UFO Moviez India Ltd

NSE:UFO

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the UFO Moviez India Limited Q1 FY '25 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand over the call to Tushar from Ventura Securities Limited. Thank you, and over to you, Tushar.

[Tushar Pendharkar, analyst]

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to UFO Moviez India Limited Q1 FY '25 Earnings Conference Call. The company is represented by Mr. Rajesh Mishra, Executive Director and Group CEO; along with 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 question-and-answer session. Thank you, and over to you, sir.

[Rajesh Mishra, executive]

Thank you, Tushar. Greetings everyone, and thank you all for joining our Q1 FY '25 earnings call. Q1 FY '25 had a slow start due to the general elections campaign in April and May and a lower number of movie releases. During the quarter, 476 movies were released, including different versions and languages compared to 581 in Q1 FY '24 and 550 in Q4 FY '24, reflecting an 18% decline year-over-year and a 13% decline quarter-over-quarter.

The quarter started with the underperformance of movies such as Bade Miyan Chote Miyan featuring Akshay Kumar and Tiger Shroff. Maidaan featuring Ajay Devgn and The Family Star featuring Vijay Deverakonda in also. This was followed by modest reception of films such as Srikanth and Mr. & Mrs. Mahi, both starring Rajkummar Rao. However, June turned out to be a better month with a sleeper hit like Munjya and other performing well without -- this film performed well without any A-list starcast. Alongside, there were successes such as Maharaja featuring Vijay Sethupathi and Anurag Kashyap and Chandu Champion featuring Kartik Aaryan.

This was followed release Kalki 2898 AD featuring Prabhas and Amitabh Bachchan on 27th June 2024 right at the end of the quarter. Overall, the underperformance of Tenfold films and lack of successful content during the first 2 months negatively impacted the quarter's results affecting advertisement and technical revenue. Advertisement revenue for the quarter stood at INR 219 million compared to INR 235 million in Q1 FY '24. Corporate advertisement revenue contributed [ INR 116 ] million compared to INR 182 million in Q1 FY '24.

With the revenue -- while revenue from government grew from -- by 55% from INR 38 million in Q1 FY '24 to INR 59 million in Q1 FY '25. The technical revenues for the quarter was INR 240 million in Q1 FY '25 compared to INR 248 million in Q1 FY '24. While both technical and advertisement revenue experienced a modest decline in revenues from government, from the EBITDAs grew by 39% from INR 318 million in Q1 FY '24 to INR 443 million in Q1 FY '25.

On the stream network, our Advertisement screen Network grew to 3,769 as of June 30, 2024 compared to 3,234 as of June 2023 making -- marking a 17% year-over-year increase with the addition of 535 advertisement screens. Overall, there was a slight 2% decline quarter-over-quarter.

Now moving to the headline numbers for the quarter ended June 30, 2024. Consolidated revenue of Q1 FY '25 was INR 945 million, up from INR 853 million in Q1 FY '24. EBITDA for the quarter stood at INR 66 million compared to $163 million in Q1 FY '24. Net loss of INR 42 million in Q1 FY '25, compared to a net profit of INR 25 million in FY '24. Regarding the consolidated funds position, the balance at the end of the quarter stood at INR 1,066 million as of June 2024, the company continues to be net cash positive [ even ] after considering outstanding debt.

Looking ahead, with the continued success of Kalki 2898 AD in July and an exciting lineup of upcoming releases across languages, including Auron Mein Kahan Dum Tha, Stree 2, Vedaa, Khel Khel Mein, The Goat, Devara, Vettaiyan, Devara, Bhool Bhulaiyaa, Singham Again and Pushpa 2 we are hopeful for a positive turnaround in the coming quarters. I would like to take this opportunity to thank all our shareholders for their continued interest in the company.

With that, I open the floor to take your questions. My colleague, Mr. Ashish Malushte, CFO, and I will be happy to take your questions. Thank you.

[Operator]

[Operator Instructions] First question comes from Ankit Kanodia from Smart Sync Services.

[Ankit Kanodia, analyst]

And before asking my question, I would like to thank you for including the -- making it a point to share the split between multiplex and singles in which we discussed in the last call. So I really appreciate that.

[Rajesh Mishra, executive]

In fact, we should thank you for bringing such important point to our notice. And I'm glad that you've got it to a notice and we included it. Thanks a lot.

[Ankit Kanodia, analyst]

Sir, my first question is related to that only. So roughly around 2,100 screens are multiplex and about 1,600 or 1,700 would be about single screen. Is it possible for you to give some breakup as to how is the revenue split -- is split between these 2?

[Rajesh Mishra, executive]

You mean in terms of advertisement revenue?

[Ankit Kanodia, analyst]

No, I'm talking for total revenue, I think bulk of it would be -- I think even advertisement revenue will work because -- in case of the...

