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UFO Moviez India Ltd
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Ladies and gentlemen, good day, and welcome to the UFO Moviez India Limited Q1 FY '24 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I would now like to hand the conference over to Tushar from Ventura Securities Limited. Thank you, and over to you, Tushar.
Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to UFO Moviez India Limited's Q1 FY '24 Earnings Conference Call. The company will be represented by Mr. Rajesh Mishra, Executive Director and Group CEO of the company; and Mr. Ashish Malushte, Chief Financial Officer of the company.
I would now like to hand over the call to Mr. Mishra for opening remarks, post which we can start the questions and answer session. Thank you, and over to you, sir.
Thank you, Tushar. Greetings, everyone, and thank you all for joining our Q1 FY '24 earnings call. Q1 FY '24 commenced with movies like Bholaa and Dasara released on 30th March. While there was no major new releases for the first 2 weeks of April, the latter part of the month had some big budgets in the movie releases like Kisi Ka Bhai Kisi Ki Jaan and PS-2, followed by the sleeper hit, Kerala Story and the Zara Hatke Zara Bachke and other significant movies like Transformers, The Flash, Adipurush and Satyaprem Ki Katha in the subsequent months.
Throughout the quarter, even when we observed signs come back from Hindi movies, regional movies like Bushirt T-shirt, Gujarati film, Sri Raghupati, Assamese film, Carry on Jatta 3, a Punjabi film and Baipan Bhaari Deva, a Marathi film continued to exhibit healthy performance. June proved to be a standout month for our business with more film releases contributing to the best month for both Theatrical and advertisement revenue in the quarter. Moreover, corporate advertising marked its best quarter since the post-pandemic period. Although the underperformance of certain tent-pole films such as Bholaa, Kisi Ka Bhai Kisi Ki Jaan and Adipurush impacted advertisement revenue.
Additionally, a couple of big films, like Jawan and Maidaan, got pushed forward, further affecting the advertisement revenues for the quarter. On the government advertisement front, we saw some traction in the advertising revenues from Caravan, with one government campaign and one corporate campaign in Assam and Maharashtra. There are still some constraints in the government advertising business, however, we are happy to say that our mobile talkies venture, Caravan, has executed a rate contract agreement for empanelment with the Central Bureau of Communications, Ministry of Information and broadcasting. This was a much awaited development, which had got delayed during the pandemic, and we expect business under this category going forward.
Now turning to the headline numbers for the quarter ended June 30, 2023. Our consolidated revenue stood at INR 853 million compared to INR 884 million in Q4 FY '23 and INR 906 million in Q1 FY '23. EBITDA for Q1 FY '24 was INR 163 million, a significant improvement compared to an EBITDA of INR 114 million in Q4 FY '23 and INR 98 million in Q1 FY '23. We are happy to share that we have achieved profit after tax for the first time since Q4 FY '20, with a PAT of INR 25 million in Q1 FY '24 compared to a loss of INR 11 million in Q4 FY '23 and a loss of INR 25 million in Q1 FY '23.
Regarding our consolidated funds position, the balance at the end of the quarter stood at INR 808 million as of June 30, 2023. After considering outstanding debt, the company continues to maintain a net cash positive position as of June 30, 2023. The strategic implementation of cost optimization measures has significantly improved our financial performance. Moreover, as we step into Q2 FY '24, with movies like Mission Impossible, Barbie, Oppenheimer and Rocky Aur Rani Ki Prem Kahani, coupled with the recent announcements of proposed strategic joint ventures with Qube Cinema Technologies Private Limited and an exciting lineup of upcoming films, such as Jailer, Gadar 2, King of Kotha, Jawan, SRI and Salaar, we are confident about maintaining our upward trajectory in the coming quarters.
Thank you for joining us today. And now I would like to open the floor to take your questions. My colleague, Mr. Ashish Malushte, CFO of UFO Moviez, and I are looking forward to a productive and insightful discussion ahead. Thank you.
[Operator Instructions] The first question is from the line of [ Rahil Shah from Crown Capital ].
Am I audible?
Yes, you are audible. Please go ahead.
First of all, congratulations on turning positive on the profit after tax. So my question is just regarding to that and the overall, the revenue and margins outlook. So how do you feel about the year going ahead? You said you will be continuing the trajectory, but then what can one expect in terms of your growth and the margins, especially for the whole year?
So as I said, we remain optimistic about the future, considering the lineup of films and the improving sentiments around the release of films. Lately, we have seen audiences coming back to the cinema with content-driven films like Zara Hatke Zara Bachke, Satyaprem Ki Katha. Even the recently released Rocky Aur Rani Ki Prem Kahani has been getting very good reviews compared -- also the Hollywood films, Oppenheimer, Barbie, Mission Impossible, they are seeing good traction. So overall, this is good news for the industry that audiences are wanting to come back to the cinemas, and that is very evident from the success of these films. And this will be a driver in our view because our distributor revenue, our advertisement revenues are directly relating to the success of these films. So we remain optimistic on this front.
