PVR Limited (PVR) Q4 FY23 Earnings Concall Transcript

PVR Limited (NSE:PVR) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Ajay Bijli — Managing Director

Nitin Sood — Group Chief Financial Officer

Alok Tandon — Co-Chief Executive Officer, Co-CEO, Central West & East

Gautam Dutta — Co-CEO, North & South

Analysts:

Ankur Periwal — Axis Capital Limited — Analyst

Abneesh Roy — Nuvama Institutional Equities — Analyst

Atul Mehra — Motilal Oswal Securities — Analyst

Karan Taurani — Elara Capital — Analyst

Jaykumar Doshi — Kotak Securities Limited — Analyst

Jinesh Joshi — Prabhudas Lilladher — Analyst

Aliasgar Shakir — Motilal Oswal Securities — Analyst

Arun Prasad — Avendus Spark — Analyst

Harit Kapoor — Investec — Analyst

Jensen Jacob — Centra Advisors — Analyst

Abhisek Banerjee — ICICI Securities — Analyst

Mayank Babla — Enam AMC — Analyst

Jaykumar Doshi — Kotak Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the PVR INOX Limited Q4 FY ’23 Results Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [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 Limited — Analyst

Thank you, Aman, and good afternoon, friends. Welcome to PVR INOX Limited Q4 and FY ’23 Post-Result Earnings Conference Call. The call as usual 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. Ajay Bijli, Managing Director, PVR INOX Limited; Mr. Nitin Sood, Group CFO, PVR INOX Limited; Mr. Alok Tandon, Co-CEO, Central West & East; and Mr. Gautam Dutta, Co-CEO, North & South; apart from the other senior management team.

I’ll hand it over to Mr. Bijli for his initial comments. Post which, we’ll open the forum for Q&A. Over to you sir.

Ajay Bijli — Managing Director

Thanks a lot. Good afternoon, everyone. I’d like to welcome you all to the first earnings call of PVR INOX to discuss the audited results for the quarter and 12 months ended March 31, 2023. As the appointed date for PVR INOX merger was 1 January 2023, Q4 FY ’23 results for the company are reported on a merged basis of PVR and INOX and not comparable with Q4 of FY ’22 reported results. Similarly, FY ’23 full-year reported results are based on nine-month numbers of PVR and fourth quarter numbers of PVR and INOX combined. Therefore, FY ’23 reported results are also not comparable with FY ’22 reported results. I hope you’ve had the opportunity to review our presentation on results, which were uploaded last evening on our company’s website as well as the stock exchange’s website. The following numbers are after adjusting for the impact of Ind AS 116 relating to lease accounting.

For the quarter ended March 31, 2023: total revenue was INR11,165 65 crores; EBITDA was INR27 crores, and PAT loss was INR286 crores. This is after one-time exceptional write-offs of some cinema assets to the tune of INR21 crores and merger related expenses of INR5.5 crores, in total amounting to INR26 crores. In addition to the above, company has taken a one-time accounting write-off on account of restatement of deferred tax assets amounting to INR134 crores on account of transition to the new tax regime effective FY ’23. For the 12-month period ended March 31, 2023: total revenue was INR3,819 crores, EBITDA was INR389 crores, and PAT loss was INR243 crores. However, if you were to look at pro forma financials of both PVR and INOX for full 12 months for the period 1 April ’22 to 31 March ’23, then combined revenue for the year was INR5,311 crores and EBITDA was INR609 crores. PVR INOX welcomed 30.5 million guests across our cinemas in Q4 FY ’23 and 140 million guests during the full financial year 2022-2023.

Although Q4 started off on a high note with the blockbuster success of Pathaan in January and the sustained strong performance of Avatar: Way of Water, which was released in December ’22; the Feb. ’23 and March ’23 admissions were dismal due to the lackluster performance from other Hindi films. While movies like Tu Jhoothi Main Makkar and Bhola from Bollywood garnered average box office collections, Selfiee and Shehzada failed to make any impact. From Hollywood: John Wick: Chapter 4, Antman and the Wasp: Quantumania, Shazam 2, and Creed III delivered decent performances at the box office. Regional films however continued their strong performance with movies like Varisu in Tamil, Waltair Veerayya and Thunivu in Telugu, and Ved in Marathi; all registering impressive box office collections. FY ’23 has been a period of strong recovery for us despite the marked underperformance and volatility of Hindi movies and significantly low release from Hollywood last year.

Our revenue from exhibition business witnessed strong growth driven by exceptional performance of regional cinema, an increase in ticket prices, and a substantial increase in consumption/spending of F&B by our patrons. While there has been a decent amount of volatility at box office over the last few months, we are quite positive that this will settle down over the next two, three quarters. As we look ahead to FY ’24, we are optimistic about the robust content lineup across all languages. Over the next few months we have several big Bollywood movies lined up for release like Maidan, Adipurush, and Satyaprem Ki Katha in June; Rocky aur Rani ki Prem Kahani starring Ranveer Singh and Alia Bhatt in July; Dream Girl 2 starring Ayushman Khurana and Animal starring Ranbir Kapoor in August; Jawan starring Shahrukh Khan and Yodha starring Sidharth Malhotra in September; Tiger 3 starring Salman Khan in November, etc.

From Hollywood; we have Fast and Furious 10 in May; Transformers: Rise of the Beasts, The Flash, and Indiana Jones & the dial of destiny in June; Mission Impossible: Dead reckoning Part 1 and Oppenheimer in July amongst others. From the regional genre: we have Carry on Jatta in June; Maveeran in July; Jailer starring Rajinikanth and Bhola Shankar starring Chiranjeevi in August; Viduthalai Part 2 starring Vijay Sethupathi and Salaar starring Prabhas in September ’23 amongst others. On the screen openings, PVR INOX added 79 screens in Q4 FY ’23 taking the total tally of new screen additions in FY ’23 to 168 screens for combined PVR INOX outfit. In FY ’24 the company intends to open another 150 to 175 screens. Of these screens; nine screens have opened till date, 15 are awaiting license for commercial opening, and 152 screens are currently under various stages of fit-out.