[Ashish Malushte, executive]

If we simply tell based on the 2 revenue key revenue streams. One is the revenue that we generate by providing services to distributors called content delivery charges. So here, our fees based on the actual playout of shows that happen in the screens. And it is also dependent upon the age of the film, which means we charge only in case of Hindi, we only charge for first 2 weeks, and there after we don't charge anything.

Similar, there is some arrangement for regional where we charge initial weeks higher amount. So in case of multiplex versus single screens, the trend is such that the number of movies that get played out in multiplexes, 4 screen are higher than single screens, the number of movies that are getting released every release. In that sense, mathematically, simply put, the multiplex is a better unit for us for CDC because if a single screen is running, say, 40 movies or 35 movies a year, a multiplex per screen mean 45 movies or maybe sometimes 50 movies a year.

So this is how -- when then you multiply the rate, because the rate is same, the high service fee. So this is where there is a differentiation in the revenue that we generate from distributor service, when it comes to advertisement you have asked a very pertinent question. Now here, the situation is we don't really -- it's a network sale most of the time that we do which means, if an advertiser is coming for, say, Mumbai region or if an advertiser is coming for, say, Karnataka region or if advertiser wants to do in, say, Hindi-speaking market, then we offer the entire network to have them, as a whole. And that's how the rates are determined, okay? So the rates in a way are flat for any screen.

But we know that these multiplex other critical screens, which is driving the advertisers to this network. But when we are billing him, we would bill him at a network rate, which means every screen the network gets built at the same rate. And therefore, even if you [indiscernible] the billing generated in multiplexes versus single screen, therefore, is at the similar level. Again, here the difference is since multiplexes will run more shows, they would run more advertisements. And to that extent, the billing will be higher. But having said that, this is not the real representation of the potential of this multiplex.

As we know that, as you must have understood by now, the multiplex being the key driver, those screens get us the business. So tomorrow, if you have to sell only multiplexes, we'll be able to sell at much higher level. But since we are doing a network sell, it appears that the rate is common across multiplex and single screen. So that's how the business is at our end, if you want any further information than I can provide you too. But this is how we actually do the sales of advertisement.

[Ankit Kanodia, analyst]

That was very helpful, sir. And if I got it correctly, basically, this trend which we are seeing since -- mostly after COVID, is that we are getting more and more multiplex screens compared to single screen in our total bouquet? It is going to help us in terms of more importantly in terms of ad revenues, right?

[Ashish Malushte, executive]

Absolutely. In fact, nowadays, single screens don't really come up. I mean, every new screen is mostly a multiplex and every new screen needs a service provider. So when we compete and get that particular property, a new property, that new property generally always is a multiple. So you're right, as we proceed from here in future, my mix of multiplexes will keep getting better and better over a single screen.

[Rajesh Mishra, executive]

So while what Ashish mentioned, is absolutely bang on, one point that we just need to keep in mind is the single screens provide a larger reach for the advertisers in the region. And single screens also have a larger, higher seating capacity. That's why I also advertisers prefer them compared to a multiplex we should have say 750, 200 a single screen would have had 700, 800 seat capacities. So that's why they are an important part of the mix, but the driver screens will obviously become the multiplex.

[Ankit Kanodia, analyst]

Got it, sir. That was very helpful. Sir, moving on to the next question, in the last call also we mentioned that even when we don't have too many blockbuster movies, what really drives our business is that how many movies that's elite. And we had, I think, close to 500 movies released last quarter, understanding number has been much lower than that, as you mentioned in the opening remarks.

[Unknown Executive]

This is something which -- where we have no control as per my understanding. This is where the industry, whatever the number of releases will happen. So -- and then this remains a long-term threat to our business model perennially. So do we think as a management, do we think hard about it, how can we do something about it as to even if in quarters where there are less releases, is there any scope of bumping up the revenue -- from a longer-term per se. You can't do things on a quarterly basis, it is not going to be sustainable in the long run. But in a -- from a longer-term perspective, do we think on some lines.

[Rajesh Mishra, executive]

You're absolutely right. But the thing that we have to see here is that even when we plan our things. Film is pretty much a seasonal business. So what will be true for quarter 1 would not be true for quarter 2 or 3 in the festive season or in the importantly like around Christmas time. So typically, the quarter 2 and quarter 3 are always the better quarters for us on certain areas of film release and all those things. And Q4 also works on certain fronts from the, let's say, advertising front or at the government front is working very well earlier.

Now this is something which is a peculiar situation that we had the election results over here, we had -- IPL also happening over a period of time in this thing. So multiple factors take place. Like this will not be true in the Q1 of next year, for sure, because there is not going to be any elections. There is much better maybe a lineup of release. So bottom line is, yes, the business is directly linked to the number of releases in state of the films is also very important for our business.

As I said, it's a seasonal business. It's never in a linear straight divided business from Q1 to Q4.

[Unknown Executive]

So Ankit, if you actually see what has really affected the performance of exhibition business in this quarter, including us as a service provider. It's not really -- I mean, partly, yes, reduction in number of films. But my business, if you see is what we are basically in our network business, we monetize our network so as long as the movies are running in the theater, we have opportunity to monetize.

