again there, although it was led by a female actress but because the director is popular, well known, it was able to attract people.
And again, the film exceeded the expectations. You would have normally expected INR70 crores, INR80 crores sort of a net box office. The film went on to do almost close to INR155 crore, INR160 crore. So, our businesses are peaks and valleys. There would always be surprises. There would always be films which will surprises on the negative side, on the downside. And then there would be films which will beat our expectations, most optimistic expectations and surprises on the upside. That’s the nature of our business. No one thought KGF will turn out to be the second biggest Hindi film, all-time after Bahubali 2.
Kannada films as a regional language never even been in the reckoning, it’s always been Tamil or Telugu and Telugu more so because of Bahubali and Mr. Rajamouli. But no one thought Kannada films would be able to beat all other regional languages and the film dubbed in Hindi will turn out to be the second largest highest collecting box office ever. So that’s the nature of our business. I think the good news is that people are back in cinemas in a big way.
I would spin this argument and give you another perspective that if a dubbed film with somewhat unknown star can do INR400 crore plus box office in Hindi dub and I’m talking only Hindi, I’m excluding all other languages, Kannada, Telugu, Tamil, Malayalam then you can imagine, when a Hindi film, which is rooted in Indian ethos, which tells the story which resonates with the large number of people and which has a popular face at the helm, it could be Brahmastra, it could be Laal Singh Chaddha, it could be any other film, which is coming.
It could very well be Prithviraj, so you can imagine what is the potential of a Hindi film which resonates with a large number of people and which has a popular phase. I think the business has the whole perception that we had that this is the maximum ceiling, all of those perceptions and myths have been broken. And what we are seeing in April and before that in March, these is a very positive developments.
Abneesh Roy — Edelweiss Financial Services — Analyst
Sir, just one very small follow-up there. So you mentioned Gangubai, Kashmir Files and the dubbed movies of South India, those are differentiated content or say more of masala movies. So essentially movies which are not doing well, say in Hindi, those are more of a metro kind of audience, so do you see now producers addressing that bit because clearly mass masala, those kind of movies seem to be working rather than too much of a SEC A1 kind of content. So would you agree to that and would you see content getting addressed — I understand some movies are coming, which would be more of Indian ethos, but do you see that as a key reason why some of these movies did not work?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yeah. So Gangubai is not a masala film. It’s your SEC A, A plus, it’s what you call typically a multiplex film. Batman dubbed in Hindi is targeting multiplex premium audience. Doctor Strange which is turned out to be the second highest weekend after Spiderman since we’ve opened — reopened theaters is a premium audience, premium segment film and Doctor Strange has not just done well in the original version but the Hindi dub has also done exceedingly well. So we’ve had examples on both sides. I think where you are right in saying what you’re saying is that the results are polarized.
Films which are doing well are doing exceedingly well. Films which are struggling at the box office are struggling more than expected. But look, we’ve been — off and on we’ve been half-shift, half open for the last two, two-and-a-half years. There would always be some unpredictability in terms of content that people like and would like to come out and watch it in theaters. But I think it’s a matter of time when it will settle down. Right now, all sorts of films are doing well. We don’t have this concern that only these pot boilers, commercial films, over the top flight films as we call them are doing well, that’s not a concern at all. In fact, we see that that is a positive.
Abneesh Roy — Edelweiss Financial Services — Analyst
Sir. My last question is on Sri Lanka. So INR8.7 crore forex impact. So my question is what would be your expansion plans in Sri Lanka next two years? And in the FY ’23 period, how do you see the high inflation and lack of low electricity those two, three issues are there in Sri Lanka market. So how do you see the profitability in Sri Lanka in FY ’23 given the current context?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Nitin, do you want to take this?
Nitin Sood — Chief Financial Officer
Do you want me to take that? I think as far as this year is concerned, we’ll wait and watch. Let’s see what happens, both with the economy and where the economy is headed. We obviously hope that things get better and improve. The months that we were fully operational we did very well. We had over 20% EBITDA margin. We’ve got a lot of support from the developer there, which is far eastern group Shangri-La, so we’re getting a lot of support and SOPs from their developers. They are very understanding, both with respect to the pandemic and now, what’s going on with the economy. So we’re just waiting and watching. Let’s hope that things get better in the next six to eight months and the business bounces back. And as of now, we’re just focusing on this one property and seeing where things go and not looking at any expansion yet.
Abneesh Roy — Edelweiss Financial Services — Analyst
Okay. Thanks, sir. That’s all from my side. Thank you.