Is it safe to say, given these new films ahead and the response you're already getting, is it safe to say that you'll be doing the same -- giving the same kind of performance as you did in '23 over '22? So is that kind of a jump that you saw last year?
Yes, I mean, to a large extent, we should be in a good position to grow the business of the company. This is a business which is largely driven -- content-driven. But the good part is that content lineup is very well positioned in the second and third quarter also. So which are traditionally good quarters for our business, and we expect to have good business over there. Unless there is some surprises which happen in the market.
Okay. Okay. And then in terms of the margins, like historically, it has always been high in double digits. But then recently, you saw some negative -- unpredictable through the COVID and everything. And then last year, you were also like single digit. So where do you expect then to be at the end of year? Can you go to double digits again?
So the one quick point is as regard to the margin structurally, there is no change that has happened now that we are back slowly on track to pre-COVID levels. So the way our margins used to be there in pre-COVID levels, we should be expecting a similar margins to slowly come back. Just to quickly explain to you, our margins primarily get the boost from the incremental advertisement revenue, because incremental advertisement revenue in our case has in excess of 52%, 60% EBITDA to PBT contribution.
So if you actually -- I mean, this is just the first quarter, where the performance is handsomely back, slowly on track. But over a period of time, if you compare our current year performance with pre-COVID performance, you will see that all the revenue elements and corresponding cost elements would be moving more or less in the similar direction. So we are not expecting a major difference in margins. But for the margins to come back on the pre-COVID levels, we need to see the advertisement revenues to go back to the pre-COVID levels, and that's where the whole efforts are on. And with the positive sentiment around movies coming back in Hindi belt, which always existed in southern markets, whole of the last year, we are hopeful that the advertisers would also, in the northern market, start looking at this network. I mean not just our network, but digital cinema networks more positively, that could add to our ad revenue, in turn our revenues. In turn our margins should be back on track.
Okay. Okay. So the ad revenues will favor the margin side, right, got it. Got it. Okay, I'll get back in the queue.
Next question comes from Devarsh Vakil from HDFC.
Am I audible, sir?
Yes, yes.
So in the opening commentary, I just heard that we have entered into some rate contract for our Caravan vehicles. So can you throw some more light on it? Is it a confirm order we got? Or is the contract and agreement they want to do some campaign, they will use these rates to give us the advertising revenue? And the status of our government issue advertisement earlier, we were about, I think, 30%, the last quarter, I think we have come to 18% of the overall revenues. So is there any traction there? Any comment or color would help.
Sure. So our government revenue typically comes from 3 sources. One is central government, second is state government and third is our public sector undertakings. All these 3 revenues they are classified under government advertising. So as I mentioned, central government advertising has been reduced at the -- by the government themselves. They have reduced the ad spends significantly as per their statements in the Lok Sabha that they have given. However, the state governments across the country whom we keep engaging with, they have been advertising. And we see upward movements over there, also with published undertakings.
As regards Caravan, Caravan, the business we have been doing earlier also. But what we were missing was the empanelment of this media by the Central Bureau of Communications. The importance of this is that the center -- the CBC, what they do is they evaluate the medium, they put in the deliverables and they run the process of tendering and rate price finding. And once that is done, they enter into a contract with the vendors, that we will give you this business at these, these rates. So this is a rate contract. This is not an order that has been received by us. But this will help us in the future, whenever we are in the process of procuring orders from a central or a state or any other entity, the rate has already been defined by the government and the deliverables are also factored in -- outlined over there.
So there are no further discussions regarding the rates and the deliverables, et cetera. This is a rate validation that gets done. So once the rate is fixed like for our cinema business also, in the earlier stages, we had to get empanelment with the DAVP, at that time, which is now Central Bureau of Communications. But once that rate is finalized, that rate is followed by the state body, the government body that knows these things. So this was at a very advanced stage of getting empanelment prior to the COVID period. But once COVID struck, as you know everything , the priorities changed to other things, cinemas were shut down, vans were shut down. But now we have got this rate contract, we have entered into that. And this will help us to procure business going forward from central, state, PSUs, whatever.
Nice. Yes, that's helpful. So suppose CBC comes out with some particular campaign, we are also likely to get certain portion of that for that campaign in these vehicles also. So do we need to do any CapEx to make them ready? Or is it we can use these vehicles now as and when some order comes to us?
Yes. So our vehicles are very much in place. So in a way, any business which comes through CBC or previously, it was known as DAVP, some of us may know it as DAVP. Once the business gets allocated, as you rightly said, that then allocation is done to various players and we are one of those. I think they have approved 3 or...
8.
8 vendors, but we are one of the bigger ones. So once the business comes, we don't have to do any incremental CapEx, all that we have to do is we have to do incremental OpEx. Just to quickly tell you, in this quarter, this business line has generated revenue, and that was after our -- first time after COVID. So in the range of about 1 point -- over INR 1 crore of business was generated in this quarter. But this was -- business was before the empanelment was done. What it means is that we have to make efforts to get business, and even they have to make internal efforts to give business to us. Now their effort gets substantially reduced because the entire medium of these Caravans, not just us but entire medium across the country is now approved by DAVP.