The company as a strategy also — has also realigned all upcoming handovers of new sites for fit-outs to next calendar year till the time there is strong recovery in the box office. We’ve also taken a decision to shut down about 50 screens over the next six months across the country. Most of these screens have been underperforming loss-making screens which are housed in malls, which have come to the end of their life cycle with little hope of revival. The decision to shut down these underperforming screens is in line with the company’s strategy to focus on profitable growth and improve unit level economics. Our screen portfolio, including the 38 management screens, stands at 1,689 screens across 361 cinema in 115 cities in India and Sri Lanka.

Now let’s open the platform for any Q&A. Thank you very much.

Questions and Answers:

Operator

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

Abneesh Roy — Nuvama Institutional Equities — Analyst

Thanks for the opportunity. My first question is on the interview which you just gave. You have said that in FY ’24, you would expect revenue of around INR6,000 crores to INR7,000 crores, which is a marked increase versus FY ’23 and now we have seen almost three, four month of lull; February, March in FY ’23; and April, May in the year has been quite challenging. So, what are the assumptions you have taken for this? Have you taken a very big revival for Hindi movie from June itself for this number?

Ajay Bijli — Managing Director

Yes. April definitely was not as per our expectation, but May has surprised us with Kerala Story has done well, Guardians of the Galaxy has done well in our circuits, now we’ve got Fast and the Furious coming. So, May is looking better than what we had anticipated. And even June we’ve got some big movies like Adipurush, we’ve got Flash and Maidan. So I think on the back of these movies, we are optimistic about at least the last two months of this quarter. April of course has been slow, but then July picks up again with a lot of big movies coming especially for our circuit. We’ve got — in fact in June we’ve also got Indiana Jones. And July we’ve got the big Mission Impossible, which releases like a Indian film; Oppenheimer which is Christopher Nolan movie; Rocky and Rani the next Karan Johar movie. So, I think it’s basically on the confidence of the lineup which is there. Of course Jawan has also got shifted to second quarter now and this is going to be a very big movie and remember Ranveer Kapoor is in the second quarter. So the numbers that I spoke about in the morning is based on the movie lineup because that is what gives us the confidence and of course also the rollout of the screens that we are doing. We have some really iconic destination cinemas opening up this year as well. And so it’s on the back of that rollout.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sure. My second question is a bit linked to the first one. So, you are rightfully focusing on the profitable growth. Now I see that earlier your vision was see an expansion of 200 screens on an annual basis, which has been now changed slightly to 150 to 175, but we also expect a recovery. So when I see your expectation of recovery and cutting down on the number of expansion, I wanted to understand two things, sir. One, the cities where you’re vacating. For example some of the smaller cities like Bharuch etc. you plan to exit. What would be the plan for entering that? And second, you’re downsizing your expansion plan when you expect a recovery so if recovery happens, then what will be the recalibration in terms of a faster expansion versus your initial plan of say 200 screens?

Ajay Bijli — Managing Director

No. Net-net it is still — it is 150 and 775 because we’re also closing down like we’ve already announced about 50 odd screens we’ve closed down — we are closing in the next six months because these are — PVR is 25 years old, INOX is 20 years old. So we have certain properties which have had their time in the sun and leases have come to an end or the malls have become less attractive than they were earlier or some of them even closed down. So, net-net that’s what the number is looking like. And I think profitable growth is the need of the hour just now and we’ve just become very strict about our criteria of where we should be spending our capital. And also the mall — there are lot of things in the mall also, there’s a checklist. The mall has to be fully tenanted, it has to have the right number of tenants. Everything has to be correct, only then we’ll start investing our capital. Even 150 to 175 screens is not a small number to grow profitably. And I think we have to also be conscious of the fact that we’ve come — only 14 months have happened since pandemic and we just need to be more — we need to be careful about how we grow — with every unit. Every unit level, the economics must work and only then the numbers will look better. So we’re just being cautious or where we invest our money and what kind of returns we’ll be getting.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sir, on the pending question of your view on the smaller cities like Patna and Bharuch kind of cities. Is it a dimmer view for smaller cities or you have an expansion plan in the next few quarters to enter again such cities? And second…

Ajay Bijli — Managing Director

No, we are getting into every city. Sorry, you can finish your sentence — question.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Yes. Just one clarification on the gross versus net. So your gross openings are 150 to 175 so net will be the 50 screens lower so net will be 100 to 125 in FY ’24. Is that right?

Nitin Sood — Group Chief Financial Officer

Yeah, that’s correct.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Okay. This will answer the first part.

Alok Tandon — Co-Chief Executive Officer, Co-CEO, Central West & East

Other question that you asked about are we not opening in smaller cities? No, that’s not correct. We are opening a lot of properties in smaller markets. I think our focus is on location. Like some of these markets where we’ve seen better quality shopping centers and malls have come up, we’ve upgraded or have better cinemas now in modern day shopping centers. I’ll take your example suppose we’re shutting down a cinema in Lucknow, we’ll open in a brand new shopping center with Phoenix in Lucknow and PVR is there in LuLu Mall Lucknow. Now these are two brand new shopping centers, which have eclipsed the rest of the smaller formats which exist in that market and hence the decision to shut down say a property, which has become outdated and is no longer viable to run and operate in that market.

Abneesh Roy — Nuvama Institutional Equities — Analyst

No. I got the Lucknow LuLu Mall, that’s a brilliant new large mall. My question was to summarize would you be present in all the cities wherever say exit is happening currently in the next six months in terms of those cities. See, lot of those are in smaller cities also. Do you have a full plan of re-entering such cities or currently some cities you will come at a later stage not in the near term? That was my question.

Alok Tandon — Co-Chief Executive Officer, Co-CEO, Central West & East

See, most of these markets we’ll already be present in a better shopping mall or some new shopping mall for example would be coming up. We took an example of Bharuch. That’s a market which hasn’t done too well and we are aware of new shopping malls that we signed up, which will be coming up in the near future and we will be migrating to better quality shopping centers in most of these cities.

