UFO Moviez India Ltd

NSE:UFO

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of UFO Moviez India Limited, hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Shweta Shekhawat from Prabhudas Lilladher. Thank you. And over to you, ma'am.

[Shweta Shekhawat, executive]

Thanks, Margaret. On behalf of Prabhudas Lilladher, I welcome you all to the 1Q FY '23 Earnings Call of UFO Moviez India Limited. We have with us the management represented by Mr. Rajesh Mishra, the Executive Director and Group CEO; and Mr. Ashish Malushte, the CFO of the company.

I'd now like to hand over the call to the management for opening remarks, after which we can open the floor for Q&A. Thank you, and over to you, sir.

[Rajesh Mishra, executive]

Thank you, Shweta, and greetings, everyone. And thank you all for joining our Q1 FY '23 earnings call. Let me start with the updates and highlights for this quarter. Ever since the beginning of the COVID-19 pandemic in March 2020, Q1 FY '23 is the first quarter wherein we saw no lockdowns, no restrictions on seating capacity and a steady release of movies from both Hindi and non-Hindi film industries.

At the beginning of Q1, we saw some of the mega releases like the blockbuster, RRR, K.G.F: Chapter 2, Beast, et cetera. All these 3 movies was South released dubbed in various languages and released pan-India. If we see from July -- if we see from January to April '22, dubbed versions of the big movies from the South contributed almost 60% of the Hindi box office revenue, especially the 2 big releases, RRR, which was released in the last week of March and K.G.F: Chapter 2, which was released in April, were the ones which contributed the most.

As a result of the success of these movies, as well as a steady release of other movies, our theatrical revenues and advertisement revenue started to recover rapidly, and the expectation was that it would recover more rapidly over the next few months. However, the release trend and the success of movies saw a downturn in May and June. Many big star cast Hindi films that were released during this period slumped at the box office, impacting our advertisement and theatrical revenues.

Nonetheless, in Q1, many movies from the non-Hindi film industries have been huge hits. Movies from the South industry have performed exceedingly well, even in the Hindi-speaking market. This is a reflection of the change in the audience's preferences to consume movies of different languages and genres. This has, to some extent, been supported our CDC revenues, and we expect this upward trend to continue.

The migration of South language films into the Hindi-speaking market offers additional revenue opportunities to everyone in the cinema value chain and we are happy to have contributed to this shift. This will mean that the volume of films available for release in the Hindi-speaking markets will go up directly, affecting our revenues in a positive manner.

In addition, while Hindi films have struggled in Q1 FY '22, we strongly believe that these are cyclical vagaries and that the Hindi films, which are lagging in terms of release and performance at the box office will reach their pre-pandemic levels in the coming months. The upcoming lineup that includes some big names like Laal Singh Chaddha, Raksha Bandhan, Brahmastra Part One, Vikram Vedha, et cetera, is scheduled to be released over the next 2, 3 months, and are expected to give a much needed boost to the Hindi film industry and positively support our theatrical revenues as well as advertisement revenues.

While the theatrical revenues in this quarter have recovered around 70% to 80% of its Q1 FY '20 levels, the overall advertisement revenues have not ramped up as per the expectation set during the release of RRR, K.G.F, et cetera. The recovery in the corporate advertisement revenue is around 55% to 60% of its Q1 FY '20 levels. However, significantly lower recovery in government advertisement revenue restricted the overall recovery to 40%.

Two of the factors that affected this recovery are, firstly, the government advertisement spending has been very low. Secondly, as I mentioned earlier, there was an absence of back-to-back hits that would have got more of corporate advertisers back to the big screen. However, during the release of a few movies like RRR, K.G.F and Bhool Bhulaiyaa 2, we saw good engagement from the advertiser side and this gives us confidence that once more movies perform at the box office, the advertisement revenues will recover faster. We expect that the upcoming releases will be able to attract more advertisers back to cinemas, thereby boosting the recovery process.

On the distribution business, it has now started to shape up well. During the quarter, the company distributed 12 films. The majority of these movies were South films that we distributed in the North market as part of our strategy to support the core business by way of the steady flow of content into the cinemas in the North. As these movies find a bigger audience in the non-South Market, our business vertical will see a good ramp up and start contributing modestly.