So the incremental expenditure we have to do is only when they allocate a route. For example, this time, we were given 3 states and 2 villages every day, it was a cycle of about 15 days for 30 villages. So we have to do the OpEx in relation to finalizing the route and putting the business in progress. But there is no CapEx that we'll have to incur incrementally. Therefore, this -- what in the opening remarks we said is this is something which we are eagerly awaiting. And finally, we have got the empanelment. And just for quick reference, UFO's digital cinema empanelment was done in 2008.
Right. And typically, sir, compared to our in-cinema advertisement, this business is typically a better margin business for us, though it is very smooth right now, but eventually?
Not really. Digital Cinema, which I mentioned about, anywhere between 55% to 65% incrementally revenue, fetching EBITDA to PBT margin. This business would also be almost in the same range, between 45% to 60%.
So in Digital Cinema, you don't have operating expenses is kept in for revenue advertising. Here, the vans have to be operated, moved around and all those things that are -- manpower requirements are there. So from that perspective, the margins also remain the same.
Right, sir. And what would be the number of vans brands running right now in a running condition, which is, sir?
Right now, we are facing monsoons. So at this time, we are not having the vans running. So during this time, we undertake our routine maintenance and servicing and all those things. And once the monsoons get over, we expect to get business on this. So we keep them in readiness for that. So 3 months do get affected for the Caravan because it's a outdoor medium, it's a sundown show and rains do affect it.
No, I understood, sir. But when -- as and when, say, after rains, when another campaign comes, what is the number of vans we have which we will be able to put to use for this business?
So for the INR 1.6 crores revenue that we generated in this quarter, primarily in the month of April alone and partly in May, there were 1-3, 13 vans which were put to use out of the 100 vans that we have.
Next question comes from Aditya Sen from RoboCapital.
Congratulations on your turnaround. So...
Thank you.
Yes, most welcome. So Q-on-Q, the average number of minutes sold increased by 61% this time. But the ad revenue per screen for the same period increased by only -- roughly about 24%. So absolutely, we were unable to figure out this gap. So can you please help here?
Yes. So that's a very valid point that you made. And firstly, I won't -- before you -- before I answer your question, the positive side of it is in spite of all these problems that we were facing while we were exiting out of COVID period, and more specifically for our company because our company has dominance more in northern part of market than southern part of market, and we all know how the sentiments was around the movies in northern part of India whole of last year. Last 4 months it is slowly changing, which is good. So in spite of that, we were able to have the better minutes -- number of minutes per sold were coming back on track very quickly.
So in fact, when I say coming back on track, I'm comparing it with pre-COVID levels. So pre-COVID, I'd I say Q1 FY '20, the number of minutes sold were 4.6. So 4.6 minutes sold per show per screen. That's how it goes. And that 4.6 number in this quarter is standing at 4.2, okay? So in other words, there's a 91% recovery there that we have. So your question would be why is it that the realization has dropped. So realization has dropped primarily so it's simply the multiplication of number of shows that you sell -- I mean, number of minutes you sell and the rate at which you are selling.
So when we were exiting the COVID period and slowly trying to get the business back on track first of theatrical and then of advertisement, there were -- there was a strategic decision that we took that we will not hold on with the prices, but it is more important for us -- when I say us, all of us, including other players in digital cinema, to get the advertisers' attention back on our medium. So out of over INR 1 lakh crore advertisement market that is there in India, the in-cinema advertisement spend, okay, even in pre-COVID was not in excess of INR 700 crores. And right now, during COVID it dropped.
But you all know that during COVID, this advertisement market kept growing. So pre-COVID, it was around INR 75,000 crores, post-COVID it was about INR 1 lakh crore. So what I'm trying to say is that the advertisers continued to spend. While the cinema -- in-cinema as a market completely was -- I mean, it was near 0, or a 0 for 2 years, they kept spending. So in a way, it was necessary for us to make conscious effort to go back in their planning process, go back and remain reengaged with them. And that needed us to bring down our pricing. You probably would see a similar kind of a strategies with other players who are listed. And therefore, what you see as a drop in the overall realization is purely and purely because of reduction in the rates, okay? And obviously, now that the sentiments are back on track as our volumes are picking up, obviously, the rates would also slowly start coming back on track.
Right. I understand. Yes. Actually, this was necessary to bring back the attention to the industry. So yes, you also told that the rates should come back. So any guidance on the pace at which it shall come back? Because pre-COVID, we did INR 150 crores of revenue. So will we be inching closer towards that number?
We are always -- get away from giving any guidance on any revenue front or on profitability front, even in pre-COVID period, and we would continue that even now. All I'm trying to bring to your notice is that the things are really looking a lot better than last year. More on sentiment front. Now the sentiment, the positivity in the sentiment, how fast it translates into the advertisement business. For example, the positivity in sentiment very quickly translated into bettering our theatrical business. But whether it will be at the same pace or a faster pace for advertisement revenue is something which we'll have to wait and watch. We can certainly say that we are at a much stronger position as compared to last year on this front.