Ajay Bijli — Managing Director

I’m just looking at where we are — Rourkela we’re coming up, Kochi is there, Pune is there. There’s so many smaller cities as well. There is no — wherever there is going to be consumption of movies, PVR wants to be present over there at a different price point, but the opportunity has to be correct. It has to be the right location, right mall, all the ducks have to be in a row, only then. But there is no — like you can’t make one sweeping statement that we’re not going to be in small cities or we’re only — nothing like that. We’re going to be in all sorts of cities wherever there is a potential for a PVR INOX to be there and it’s just that these particular properties where we have closed or we are not investing, obviously that’s not meeting our threshold criteria.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Got it. One quick question. When I see your comparison on YoY for Q4 versus the pro forma, ATP has grown 3% and SPH has grown 13%. So that sharp increase in SPH, is it mostly because of the inflation which you are seeing in foods? So that is the main reason or is it a mix improvement because of newer and better menu?

Ajay Bijli — Managing Director

Actually it’s 50-50. 50% is purely attributable to value increase and 50% is on volume. We have introduced many products — better products and we’ve also come up with a hinge where consumers are encouraged to buy product and consume at home like the kernels of popcorn or the microwave popcorn. These are all low price items which are being sold at the cinema, it helps us increase our SPH. At the same point in time does not eat into the consumption pattern of the consumer at the cinema. So, that’s what we are working on.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sure. Thanks. That’s all from my side. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Atul Mehra from Motilal Oswal Asset Management. Please go ahead.

Atul Mehra — Motilal Oswal Securities — Analyst

Good afternoon and thanks for the opportunity. This is with reference to Slide 23 where we have put out the pro forma numbers pre-COVID and now. So one of the observation is that while total revenue is more or less similar, profitability has declined quite materially versus pre-COVID 11.5% margins versus 18% margins and despite like COVID being a time which has taught most businesses to be — lot of businesses have invented ways of saving cost. So as we look forward in the next year and like you said about the INR6,000 crores to INR7,000 crores of revenue expectation, how do we think about profitability? When do we hit the 18% number that we did pre-COVID?

Nitin Sood — Group Chief Financial Officer

I think if you look at the numbers, it’s largely down because of the operating leverage in the business like this year has been a tough year for the business so footfalls are down, it has a direct impact on the profitability. We did about — PVR INOX did 168 million footfalls in FY ’19-’20. As compared to that, we’ve done only 140 million footfalls. So, that is the reason for the decline in profitability. And this year comparing costs of three years ago, so while most our costs are down, whatever is controllable — rental cost after a two-year holiday that we got in tax, the break that we got from our landlords, are back to the original contracts. This is obviously reflected in the profitability. Our hope is that this year will be a strong revival in box office performance for both Hindi films and Hollywood films as well, which have underperformed last year. And admissions and profitability should improve significantly. It’s difficult to say what the exact number would look like. But like Mr. Bijli spoke at the beginning of the call, we are expecting much better content starting May-June onwards and Q2, Q3 are looking quite good on paper based on the content we have. And we should do anywhere between INR6,000 crores to INR7,000 crores depending upon where the box office is and we are hoping to get back to pre-COVID level margins of 18% to 20%.

Atul Mehra — Motilal Oswal Securities — Analyst

Okay. Got it. And secondly, sir, in terms of the vagaries of the box office and the content for which you have no control over so in the medium to long term — obviously we have other competing media like OTT and so on and so forth. So in the medium to long term, how do we — like we will be always be at the fate of how a producer or a director manufactures content or is there anything? Now that we we’re a much larger entity of two companies coming together, is there anything we can do on the content side which is more innovative and which perhaps has never been done before?

Ajay Bijli — Managing Director

Actually there is no shying away and being embarrassed — there is nothing to be embarrassed about. This movie — this business is about — cinema since time immemorial has been about movies and in a country like India where 1,800, 1,900 films get produced and released every year, how can that be a disadvantage? That is an advantage because if one movie doesn’t do well, there are other movies that take their place and compensate for that one movie if it doesn’t do well. It’s just that last year has been very volatile, but we don’t see this to continue. So, I think depending upon movies is our business and that is something that we are very confident about that people — that the supply of movies and the quality of the movies connecting with the audience will happen and it’s already happening. And on the other side on the demand side, consumers will continue to go out and entertain themselves and the Number 1 form of entertainment still out of home is cinema. So I think we’re in a market where both the supply side and the demand side is very strong and it’s just an aberration that we’ve had of post-COVID syndrome of about 12 to 14 months, which is going to correct itself. There’s no question about it.

Atul Mehra — Motilal Oswal Securities — Analyst

Right. Great, sir. Thank you and all the best.

Operator

Thank you. The next question is from the line of Karan Taurani from Elara Capital. Please go ahead.

Karan Taurani — Elara Capital — Analyst

Thanks for the opportunity. My question is around the profitability aspect again. So if you look at the box office revenue, I don’t know if it’s correct or wrong. But if you try to compare this to your quarter in what Q1 FY ’18 had in the form of Mowgli. If you look at the collection numbers of Mowgli, they are more a mirror of Pathaan wherein one movie has done well for multiple weeks and the other films have not done well. And you’ve probably got one more film which has done INR100 crores this quarter, which is [Indecipherable]. In terms of the margins that time around 18.5% EBITDA margin for the merged company, today which has come to almost 2.3% Ind AS. So, what is the gap here clearly? Because earlier if you look at the box office revenue also, it’s around INR300 crores for that particular quarter in terms of net box office. So, what is this big gap here because the number doesn’t seem to be very dismal as far as Hindi box office is concerned? I know for a fact that advertisement revenues down very sharply so that’s having an impact. But is the delta that big that your margins can move from 18% to 2%?