I'd like to reiterate that in our distribution business, there is near zero content risk. Now coming to the headline numbers for the quarter ended June 30, 2022. Please note that due to the pandemic, our revenues were severely impacted in FY '21 and FY '22, and the year-on-year comparison will not be an appropriate comparison. Hence, we have compared our current quarter results sequentially with Q4 FY '22 for better comparison. Consolidated revenues stood at INR 906 million in Q1 FY '23 as compared to INR 561 million in Q4 FY '22.

We have turned EBITDA positive during the quarter, as our EBITDA profits stood at INR 98 million as compared with an EBITDA loss of INR 119 million in Q4 FY '22. Loss at PAT level reduced to INR 26 million as compared to a loss of INR 189 million in Q4 FY '22.

With this, I'd like to take this opportunity to thank all our stakeholders for their continued trust in our company during these unfortunate times. With that, I open the floor to take your questions.

[Operator]

[Operator Instructions] The first question is from the line of Niteen Dharmawat from Aurum Capital.

[Niteen Dharmawat, analyst]

Am I audible?

[Operator]

Yes, sir. You are audible.

[Niteen Dharmawat, analyst]

So a couple of questions. Since we are talking about the distribution business, so how many movies are we going to distribute in the next 3 months or maybe 6 months if we have some visibility and how many of them are dubbed movies from South?

[Rajesh Mishra, executive]

So, on an average, we release around 10 to 12 films in a quarter. And yes, as a strategy, we have more South content into the North markets on 2 reasons. One, it is a low-risk strategy. And secondly, it ties into our core business of providing content to our cinema network. And also, as I said, this has seen an increasing traction in the North markets. And I strongly believe that this will be a continuing trend as we go forward also, because dubbed language films even for Hollywood films are worked across the world. So, there is no reason. So films from the same country, same culture, why should they not work in the North market and that is exactly how we are proceeding with this. So on an average, on a year basis, we expect to do around 40 to 50 films a year, big and small combined.

[Niteen Dharmawat, analyst]

And how much revenue we are expecting from the distribution side during the year?

[Rajesh Mishra, executive]

So during the year, we have kept very modest targets of between INR 4 crores to INR 5 crores of revenue. Again, what we are looking at is low-risk distribution. So, we are not investing in the IPR CapEx on this thing. There is no investment in the IPR of the films. So, there is no risk to us. And secondly, we are utilizing and leveraging our existing infrastructure and manpower. So there is no additional cost also.

[Niteen Dharmawat, analyst]

So, this will directly go into there because there is no additional expenses, that's why?

[Ashish Malushte, executive]

80% of this is expected to go into EBITDA.

[Niteen Dharmawat, analyst]

Got it. My second question is about the charges, various charges of the -- charge. So, is there any upward revision because I remember that we have given some discounts earlier considering the situation. So, have we done the upward revision considering the changes which are happening now and towards the normalization of the operations? So have we done that as well?

[Rajesh Mishra, executive]

Yes. So from 1st April itself, we have reverted all our rates and charges to our pre-pandemic levels. Whatever discounting was provided in Q3 and Q4, that all have been discontinued.

[Operator]

The next question is from the line of Saral Seth from Indsec Securities and Finance Limited.

[Saral Seth, analyst]

Yes, sir. Am I audible?

[Operator]

Yes, you are audible.

[Saral Seth, analyst]

Yes, sir. Congratulations for a decent set of numbers. Sir, I have 2, 3 questions. Sir, my first question is what is PRIME and Popular screens and how are they different?

[Rajesh Mishra, executive]

So Prime screens, this is a bifurcation that we do to categorize our screens into largely 2 categories. So the Prime screens are the films, are the cinemas, which are the better cinemas and the ones which largely are installed in multiplexes or Prime singles screens and are equipped with equipments, which are capable of playing out Hollywood content. So, this is a very good demarcator and set of this thing to bifurcate the screens in these 2 categories. And largely, we also categorize them on the basis of the ticket pricing. So, on an average, ATP, what we are getting in the cinemas, that besides whether it's Prime and Popular.

[Saral Seth, analyst]

Okay, sir. Sir, can I get the breakup between the 2, I mean the count?

[Ashish Malushte, executive]

Sure. Yes. So, if you actually go on the Slide 9 of our Investors Presentation, you would get the breakup of the Prime screens and Popular screens that we have.

[Saral Seth, analyst]

Sure, sir. That was very helpful. Sir, my next question is, sir, do we expect that with more Prime screens, we will get more advertisements portrayed like INOX or PVR?