Right, right. Understood. Just one more question about the ad share with the exhibitors. Earlier, pre-COVID, it used to be in the range of 30%, 35%, which surged to 60% in FY '20, and now it is declining. So how is it going to trend in the coming years? Like is it going to get back to that 30%, 35% range? Or will it stabilize here itself?
So actually, you're absolutely right. This is an advertisement share though is appears like a sharing of revenue, it has one component, which is called minimum guarantee. So irrespective of revenue, we give a minimum guaranteed share to a theater. And in that sense, that's a fixed cost. So theoretically, if my revenue is 0, I'll have to still incur that cost, and therefore, you will find revenue 0 and still a sharing. So that's not a sharing. That's actually a minimum guaranteed pay out. So what do you currently see that as a sharing as a percentage of revenue is still higher. So maybe in this quarter, it's around 48%. And in pre-COVID period, that used to be in the range of 32%, 34%, 35%.
And purely, if you see the revenue comparison, once the revenues start going back on the pre-COVID levels, the minimum guaranteed payment would stay the same way for a long period till such time a threshold revenue is reached. And till such time, what happens is the gap -- I mean, the sharing of percentage keeps dropping, okay? And only beyond a threshold level in a particular theater if we have given a minimum guarantee of INR 10,000, and the sharing is 25%. So till such time, I am between INR 10,000 and INR 40,000, you will find that the sharing percentage is very high. So assume it is moving from INR 15,000 in this quarter, to say INR 35,000 next quarter, the sharing amount would remain the same, but revenue would go up. And it's a simple math. So therefore, the sharing will go down.
What I want to tell you is that once the revenue, in this example, exceeds INR 40,000 from that theater, then you will start paying more share. So to broadly answer your question, yes, directionally, this sharing should go down as the revenue increases. There would be some movements. I mean it will not be at the same level of pre-COVID of 30%, 32%, it will be slightly higher, because in the process, we would have given slightly higher minimum guarantees in some theaters. And that is with an anticipation that those theaters would do better for ad revenue. So over there, if the ad revenue goes up, surely, this ratio would further go down from the higher levels.
Next question comes from Amit Mehendale from RoboCapital.
Sir, when do you expect 2 JVs to be operational? And if you could explain overall strategy going forward for the JVs?
Yes. So we have entered into an arrangement for 2 JVs. One is for mastering and content delivery and one is for advertising. The rationale is that if you see the businesses of UFO and Qube, they are pretty much identical in nature. So it makes imminent sense to enter into a JV and optimize on the costs on the mastering and content delivery front, and this will benefit not only the companies of UFO and Qube, but it will also be beneficial for the industry because they will be required to now interface more or less with one entity rather than multiple entities.
And as regards the advertising is concerned, currently, both UFO and Qube are selling their advertising independent of each other. But by pulling the advertising inventory of these into a joint venture, what it enables us to do is it provides a greater reach to the advertisers. And typically, if we see the bigger level of advertisers, the FMCGs and all, they look out for larger reach. And this is exactly what the JVs will be able to provide them. Plus, JV with a single focus on improving the advertising will also look at various areas of evangelizing the medium, improving the advertiser experience, providing post-evaluation exercises, giving them more data guided advice, helping them to maximize their impact of the content advertising that they are doing.
And just in terms it will definitely lead to increase in the volumes as opposed to what the individual companies would do on a stand-alone basis. So essentially, this is purely a cost -- revenue optimization exercise and mastering revenue is a cost optimization exercise. Ultimately, both will benefit us because it will improve your EBITDA positions in these things and provide focus in these 2 areas itself.
Right. Sir, on the advertising side, apart from volumes, will it also effectively mean a slightly better pricing, because if I understand it correctly, Qube and UFO probably were competing each other in -- prior to the JV. So there could be some inherent price [ VAR ] price discount in there, that probably will get stopped. Is it a fair statement to make?
So ultimately, we were all selling our own screens, right? I could not -- I was not selling Qube screens or Qube was not selling my screens. So there was no competition to that extent over there that an advertiser was not being approached for one common screen that way. But definitely, we will provide a better value proposition to the advertisers which will, in turn, we are hopeful of giving them a better return and give us also a better this revenue from these screens.
Right, sir. And on the volume side, I mean, there would be some clients which are unique to UFO and some clients which is unique to Qube probably. Sir to that extent, once there's a JV, which is talking to both clients, effectively the volumes will add up in a similar way. Is that -- is my understanding correct on that?
Yes. That is an astute observation. And this is definitely an upside that will happen in the JV. If a client has been exclusively on the UFO network, now there is no reason why we cannot be approached for the combined network. Because the JV's mandate is to sell the combined network. So to this extent, yes, we are hopeful that we will be pulling each other's strength and relationships to optimize the revenues for both the companies.
In fact, this would be one of the low-hanging fruits for the JV once it starts operationalizing.
All right. Great. So I think -- and it's the first part, probably, when is this going to be live in terms of revenue picking in, or on the ground, the JV operating, at -- which quarter will it be?