So it would not really happen that because there are less movies the shows have completely been stopped in a particular theater, there has been reduction, but not a direct proportionate reduction, which means if we're 20% less movies released in this quarter, which is the fact over last quarter. That doesn't mean that 20% of the theaters were closed, okay, or 20% of shows didn't run.

But what happens is because of the lesser number of movies since we don't get newer movies in more proportion -- higher proportion, my revenue from CDC goes down. But more than this, the bigger impact is when -- what happened in this, say, quarter, the first 2 months, the movies didn't really perform well, which were expected. Now when that happens, although there are shows running of maybe old films or the same film in the remaining period of the quarter, the advertisers would not come back with the same kind of intensity.

And therefore, more than the number of movies, what really damages a particular quarter or period is when you have a long-ish strength of movies not doing well. In this quarter, there were first 2 months, if you see many expectations, good number of -- in April 3 good movies were expected to do -- I mean, 3 good movies were there, but they didn't do well. So this damages the advertisement potential and the actual revenue.

[Ankit Kanodia, analyst]

Right, right, right. Now this is a very important point you have raised. So that -- with that, I have a follow-up point which we were discussing as a team also. So like what I have observed or what we have observed in our team is that there are multiple number of movies, and it is becoming a trend now, multiple number of good quality movies, which are not doing good at box office because you think that probably 1 month later, I can watch it on OTT.

So examples like Laapataa Ladies and recently Srikanth you have mentioned. So I mean, there are many people who have bought these movies on OTT, but they would probably -- but when it comes to a movie like say, Kalki, where you need to go to the cinema hall to actually enjoy the crux of what is there or what are the special effects.

So maybe do you see that as a risk having more people going to cinema to watch only those movies, where there is some cinematic flavor which you cannot have at your home or in OTT. And for all the rest good quality movies, because you have an option of OTT 1 month, you can wait for 1 month. So probably you are not -- even though you know that the movie is very good, very well made but probably more people are not going to the cinema. It would be great to have your view on that.

[Rajesh Mishra, executive]

Yes. So the way to see this would be that is -- if you see just in the last quarter itself, when you have a film like Munjya, which has virtually very new star cast, and it is a horror film, it give a business of INR 100 crores plus you had smaller films like Laapataa Ladies and Crew and Article 370, which had no big star cast and no big production setup, they grew the audiences. So this is pretty much film related business that works out. Only thing is when these are smaller films with no great buzz around them from the point of view of star cast or production values, they don't have that wider release.

But what we are seeing here is it's a very healthy trend the way I see it. When you have 2 Rajkummar Rao films doing well in a period and our non-starcast film that I mentioned that with Munjya and all, when they start performing in cinemas. I'm talking -- I mean, everyone had the option that this film will come on the platform of OTTs -- But Hindi OTT platform is a delay release of stable wings. That is one. Secondly, it's very heartening to see such type of films performing well because that increases your total pie of good films that are coming in the market.

So there is footfalls happening on this trend. Even like, for example, here for Srikanth, you take many films like this we have seen in the past. And another very healthy trend that we are also seeing is the south fields, which are now migrating into the north market in dubbed version and all, and we are finding much greater acceptance by the audiences.

Again, these films are getting viewership in the markets. The bigger films like Kalki and all, of course, have a different level of pull from the fact that they would want to see it only in a cinema for sure. But it's not like either/or situation. A good film is finding audiences, that is for sure.

[Ankit Kanodia, analyst]

Sir, one last question, if I may.

[Operator]

Can you join back the queue?

[Ankit Kanodia, analyst]

Sure. No problem.

[Operator]

[Operator Instructions] Next question comes from Niteen Dharmawat from Aurum Capital.

[Niteen Dharmawat, analyst]

I wanted to understand why our expenses have gone up so much? And are there going to be recurring or you'll have a better control of the expenses, especially purchase of digital equipment that I can see the results. So can you please elaborate on that? And how the EBITDA is going to be in the subsequent quarter as we are anticipating better business in this quarter and the subsequent quarters?

[Unknown Executive]

Yes. So when you look at the -- so Niteen, thanks a lot for this question. And let me try and explain the point. So your observation is right that the overall expenses appear to have gone up in this quarter. But the single largest reason for this increase in expenses is the cost associated with the sale of products. So sale of product revenue which has gone up by 84% from INR 14 crores last year to INR 26.5 crores this quarter, which in both these quarters, have an approximately 20%, 22% operating margin for us.

The corresponding cost of the purchased goods has also gone up. So it has gone up by about INR 8.6 crores. So if you see my total expenses, which have gone up by INR 18.5 crores, of this, almost INR 9 crores, more than half is only on account of this purchase of equipment. But when I say that, actually, net of expenses, the net revenue that I have made in this quarter from sale of product revenue line is higher than Q1. So my suggestion would be to actually look at this sale of product revenue at a net level and in a way, just take off the entire cost because that will give a clearer picture because it's a trading business. So you buy and you sell and this is the only trading business line that we have.