[Rajesh Mishra, executive]

See, the better quality screens will definitely attract a higher level of advertising because they are situated in key locations. They release all the main films. On their end, it releases, it happens. Yes, the quality of the screens, the ATP is higher, the quality of eyeballs is higher. So definitely it affects and naturally, at any point of time, it is always the endeavor [ to invest ] in these types of screen also.

[Ashish Malushte, executive]

So, just to quickly add one point here, Saral, so pre-pandemic we started -- just pre-pandemic, we started showing this breakup between Prime and Popular and the primary reason for that was it was -- there was a misconception in the market about UFO network being in a way not so superior, sort of an inferior network as compared to the premium multiplex chains. And there also was an assumption that multiplex means only premium multiplex chains in India. And therefore, we decided also to make sure in addition to have a proper attention of the business, we also wanted our investors to know clearly as to what kind of 2 segment of networks that your company operates in, and that -- the fact that almost more than 60% of your network is focusing on the Prime category, which is constituting majority of the multiplexes, which are obviously not the premium multiplexes in the country.

[Saral Seth, analyst]

Understood. Sir, I have 2 more questions, if I may. Yes. So PVR has guided for advertisement revenue to reach to pre-pandemic levels by Q3. So when do we expect to reach those levels?

[Rajesh Mishra, executive]

So Q3 is a festive season, and we should be getting very good traction by that time also. Only thing is our revenues are largely divided equally between government and corporate advertising. As I've said in my opening remarks, the government advertising is low. But you hope that also picks up by that time, but corporate advertising will definitely see an upswing by Q3 also, for us also.

[Ashish Malushte, executive]

So just to give you not the future outlook, but where it stands today in terms of the percentage recovery, if you compare against Q1 of FY '20, the broad numbers would be, in case of PVR, they probably are around 75% to 77% of Q1 numbers in terms of advertisement revenue. INOX, if I'm correct is close to 65%, 66% of Q1 numbers of FY '20 pre-pandemic. And in our case, we would request you to look at our corporate numbers because that is actually an apple-to-apple comparison with PVR and INOX, and there the recovery is to the tune of 57%. So, these are just an indicative numbers for you. From here on, we need to keep a track and we would like to comment on the performance as it happens, and not really at this stage give any kind of a outlook or an indication.

[Saral Seth, analyst]

Understood, sir. That was very helpful. Sir, my last question is, do you have -- do you anytime plan to enter into the exhibition space, given that you have equipments and the technical-know how?

[Rajesh Mishra, executive]

As of now, we have not taken any step in that regard.

[Ashish Malushte, executive]

So while we say that, we would also what -- I mean, I'm not sure to what extent you have been -- my team has been able to meet your team or you have been able to go through our all subsidiary companies, but one of the focus areas and that is where we are actually putting our energies to, in addition to our core business of digital cinema is NOVA business, which is nothing but an asset-light model for launching screens in the areas in the country, primarily the urban areas in the country, where there is currently scarcity or lacking of the screens. So that's a separate, focused approach under a separate initiative called NOVA. And through that, we intend to have these centers partly directly and partly through franchisee mode, proliferating the growth of the screens across the country. But that's a separate kind of a business, but not directly under UFO.

[Operator]

Thank you. The next question is from the line of [ Akshay Ajmera ] from Nirzar Securities.

[Unknown Analyst]

Yes. I had a couple of questions. My first question is content delivery charge revenue and lease rental incomes, have they come back completely now in this quarter? And how do you see them [Technical Difficulty]

[Ashish Malushte, executive]

So part of your question I missed, but I'll repeat. What I heard you saying is whether content delivery charge and lease rentals revenues have come back to the pre-pandemic level? Is that the specific question? Hello?

[Operator]

Sir, we lost his line. So we'll move to the next question, while we wait for him to join. The next question is from the line of Vaibhav Badjatya from HNI.

[Vaibhav Badjatya, analyst]

Yes. So, I think you said that all our rates and charges are at pre-pandemic level now, right, if I'm not wrong?

[Ashish Malushte, executive]

Yes. That is not what we have [Foreign Language] the rates what we are charging in the market.

[Rajesh Mishra, executive]

The distributor charge and the rental to the cinemas that is all back to the pre-pandemic level.

[Ashish Malushte, executive]

The rate. Yes.