Nitin Sood — Group Chief Financial Officer

So Karan, I think when you look at the pro forma number, you are comparing box office revenues three years ago versus now, lot of it is driven by ticket price improving, but some in the cost front. So, we were paying ex rental three years ago, we got rebates in rental and CAM cost. Costs have moved up with inflation. So if you look at lot of our fixed costs which are external, they have moved up after a two-year holiday that we got or the break that we got from our landlord. As a result of which, those costs are there. Second big impact area for our business is advertising revenue still significantly below pre-pandemic level. These two are I think the key two items, which go directly to the bottom line. So while price realization and SPH growth has kicked in and they have helped us get to the topline number, advertising revenue shortfall and the rent and CAM increases across locations over a three-year period has been the biggest reason whey the operating margins are low.

Karan Taurani — Elara Capital — Analyst

Right. But then there’s also SPH and ATP which is a big delta versus that time. Right, I got the point. I mean advertisement is a big contributor here. Now to the second question. How does one foresee ad revenues because ad revenue was — lot of premium pricing happened in the Hindi socket as far as advertisement is concerned. So what is the kind of acceptance, what is the kind of growth that we’re seeing in non-Hindi sockets as far as ad revenue is concerned? So tomorrow in the next six months if Hindi content remains to be this way in terms of volatile performance and the small medium value films don’t come back, will we see that your regional content is good enough to pullback this ad to pre-COVID levels?

Ajay Bijli — Managing Director

So, clearly this year we are aiming to get closer to the pre-COVID number. That’s the big one — the big target. But having said that, advertising revenues do need some big tent poles. We saw a spike in advertising revenue whenever a big film releases even in case of Pathaan. The brand managers confidence is coming back at the cinema very, very strongly. We hope that by quarter two and more by the beginning of the festive quarter which is the quarter three, we will be able to get to very, very strong numbers on advertising. So some pathbreaking work is being done at the ground level to introduce and get these advertisers back to cinema and we are very hopeful that within next quarter, we should be able to get back on track very strongly. And this merger with INOX has really helped to accelerate and seal the gap in a big way because now the undercutting, all of that has gone. There is certain synergies in terms of rate card, the way we are selling, all of that. So, that’s really helped us as we move forward to bridge this gap.

Karan Taurani — Elara Capital — Analyst

Thanks. Just one bit on this. So obviously ad revenues is only one lever, but what about cost realignment? What are the key levers that you’re seeing around costs which can actually reduce over a period of time?

Ajay Bijli — Managing Director

So let me tell you that where costs are concerned, after the merger we are going through every line item with a fine tooth comb. Whether it is the repair and maintenance cost; whether it is the COGS where food is concerned; whether it is the power that how we can work together to reduce the units, yes we cannot do anything much about the rate of power, but how do we control the units. So, let me tell you that each and every line item of the P&L is being looked at and yes, we are getting a lot of benefit from the economies of scale. And I think that by the end of the next couple of months, you will see a drastic reduction in all our cost heads.

Karan Taurani — Elara Capital — Analyst

Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.

Jaykumar Doshi — Kotak Securities Limited — Analyst

Good afternoon and thanks for the opportunity. My first question is related to Slide 19. If I look at 4Q FY ’23 versus 4Q FY ’22 pro-forma numbers for PVR and INOX, there’s a 20% increase in admits, 6% increase in seats; but occupancy seems to have dropped by 290 basis points. So I’m just trying to understand how can occupancy decline YoY when admits have gone up 20% and seats have increased by 6%.

Gautam Dutta — Co-CEO, North & South

The main reason for that is in Q4 we were still operating at 50% capacity in lot of markets. So when you calculate the occupancy in Q4 FY ’22 was still being calculated on half the capacity so that is the reason. Broader markets, that’s the reason there is a difference.

Jaykumar Doshi — Kotak Securities Limited — Analyst

Perfect. And I think associated question is on cost. On a YoY basis, rent is up 40%; personnel costs are up 49%; and electricity utility is up 41%. Is this also because the base quarter had — did not have cost pertaining to it?

Nitin Sood — Group Chief Financial Officer

That’s correct. We had lot of rebates from our landlords, which finished on 31st of March FY ’22. So, we had lot of discounts and rebates which were continuing till Q4 of FY ’22.

Jaykumar Doshi — Kotak Securities Limited — Analyst

Understood. So 4Q FY ’23 is more or less normalized cost structure and you will start realizing synergy savings during the course of this year from these levels?

Nitin Sood — Group Chief Financial Officer

That’s correct.

Jaykumar Doshi — Kotak Securities Limited — Analyst

Finally, can you give some color on the other operating income that comprises of your ticketing contracts with Book My Show and I think PayTM, I’m not sure if that is still on, and the virtual print fee related revenue. So what’s your outlook from a two to three year perspective on these two revenue streams?

Gautam Dutta — Co-CEO, North & South

We have long-term partnerships with all of our online aggregators so these partnerships will continue. Some of that will come up for renewal during this year. We are in advanced stage of discussions and all these partnerships will continue and we’ll continue to work with our aggregator partners. And same for virtual print fee as well over the next two, three years.

Jaykumar Doshi — Kotak Securities Limited — Analyst

So there is no sunset clause associated with VPF, right? VPF continues?

Gautam Dutta — Co-CEO, North & South

No, there is currently no sunset clause on VPF.

Jaykumar Doshi — Kotak Securities Limited — Analyst

Thank you so much. That’s it from my side.

Operator

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

Jinesh Joshi — Prabhudas Lilladher — Analyst

Thanks for the opportunity. I have a bookkeeping question on the balance sheet side. Despite INOX being net debt free, I think the combined entity’s net debt position has gone up by about [Indecipherable] on a sequential business. So does it mean that we have done in 4Q has been funded by debt? And if yes, what is the sustainable debt level from here on?

Nitin Sood — Group Chief Financial Officer

So between INOX and PVR, we added a lot of screens this year including the acquisition of one of the cinema properties in Chennai called Jazz. The overall capex of both PVR and INOX put together this year has been INR300 crores approximately. And yes, the incremental debt has largely gone to fund the capex as the earnings has been slightly short. Yes, our net debt levels have gone up from 31st March, but largely the incremental debt has gone to fund the growth. We think this year as the earnings move up, our debt levels will get better and by the end of this year, our net debt levels should look lower than what we’ve ended at this year.