So right now, there are certain statutorily things, approvals and all that are required, which we will be approaching the shareholders in the AGM that is scheduled on 8th, the company formation and all that are taking place. So we expect another 30 to 45 days before we can make the JVs operational. Now having said that, the effect of the JVs will probably be seen in the second half of the year. So H2 we'd be seeing -- start seeing the impact of these 2 JVs.
Next question comes from Vaibhav Badjatya from Honesty and Integrity Investment.
Sir, a couple of questions. Firstly, I'm a little...
Can you speak a little louder, please?
Yes. Can you hear me now? Is it better?
Yes. Yes, it's perfect.
Yes. Sir I just have to have 2 or 3 questions. So in terms of rates, advertising rates per minute or per 10 second or whatever, are they back to pre-COVID level or they're not back to pre-COVID level?
Sir should I answer this question? And can we go one by one? Yes. So the rate in the previous question I answered that, no, the rates are not back to pre-COVID levels. Second part of that question was that the reason why we dropped it was because we wanted to get back the advertisers' attention to this medium. And third was that we had clarified is that the expectation is that with the sentiment becoming positive in the northern part of India around movies, we hope that the advertisers would continue their spend, and that will help us to push our rates higher and the special discounts or special lower rates, which were offered most immediately post-COVID, we should be able to slowly bring them up.
Okay. Okay. I just well needed a clarification. Yes. So -- and secondly, sir this -- because of this JV in the sense that a client who is looking for advertising in this -- on this medium anyway, earlier if we needed it, we could have gone to Qube and UFO separately, right? So obviously, there will be some convenience to plan in terms of entering into a single contract. But why would it enhance the volume, as you said in the earlier question, because anyway, if somebody wanted advertising on the north side as well, he would have come to you?
Yes. So basically, we have to see it in a manner that when both teams are combined together, our feet on the ground increases, our experience of selling the cinemas that we have accumulated over the 2 years in both the companies, that gets pulled together. The cinema advertising medium typically works on all India level, it works at state level, it works at hyper-local level in the cities also. So in addition to national advertisers, there is a big volume of retail advertisers, which is there. There is a big long tail of advertisers who would be available to advertising only at district level or state level. So feet on the ground and experiences and relationships pulled will increase the volume, as I had mentioned earlier also.
And there are a lot many clients at local level brands which do not advertise on television because it entails a lot of wasteful expenditure for them, because television will typically go all over the country and where they are not even selling their products. So they don't have a value proposition of advertising and cinemas provide that very well. So this is where the bigger team size, more focused approach, more data-based research, analytics, better post-evaluations, better guidance and advice to the advertisers, helping them execute the campaigns, all this will drive up the volumes.
Okay. Sir let me ask another question. So in the sense in -- before this JV and after this JV, what was -- was there any flexibility to advertiser to choose his screen and how it will change before -- after this JV? I mean can advertiser choose specific screen that is the screen I want and this the screen I don't want it? And will it change those that change?
Yes. So advertisers -- I mean, advertiser is a king and he always will remain the king. He will decide where he wants to advertise because he ultimately knows it better how to get the visibility for his products or services through a particular medium. So straightforward answer, yes, advertiser obviously needs to have this freedom and he will have a freedom. What Rajesh explained and tried to make a point is that now one sales guy goes, in the past, he had 100 screens, now he'll have say 200 screens. So his overall offering itself becomes stronger to an advertiser, an advertiser starts paying more attention to what he is trying to propose.
But your question whether the advertiser can select which network or which screen he wants, which obviously he would exercise that right, and JV is there to offer the whole of the network, part of the network. And in the process, JV will try to certainly convince that advertiser that how -- if he has chosen, say, only 20 out of 100, the JV now can make more focused and more impactful effort to tell him how from 20 he should move to say 60, okay? In the past, when it was not a JV scenario, both the sales teams probably would have been fighting against each other in some cases. Now they will be talking only one language for the combined network for better good.
Okay, sir. And in terms of advertising rates, so it will -- so I mean, because you're saying screen by screen advertiser can use it, so this JV will it have any impact on the rates also? Or it will not have, it will not happen...?
So we tried to explain this in one of the previous questions that whether JV or no JV, as the volume goes up of any product, the pricing has a probability of moving up as the demand increases. What JV is going to do is JV will systematically be able to make efforts to drive the volume up, okay? Now the volume goes up as more number of minutes gets sold, which means less number of minutes are available for selling. It's a finite inventory at the end of the day. And that is where slowly the pricing would start going up. Currently, it is more relevant because our prices really have come down, as I mentioned, because we wanted to deal with the post-COVID scenario. So yes answer is...
Sir, what I wanted to understand was that see there might be some screens which are very -- in a very common area, right, for both Qube and for you, and the rates might be different for both these. So now if a advertiser comes to this JV and he says I want to advertise in both the screens, so for both the screens in same area will there be a different 2 rates? Or you will give him one rate is what I'm trying to understand?
So typically, the rates are decided by the quality of screen, the catchment area, the type of audience that frequents this screen. So it's not like a one size fits all formula that is applied normally. The advertisers will give weightage to the quality of screens which are there and he is free to choose accordingly.
So there will be no standardization of rates as such for a similar screen and simialr location?