[Vaibhav Badjatya, analyst]

Not the ad rate, I mean? So, ad rates are not at that levels yet?

[Ashish Malushte, executive]

No, the ad rates are also more or less at the same level. I was trying to say that there is a difference between the rate and the actual realization. The realization is fully not at the pre-pandemic level in some of the revenue streams like advertising.

[Vaibhav Badjatya, analyst]

So realization is anyway -- it's not -- I mean, because it is dependent on the [ types of ] movies and number of movies releasing. But the rates are something that probably we can decide based on the overall market situation. So, you're saying rates are still not at pre-pandemic levels, the charge that we have, like, [indiscernible].

[Ashish Malushte, executive]

Vaibhav, sorry, there seems to be some confusion from our end probably. The rates are at pre-pandemic level, both CDC and rental, which is what we call a theatrical business. More or less, the rates for advertisements are also back in pre-pandemic level. The second part, the actual realization in case of some revenue streams such as advertisement is not at pre-pandemic level. So rates are back and for a long time, for about 3, 4 months now. 3 months.

[Vaibhav Badjatya, analyst]

Right. Right. So basically, to reach the previous level of total realization, we just need the volumes to pick up, that is the only catch. The rest doesn't have to catch. Okay. So -- and in terms of bifurcation between the Prime and Popular scheme -- screens, sorry, so how does that work for the government advertising business? Are the rates -- I mean, I don't think so we can differ in the government business between the 2. Can we?

[Rajesh Mishra, executive]

So government business is more focused on the number of eyeballs where they reach. So in fact, they go on the category of -- criteria of the seating capacity of a cinema. A cinema, which is having 500 plus more -- plus seats will have a higher rate as compared to a cinema which has lesser numbers of seats, lesser than 500. So typically, there the single screens get a higher rate as compared to the multiplexes, which are usually 99% less than 500 seating capacity.

[Vaibhav Badjatya, analyst]

Right. Okay. Got it. Understand. And so if we compare your operations to pre-pandemic level, I'm just not talking about a single quarter. But over the years, we kind of -- earlier we had reached up that level of [ INR 60 crores, INR 70 crores ]. Now, if we compare that to today's situation, because now we have higher capital base due to equity infusion and we have some high borrowing as well.

So, basically, to reach to a similar kind of return on equity level, we need significantly higher PAT, if we want to achieve similar return on equity. So, what can drive that? Because the rates -- I'm not sure, given the environment, the rates can be jacked up that much. And other charges like VPF revenue and all of those, I don't think so there is a much potential there. So what can be the trigger, which can give us a similar return on equity as compared to pre-pandemic levels?

[Rajesh Mishra, executive]

So largely the content delivery charge, theatrical revenue is pretty static. So that's the fixed revenue that we earn on a month-to-month basis. So that doesn't change. As far as the content delivery charge is concerned, it is directly focused on the number of releases and how they're playing out in the market over there. There, we have said, we are already working towards increasing the content pie in the North market by bringing South content upwards. So that should have a very positive impact on that. The main variable over here would be the advertising revenues, which once it ramps up, it will quickly move the needle very fast.

[Vaibhav Badjatya, analyst]

Just to add one point because the debt -- there is no increase in the debt versus pre-pandemic levels. Pre-pandemic, we were at around INR 70 crores. Even now, we are close to INR 70 crores, INR 72 crores.

[Operator]

The next question is from the line of [ Akshay Ajmera from Nirzar Securities. ]

[Unknown Analyst]

Yes. So could you give us some more clarity on this? How much of those 2 revenue streams have come because I got cut out after I asked my last question. On this content delivery charge and lease rentals, they are at normal level in terms of absolute figures.

[Ashish Malushte, executive]

So in terms of recovery as regards the revenue from distributors, which is my content delivery charge and my VPF service fee is concerned, there is a very fast recovery after we reinstated the rate in June. [ Simply ] we can say the recovery is to the tune of 75%, 80% as compared to Q1 FY '20.

So, this is a recovery which we have seen in distributor revenue. Similar recovery would be there in your rental revenue. But if you know our model, rental revenue, more or less is an offset against the minimum guarantee that we pay to the theaters. But it's important for my investors to know that, yes, we have been able to now start charging to the theaters rental and they're also in a position to accept the rental bills -- which billing, which was not the case during pandemic.