Jinesh Joshi — Prabhudas Lilladher — Analyst

So basically our screen guidance of 150 to 175 that we have prepaid, primary that will funded by internal accruals and not debt?

Nitin Sood — Group Chief Financial Officer

That’s correct.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Sure. And secondly, if you can just share what was the revenue and EBITDA loss from the 50 screens that we intend to shut down. And rather than closing these screens down, perhaps we could have entered into a variable rent fee model and brought down the fixed cost basically. And if despite evaluating that opportunity, you have taken this decision to close down, I mean I was just thinking whether this is an indication of any change in consumption pattern or a routine decision. I thought of asking this question because even sometime back we had closed a few screen and such instances have not happened quite frequently pre-COVID. So, just wanted your thoughts on that.

Ajay Bijli — Managing Director

I think for the second part of your question, your voice is quite muffled. But answering your first question if I heard it right was what is the EBITDA impact by closing those 50 screens. That will be a savings of INR10 crores. So that’s the EBITDA impact we will have by closing down those 50 screens. And if you could just repeat the second part what you said?

Jinesh Joshi — Prabhudas Lilladher — Analyst

Yeah. So what I was asking is that rather than closing these screens down, you could have perhaps entered into some kind of a variable rental model and brought down our fixed cost. And if despite evaluating that option, we have taken this decision to shut these screens, is this a routine business decision or any kind of change in consumption pattern that you are evaluating because pre-COVID shutdowns were not as frequent as we have witnessed currently?

Gautam Dutta — Co-CEO, North & South

So I think Mr. Bijli answered that question that most of these have reached the end of the life cycle. We feel that even if we put in more money in these properties, there will hardly any returns. So, why put good money after the bad? So, that’s number one. Number two, the consumption habits have not changed at all. The Indian parties are still the same. They still go to movies for a great experience and it’s all quantity of content that brings in people. So the consumption habits have just remained where they are. When you talk about speaking with various operators for revenue share, yes, we are in talks with various operators for revenue share and a few of our properties also are on 100% revenue share basis. If that answers your question.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Just one small clarification. Out of this 50 screens that you intend to shutdown, do any of them belong to metro or Tier 1 markets?

Gautam Dutta — Co-CEO, North & South

Well, it’s a mixture of all, Tier 1 and Tier 2.

Jinesh Joshi — Prabhudas Lilladher — Analyst

Sure. Thanks a lot.

Operator

Thank you. The next question is from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead.

Aliasgar Shakir — Motilal Oswal Securities — Analyst

Thanks for the opportunity. I had a first question on your — I understand a couple of quarters back we had done a survey to understand consumer behavior post COVID in terms of the experience, the liking in different customer segment, who’s coming to the cinema hall, what kind of products they like, and multiple things like that. So if you could just share your insights from that survey; what were the readings. what were the learnings that we got out of that survey?

Ajay Bijli — Managing Director

So while a lot of little points came in, but I can just sum up to say that one thing that stood apart was the fact that every consumer unanimously said that the cinema experience is differentiated and once they feel that the content is up to their liking, they would all want to come to a cinema. So in one voice when we asked them — when the researcher asked them saying what do you think of a cinema experience? They said it’s fantastic. Today we only watch a plot. In fact this was very interesting. He says we get to see the plot, but we never enjoy the content, we never enjoy the story, the film because we are always consuming it on a small screen. They were very well aware, But however, they said I am checking with my friends, I am possibly wanting to do my research because the biggest asset that I am kind of investing when I’m coming to the cinema is my time.

So, I just want to be 100% sure of the content that that it’s worth. That’s number one. Number two, they spoke about this entire experience of going to a cinema. They said it’s no longer just about watching a film. The accredited companies like PVR INOX and others to say that they have invested a lot in experience and today it’s no longer just about going out and watching a film. It’s about eating the right food, sitting on a recliner, and enjoying the entire ambience and the cinema. In fact it was a very pleasant surprise to see that they said it was our doors to fantasy. When we enter the cinema, we tend to forget everything. The fact that they could switch off their mobile phones and be completely ground in that experience is something that they really look forward to. So from that perspective, I think very strong positive signal.

All waiting, trying out, and saying I just need to get back. And also at that point in time because they were coming out of COVID, I guess the whole visiting with friends and parties was up on the rise and everybody felt that soon that would kind of subside and very soon we will all begin to go back to the cinema the way we used to. But at that point in time, they felt a bit wanting to meet up with friends and party and do a face to face bonding. But I guess everything has kind of a lifecycle and that’s the reason we feel that right content now coming in, big tent pole films coming in, PVR and INOX investing a lot in experiential cinema. We believe that we are just a few months away from getting the consumer back. And we ourselves are also working very hard to sort of convince and work on the consumer to remind them of the great experience they’ve had at the cinema.

Aliasgar Shakir — Motilal Oswal Securities — Analyst

This is very useful and quite detailed. Just one thing is any insight we got to understand what is leading to lower occupancy? I’m just saying this from the point that if you see the average IMDB ratings, they would have probably remained the same typically for the Top 25 movies in ’18, ’19 versus even now. So, any insight you got in terms of what particularly are they looking for or anything that would help us understand the content that will work?

Ajay Bijli — Managing Director

As I said, they kept talking about content and then about saying that is this a content which possibly deserves the big screen. Even films like they felt horror, they said a certain genre like even films like Drishyam did well simply because it needed that attention for the movie watcher to enjoy that content. They said that in their minds, they were kind of segregating that. And the second piece that came in very strongly is that when I want to bond with my friends, when I want to bond with my family, cinema is the place to go, because I get a holistic 360 entertainment. But when I’m on the move, when I am alone on the flight, when I’m traveling and I may end up consuming a plot as we kept saying not a story, not content, plot on my small phone or on the iPad. So, I think what was very positive to know was that they knew exactly what they were doing with every film.