So in that sense, this increase in expense can never be a concern. In fact, it's a good thing because higher the expense, higher is your margin in the sense, the realization, which actually happened in this quarter also. The other second line of expense that has gone up with advertisement share, and that has gone up because I'm not sure, Niteen, if you were there in some of our earlier calls, but we have made a very significant strategic advertisement network rights acquisition down south of network -- very strong network called TSR and over there, it happened in Jan.

And during that time, we had said that we'll take 2 to 3 quarters for the entire integration to happen post which we can start effectively monetizing that network along with our network [indiscernible] to them is close to INR 3.5 crores, INR 3.3 crores per quarter.

So that cost is going away every quarter. I mean at least for this 2 or 2.5 quarters, I'll have to keep paying, but corresponding revenue may be far to lower. But if you're absolutely looking at the cost line item, which shows you a concern in the question, out of this, INR 18 crores, more than half is cost of goods sold, which is INR 9 crores. Of the balance, INR 6 crores is an increase in advertisement share of this increase in advertisement share of INR 5.9 crores, INR 3.3 crores is the share that we have paid to TSR. While explaining this is both this increase in ad revenue share and increase in cost of goods sold is a healthier thing for the business because both are going to straightaway add to your revenue potential in a very significant way.

While we are on this point, I would draw attention on the SG&A and employee cost. So that is where we have been very, very cautious from the middle of the pandemic. And if you see SG&A, we have had a marginal increase of 2% Y-o-Y this year. And in case of employee benefit also, there's only 14% increase. And this 14% increase may appear higher, but I would like to quickly bring to your notice that there was a massive change that we did in our payout structure to the employees last year, and we had converted 20% of fixed salary into variable.

So this year, there was some amount of normalization and rationalization that was done which has led to an increase of about 14%, 15% in employee cost. So employee costs and SG&A are 2 items, which in business like us, we should keep a track on, and those are under check. Direct operating expenses going up, sir, in my view, is in a way, healthy option and both cost of goods sold and advertisement share directly will contribute to us. Cost of goods sold has actually contributed INR 3.5 crores in this quarter. So that is a little longish explanation to the question that you had about why the expenses have gone up and is it area of concern.

[Niteen Dharmawat, analyst]

I understand. And we announced some partnership again in the last quarter. So will there be any impact on the subsequent quarter for the expenses part for this as well?

[Ashish Malushte, executive]

You mean in terms of cost? No. That's a revenue-sharing arrangement. So the cost, we have not entered into that agreement. So are you talking about the latest announcement that we did?

[Niteen Dharmawat, analyst]

Yes.

[Ashish Malushte, executive]

So that is not going to add to cost because it's a revenue sharing arrangement. And there's no fixed commitment as such that the company has in that business arrangement.

[Niteen Dharmawat, analyst]

Got it. My next question is about the advertisement revenue. In the previous quarters, we were having slight struggle rather than biggest struggle in getting revenue from the government sector and PSU. So are we getting the government revenue back because the numbers have improved in this quarter. So are we getting more revenue? Or is it coming mostly from the PSU still and not from exactly from the central government. So can you elaborate on that? And how sticky this revenue is going to be going forward?

[Ashish Malushte, executive]

So yes, the challenges on the allocation by central government ministries towards cinema network continues. Even in this quarter, we have not got any meaningful revenue. But in this quarter, since elections were there, even if they were doing a regular spend, this quarter would have been a dry quarter for us on the central government front. So that's a fact of this quarter. But more importantly, as of now, we don't see a major change in the allocation. Those are done by the ministries.

Probably we need to wait and see when the new setup is completely inside with the new government. But we have for last 7 quarters, we are going ahead, assuming that central government may not have positive views towards doing more allocation towards in cinema network. And we have focused our strategies on the other avenues, more importantly, corporate retail and state government. In this quarter, state governments continue to spend, but again, because of the election period, that spend was less. But as it has always happened in the past, the political parties when they want to do their campaigns, they find cinema as one of the most attractive medium.

And this quarter, we have generated about INR 4 crores of revenue by doing -- I mean, by advertising -- by giving our inventory for advertisement by the political parties for their election campaigns. Now this according to me probably tells a lot to us and also probably by investors that if a political party funds, this has a strong medium to advertise about their candidate. Our view is that when one of those parties come in forward, they should have a similar view for even their spends. But we have to wait and watch. Central government is a stress, and we are successfully -- we have been successful in shifting the focus on the alternate avenues suggested government.

[Operator]

Next question comes from Aditya Sen from Robo Capital.

[Aditya Sen, analyst]

So can you please share some guidance on how are this advertisement revenue is going to shape up in the next 2 years? Because FY '25, we just got an idea, it is completely dependent on the central governments allocations. But for the next 2 years, where do you see this advertisement revenue going?