[Unknown Analyst]

Right. So, how much is this as compared to this Q1 of FY '20?

[Ashish Malushte, executive]

No, rental will be again in the same range, about 75% to 82%.

[Unknown Analyst]

Okay. Okay. And what kind of a CapEx we'd be doing this year for new equipment and refurbishing of -- or replacement of old equipment this year?

[Rajesh Mishra, executive]

So the CapEx will be curtailed currently this year. We have stock of certain key level equipments as regards -- but of course, certain amount of CapEx will be required to be done and I don't think it should be more than INR 20 crores to INR 25 crores.

[Unknown Analyst]

Okay. Okay. And...

[Ashish Malushte, executive]

CapEx is something which we control, because most of the CapEx is something, which we try to do in anticipation of changing the technology or providing better kind of an equipment to my better set of theatres. And as such in the years such as this, where we are just starting to get out of the woods, we make sure that kind of a replacement CapEx is kept at the minimal, but at the same time, obviously, there is no restriction whatsoever for new CapEx when I'm trying to acquire a new screen. But at this stage, that new screens are also not in a substantially high number and therefore, we are expecting that the CapEx should be in the range of INR 25 crores for this year against INR 45 crores, which is [ right in the park ].

[Unknown Analyst]

Right. Okay. And in terms of this government ad revenue, has the government curtailed spending in other media also? Or it is only for the theatrical advertising, the government has cut spending? What is your sense?

[Ashish Malushte, executive]

So, our sense is that they have not curtailed for a majority of the other media. They are spending in other medium, but as regards digital cinema networks, not just us, but across all the networks, currently, they have -- they have curtailed their spent.

[Unknown Analyst]

Okay. And what could be this reason? Is there a tactical shift away from this medium or it's a temporary thing?

[Ashish Malushte, executive]

They were the first ones who recognized the power of this medium, one, by giving recognition to this; two, by giving differentiated rates to, for example, theater with higher seating capacity, which actually meant that, yes, there are certain advertisements, which are necessary to reach to the paying audience, though those paying audience are going into not the highest end of the premium. It's like eating in a 5-star and eating in a regular restaurant. But still, the regular restaurant eater is also a spending customer.

We are in discussion with the right set of guys in the entire system. And probably by the festive season, there should be further clarity. But the hope is that this whatever -- the way they have restarted their spends on other networks, other mediums, it will be replicated for this medium as well. For instance, whenever there is a advance tax drive, this is one of the first mediums which is heavily used by Income Tax Department to pass on their message.

[Unknown Analyst]

Okay. Okay. And could you talk a little bit about some new initiatives that we have done by taking some small stakes in certain small OTT platform also that we have set up, so some update on those?

[Ashish Malushte, executive]

Yes. So OTT platform is more or less at the same stage. There is nothing that we have spent on it and nothing that has significantly moved on it. As regards my initiative of NOVA, it is now looking more meaningful. And from the stage where we were last time when we met and we explained you that prototype is there near Mumbai and people are coming down. When I say people, the franchises are coming down and trying to see what it is. From there, now we have reached a stage where the first center is expected to get -- the construction gets completed in this quarter, and we are trying to make sure that it gets operationalized before festive period. During this quarter, the construction with some of our franchisees would start at least at 2 locations. And this is how, by Q2, we'll have more clarity about what is the -- with what kind of interest we have viewers and the customers going to these centers, the initial traction. So NOVA is very much on track the way we wanted to place it for our expansion plans.

As regards to the third initiative, which is Zinglin, which was again a very small initiative which we started immediately after the beginning of the pandemic, which was more like a short content video platform. That has transitioned from that stage and now is -- we are at the stage where it is going to be used more for the core business as its second screen. And that would also be operational around the festive period.

So on the CapEx outlay or the OpEx outlay front, the 2 initiatives Zinglin and Plexigo, there is not much -- there is no CapEx and very insignificant OpEx. Yes, there is CapEx and OpEx on NOVA, and that is something which would be interesting to see how it pans out by the end of this year.

[Rajesh Mishra, executive]

Yes. But again, NOVA is a very asset-light model. So the whole model is designed to be -- get volumes and traction in terms of numbers and ultimately tie into our core business of digital cinema.

[Operator]

The next question is from the line of Arham Shah from Alpha Invesco.

[Unknown Analyst]

My question is regarding the effective rate per minute in the advertisement segment and about the inventory per minute in ad segment, and how do you see it pan out going forward?