So even if there is a generation of rate, the weighted gets plugged them by the advertiser. So supposing he wants to advertise in one city, just to take a simple example, and there are 5 A-plus category screens and there are some lower category screens, he will give weightage according to the quality of screens that are being put in the product mix for him.
Got it. Understand. Understand. And just -- so for the -- we know the numbers for ourself. But for the Qube, what's the realization per screen and what's the -- because the JV will have all those numbers and we will have a equity stake in JV. So what would be the JV number? It's very important for us to understand. And sir for Qube what's the realization per screen? And the numbers that we have, what would be the numbers for the Qube in terms of ad rates and advertising-related numbers?
So broadly, you can assume that both of us are operating at almost the same level on a consolidated network level. So therefore, to answer your question is relatively easy that what is going to be realization? Yes, both for corporate and government segments, whatever realization we have, more or less, they would have. Probably last year, they would have had a better realization in corporate because movies were doing exceptionally good in south, even as compared to pre-COVID period, okay? So they probably would have had better realization. And better realization, better volume in turn better revenue per screen.
But in a normalized scenario, since both the networks are quite solid, strong, big, run by professional setups and have been in place for almost 1.5 decade in the country, the realization for spot or the revenue per screen at a network level would remain more or less same. This is what we can at least tell you at this very moment. The rest, how it pans out, we have to give some time for the JV to come in -- I mean, come in full force, start operating. And maybe a few quarters later, we can analyze quarter-after-quarter how the JV is making a difference in both volume and rates.
[Operator Instructions] Next question comes from Niteen Dharmawat from Aurum Capital.
Sir, as we mentioned about the revenue stream from the government sector is from 3 sources, public sector, cental government and state government. So can you please give us the split amongst these 3 pre-COVID and the current one?
Yes. Just give me a minute here okay...
In terms of percentage, it will do.
Unfortunately, I have absolute number. I can -- well right now, let me give you the absolute numbers.
No problem.
So the total -- and thank you very much for clarifying that the government segment, when we say it means 3 subsegments, one is central government, one is state government and third is PSU. So in pre-COVID FY '20 if I take, the total revenue was INR 51 crores from this segment, okay, which was split INR 20 crores from central, INR 18 crores from state and INR 13 crores from PSU. So Central and state broadly were contributing 40% each, okay?
But if I go a year before that, against this INR 51 crores revenue in FY '19, which was one of the best years for us on revenue front, INR 112 crores was the revenue from overall government segment, of which INR 80 crores was from central government. So that contributes around if I'm correct, about 72%, 73% versus 40% in FY '20. Now it is INR 116 crores of FY '18 -- or sorry, sorry. Yes, INR 112 crores of FY '19, which moved down to INR 51 crores in FY '20. If I take it in Q1 now, this year, it is almost INR 4 crores, INR 3.8 crores. Of the INR 3.8 crores, INR 3.7 crores has come from state government. Central government has contributed just INR 10 lakhs.
So this is the kind of massive shift that we are seeing. The positive trend here is even after COVID, the teams have been able to get the revenues in a meaningful way from the state government subsegment. And that has contributed INR 4 crores or INR 3.7 crores in one quarter. If I just mathematically analyze, it's close to INR 14 crores, and we were INR 18 crores in FY '20, or INR 16 crores in FY '19 from this segment. So I hope this gives you some flavor. And since I have given you absolute number I think percentage is also broadly when communicating.
No, absolutely. This is helpful. So my question is -- the second question is, do you see any trend in government revenue, especially coming from the central government, which is right now not coming to cinema. But is it across other mediums as well, the similar kind of thing? Or is it that they have restricted cinema, or they have removed cinema right now? Or is it applicable in other formats of advertisements, where government advertises?
So as I had mentioned in response to a query in the Lok Sabha also they had highlighted that they have reduced their advertising spend from almost INR 1,150 crores to around INR 115 crores, something like that. So virtually a 90% drop they have said that they have done in the central government advertising from DAVP that is released. And this is pretty much across the mediums. Not only -- it's not like only cinemas are being targeted, but television, print. Across the mediums they have done this reduction. So this is a government level action. And we keep appealing and approaching the government and pitching our campaigns. But ultimately, it's their call. Not much can be done. In this, we are hopeful that they will resume advertising on this area. But nothing can be commented on that.
So the only positive side here is that the reduction is across all mediums, and it's not that only digital cinema has been singled out. So when the spend resumes, which at some stage should, we -- when I say we, the entire digital cinema fraternity would be beneficiary and so would be your company.
Yes, entire cinema industry.
Yes.
Next question comes from [ Karan Mehta from Mirza Securities ].
Hello? Hello? Am I audible?
Yes, you are.
So I just have 2 questions. Firstly, how much improvement do we see from entering into the JV with you? And so if you can give a broad range in terms of cost structure benefits and improvement in profitability growth. If you can give a broad range on this, how much benefits do we accrue from this JV? Secondly, we have seen good improvement in our profitability, mainly driven from improvement in cost structure. And in this regard, all our costs have decreased, especially VPF has decreased Q-o-Q and Y-o-Y. So do we expect this to be sustainable? And can there be further reduction going forward?