[Rajesh Mishra, executive]

So from government advertising perspective, that is central government, state government and PSUs. As my colleague Ashish just mentioned, central government remains under a cloud for us as far as clarity on that is concerned. But what we are definitely doing is shifting our focus from central government to also the state governments, which have their own independent budgets. And we have seen healthy traction over there. And we will continue to do work in those areas.

As regard corporate advertising is concerned, we are -- as I said, it's a very good lineup of films, which will drive this business from the corporate advertising. Secondly, we have also done this tie-up for the south screens increasing our network strength over there. And as we explained earlier in the call also, the overall product mix is going up because of increasing number of multiplex screens in their network. Keeping those in mind, we see a very good traction coming up in the immediate 2 quarters and going ahead also.

[Operator]

Next question comes from [ Adithya Karan ] an Individual Investor.

[Unknown Attendee]

So I just wanted to pick on the thing that you said about advertising share revenue, that's at 85%, basically, I mean I understand you said it because of TSR, that's 500 screens on the base of a 15% screen you added, but your average revenue share has gone to 85%, you're basically doing the business for 3 years you said. So can you just explain what is the timing issue that you're talking about? And what's like -- can you break it out like what is your stand-alone advertising share, excluding TSR and I find it hard to attribute just 15% screens added and the advertising you'll start getting on your entire revenue to your exhibitors that -- that can you just break that down and help us understand like what is the normalize going to look like? How -- when is the revenue going to kick in from TSR?

[Ashish Malushte, executive]

Yes. So let's simplify it. Otherwise, it will appear to be a complicated scenario, and it is not. So about INR 5.9 crores increase, almost INR 3 crores of that is TSR. TSR, we have explained that it will become part of our regular network probably by end of Q3. What it means is that in TSR, we have a fixed commitment, it's not revenue sharing. It's a fixed commitment that we have given to them for their screens.

What it means is that I need to bring that screen and integrated my network faster so that my fixed commitment is taken care of by the higher revenue, okay? So when we say revenue share paid, it is -- in case of TSR, it is not a percentage of revenue, but a fixed fee predominantly that we are paying, okay? So INR 5. 9 crores increase, almost INR 3 crores is coming from TSR. There are -- in some of the initial questions, you must have seen that we're discussing about my multiplex network, which is 2,000 screens and how that is going to be helpful going forward.

But there's multiple screens when they give -- add a lot of value to my advertisement network as a whole. It comes at a cost to us. So what it means is if my rest of the single screens or lower end multiplexes, I can sign up on a revenue share arrangement, which is my normal arrangement of whatever I earn, I'll give you 25%. That's a revenue-sharing arrangement. In that case, you would never see this kind of an aberration where in one quarter, the sharing is less in other quarter higher.

Now those screens that the arrangement with multiplexes, some of the key chains is not like that. Over there, because they know their strength, they also insist on a higher fixed share. Now this higher fix share is what we call minimum guarantee and it has an annual escalation in some of the cases. So what you see in Q1 is another close to INR 1.8 crores towards this higher escalation that has happened of the older screens of multiplex category. And you rightly said that there is an addition and that addition of the new screens have added only 60 lakh of new share.

Now this is on the cost front that you are seeing. But if you simply see and when I explained to you cost-front, you must have now realized that a major chunk of my cost of theater share is fixed in nature. Now when you look at my previous quarter's advertisement revenue, that was close to INR 30.5 crores, which has now dropped down. So on a INR 30.5 crores ad revenue, even this higher ad share would have been maybe around 55% to 60%. But it appears at 85% now. So the key here is to make sure that your advertisement revenue keeps growing, and therefore, you are able to cater to the needs of your exhibitors who are hoping that as by every passing year, we should be able to add value to them by increasing their revenue share in the advertisement.

So this is how it is playing out. Coming to your second part of the question, when is it going to normalize? TSR I explained. By Q3, we are expecting that it should be a part of my regular network, which means it should generate regular revenue. And we should not have these kind of shocks, but these shocks we had explained in the very beginning. It will be there for 2 to 3 quarters. Rest of the theme, when the advertisement revenue growth since the revenue share is fixed, the percentage automatically will drop to a level of 45% to 48%, which appears to be a normal kind of a range for us now in this scenario.

[Unknown Attendee]

Yes. So just on TSR, so you're saying it will be Q3, it will be part of the regular network. What is the incremental revenue that you kicker that you get? Because I mean, I understand that you're paying them fixed right now. So are you losing money on TSR screens right now? Or...

[Ashish Malushte, executive]

Answer is yes. And that is where the challenge and that is what we had very beginning said that this is not only true for TSR, any new network that we take, which is bigger, which asks for a fixed share, even a single screen, if I'm adding and if you ask sort of fixed share, of the INR 15,000 per month, and he says, I'm not agreeing for a revenue share of, say, 25%. Then I have not been able to start generating INR 15,000 on that screen from month one. My sales team will need some time to be able to evangelize that scheme screen as part of the network.