Operator
Thank you. The next question is from the line of Aaron Armstrong from Ashmore Group. Please go ahead.
Aaron Armstrong — Ashmore Group — Analyst
Hi, sir. Thank you for taking my questions. Three questions from me please. Firstly, ticket price.
Operator
Aaron, may I request you to please speak louder please. It’s not very clear.
Sanjeev Kumar — Joint Managing Director
Your voice is not very clear.
Aaron Armstrong — Ashmore Group — Analyst
Sorry, firstly in terms of ticket pricing, the trends were very strong last quarter. Could you talk about the outlook for that for the coming quarters, please, whether it can remain at these elevated levels? Secondly, in terms of on the rental side, we had some anecdotal reports of mall operators looking to catch up some of the revenue that they lost during lockdown and if you could give any comments on that side of things, please, in terms of whether you’ll be paying any kind of catch up elevated revenue to landlords? And then thirdly, any kind of timing you can give around merger completion and the approvals that we’re still waiting for how long you think that will take?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
I’ll take the ATP answer first. Technically, we’ve been out of business for over two years. And so whatever growth we have taken on ATP is largely on account of inflationary cost at all ends going up. And now that we’ve been operating at whatever rate we intend not to take any pricing up. This is largely going to remain where it is and we are wanting to maximize footfalls as we go further. And there is a complete acceptance as far as the new ATP norms are concerned. And technically, no plans to take the ATP up and it will remain at the same level. But we are very confident that we’ll be able to maximize footfalls with this strategy going forward.
Sanjeev Kumar — Joint Managing Director
Aaron on your second question about the rental catch up — all our deals, bulk of deals, I would say 98% to 99% of our deals had limited time period, long-term discounts available to us during this two-year period of pandemic. There is no catch up on rentals with most of our landlords going forward. There could be one or two exceptional cases where we may have some bit of a higher revenue share during the next 12 months period. But I would say, 97%, 98% of the cater [Phonetic] there is no rental catch up. And effectively, we are going to pay fully contracted rentals in accordance with our contract now, which we’ve also done in the month of March as we came back to full operations.
Last question was on merger and timeline. I think we can only share indicative broad timelines because part of it is not in our control, but just to explain, we filed the scheme post the announcement with the stock exchanges for approval on March 30. This process normally takes anywhere between two to three months before you get approval from stock exchanges and SEBI. Post that you filed the scheme with the National Company Law Tribunal, which I understand the processes could be six to eight months. We think that we should be able to manage the whole process — indicatively in a 9-month window as things stand. So hopefully in beginning of Q4 we should hopefully see the merger — all formalities being completed. That’s the indicative timeline that we are looking at — that end of December or sometime in Q4 hopefully we should be able to complete all the legal formalities with respect to the merger.
Aaron Armstrong — Ashmore Group — Analyst
That’s great. Thank you. Could I ask maybe one follow-up, please, just on the merger timeline? So the process of the merger not requiring certain approvals because the two companies now fall below the minimum revenue threshold due to the pandemic lockdown. Do you think that that’s something that the regulator will view favorably and in which case you have a very high level of confidence that this will be approved in the nine month window or do you think there could be some ambiguity, there could be some pushback from the regulator and in which case it could take more time or there could be a small probability that the merger doesn’t go through?
Sanjeev Kumar — Joint Managing Director
To be honest, it’s quite hypothetical. When we announced it the scheme we said, based on the advice that we received from councils, we don’t believe that this requires any competition, regulator approval based on the thresholds that we have. And see here anything from the regulators we’ll adequately respond to them. So it’s slightly difficult to comment right now. We haven’t heard anything as yet from the regulator if any and if we do hear back we would respond to that. And yes, in that case the timeline [Indecipherable] but it’s quite hypothetical at this stage for us to comment.
Aaron Armstrong — Ashmore Group — Analyst
Understood. Thank you very much.
Operator
Thank you. Next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Prateek Poddar — Nippon India Mutual Fund. — Analyst
Yeah, hi. Sir, just two questions, one is just to get some clarification, the 20% margins, which you called out in the month of March they were pre-Ind AS, right?
Sanjeev Kumar — Joint Managing Director
Yes, yes.
Prateek Poddar — Nippon India Mutual Fund. — Analyst
Okay. And given that these are pre-Ind AS margins, I’m assuming that the ad spends recovery in the month of March would have been very good versus pre-COVID. That’s a fair understanding and also if you can comment on the forward outlook for that.