[Ashish Malushte, executive]

So your ad inventory utilization is there on Slide 10 of our earnings presentation where you get -- and if you go to our previous presentations, every quarter we present our numbers. So, at this stage, on the minutes sold, we are close to 1 minute, 0.94 minutes -- sorry, we are close to 2.8 minutes versus 0.94 minutes. So we were at 1 minute in Q4 when business had just started opening up in February and March. And versus that, in whole of this quarter, we have done 2.8 minutes. And if I have to compare it with my Q1 number, Q1 FY '20 number, then that number will be slightly higher, and that is around 3.3 minutes.

So in terms of volume, there is a very significant jump from -- on a sequential basis, but there is still some way for us to reach my pre-pandemic level of minutes. And these are the minutes which I'm talking about the corporate minutes because government, as we know, currently is -- currently on a standstill, more like a standstill.

[Unknown Analyst]

Yes. So in terms of realization and how do you see it pan out going forward in FY '22 and '25?

[Ashish Malushte, executive]

So realization is always a combination of the movies coming in and the kind of demand that is there from the advertisers in a particular week. So the good part is that in spite of going through this very severe kind of a business situation, our marketing -- sales teams have been able to hold the rates, and there has not been any desperation in dropping the rates and filling the inventory, because our belief is that that kind of effort may turn out to be a negative move.

So our rates have not dropped. Going to a question how they're going to move from here on, again, before the rate, it is more important to see how the inventory is getting filled. Currently, we have a 20 minutes inventory, both putting together pre and post internal -- preshow and post-interval inventory in every show.

As I told you that currently we have reached a level of 2.8 minutes. If you compare it with few of the premium multiplexes whenever they have released these numbers, these numbers are substantially high in excess of 15 to 18 minutes. We also believe that we have a significant upside in filling the volume before tampering with the rates. And we don't need to really touch the rates, because as the volumes start picking up and the inventory starts becoming scarce, the rate automatically start moving up. That is what we have also seen in pre-pandemic period whenever there used to be inventory getting filled to 100% level, especially during the weeks when there were good movies.

[Operator]

The next question is from the line of [ Manan Patel from Airavat Capital ].

[Unknown Analyst]

Congratulations for very good numbers. And also, congratulations for the very good presentation that you have prepared. Sir, my first question is regarding -- if I look at the trend for last 5, 6 years, the number of screens have been declining continuously, even though it's a steady decline. So I wanted to understand, obviously, we have taken initiatives like NOVA, but I wanted to understand how should we think about the number of screens going forward? Because as a country also we have not increased the number of screens and the single screen are sort of closing down. So how do you think about the number of screens and what steps are you taking to increase the screens?

[Ashish Malushte, executive]

Right. So as you have rightly said, the number of screens in the country have not increased over the years, and we have seen quite a bit of single screens shutting down. But at the same time, many of the single screens when they shut down, they normally convert into a 2-screen multiplex or a 3-screen multiplex. But the growth rate of the multiplexes and the number of screens that are there in the market, that has virtually remained static. So that means more number of single screens are closing down as compared to the number of multiplex properties are opening up. So while the screen count is maintained, the property count is going down.

The way we see the business is that during the pandemic, there has been a hit basically on the smaller single screens. These were the ones which have suffered the most because they were also the most vulnerable. And the economic impact on them was much more severe than on larger chains or something like that. So the number of single screens that have shut down is much higher. But at the same time, there has been a significant increase in the number of screens that we have installed also during this period. And what we have seen is that number of multiplexes which we are gaining as compared to the screens that we are losing, this is having an effect of improving our product mix vis-a-vis multiplexes and single screens.

So our focus here now is to acquire as many key properties, prime properties of the multiplex screens and to ensure that we remain top of line for these multiplex screens as a content -- digital cinema integrator.

[Unknown Analyst]

Okay. And sir, in terms of -- so you talked a lot about NOVA. So I wanted to understand how many [ screens ] are there right now?

[Rajesh Mishra, executive]

So NOVA is -- as Mr. Malushte had explained, NOVA is a infrastructure business where we are working on creating a model -- asset-light model which we hope to franchise it out to a larger number of people. So currently, there is low traction on this. There is no properties. One is under construction and another is in the pipeline to start construction from next quarter. But with these 2, 3 properties that will come up will serve as a template and a demonstration to all other franchises across the country, and that is where the traction will come from.