So what holds good for every screen holds good for a network also. And in case of TSR, it is even -- it's a bigger hit because they have asked for a fixed share. But that's not a concern because if you see the advantages that UFO has been able to achieve, and it's a win-win for us and TSR both. But my south network is all of the sudden become so strong. If you remember in the few quarters back, we used to say that our network in South is weak, and we are unable to monetize it for retail. But that scenario is very, very fast changing now.

If you see my Kerala network, the revenues probably very soon, I'll be clocking the same revenues, which I clocked last year, when I'm not even 6 months there. So these are the very, very important drivers, when you integrate critical network with you, such as...

[Unknown Attendee]

One of TSR running ads on their own earlier because I understand you're going to say it's a seasoning process like we need a couple of quarters to get it up to full ramp. But that would make sense if it was a new theater but this is an existing data at an existing ad network or is that not the case? We didn't have any...

[Rajesh Mishra, executive]

So to answer that, they were running their advertisements earlier, but they were not able to fully monetize it the way our established network like us would be doing, and that is why we had this tie up also. Secondly, there are technology differences between their network and our network and the integration of that is going to take around 4 to 5 months. That's so -- and hence, this blip that we see in the revenues of the screen is a planned activity.

It's not like that we have caught unaware that this has happened. And as Ashish said, this would take time for it to stabilize. But this is a long-term deal that we have with them. One sees the immediate monetization ability of their screen. And the second impact that needs to be it really understood is that when this network adds to our network, our ability to monetize our network also goes up. So if we were earning x on our own screens, we will be earning a x-plus factor going forward over there. So these 2 things have to be kept in perspective and red alongside each other.

[Unknown Attendee]

Okay. Okay. Got it. So we can expect that to normalize -- can you talk about the stand-alone like including TSR?

[Unknown Executive]

Let's take this question because it will lose the link...

[Unknown Attendee]

Just a stand-alone number, like excluding TSR, are you still at 45, 50? Or is that also gone up to 60, 65?

[Ashish Malushte, executive]

No. So it's a simple math. You reduce 3 from my total ad share, okay? So if you see my INR 16.5 crores, share will go down to about 13.3% and my revenue would maybe go down by about INR 1 crore, INR 1.5 cores so my sharing without TSR would still be high. It will be in the range of 60%, 63% that is back of the envelope calculation. And that's purely because my revenue still has dropped in this quarter versus not previous year's Q1, but versus Q4 and that is where this percentage has gone up to about 63%, 64%.

Two components: 1, revenue dropping and two, annually, some of the networks, not all. Some of the networks where there was a contextual arrangement to increase the rates of the sharing, they have kicked in. So has the quarter been better on the content front, and it may sound as an excuse, but that's a fact first 2 ones ruining and the advertisers don't really look at it. So there was a question before this, how we are looking at the advertisement potential. In fact, the ad sales teams are really [ gumbo ]. They feel that the advertisers are sitting there with ready for allocation, the agencies are there ready for allocation to different mediums.

But the medium has to improve its efficacy. Now that is where our hands get tied. We cannot drive the content or the audience to the theater. But if that happens, then we are all set to monetize, like Q4 was good. Maybe next quarter or the Diwali quarter would again be good on the content front, then you will directly see the benefits in the ad revenue.

[Operator]

Next question comes from Pradeep Rawat from [ Yogya Capital ].

[Unknown Analyst]

So a couple of questions. The first one is our government advertisement is still lower than the pre-pandemic level. And as we see on an absolute basis, our corporate and retail advertisement revenues still below FY '19 levels. So just wanted to get some sense around that. Why is that happening?

[Ashish Malushte, executive]

So on the government advertisement, we tried to explain in the previous question that there is a change in the -- where the central government ministries are doing allocations for advertisement and they are literally almost stopped allocation for your in-cinema advertisement network. And that has been the single largest hit, so to say, UFO. Of course, we have got over it and we have managed to activate the state government revenue pipeline and the corporate to some extent.

So yes, pre-pandemic to current we have this challenge and that we see will continue. In such time, the government will start doing the allocations back. On corporate front, your observation that the corporate revenue has also not come back to the pre-pandemic level is also right. But if you see my numbers in last 2 years, you will see that there is a fast acceleration towards that. And on corporate fund, we are not really worried the way we are on the government side. Corporate will certainly outshine their own performance in the past, provided the content pipeline should not be as bad as it was in the first 2 months of this quarter.

We don't need super it every week, but we don't want a situation where expected expectedly good movies are really performing pathetic on box office. That is a big negative for my advertisement team.

[Unknown Analyst]

Yes. Sir, so would it be like corporate and retail segment is falling. Could the reason be the surge in the advertisement from online opinion like Instagram or Facebook advertisements. So could it be a reason for that?