Sanjeev Kumar — Joint Managing Director
Ad spend recovery in the month of March was not even 50%, it was around 40% of pre-COVID and it would take another quarter, at least for us to get back within the pre-COVID numbers. So we believe that the journey on recovery is another three to four months away, where we could start to sort of look at the similar numbers around pre-COVID.
Prateek Poddar — Nippon India Mutual Fund. — Analyst
And then what experience 20% margins in the month of March, sir.
Sanjeev Kumar — Joint Managing Director
Yeah, very strong footfalls at the cinemas — still some of the cost cuts and the cost-efficient.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Controlled cost, very good footfalls, ATP was strong and so was SPH.
Prateek Poddar — Nippon India Mutual Fund. — Analyst
And would your exit SPH and ATP be higher than your company average SPH and ATP for the quarter. That’s a fair understanding for the month of March.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes, absolutely.
Prateek Poddar — Nippon India Mutual Fund. — Analyst
Okay, great, thanks, and all the best.
Operator
Thank you. The next question is from the line of Arpit Shah [Phonetic] from Deep Research Capital [Phonetic]. Please go ahead.
Arpit Shah — Deep Research Capital — Analyst
Hi, just wanted to know what kind of revenues we were generating from the property, which will expire in nine properties?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Did you hear that?
Nitin Sood — Chief Financial Officer
Yeah, yeah. I’m answering that question. The senior line properties, which we closed down contributed approximately 2% of our revenues pre-pandemic and a similar contribution to the earnings.
Arpit Shah — Deep Research Capital — Analyst
A few percent of the revenues and you have restarted the cinemas under a new brand, right?
Nitin Sood — Chief Financial Officer
Correct, correct.
Arpit Shah — Deep Research Capital — Analyst
Thank you sir.
Operator
Thank you. The next question is from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead.
Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst
Thanks for the opportunity. Sir, if you can talk a bit about your tie-up with must Umaa Cinemas, will we have to pay any kind of royalty for design know-how? And also given the fact that these cinemas will have a forward concept, will it result in any kind of loss of fees? And lastly, if you can also share what can be the capex per screen over here? Will it be materially different than what we have for premium screens?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Wow, is Pramod there or?
Sanjeev Kumar — Joint Managing Director
No, Pramod is — I don’t think he’s there on the call.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Okay. It’s basically just the upfront cost as far as I know. We just concluded the deal with them. And I think, ideally, we wouldn’t want to look at a conversion at this stage — a conversion [Indecipherable] is very, very new and very — on the layouts really right now, we’re just fully evaluating various options in various places where we can introduce this concept. So we don’t know for sure if there will be any seat losses or there will be — impact we’ll be able to manage to get more seats for better efficiency because we really haven’t even started working on layouts yet. But we would look at probably introducing this as a new multiplex and not in a retrofit. So in a retrofit you may have those worries of moving seats, but in the new projects we will be able to accommodate the formats, and at the same time not lose any seats.
Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst
And the capex part and also the design part with respect to royalty and all.
Sanjeev Kumar — Joint Managing Director
Yeah. So let me answer that. In this case, this is an architectural concept. There is no long-term royalty payable. We’ll be paying them for the services for designing the unique concept and putting that in place for each property level. So there is no long-term financial impact apart from exclusivity in being able to introduce that concept for the Indian market. And currently, I think it’s a fairly early stage where we are going to identify a location and then develop a design concept, which can be executed in that location.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
It’s also very early stage to even determine the capex per screen, as I said, we’ve only in the deal, not even 10 days ago.
Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst
Sure sir. One last question from my side. I think we opened our first multiplex in Orissa sometime back. So since we have debuted in this state what steps are we taking in terms of branding? And any specific reason as to what took us so long to kind of enter this market? Was it lack of malls or any specific reason, which you would like to highlight?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Rourkela, we actually signed with a very established developer there, foreign group based out of Calcutta. And of course, as you know from signing to opening takes a while any which way and of course as you said rightly behest of any retail development for the longest time. But the first and the best mall that came up in Rourkela, Forum Mall, we signed and which invariably got delayed by two years because of the pandemic as well. So we have started work on that property two years ago before the lockdown.
And then we started post opening both the mall and as we stopped work, even they stopped. And obviously then we managed to complete an open it in April and is showing good numbers initially from within less than four weeks of we’ve opened it now. And it’s showing some promising numbers and we have another one coming up in Rourkela where we’ll start work. We haven’t started yet. We’ll start work there as well in a couple of months’ time.
Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst
Sir, one small clarification, this INR8.7 crores of loss that we have reported from Sri Lankan operations. Is this a non-cash charge or actual cash loss?
Sanjeev Kumar — Joint Managing Director
No, this is a non-cash charge part of our investments into a 100% subsidiary are structured in form of foreign currency loan and as a result of which we need to book a reinstatement loss on the loan as the currency depreciates. So this is a non-cash charge. This is only an accounting charge required.
Jinesh Joshi — Prabhudas Lilladher Pvt. Ltd. — Analyst
Okay, sir. Thank you so much.
Operator
Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Sanjesh Jain — ICICI Securities — Analyst
Good afternoon, sir. Two questions from my side. First on the ATP, so INOX has also reported their numbers, just comparing the two companies there is a divergence in how the ATPs has moved. The ATPs has improved for us while INOX it has declined on a sequential basis. Can you explain, help us understand the ATP increase for us? Is that we have taken a price increase and INOX has been in similar pricing, what is the reason for the ATP because SPH we are on the same trend as they are. So can you just help us understand the ATP? And if you have taken the price rise what is the kind of price increase we’ve taken?
Sanjeev Kumar — Joint Managing Director
So let me correct you, even the SPH growth for PVR is much healthier than what the competition could manage so on both ends be it ATP and SPH, I think we’ve been able to record slightly better number. But now coming to your question on ATP, ATP is actually a blended mix of what the operators manage with content, timing, premium versus non-premium and the kind of content that plays out better within the circuit. So I think PVR could manage a healthy mix between the premium offering to a consumer and could maximize on that part of the game. And I think SPH as well we’ve been consistently working on this piece and managed to record a good healthy number. And we feel that this is here to now stay and it will only get better from here.
Sanjesh Jain — ICICI Securities — Analyst
So what I understand is that we have not taken price increase. It’s just the mix and the mix has more towards premium and going forward this is the ATP we should be looking at, even for FY ’23?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes. The only thing as I said, sometimes the kind of films that do well, the mix of Tier 2 and Tier 1 market mix for us, South performed well. So each chain has its own strength and the way they program content has a bearing on ATP because ticket pricing is what you see — an average ticket price is a blended answer to what we’ve managed to do with ticket prices. And for us, that formula has kind of worked a little better.
Sanjesh Jain — ICICI Securities — Analyst
Sure. A second question on the distribution margin. Again there is a divergence trend between the two player. For us, on a sequential basis, the margin has declined, while for the competition, it has increased while we have done better on the ATP side, but the flow-through has been slightly inferior for us. What explains that?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
We would not like to comment on the comparison because this is all sensitive data and information that we would not be comfortable sharing on the public platform. I would only say that in Q4 because Jan and Feb were disrupted months where cinemas were open, but content does not really coming — new content I mean, very difficult to analyze it the way and the manner in which you’re looking at it. I think if you wait for another quarter, look at April, May, June period which is Q1 of the current financial year, you will get a better sense of where the film hire and the other comparative variables are moving.
Sanjesh Jain — ICICI Securities — Analyst
Fair, sir. But just to understand for next year or new year, how should we look at the distribution margins? Should it certain to the historic level — pre-COVID levels? Will that be a fair assumption? Or for a time being, we will accommodate as we said earlier, if they releases because they have waited a lot for the movie releases, how should we look at the distribution margin for FY ’23?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
The accommodation strategy has — it has stopped in March. We are back to historic levels as far as the sharing percentage goes. The only moving part now is because we have variable sharing percentages in different languages, what I mean is in Telugu, Tamil, Malayalam, Hindi, Punjabi, Hollywood films, we have a different sharing arrangement with the distributors. So depending on which language performs better, the blended film hire percentage could vary, but the sharing percentage, we are back to historic levels.
Sanjesh Jain — ICICI Securities — Analyst
We’re back there. Sorry. The next one is the shows per day. In the April, are we back to the 4.7 to 4.8 shows per day, and the entire inventory is available now with the normalization?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes. We are back to our normal average shows. And I think the average is slightly higher than 4.7. It’s 5 plus. And except Jammu where we have a capacity restriction in India, no other state has any capacity restriction. And of course, in Sri Lanka, there is a small restriction of capacity. We are permitted to sell 75%. So apart from that, within a chain, there is no restriction in any other state or any other territory.
Sanjesh Jain — ICICI Securities — Analyst
Fair enough, sir. On the distribution business, I mean, you did mention in the previous call that we will be stepping up on that business side on the film distribution. How are we looking the film distribution business for FY ’23?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Nitin, do you want to comment on this?