In fact, a lot of people said that while I was watching a film, I felt that it deserved a cinema viewing and either stopped midway or I regretted of watching the plot on my phone. So, these are very positive signals, yes, it takes time, because they have been — they were out of the cinema for nearly about 18 to 20-odd months. So, it would take time, but we’re very certain with the way some of the big tent pole films are performing. We’re just about a few titles away from getting the consumer back very, very strongly.

Aliasgar Shakir — Motilal Oswal Securities — Analyst

Got it. Thank you so much. Just last one question is on the operating metrics. So, if assumed that occupancies remain post COVID at the mid-25 levels approximately or even if we see improvement, but it is at this level, what are the other levers we have. I’m just asking this from the point of view that many of the global developed markets occupancies are low, but maybe they understand that price — I mean cinema is price inelastic, so you could your charge way higher and if pricing is used a tool. Are there any other tools like in terms of your cost structure, whether your exhibition cost, rental, any other cost where you feel that we have another way to basically have higher story or rather screen economics if even occupancies are at these or slightly higher levels?

Ajay Bijli — Managing Director

Yes, so the biggest difference in India versus globally is that, we have high occupancy, but very low ticket sizes in comparison to what exists all over the world. And those compensate for each other. And the other — on the cost front, I think all our costs are very, very manageable and we kept them at really low levels when compared to global benchmarks, except for the rental and occupancy costs. This is quite high in a country like India. That’s true for the entire retail industry. And hypothetically, if the occupancies were not to improve in the long-run, then I think the company’s focus will have to shift to bring down and reset all the cost structures of the business and the biggest cost structure of the business would be your rental and occupancy costs.

Aliasgar Shakir — Motilal Oswal Securities — Analyst

Got it. Do you think pricing can be used as a tool?

Nitin Sood — Group Chief Financial Officer

To a size and extent it can be and that’s the mandate we have for this year. We will work on — we’re working with sophisticated tools to see wherever there is elasticity in pricing that we should be able to charge more. However, given that this is India and given the fact that this is the most popular form of entertainment, our focus is always to get the extra footfall. Our focus is always to entertain more people, get more people within the cinema, rather than getting lesser people at higher ticket price, that’s not the idea. But at the same point in time, we don’t want to leave any money on the table. Whatever is the right pricing for the right consumer for the right experience, we’ll be charged and that’s what we’re working on.

Ajay Bijli — Managing Director

And just to continue, the other thing just continuing that we want to make our cinemas much more experiential. So, whether to have 4DX, MX4D, whether we do have a Playhouse, KIDDLES, whether to have club seating, ICE, Streamyx, whatever it is, we want people to come to our cinemas and see a particular movie in more than one format. And that’s something which we are working on and that’s yielded a lot of results. So, pricing is one-side, the other side is how do we make our customers come to our cinemas and enjoy a great experience, whether it’s crystal-clear sound, absolutely clear picture, having laser projection in all our screens. So that’s something where we want people to come in, have a great time, spend a lot on where INOX and PVR are concerned on aesthetics, on luxury, on safety, on service, so that people are de-couched and they come to our cinemas to watch movies.

Operator

Thank you. Mr. Shakir, request you to join the queue for any follow-ups as we have several participants waiting for their turn. [Operator Instructions] Thank you. The next question is from Arun Prasad from Avendus Spark. Please go ahead.

Arun Prasad — Avendus Spark — Analyst

Thank you for the opportunity. Two questions, one is on the — you have indicated that you will be deferring the takeover of any fit-out properties going forward given the industry recovers. Does it mean, if the Hindi movie industry doesn’t recover, we will not be adding any screens in the next year, that is in FY ’25. And consequently, what is the obligation of the developer according to the agreements that you have signed. Can he wait out for a longer period of time or can he give — can he seek out for another exhibitor? How does it play out. That’s the question number one.

My second question is on the OTT window. Few days ago, Mr. Bijli talked about this, where he said that industry shouldn’t shy away from extending the OTT window. So, what is the thought process going behind this? Are we trying to push the OTT window beyond the current stipulated time? So that’s — those are my two questions.

Ajay Bijli — Managing Director

Yeah, I’ll respond to the first one. Currently, we are in the advanced stage of setting out about 175-odd screens, which we plan to open this year. We have a very robust pipeline of similar number of screens, which are coming up for handover this year. But in view of the huge amount of volatility at the box office that we’ve seen, we want that to stabilize before we take the next leg of screens for handover and start fitting them out and keeping that in mind, we’ve delayed the handover, all new handover that are coming up. We are not worried about losing some screens because the pipeline is quite massive for us, the opportunities are quite large. And given some of these shopping centers and malls, you know, most of the developers have consented agreed. They understand the situation. We have long-term partnerships with lot of these guys.

But in some cases where developers have an opportunity or would want to do screens with anybody else, that is possible that we may end up losing a few screens. But there are enough good pipeline of screens that we have. So, we are not so worried about that. And that’s the way we’re approaching it. Between PVR and INOX, the screen pipeline that both the companies have designed for development is in excess of 700 to 1,000 screens, which will come up over the next five to seven years. So, we are not worried on that front.

Second question was on digital windows.

Nitin Sood — Group Chief Financial Officer

Yeah, so let me tell you that what Mr. Bijli said is yes, for Hindi, we have eight-week window where after the movie is released and all opportunities [Technical Issues] industries, other than Hindi where the period, which taught us. So, we are in discussion with them because a longer window helps everybody. It helps the producer, it helps the talent, it helps the exhibitors because they can earn more from the box office and then whatever — whenever they release on the OTT, they can earn more from the OTT. So, that’s something we feel world over there is a long window or the window is quite high between the time they see on the screen and it comes on OTT and that’s exactly what we want in India, because it benefits the entire the earning potential of a film and the more it plays at the box office, the more the producer earns, the more the exhibitor earns, the more the distributor earns. And better it is for the entire industry and that’s something which we are speaking with people who make films in other languages that yes — and if it’s increased it will help everyone.

Arun Prasad — Avendus Spark — Analyst

Thank you. On to the first answer in which we are talking about we are not worried about the screens go out of our pocket and it is end up in their exhibitor. Does it — is it also you are trying to renegotiate the contracts in terms of rentals and cans. Is it fallout of that is, is why we are not taking the handover?