[Ashish Malushte, executive]

No, no, no. In fact, certainly not. If you see the digital pie in the overall ad-ex in India has significantly grown, but the ad-ex has also grown. In fact, the medium -- your company's medium provides certain distinct advantages such as a captive time of an audience, a large screen experience, he doesn't have a remote control in hand, he is a paying audience. So except for the headcount, which also we are moving towards getting that kind of in a different way.

Rest of the things are almost equal to our digital network. So if an advertiser has to prioritize after digital, what comes the best next is probably the in-cinema advertisement network. But it has its own limitations such as you cannot have a longer than campaign in cinema because of viewer -- average viewer sees only 5 or 8 movies in a year. So it is an impact medium but not a frequency medium is what we refer to. But this assumption that because the allocation to digital mediums is higher, therefore, in cinema is taking a hit is not true. In fact, I would say that the corporate ad expense in UFO have really fast paced in last 6 to 8 quarters ever since we are exiting COVID.

[Unknown Analyst]

Yes. Understood. And I see that we have a lot like a significant amount of cash in hand. So what is our plan to utilize this cash?

[Ashish Malushte, executive]

So now this is where even pre-pandemic level we used to have over INR 150 crores of cash. The reason why we have it is in those days, we were waiting for right opportunities for business expansion. And then some of those opportunities, which we tried, but which could not get implemented certain merger opportunities. That time, we distributed that excess cash. In fact, 22nd March COVID hit and 10th of March, we distributed INR 60 crores of our cash.

So your company believes in a philosophy that excess cash, which we cannot use should be returned back. However, we keep a kitty with us because in case of any business opportunities it's difficult to tap bank because bank cannot fund you for business acquisitions. That doesn't mean that we have any acquisition on horizon. But that's a kitty that we have kept. And therefore, you are net cash plus INR 50 crores, pre-pandemic, we were almost INR 120 crores, INR 130 crores net cash at generally at any point in time till the time the dividend was paid off.

[Unknown Analyst]

Yes. Understood. And what would be the normalized revenue from TSR for a single financial year?

[Ashish Malushte, executive]

So per screen revenue, I can tell you, you can assume that per screen revenue from TSR because I want to -- I don't want to say because it is TSR because it is a better quality screen. That revenue would be equivalent to my better quality screen revenue that I generate in the rest of my network, which is generally anywhere between 30% to 80%, 90% higher than my average, depending upon the screen and the location of the screen.

[Unknown Analyst]

Can you name some of the competitors?

[Unknown Executive]

Some of UFO's competitors?

[Unknown Analyst]

Yes.

[Rajesh Mishra, executive]

So one would be a Qube in the -- Qube and then you have other players like Cinematica in Andra or even TSR in the South and other -- largely, these are the key players [indiscernible] also, which are smaller players.

[Ashish Malushte, executive]

Two big players, UFO and Qube, if I have to simplify the answer to your question. .

[Operator]

Next question comes from [ Ankit Gada ], an individual investor.

[Unknown Attendee]

Just one question. It's regarding the latest partnership that UFO has with NeuralGarage. Could you just elaborate on it? Like how does it help us? And what is the effective revenue that we can generate from it? Because it looks like it -- service of this is during the editing phase of the movie and not during the relating to the exhibition of the movie and that. Could you just elaborate on that?

[Rajesh Mishra, executive]

Yes. So NeuralGarage is a technology company. And what they have come up with technology is called VisualDub. And that is where we have associated with them for providing marketing and technological services for dubbed films rather. So essentially, what VisualDub does is currently, if you have seen any dubbed films from foreign languages or, say, Indian languages from south to north, the lip movement and the audio sync between the lip moment and the dialogues is so far off that it takes away the real pleasure of the film, okay?

Also, it is not able to let this become as a mainstream part of the films because of this negative effect of mismatch between the audio and visual sync over here. What VisualDub technology does is it matches that dialogues to the lip movements of the characters so as to make it seem as of the actual actor is speaking itself and it is not a dub version. And this vastly improves the viewing experience. And this is a machine learning and AI-driven technology. So with time, it will grow better and better.

And this has very good potential for dubbed content and we have very good hopes on these technologies that it will find acceptance in the market. So as I said, for us, there's no cost in this. This is a technical services revenue sharing arrangement as part of our bouquet of services that we offer to the film industry. And it will find big-scale acceptance amongst the film producers and the people who are doubling it over here.

Secondly, it also has good implications because many times, producers, who want to make films in other languages end up shooting for it twice, a scene will be shot twice with the Telugu dialogue or with a Hindi dialogue again, you understand, which increases the cost of the shooting of the film because you spend double the time almost in doing something. Now they do this primarily to avoid this mismatch between the lip movement and the dialogues. And this is exactly what this technology addresses. So you could actually have one single short taken and it could be dubbed seamlessly in other languages.