Nitin Sood — Chief Financial Officer
This is a PVR Pictures part of the business you are talking about?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes, PVR Pictures part. Right, right.
Sanjeev Kumar — Joint Managing Director
This is PVR Pictures [Indecipherable] do you want to talk about this?
Nitin Sood — Chief Financial Officer
Yeah. So you know, we continue to build on our distribution business. It saw a sharp recovery in financial year ’22. We were fortunate to have a couple of films releasing — a couple of big films which came out theatrically. We were able to move a lot of our Hollywood foreign language inventory to various streaming platforms and television stations. All of that resulted in a very sharp recovery in our distribution business. We were pretty much back to where we were pre-COVID. I mean we could have done better. There was no COVID impact in the beginning of calendar year ’21. We could have done better in terms of top line and most likely bottom line.
But I think we made a very sharp recovery given that exhibition was still struggling. We are extremely buoyant on distribution business. We are getting many opportunities. Fortunately, PVR has a very strong brand equity amongst all content partners. We have seen as a very solid distribution service platform. We get many opportunities. So it’s our endeavor to scale up this business many fold, and you would see a lot of action, a lot of steps in that direction, but we would speak more about it as we move forward.
Operator
Thank you. Mr. Jain, request you to return to the queue for any follow-up as we have several participants waiting for their questions. Also, the participants are requested to limit their questions to two per participant. If time permits, you may join the queue for any follow-up. Our next question is from the line of Vipul Garg from Kotak Mahindra. Please go ahead.
Vipul Garg — Kotak Mahindra Bank — Analyst
Hello. Am I audible?
Operator
Yes.
Sanjeev Kumar — Joint Managing Director
Yes, you are audible.
Vipul Garg — Kotak Mahindra Bank — Analyst
Sir, actually, you told that you would be going for a portfolio of 120, 125 screens during FY ’23. So what would be the capex amount for the same?
Sanjeev Kumar — Joint Managing Director
Yes. Our annual capex outlook this year will be between INR350 crores to INR400 crores on new build screens plus also maintenance capex on existing screens. So we are looking at annual outlook of anything between INR350 crores to INR400 crores this year.
Vipul Garg — Kotak Mahindra Bank — Analyst
And what would be the debt levels at present, about INR1,400 odd crores?
Sanjeev Kumar — Joint Managing Director
Our gross debt is about INR1,500 crores, net debt is about INR900 crores.
Vipul Garg — Kotak Mahindra Bank — Analyst
Okay. And would you be able to share the debt and cash numbers for INOX also or not?
Sanjeev Kumar — Joint Managing Director
I can’t comment on INOX numbers as of now.
Vipul Garg — Kotak Mahindra Bank — Analyst
Okay, fine. Thanks.
Sanjeev Kumar — Joint Managing Director
They’re in public domain. You can refer to their website.
Vipul Garg — Kotak Mahindra Bank — Analyst
Okay. Thanks.
Operator
Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.
Harit Kapoor — Investec — Analyst
Yes. Hi. Good evening. Sir, I just wanted to check on two things. One was — sir, during the pre-COVID period, you had made certain structural cost-saving measures across the opex line. At that point, I think you mentioned that ex-rent you are looking at a like-to-like cost reduction of about 10% across all line. Just wanted to know, in the current context where the inflationary environment would probably hit within your employee cost line and you would have to ramp up cost. Does that like to like 10% reduction kind of number still stand or it could be lower in a fully operational business?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Fairly a valid point you’ve said. And if you refer to Slide 18 of our presentation, which basically shows an outlook of how we’ve been managing our costs so far. I think even in Q4, if you look at let’s start with the people cost. Our average run rate of cost in FY ’20 on people cost was roughly INR100 crores a quarter which in Q4 this year is INR81 crores, still 20% lower. These are headcount low as compared to pre-pandemic. And we are reasonably confident that we will be able to operate next year on a same-store level, a lower headcount than what we were operating in pre-pandemic.
However, as you rightly said, there is a wage inflation already in play. I think we’ve already seen up to now, almost 11% to 12% hike in average cost as we compare to FY ’20 on account of minimum wages and cost inflation. And there is likely to be even further inflation this year as the business bounces back, we have not given significant increments, et cetera, to the team. So some bit of inflation is going to play out, for sure. But I think — we think that some of it will get recouped by the higher realizations that we are doing, but you know our cost should still be closer to what we were doing in FY ’20. In FY ’23, we may not be possible to get full 10% savings over FY ’20 given the inflation, but we still think that we’ll be able to keep this cost at FY ’20 or below levels even in FY ’23.