[Unknown Analyst]

Right, sir. But from your annual reports, I think NOVA is also a 4-, 5-year-old initiative. And initially, we had some 30, 40 screens also. So this NOVA Kendra and all the utilities and all that might be new, but we should still have the older screens, right?

[Ashish Malushte, executive]

Yes. Actually, good you pointed this out, otherwise, this would have left confusion in minds of everybody. Under NOVA, yes, we have this 30 screens where we primarily do programming, which means we make sure that the content is made available in these theaters. So we act as a link between these theaters and the distributors on an exclusive basis. And that business is very much on. But as you would appreciate that, that is a very insignificant business in terms of any scalability or materiality. And therefore, that was our first step from what you have seen UFO as a service provider -- digital cinema service providing company, moving from being a service provider and playing some role in the actual value chain, starting from producer and ending into the theater. So this was our first attempt, which we started in 2015-'16, and we are pretty successful in that, and that business still continues.

What we're talking about NOVA EUC is the initiative which is based on taking inputs from where we learned in the core programming business. And that is where we realized that we can play this role of having these smaller centers but with a significantly good ticket price across the urban and semiurban areas. And on these lines, we started the work in the middle of the pandemic.

Towards the end of the pandemic, we had the our prototype ready at Bhiwandi and that was used to popularize the concept and get the franchisees to understand the concept in detail when they see the prototype in running. And that is exactly what happened towards the end of the pandemic, which has moved into a stage where we have few of the franchises who are either signed up with us or at an advanced stage of discussion. And out of these franchisees, one of the franchises moved ahead and has almost completed construction of his theater in Maharashtra.

And as I said in the past that we are expecting that this should get operationalized by November. And this part of the business is new, which is what is going to help us, not just us but the entire industry, to push the overall pie of the industry as and when more theaters come in. But the original 30, 40 theaters, of which almost 28 are still operating under the model of programming, and that continues to make that small amount of money every year.

[Unknown Analyst]

Sir, can you explain the business model of the new NOVA initiative that we are talking about for UFO?

[Ashish Malushte, executive]

I'd suggest that, one, once this model is -- there are 3 to 4 different variants of this model, one which we directly, the one with a franchisee approach to it. So that is getting finalized as we speak. Of course, our own model is final. So I would choose to wait for some more time and have these models posted on my website for the understanding of everybody, and that would happen probably in this quarter only. And once those are there in public domain and, of course, I can also speak now and that will also be in public domain, but once those are there on my website, it will be better to address specific questions arising out of that, instead of spending a little elaborate time on this call to explain exactly how each of those models will go. So I'll request for that liberty from you.

[Unknown Analyst]

Sure, sir. Sir, last question. So, we had an amalgamation plan for Scrabble and other companies to get amalgamated to make the corporate structure simple. But is that plan still on, or has that been scrapped?

[Ashish Malushte, executive]

It's not scrapped. And it was always whether should we do it will be better or not doing it better. And we had actually communicated to exchanges also, if I'm correct. The reason why we decided to not pursue with that was a small window of opportunity that this sunset business, which we completed, if you know that we were -- under the sunset business in Scrabble, we were supposed to provide equipment to theaters.

And after 5 years, we were supposed to get out of that business, and therefore, there was a sunset. But for these 5 years, the Hollywood videos were going to VPF fee to us, and that was the main revenue stream.

Now what happened in the process was we had this superb relationship built with all the Hollywood studios, plus the relationship is documented in form of an agreement.

Now that relationship exists with Scrabble. So Scrabble as an entity is through their whatever evaluation system, and basis Scrabble's backbone only -- Scrabble India's backbone only we have done similar business which were pretty successful in Middle East. So the thought emerged that if at all there is any opportunity of the same sunset business repeating because the equipment coming to end of life, and again, one more round of 3- to 5-year sunset coming in. And I'm not saying this will come. But I'm saying this was an opportunity, possibility. To be ready for that possibility, we decided not to merge Scrabble into UFO, and then, again, put UFO through the whole approval process, though, it wouldn't have been that difficult, but a whole new process.

So that was the primary thought why we held it back, and then we realized that there are no significant cost outflows that is happening because of having this separate entity. But you're right, this is not something which you would like to keep it going on perpetually. So maybe towards the end of this year or early next year, we will have to take a call whether that is a feasibility or not and should we fold this up in UFO or no.