Ajay Bijli — Managing Director

No, as I said, we’ve given you the outline of company’s strategy to say we have got this capex already on screens, which we are fitting up. And that’s the reason we’ve decided to postpone any [Indecipherable] handover till the time, the box office stabilizes. We want to ensure that we fund all our growth from internal accruals and pass-throughs. And in-spite of testing all handovers, we’ll still add about 175 screens this year.

Arun Prasad — Avendus Spark — Analyst

Great. Thank you. Thank you so much.

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 afternoon. So, I just had two questions. One was on the breakeven titles this quarter is broadly breakeven at an EBITDA level. We’ve done about 22% occupancy. Once we kind of, realized all these synergies over the next 18, 24 months, what do we believe this number will now harvest at the merged entity?

Ajay Bijli — Managing Director

Yeah. I think, like we’ve guided bulk of the synergies is very revenue-driven for us. There will be some bit of cost-savings, but bulk of the synergies will come from the revenue and advertising is one number which is currently lagging behind. So, this number will not change dramatically. This 22% should look like 20% or 21%, from a synergy perspective, this number as advertising revenues [Indecipherable] normal levels. And there are some cost-savings, this 22% number could potentially look like 20%, 20.5% kind of number for a breakeven.

Harit Kapoor — Investec — Analyst

Got it. And the second question was on the movie pipeline. So, I understand on the quality of the content. But based on your discussion with production houses, etc., do you also believe that the quantity of content in terms of number of home release releasing maybe over the next calendar year versus, say, pre-COVID, as probably even producers are recalibrating the same way as you are could be a bit lower. Is that also the [Indecipherable] or maybe they focus more on call quantity. I just wanted to get a sense of what you’re hearing from the other side of things.

Ajay Bijli — Managing Director

It’s very difficult to say what the producers will do. But yes, for us and for everybody, quality is very, very important because I think today’s Indian audience, they’ve got very, very refined taste buds. They know what they want from a script and when they spend 2.5 to 3 hours in an auditorium. So, I think that quality is more important. And today’s producers are looking or the content creators are looking at giving quality, great content. And that’s something what we know in the industry people are working on. So, a good quality is very, very important. Yes, quantity too is important for us to have shows for all particularly Friday’s in a year, that’s not denying the fact that we don’t want quantity, we also need quantity, but at the same time quality is also something which is very, very important for this entire industry.

Harit Kapoor — Investec — Analyst

Sir, just a follow-up to this. My question has been coming more from the fact that our production house is kind of keeping similar budgets. Would there be any changes in that budget to kind of improve quality or create bigger, bigger films? Is that a sense that you are getting that they’re trending towards, given that the small and mid-size films have not done as well in theaters or there’s just any kind of insight that you have there that will be helpful.

Ajay Bijli — Managing Director

Well, I think that’s the question about budget you should be asking them, not us. But at the same time, it’s I don’t think it’s right to say that small quantity or the small budget movies don’t do well at all. I can give you lots of examples of small budget movies, which have performed well at the box office. As I always say, it’s the content which matters and people come out to see great content. For them, they are not bothered if more money has been spent on a film. If that be so, if it doesn’t perform, or it doesn’t cater to the taste buds of the people, nobody will come in. So, people go for great stories, they for great directions. They go for [Technical Issues] or great screenplay rather than the budget of a movie. And that’s very important for the entire industry.

Harit Kapoor — Investec — Analyst

Okay, okay. Great. I have some more, but I’ll take it offline. Thanks.

Operator

Thank you. Next question is from Jensen Jacob from Centra Advisors. Please go ahead.

Jensen Jacob — Centra Advisors — Analyst

Thanks for the opportunity. My question was regarding the management screens that were mentioned in your presentation, it would be great if you could explain how these arrangements work and its economics as possible.

Ajay Bijli — Managing Director

Yeah, so these are about 38 screens, 35 of them were you know from INOX portfolio, three screens PVR. Basically, we run and operate these screens. We earn a management fee from operations. We don’t consolidate revenues from these screens. And hence these screens have been called out separately. We just earn a management fee from these screens. This is reflected in our operating numbers.

Jensen Jacob — Centra Advisors — Analyst

So, this management fees would show up in your other operating income, if I’m correct?

Ajay Bijli — Managing Director

That’s correct.

Jensen Jacob — Centra Advisors — Analyst

Yeah, so the reason why I was asking about, even though it’s a relatively small number is because you mentioned that you were looking at higher profitability going forward. So, I was just wondering if you are looking to do more of these management fees models in the future considering its asset-light measure?

Ajay Bijli — Managing Director

So, we are looking at different orders. We will guide market as we do one of the screens. Our focus is to be in full control of screens which we run and operate obviously, with a lower capex intensity and we are working on various models right now to build a long-term better model than what we’ve been traditionally invest in this.

Jensen Jacob — Centra Advisors — Analyst

Okay, so these arrangements are just like a consulting model, right, or is it like a franchise in the hospitality industry?

Ajay Bijli — Managing Director

No, it’s more a franchisee. It is something where INOX and PVR has won these properties. So, the P&L goes to the developer. He’s the one who puts in the capex. Everybody are on his role. But we are cinema experts, we run everything for that particular developer. So, in all aspects it’s like an INOX or a PVR property.

Jensen Jacob — Centra Advisors — Analyst

Okay. So, the branding will be the owner’s branding, right.

Ajay Bijli — Managing Director

So the owner, the branding is either INOX or PVR.

Jensen Jacob — Centra Advisors — Analyst

Okay, understood. Thank you. That’s all from my side.

Operator

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

Abhisek Banerjee — ICICI Securities — Analyst

Yeah, hi sir, just a couple of questions from my side. First on the advertisement front, so, in terms of the total proportion of ad slots per movie, movie running time, what would that be pre-COVID and what is that now? And one more question is on the quality of content that we were talking about. Right. We obviously read a lot about the quantum of money being charged by the big actors. However, when we see certain big budget movies, the quality of production, is not probably at par with Hollywood despite having a reasonably large budget. So, is there any change which is happening in that regard?