Harit Kapoor — Investec — Analyst
Right. Thanks. The second question was on the screen addition. So this pick up from 80 odd screens toward 100, 125 screens, is that just a function of pent-up assets at the developers end which probably you were not taking or not getting completed due to COVID and just kind of come in one short, is that the way to kind of read it?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes. Yes, precisely I think a lot of the developments for screens also stuck due to lockdowns and COVID and the malls weren’t ready. But now the malls are ready and therefore we are taking the hand over and start work on them, and also we have a lot of large-format one here which is accelerating the number — the screen count. We have 8 screens to 10 screens to even a 12 screen complex coming up what we call a big complex sales. And those are actually adding up to the number of screen openings for the year.
Harit Kapoor — Investec — Analyst
And just a follow-up on this screen addition part. It seems like a larger share in South India this year. So is this that coincidental in terms of what properties are coming, or is it more of a planned thought process, at least by FY ’23?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
No, I think quite scheduled pretty evenly all over the place. I think one in South India, maybe one of the few are. They’re just more large formats because as I said, more screens, 8 to 10 to 12 screens because of the acceptance of multiple language films. Otherwise, we have Gujarat, Gurgaon, Pune, even the East India, again Rourkela, it’s pretty well spread out for the country.
Harit Kapoor — Investec — Analyst
Got it. That’s it from me. Thanks, and all the best.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Thanks.
Operator
Thank you. The next question is from the line of Girish Pai from Nirmal Bang Equities. Please go ahead.
Girish Pai — Nirmal Bang Equities — Analyst
Yes. Thank you for the opportunity. Just wanted to discuss potential CCI involvement with the merger deal. Is there a timeline within that CCI has to raise any objections if any post which it becomes kind of a time-barred situation? That’s point number one.
Second, if there is a CCI involvement and there is a divestment in screens that is required from your side, is there a certain minimum threshold you’re looking at, or beyond that you would probably want to kind of go-ahead with the deal? Those are two questions I wanted to ask you.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
So, Girish, let me respond to your second question first. Second question is quite hypothetical and we haven’t even thought about anything like that. So we would refrain from commenting. On the first point, until what time CCI can intervene, I’m not aware of any specific guideline, but our understanding is mergers are typically fall under the merger control guidelines. And effectively if you need an approval, you need to apply to them and seek an approval. If you don’t need an approval, you don’t need to file with them. So, to be honest, I’m not aware of any timelines, but if years — I’m guessing the stock exchanges and SEBI approval once it’s in place, there will be the basis for us to go ahead and file in the courts.
Girish Pai — Nirmal Bang Equities — Analyst
Just one more question regarding the CCI thing. You had an experience with DT Cinema situation where you had to divest seven screens out of 39 screens, of which one was — I think one was in a property in Saket. What in your opinion determined that particular situation where CCI said that you need to divest six screens in Saket? Is that a micro-market monopolistic situation that you saw, I mean that it saw?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes. You know, the starting point of that question is whether a transaction is notifiable or not notifiable. And in the case of that transaction, when we were acquiring that business, that transaction was notifiable. In the present case when we are doing this transaction, this transaction is not notifiable according to law. So both the situations are not comparable.
Girish Pai — Nirmal Bang Equities — Analyst
Thank you very much.
Operator
Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.
Jaykumar Doshi — Kotak Securities — Analyst
Hi. Thanks for the opportunity. First off, a bookkeeping question on theatrical window. Now that the business is normalized, is there an understanding with producers in the Bollywood to move back to, let’s say eight weeks of theatrical windows?
Sanjeev Kumar — Joint Managing Director
Yes, we will be returning to the erstwhile eight-week window by end of July.
Jaykumar Doshi — Kotak Securities — Analyst
Perfect. Thank you. Second is —
Sanjeev Kumar — Joint Managing Director
This is for Hindi films. For different language films, it will be a different arrangement. But for Hindi films which is a stapled eye, we will revert to eight weeks at the end of July.