So you have 2 -- probably I'll split your question in 2 parts. One is JV related and one is business profitability and cost related pertaining to UFO. So my request is JV related part, I'm not sure whether you were there in the earlier parts of the discussion, but there was one question which was asked to us by Mr. Amit Mehendale. And at that point in time exactly the question that you asked, except the cost part of it, where cost of JV part of it were elaborately discussed in terms of benefits and why should there be benefits and how the volume can go up.
So my request is instead of me repeating it, if you can just go through it on the earnings call transcript, it will be really helpful. And Navin will connect back with you in case you have any questions. As regards to the cost part of the post-JV scenario, there are 2 JVs, 1 is ad JV and 1 is your content processing JV. In the advertisement JV, well, cost is not really that relevant driver. Costs would go up as the revenues would go out there. So there is nothing like significant cost optimization that is what we had in mind when we went into the JV. It's only the revenue optimization or revenue push is the sole objective of the advertisement JV.
As regards content JV is concerned, yes, there were duplication between the 2 companies for carrying out similar kind of an activity. So therefore, once this JV is put in action, the cost optimizations on infrastructure, on assets would take place, but it won't be like immediate next quarter, you will see cost savings. Obviously, over a period of time, you'll see it. But in the overall context of our balance sheet size, that cost optimization is not that significant. However, in the current scenario, any optimization is critical.
Coming back to your question about our profitability of the current quarter, yes, the profitability has had a major support when we came back in profit that had major support from the cost reductions that you are seeing. And yes, the cost reductions that you're seeing in certain key areas are not like onetime, but those are more sustainable cost reductions, which were achieved over a period of last almost 18 to 21 months of efforts, where we managed to get the cost down without really cutting the corners and without really disturbing the operations of the organization, as it was coming back in pre-COVID business growth scenario.
Even the VPF is sustainable, VPF sharing is sustainable.
So VPF sharing is a very specific point that you asked. And yes, first answer is yes, it is sustainable. But you need to know why it is reduced, it is reduced because the VPF revenue has also gone down. So sharing remains almost the same in terms of percentage. But if the absolute revenue has gone down, your sharing would also go down. So therefore, this particular cost reduction in the line item of VPF sharing expense does not really tantamount to any profitability increase. Because after revenue become why our excess becomes...
Next question comes from Harsh Patel from Alpha Alternatives.
So you said the content is very promising from here on. But at the same time, there's a strike ongoing in Hollywood. So next year, we might not see movies like Oppenheimer and Barbie, or even Mission Impossible. So what do you make of that?
Thanks, that's good for us because...
Yes, so you're right, the strike is going on, but it's a temporary glitch from the Hollywood side. Hollywood content forms roughly around 15% -- 10% to 15% of the content at the high-end multiplex levels. The rest of the country, the lower chains they rely largely on the local and regional content. So while some impact will be there, the contents would get delayed to some extent.
But having said that, we don't really get VPF on Hollywood content. And theater footfalls get affected surely if this will continue to get delayed, but this is not a big item that we see. 85% to 90% of the content is from the local industry over here. And any gap in the Hollywood industry would also get filled in by the local industry. Good part that we are seeing in the last couple of years is that South content has started migrating to the North. We have put in a lot of efforts to promote this culture also. And what this typically means is, to give you -- put things in perspective, the Bollywood industry, which is the Hindi film industry, roughly produces around 225 to 250 films a year. As compared to this, the South -- Southern 4 languages produce around 900 films in a year.
So even if I take a rate of hit or average hit of 1% from that 9 to 10 films, it almost doubles the number of 10-fold films that become available for the entire country. So this healthy trend of films coming from the South to the North will be picking up the slack to a great extent. And again, Hollywood will come back, this -- the site has reached a proportion where they have to find a solution now. We don't see it lasting for a long time, and we are not overly concerned on that front.
But at the same time, in the beginning, Rajesh made a point, and we request you to keep note -- take note of that. In earlier earnings calls, we have discussed it at length. We as UFO Network does not receive CDC or VPF revenue when a Hollywood studio film gets released on our network. And therefore, if there are more such films, then there is some stress on our CDC revenue line, which, to some extent, gets compensated because the footfalls are there, and therefore, we get higher advertisement revenue. But in place of that Hollywood film in our network, if there is a regional or Hindi film running, then we get both. We get VPF/CDC revenue as well as advertisement revenue. So this is one important point, very sticky to our network is something which will request you to take note of.
Sit, if I was a high-end multiplex owner, I would be worried about the strike that UFO running the...
Correct. Very well put sir. Very well put sir.
Next question comes from Dhwanil Desai from Turtle Capital.
Hello? Hello?
Yes, can you speak a little louder because we can hardly hear you.
Yes, I can. I can. Is it better?
Much.
Yes.
Okay. Sir, my first question is, if you look at our history in the past to pre-COVID, we used to do around 30% plus margins. And given whatever that you explained during the call, the government advertising have kind of reduced significantly. So for us to reach to that level, since that pie is not available, at least for the moment, what is it that we do is it possible to go back to 30% kind of a margin with whatever cost saving measures that we have taken? Can you elaborate on that?