Nitin Sood — Group Chief Financial Officer

So, let me take the advertising question. We normally on an average would play about 19 minutes of advertising. Now, in certain big movies, this goes up. But largely if you average it out, the advertising time slotted is about 19 and these are in two slots; before the start of the film and in the intermission. We currently are doing about 12, 12.5 minutes consumption. And this is expected to grow as we move forward.

Abhisek Banerjee — ICICI Securities — Analyst

So, you mentioned that the 19 minutes will grow going ahead.

Ajay Bijli — Managing Director

No, no. We are currently at 12.5, the 19 cannot grow. 19 is the time slotted with film for advertising. So technically, we need to grow both value and volume currently. And for PVR this time, it’s slightly higher, for INOX it’s slightly lower. So, if you average that out, we are consuming close to about 12.5 minutes currently. Our uptick is currently about 6-odd minutes that we can move up. So, we have to sell more advertising. And then also get our rates up. So, that’s how the journey is going.

Abhisek Banerjee — ICICI Securities — Analyst

So from just volume perspective…

Ajay Bijli — Managing Director

[Speech Overlap] lot of media outside the big screen as well. So, we want to also — and we also have a plan to monetize the off-screen spaces as well.

Abhisek Banerjee — ICICI Securities — Analyst

Got it. So, just just in terms of volumes, you have a 50% upside possibly. And value-wise, what would be the upside?

Nitin Sood — Group Chief Financial Officer

Difficult to say. Currently our whole focus is to get the volume back and that journey may happen once all the merger stability comes into PVR and INOX. So, I guess that would be done next year largely. This year, we are concentrating largely on volume increase.

Abhisek Banerjee — ICICI Securities — Analyst

Understood, that’s helpful. And would you be able to comment on the question on production value.

Ajay Bijli — Managing Director

See, again the production value as I earlier said that I think the producers and the content creators will be able to answer.

Nitin Sood — Group Chief Financial Officer

But more importantly, we are in conversation with the producer and believe me more than us, they are the ones who are doing a lot of research, understanding exactly what the consumer wants. They have been digging deep into data and you know the content that we are expecting this year will be — it’s fresh and is made keeping in mind what the consumer wants. We believe that the content that we will all see this year and moving forward is ingrained in deep consumer insights and will be very powerful. That’s our hypotheses and hunch.

Abhisek Banerjee — ICICI Securities — Analyst

Understood, thanks.

Operator

Thank you. The next question is from the line of Mayank Babla from ENAM AMC. Please go ahead.

Mayank Babla — Enam AMC — Analyst

Thank you for taking my question. I had a bookkeeping question. Could you please give us the proposed Ind AS total operating expenses for the combined entity for FY ’23, the entire year?

Nitin Sood — Group Chief Financial Officer

No, it’s difficult to give a Ind AS expense because you know the accounting changes quarter-on-quarter, depending upon, you know, how the assets are done. So you know, we can take this question offline, but it’s difficult to give you know with Ind AS what the expenses will look like.

Mayank Babla — Enam AMC — Analyst

Okay, fine. Thanks. Thank you. That’s it from my side. Thank you.

Operator

Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.

Jaykumar Doshi — Kotak Securities — Analyst

Yeah, hi, thanks for the opportunity again. I just want to sort of understand the screen expansion sort of, and really better. If I understood correctly, you will be opening 175 screens ballpark in the coming year where you have already incurred some capex. Any further expansion beyond that 175 you’ll wait for the box office situation to normalize. So then, how should we think about screen additions for FY ’25? And what does this change mean for your mix, because if I understand correctly, earlier you were targeting about 40% of new screens coming from South and 60% from rest of the country, how will that mix change? And what — if you can give us some color where do you think you will cap your capex plan for FY ’24 and maybe FY ’25 the way you see things today?

Ajay Bijli — Managing Director

So, there is, first of all you know our screen expansion, like we said, a large proportion will be focused on South. The year-on-year ratio is difficult to predict, but it will vary anything between 40% to 50% of our overall screen count will, you know, continue to be added in Southern India over a period of time. Secondly, you know, this does not change anything as far as the growth plan is concerned. What we are basically saying is, depending upon how they get pans out, we want to manage our cash flow slightly better. We want to fund bulk of our growth from our operating earnings and hence, you know, the decision to delay even further handovers has been taken back in line. Now, this could potentially mean, yes, we work on slightly less number of screens in FY ’25. It’s possible, like this year you had lot of screens that we’ve opened this year all opened in Q4. 50% of all the screens that we opened this year have opened in Q4 of this year. So, FY ’25 potentially look like a similar situation if we delay the handovers by another 9 to 12 months.

But I think we are reasonably confident because the pipeline of screens is so huge, we will still end up opening, you know, a similar kind of number even in FY ’25. So, I don’t think it changes anything, it just delays and the timing of opening would change. Like, current year, a lot of our screen openings would happen in the early part of the year as compared to previous year where lot of screen openings happened towards the end of the year.

Jaykumar Doshi — Kotak Securities — Analyst

And what about refurbishment upgradation capex, which…

Ajay Bijli — Managing Director

Which is going to be a big focus area where we will continue to spend on refurbishments, maintaining and upkeeping our existing screens, because they are the screens, which are continuing to deliver a strong ROIs where we have strong admissions. And we will continue to do that. I think our overall capex number for this year will continue to be in the range of about INR700 crores for all the new screens, existing screens, investments in technology, IT, maintenance, everything put together. So this year, I think the number will be in that range for these 175 screens [Indecipherable].

Jaykumar Doshi — Kotak Securities — Analyst

Understood. Thank you so much.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I would now like to hand the conference back to the management for their closing remarks. Thank you and over to you.

Ajay Bijli — Managing Director

Thanks, Ankur and thank you everyone for taking time to attend the call. If we have not been able to answer any of you during this call, we feel free to reach out to us separately and we’ll be happy to address your queries offline. Thank you very much.

Operator

[Operator Closing Remarks]