So this is essentially what the whole technology is about. And as I said, part of a bouquet of services for the industry, it's a new technology, we will be taking it to the market. It's not been taken out over here. So there's a price finding mechanism that to take place. But there is a definite application for it and there's a need and the gap for this. So as of now, I would just say that it's something which the industry is also looking forward to.

[Unknown Attendee]

So this would be the production phase of the making, right? So are you venturing into that? Because...

[Rajesh Mishra, executive]

It won't be a production fee. It will be a post-production activity once the film is completed and the dubbing is done, then we match the lips to the audio track making it seamless without any lip sync gaps. So it's a post production. It happens not on the production field as such.

[Unknown Attendee]

Okay. So you are basically distributing this service is to do film industry? And do we have to put some additional resource on it for like providing the services to the film industry?

[Rajesh Mishra, executive]

Not really. Not really.

[Operator]

We have a follow-up question from Ankit Kanodia from Smart Sync Services.

[Ankit Kanodia, analyst]

My next question is, so one question was related to advertisement, which you have already answered, but the other question is related to the Caravan advertisement revenue. #1, if you can just share, even though it is currently a very miniscule portion of our total advertisement revenue and our total revenue per se. But from a longer-term perspectives, how do you see this revenue stream going forward? That is one.

And the second question is, again, related to what is the working capital situation in Caravan compared to the other main sources of advertisement revenue. Do we have any advantage, disadvantage in caravan? That would be very helpful.

[Ashish Malushte, executive]

So second question, I'll take first. The working capital of the data realization of Caravan is not really different than what it is for the corporate ads -- or is it the government or PSU running a caravan van, then their receivable cycle is exactly the same the way the receivable cycle is for any other PSU or state government ad sales contracts. So it's exactly like for the ad sales team, it's just another billing and the same -- the plan doesn't differentiate either prioritize or delays the payment. So it's on the same footing. So this is on your working capital.

As far as your -- the core question of Caravan is concerned, we have been nurturing this business. We have, in fact, pre-pandemic during pandemic and even after we have been running these vans. The vans have a lot of potential, which is quite evident even during election campus, the political parties have picked it. Government also picks it for taking their messaging deeper into the semi-rural and rural India, not just these -- even the corporates, many times want to use this to again take their branding or a product placement deeper so it is an interesting business, which gives us good margins also.

But more than that, it acts as a tool from advertising team to provide a comprehensive kind of offering to a client. But if you're looking at it from a pure modeling perspective, you should not have a very high hopes because here, the revenue potential is directly linked with the number of brands, unlike my advertising network where the investment is already done, I'm selling only 2.5 minutes today, potentially, I can go to 15, 18 minutes.

The rate can also double. So there, the potential is not linked with my new CapEx in my existing screens. But in case of Caravan, that's not true. If I have to -- if you really want to assume that this would really grow, then it would mean that we need to then invest into these caravans. And if required, we will do that. But for modeling purpose, this is not a very big driver unlike -- the core advertising network.

[Ankit Kanodia, analyst]

Got it. Got it. That was really helpful. And related to Nova Cinemaz in the last call, we mentioned that we expect to open a couple of these properties in Q1. Any update on that?

[Ashish Malushte, executive]

Yes. So we have got a license to operate one of the screens in UP. We had told you that there are 3 which are under construction. The construction of 2 is over is complete. So one of the screen, we're just waiting for a good movie probably by middle of this month or end of this month, we will launch it that particular screen in UP.

And the other 2 will also follow the same. So we should be able to get indication of how the reception of this new offering is in those centers, maybe by Q4, we'll have a better idea because then we'll also have one meaningful season of Diwali to Christmas behind us.

[Ankit Kanodia, analyst]

Got it. Got it. And any reason for having opened the first one in case of sound like [ Meerut ] and not in a, state like say, Delhi, Mumbai, Bangalore something like that?

[Ashish Malushte, executive]

Okay. So this offering is meant not for metropolis or even bigger cities or even I would say midsized -- this offering is for semi-urban or rural areas.

So you know what the total audience that we have for movies in India, it's entirely into urban area. And in urban also the key cities. So if we really want to expand the overall revenues of box office, the only way to do is to go deeper. And in that direction, these are the efforts. So only 20 crore people in a way in India, 25 crore people have an access to theaters and you have 140 crores people.

Even if you take half of them 70 crore, almost out of 70 crores, only 20 crores, 25 crores have access to theater. So if this works well, which we are hopeful and others would then start picking up from us and start putting up screens, then you will see entertainment of films going deeper into the country like how we have seen it in some place in China.

[Operator]

Thank you. Now I hand over the floor to Mr. Tushar for closing comments.

[Tushar Pendharkar, analyst]

Thank you. On behalf of Ventura Securities Limited, we would like to thank the management of the UFO Moviez [indiscernible] Good day.

[Operator]

Thank you sir. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. You may disconnect your lines now. Thank you, and have a good day.

[Unknown Executive]

Thank you, everyone.