Jaykumar Doshi — Kotak Securities — Analyst
Perfect. Thank you. Second is, I was a bit surprised when you sort of mentioned that advertising revenues would take three to four months to recover. I was hoping that the way April has shaped up from a box office perspective, ad sales would have — ad revenues would have largely recovered. So what is the challenge you are facing on the ground, and if you could elaborate a little bit on it? And does it mean that FY ’23 ad revenues could be lower than FY ’20, or at best match FY ’20 levels?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
First of all, yes, it is most expected that actually advertising revenues will be lower than the pre-COVID level, number one. Number two, now coming to the question of why it’s taking time because you need to understand cinema as a medium. It is the fourth of the fifth priority for a media planner. So technically we’ve been off radar for close to about 30 odd month, and it will take time before you know planners. And typically a plan gets made about three or four months prior to a big launch, and that’s where most of our bulk of our earnings happen.
So we are back on the radar. We got a fairly decent recovery in March. But having said that, we are waiting for some big blockbusters. The good news around KGF, RRR, Gangubai is only helping matters. And now with Doctor Strange doing well at the box office, we still believe it’s a few weeks away but very, very confident that within about three to four months, we should be back on track.
Jaykumar Doshi — Kotak Securities — Analyst
What is your mix between local advertisers and slightly larger more organized players?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
So technically, the split is about 60%-40%. We still cater 40% to retail and small businesses. 60% is largely on big businesses which is garnered through agencies and the corporate offices.
Jaykumar Doshi — Kotak Securities — Analyst
Are you seeing a better recovery in either of the two, or it’s broadly similar?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Actually, yes. The retail is much better. They’ve warmed up to — because their stores are in the mall. They can already see a huge amount of recovery. They can feel the pulse a lot better. So that retail recovery specifically in South is very, very good. In fact, if you look at market, South has done well and has recovered fairly well. North, as a market is, is second in line. But it’s actually the West region, which has a bulk of contribution to make a staking a little more time because there, you have the maximum corporate business flowing in and that’s taking some bit of time.
Jaykumar Doshi — Kotak Securities — Analyst
Understood. Thank you so much.
Operator
Thank you. The next question is from the line of Mayank Babla from Dalal & Broacha. Please go ahead.
Mayank Babla — Dalal & Broacha — Analyst
Hi. Thank you for taking my question. I have two questions. My first one is particularly about footfalls. Sir, I needed your help and understanding that despite having a larger screen base compared to our competitor and being more diversified, is there any other specific reason why there was a hit in footfalls this quarter compared to last quarter?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Can you repeat your question? The last part not very clear.
Mayank Babla — Dalal & Broacha — Analyst
Yes. Sir, my question was why were the footfalls marginally down quarter-on-quarter basis?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Do you mean Q4 of financial year ’22 as compared to Q3?
Mayank Babla — Dalal & Broacha — Analyst
Yes.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Because Jan and Feb, we didn’t have releases, whereas in Q3, we started getting films in October, and we had films slight till the end of December. So there were more productive weeks in Q3 as compared to Q4. Nitin, do you want to add something? Maybe I’m missing some point.
Nitin Sood — Chief Financial Officer
No. We covered that. The Q4 basically, the Omicron wave hit, third wave?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes, yes.
Nitin Sood — Chief Financial Officer
At the end of December all the way to Jan end, and since capacity restrictions were imposed in Delhi and Haryana which are of course very big markets for Hindi movies, no new films got released till the third week of February. So all of Jan and most of February, no new movie got released. When movies started getting released only after the restrictions were lifted such as Gangubai and all, and then those — so these 10 days of February and full March is where we actually had recovered and — genuine footfalls.
Mayank Babla — Dalal & Broacha — Analyst
Right. Sir, thank you for that. And my second question was regarding with — does the promoter has any pledge of around 6%, 6.3%?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Hello?
Sanjeev Kumar — Joint Managing Director
Yes, there is a pledge. Yes, there is a pledge of Securities. They have taken some short-term borrowings. Yes, there is a small pledge of shares.
Mayank Babla — Dalal & Broacha — Analyst
Sir, this was in the March quarter itself, is it, or it was before this quarter?
Sanjeev Kumar — Joint Managing Director
This was in the March quarter. Yeah.
Mayank Babla — Dalal & Broacha — Analyst
Okay, sir. Okay. That’s all. That is my only question. Thank you so much and best of luck.
Operator
Thank you. The next question is from the line of Arun Prasad from Spark Capital. Please go ahead.
Arun, your line is unmuted. Please use the handset mode and proceed.
Arun Prasad — Spark Capital — Analyst
Hope I’m audible now?
Operator
Yes.
Arun Prasad — Spark Capital — Analyst
Yes. Sir, my first question is on the screen opening which you have indicated as around 125 about in the coming years annually. So question is, is this restricted because of the fact that you wanted to open only up to the internal accruals, or is it more because of the mall developer handing over the property?