What was the last thing you said, possible to go back to 30% level, what is...?
Yes. EBITDA level. Sir, with all the cost-saving measures that we have taken, considering that our government advertisement may not come back, is it possible to go back to those levels?
Answer is yes. Is it possible? Yes, certainly yes. The question is, if there is no government -- theoretically, if there is no government advertisement revenue, of course, as we explained that there are 3 subsegments in government. But of that, central government spends is a major bit. If -- I understand you are saying, hypothetically, if that remains 0, then we will be able to go back to pre-COVID level of profitability. Answer is yes, but it would take time. Because what would that mean is that whatever is a loss on account of not being able to get central government ad revenue, need to be filled in by the other segments, such as corporate or state government or PSUs, or maybe the Caravan, which has got the empanelment recently.
So yes, it certainly is possible. In fact, we have clocked in excess of 30% margins also. But I don't want to be sounding excessively bullish here on the margin front, but those have been the periods. And it entirely driven by the ad revenue. So yes, central government taking a pause, which we believe is a temporary pause in spends is a problem for us also to get back our margins back to pre-COVID or FY '19 or FY '20 levels, or maybe FY '19 levels to be more specific. So hopefully, they would start spending. And if not, then we'll have to give a little longer period for the business to go back to those levels.
Okay. Got it, sir. Second thing, sir, you mentioned that pre-COVID, the entire theater advertising industry was around INR 700 crores. So between you and Qube...
How much you said?
INR 700 crores?
INR 700 crores.
Right, so between you and Qube what would be the market share you would be commanding?
So I told you INR 700 crore it would be slightly higher because the key multiplexes, I think we're at close to INR 350 crore, if I'm correct, pre-COVID. And we would be -- both of us put together would be another INR 250 crore. Yes. So it's around INR 700 crore only. So of that INR 700 crore, both of us individually will -- Qube's numbers are not in public domain. But yes, both of us put together would be close to 40% of this overall share.
Now we don't intend -- nowhere we are saying that we will move from 40% to 80%. The critical part here is that INR 700 crores or INR 750 crores is expected to significantly grow. If we have not taken any other assumption, if INR 70,000 crores of ad industry moved to INR 110,000 crores in India in 3.5 years, then naturally, at least that much of growth could have been seen in our segment. But because of COVID, this was closed, so nobody spent here. So our efforts -- when I say our, the entire cinema industry's efforts to get that back to the INR 700 crores, which hopefully will get back sooner, but move up from there and claim at least the same share, which we used to claim or command in pre-COVID scenario.
Right. Sir, the reason I'm asking this question is that -- sir in -- you also mentioned that the rates are much below pre-COVID and it was a conscious decision from your side to ensure that the industry gets its fair share. But considering that the rates typically in media industry are quite sticky, and it takes time for it to recoup, does it mean that our volumes have to grow substantially higher? And is that a likely scenario let's say we are clocking 4.5 -- 4.2, 4.5 minutes per screen per show. That number can go up substantially. How will it move significantly higher than INR 700 crores? If you can...
So yes, I mean you have made a very important point that whether the rates would come back. But the second part of your statement where you said in the media industry, the rates are sticky and they generally don't move up is something which -- where probably we will have a little this, difference of opinion. I mean, I'm giving you an extreme example of how power of media for example, IPL, I mean, I'm nowhere saying that we want to compare ourselves with IPL. But we are, in a way, an impact medium. And IPL rates, you would see would never see this kind of a problem. They would keep going up and they have been going up.
So the point which I was -- we were trying to make is all of us have dropped our rates strategically. Maybe somebody would say, even if without dropping rate, you could have got the business, answer is yes. But that was the strategy which was implemented in a way by all the players in this industry independently. And the objective was to get some share back. And therefore, we don't see challenges going back to that rate because that was, in any case, established for a long period of time. And the rates, when we were offering lower, there was also a reason that the footfalls -- one, the footfalls were lower in the theaters. Second, the anticipation by the advertisers about the footfalls was very negative. Even if in some cases, the footfalls were there, they were not ready to agree.
Now when I say that the perception is changing, this is where the perception changes. And therefore, I don't think since the medium is well understood by the advertisers as an impact medium, I don't think giving that kind of a rates which were prevailing in pre-COVID, giving those rates again, is a challenge. It's a process. It's a time bound -- I mean, there will be a time involved for us to go back to that level. But on getting those rates back is not a challenge. How it goes beyond that is a different discussion, which we should do maybe a couple of quarters down the line when the JV is fully operational. Not just quarters, maybe a year down the line.
[Operator Instructions] That would be the last question for the day. Now I hand over the floor to Mr. Tushar for closing comments.
Thank you. On behalf of Ventura Securities Limited, we would like to thank the management of UFO Moviez and the participants. Good day.
Thank you, Tushar, and thank you, everyone, for joining me.
Thank you, sir. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.
Thank you.
Thank you, sir.