[Unknown Analyst]

Got it, sir. Can I squeeze in one last question?

[Rajesh Mishra, executive]

Sure, sure.

[Unknown Analyst]

So, sir, we raised capital around INR 100 crores. Largely one purpose was to sail us through this pandemic if third or fourth wave comes. So largely, we see that sort of that is behind. So what are the plans with the capital that we have raised? Are there any inorganic plans? Obviously, you will service the debt as well. But apart from that, whatever [ capital ] is still left, what plans...

[Rajesh Mishra, executive]

So for debt servicing, this was -- so just quickly answer your question. Obviously, it was to sail us through, and it helped us when there was some amount of disturbance because of Omicron. Luckily, it was very, very short disturbance. It was not meant or it is not meant for repayment of debt. Yes, other opportunities like new initiatives, which I spoke about, or in case if there is any inorganic opportunity coming up, again, I'm saying there is nothing on cards as of now that we are discussing. But if something of that sort comes up, then we should not be then scouting for money because in the past, pre-pandemic, ours was a very attractive balance sheet for us to go and raise funds, debt funds easily. But because of pandemic in entertainment industry, which was a worst hit, none of our balance sheets of all the players were supporting beyond a point any further debt raising. And therefore, we thought that this equity fund can be a kitty with us in case if some inorganic opportunity comes up.

[Operator]

We'll take the next question which is from the line of [ Madhav Jadhav from PRI & Associates ].

[Unknown Analyst]

So thanks for the concise presentation. My first question is what is the difference between CDC and VPF revenue?

[Rajesh Mishra, executive]

So CDC -- essentially, it is the same. The amount which is charged to the distributors is content delivery charges that we categorize as that. VPF services is the service that we provide to certain chains to collect their CDC or VPF amount. And large part of that is shared back to them, and we keep only a smaller service fee component. So from that perspective, it is bifurcated.

[Ashish Malushte, executive]

So if it was clubbed, it would have colored my CDC where almost 100% of the CDC travels into EBITDA after reducing small portion of direct expenses. Therefore, from this quarter onwards, we have taken a decision of showing the distributor revenue into these 2 buckets. Earlier in pandemic -- pre-pandemic when there was this sunset of ours at its peak between 2016 and 2019, we were showing this revenue from 2 different segments called E-Cinema and D-Cinema VPF where E-Cinema VPF was largely not shared, except 2%, 3%. The D-Cinema VPF revenue structurally as -- contractually and as a plan was to be shared with the exhibitors who had either partly invested or, in some cases, not invested.

But that revenue was to undergo a complete sunset where we actually lost, I won't use the word lost, but if you compare FY '15 revenue or FY '15 EBITDA and FY '20 EBITDA, in FY '15 EBITDA, there was amount to the tune of INR 70 crores, which was coming from this sunset business, which over a period of time got over, which means no more we are getting that INR 70 crores.

But still, we managed to maintain and up the EBITDA pre-pandemic from obviously, other revenue streams, including CDC. So we have now stopped showing that categorization because D-Cinema is no more relevant because sunset is over. Therefore, we want now the investors to look at my distributor revenue in these 2 segments, one, CDC, content delivery charge, where there is no sharing; and VPF service fee, where I charge either CDC or VPF from the distributors, and significantly, portion of that gets shared.

[Unknown Analyst]

Okay. Sir, that helps clarify. My second and final question is, in the opening remarks, as you have said, that the success of movies has resulted in a smooth recovery. But sir, since we are not in exhibition space, how does a blockbuster or even a superhit movie which, let's say, collects INR 100 crore plus of revenue contribute to our revenue?

[Rajesh Mishra, executive]

So we get affected by this on 2 fronts. One is the CDC revenue that we collect when the film goes into more number of screens, and it carries into more number of weeks. So that revenue gets impacted if the film does well. But the primary impact of our swim going well is on the advertising business. So if a blockbuster sustains, it gives us a very good traction on the advertising front. If films are not doing well particularly in any period, the advertising of that period also gets impacted directly.

[Operator]

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Ms. Shweta Shekhawat for closing comments.

[Shweta Shekhawat, executive]

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

[Ashish Malushte, executive]

Thank you.

[Rajesh Mishra, executive]

Thank you, everyone.

[Operator]

Thank you. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.