Sanjeev Kumar — Joint Managing Director
This is because — this is the list of pipeline of screens that we are executing. We are executing a little more, to be honest, but we are — because sometimes the screens get delayed on account of developer’s execution as well, so the number of screens under fit-out will be more than what you see what we’ll end up opening. But yeah, we hope that these many will definitely open during the course of the year.
Arun Prasad — Spark Capital — Analyst
So in the medium term would be mall pipeline will be reconstrained, or do you see any issue in that?
Sanjeev Kumar — Joint Managing Director
No, we don’t see any constraint in that. We see active mall activity on the ground, a lot of new screens moving towards execution, and we will also be moving to a lot of new cities in the next few years, adding a lot of Tier 2 and Tier 3 cities, which are beginning to see development of retail infrastructure now, and that will also be a big focus area for us.
Arun Prasad — Spark Capital — Analyst
Okay, that’s clear. My second question is on the cost of debt. Your current cost of debt is north of around 11 percentage, which is at around 400 bps, 500 bps above the [Indecipherable]. Do you see with the balance sheet strengthening, do we see this threat coming down? And what extent can we expect this reduction?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Yes. Our average cost of debt just to clarify is close to 9%. I don’t know where you got the 11% number from. If you are looking at the interest cost that is [Technical Issues].
Operator
Sorry, ladies and gentlemen. It seems that we have lost the line for the speaker. We would request all participants to please stay connected.
Ladies and gentlemen, we have the line for the management reconnected. Sir, over to you.
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Sorry. I was just answering the previous question. Just to clarify, our average cost of debt is not 11%, but it is close to 9%. The overall interest cost charges that you see in the P&L also includes bank charges, et cetera that are applicable on the credit card usage that we pay to the bank and also has an impact of IndAS adjustments, which are pertaining to fund accounting of convenience fee, income, et cetera, which is a non-cash charge. So our average cost of the debt is close to 9%.
Also, you know as during the year like I said, we intend to fund all our growth through internal accruals and liquidity that we have in hand. It is primarily free cash flow generation from the earnings that will go on to reduce leverage. I think our leverage is ideally peak now, and as we get into earnings and cash flow generation from the business, hopefully, this should start coming down from these levels.
Arun Prasad — Spark Capital — Analyst
So do you see the cost of debt see coming further down from this level?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
So we are in a high-interest rate environment now as we enter this year, so it’s difficult to say. If there is any refinancing opportunity, clearly, it will happen at a lower cost than what we’ve borrowed during the pandemic, for sure. But given the increase in interest rate during the year and the impact of it in this existing portfolio, I don’t see any material changes in our average interest cost from here.
Arun Prasad — Spark Capital — Analyst
Okay. Thank you very much. Thanks.
Operator
Arun, is your question answered?
Arun Prasad — Spark Capital — Analyst
Yes, yes. Thank you.
Operator
All right. Thank you. We’ll take the next question from the line of Jaykumar Doshi from Kotak. Please go ahead.
Jaykumar Doshi — Kotak Securities — Analyst
Yes. Hi. Thanks for the follow-up. Just a quick question. When does your convenience fee contract with BookMyShow and Paytm expire? And are there any discussions around renewal of the same?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
Both the contracts were set to expire in 2021, but because cinemas were shut, the contracts were extended, and they will expire in 2023 calendar year, different dates. As you know, SBI which is now merged into PVR, they’ve also had erstwhile pre-existing contracts prior to the merger. So those states will also fall sometime towards the end of 2022-’23. As far as on the discussion front, I would not like to get into these details.
Jaykumar Doshi — Kotak Securities — Analyst
Essentially it’s still two, three quarters away — three to four quarters away?
Kamal Gianchandani — Chief of Business Planning and Strategy, and Chief Executive Officer, PVR Pictures
It is still a few quarters away, yes.
Jaykumar Doshi — Kotak Securities — Analyst
That’s it from my side. Thanks again.
Operator
Thank you. Ladies and gentlemen, due to time constraints, that would be our last question for today. I now hand the conference over to Mr. Nitin Sood for closing comments. Thank you, and over to you, sir.
Nitin Sood — Chief Financial Officer
I would like to thank everyone for taking their time for our call. And if we have not been able to answer any questions during the call, feel free to reach out to me or my colleague, Saurabh, and we will be able to individually do a one-on-one call with you. Thanks once again.
Operator
[Operator Closing Remarks]