UFO Moviez India Ltd

NSE:UFO

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the UFO Moviez India Limited Q4 and FY '24 Earnings Conference Call, hosted by Ventura Securities Limited. [Operator Instructions] Please note, this conference is being recorded.

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

[Unknown Analyst]

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities, I have welcome you all to UFO Moviez India Limited Q4 and FY '24 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 Q&A. Thank you, and over to you.

[Rajesh Mishra, executive]

Thank you, Tanuj. Greetings, everyone, and thank you all for joining our Q4 and FY '24 earnings call. The fourth quarter of FY '24 started on a decent note with movies like Hanu-Man featuring Teja Sajja, Captain Miller featuring Dhanush and Fighter featuring Hrithik Roshan in January.

Following these moves such as Teri Baaton Mein Aisa Uljha Jiya featuring Shahid Kapoor, Article 370 featuring Yami Gautam, Shaitaan featuring Ajay Devgn and R. Madhavan and Crew featuring Kareena Kapoor Khan and Tabu released in February and March, contributing to a steady quarter along with some sleeper hits also like Madgaon Express, Manjummel Boys, et cetera.

However, there were some movies like Merry Christmas, Main Atal Hoon, Crakk and Yodha would fail to make a mark in the box office. So overall, the fourth quarter had a mixed bag of content, and we closed the year with a blend of successes and underperformances.

The year FY '24 showcase a diverse range of films reducing across languages and genres from big-budget spectacles films to regional gems and some sleeper hits, demonstrating the industry's resilience in meeting changing consumer demands.

Despite significant content volatility, the overall business saw improvement, marking the first profitable financial year since FY '20. Strategic cost optimization, along with steady critical revenue and a 62% year-over-year growth in advertising revenue as compared to the previous financial year, has helped to strengthen the financial position of the company.

[ Corporate ] advertisement grew by 40% as compared to the last financial year. Government advertisement revenue also marked a growth of 85% on year-on-year basis due to traction from state government and PSUs. Caravan's advertisement revenue sustained the momentum and marked the highest advertising revenue since FY '19.

Along with the growth in advertisement revenue, screen network also expanded significantly, surpassing 3,800 screens for the first time in over 5 years. The advertisement screen network was a 3,859 screens as compared to 3,348 screens in FY '23, and 3,792 screens in FY '20, with a notable boost in both Prime screens by [ 419], even Popular screens by 92 screens as compared to FY '23.

Now moving to the headline numbers for the quarter and full year ended March 31, 2024. Consolidated revenues stood at INR 1,192 million compared to INR 884 million in Q4 FY '23. EBITDA after considering [ 110 ] provision in Q4 FY '24, was INR 152 million compared to INR 115 million in Q4 FY '23. The loss at PAT level was INR 12 million in FY '23 compared to a profit of INR 60 million in Q4 FY '24.

For the full year FY '24, the consolidated revenue stood at INR 4,101 million compared to INR 3,978 million in FY '23. EBITDA improved to INR 676 million compared to INR 339 million in FY '23. The EBITDA margin improved by 796 basis points from 8.5% in FY '23 to 16.5% in FY '24. PAT stood at INR 164 million compared to a PAT loss of INR 132 million in FY '23.

Regarding the consolidated funds position, the balance at the end of the quarter stood at INR 1,098 million, As of March 31, 2024, the company continues to be net cash positive after considering outstanding debt.

Looking ahead with the upcoming movie lineup, including releases like Mr & Mrs. Mahi, Chandu Champion, Kalki 2898 AD, Pushpa II, Despicable Me, [ Sarfira ], Vedaa, Sabarmati Report, Pushpa 2, Stree 2, Bhool Bhulaiyaa 3 and many others; we are seeing a good slate and we are optimistic to see a continued positive momentum. I would like to take this opportunity to thank all our stakeholders for their continued trust 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.

[Operator]

[Operator Instructions] Our first question comes from the line of Ankit Kanodia from Smart Sync Services.

[Ankit Kanodia, analyst]

Congratulations for a good set of numbers. Sir, my first question is related to the inventory as a whole. So if you look at the results of, say, [ PVR ] the commentary there and as we believe this is an industry where the quality of movies which gets released, that decides the performance of our business to a great extent; and general consensus is that Q4 didn't have too many good movies being released. And given the Hollywood, contribution was much better in Q4.

So given that kind of a backdrop, I think we have done a commendable job. What was really for us to have this kind of revenue growth in Q4 year-on-year? If you can give some more color on that, that would be very helpful. That is my first question.

[Ashish Malushte, executive]

Yes. So should we first take this question?

[Ankit Kanodia, analyst]

Yes.

[Ashish Malushte, executive]

So good question. And happy you have brought this up for discussion. There are only 2 points I'll give you. One is that you're absolutely right that we are integral part of this industry, and we provide one of the critical sets of services for the industry. And therefore, our fortune should as much be linked with the fortune of the industry, and so is the case.

Particularly in Q4, what has happened is we have 2 sets of revenue streams, one which comes from the services that we rendered to the industry. And second is from the advertisement level. This is broadly the model that we have.

As regards with service revenue, you must have noticed that being in the nature of service revenue, it is, in a way, nothing to do with the success or failure of the films. In other words, more than number of films, better is our revenue there.

The other side to look at it is when there are an exceptionally good quarter on the box office, you won't see this revenue stream going up because we are acting as a service provider.

So here, especially in content delivery services, if you see our numbers for Q4, we have actually generated INR 4 crores of higher revenue versus last year's quarter. And that's because we have close to 500 movies which got released across the country, including various genres and languages and -- which is a phenomenal number.

On an annualized basis, it is close to 2,000. And pre-COVID, this is around 1,800. So sheer number of movies getting released help us to generate this service revenue, which shifts into the -- my revenue line item, content delivery charges. And that has almost 90%-plus PBT margin or EBITDA margin for us.

So one of the reasons why we, in a way, could do better performance, though the industry's box office didn't do well, it's because more number of movies were there. The industry came back in a way because in the previous year, we didn't have all the theaters who were operating fully. This year, probably, that number has gone up. And that has helped us to better our service revenue.

When you come to the advertisement revenue, over there also, we would have -- we have done a little better than our peers and seniors. But over here, the ad revenue, if you compare with Q3, even we had a little disappointment because we were hoping that if the content is better, we will be able to do much better on ad revenue front as well. But unfortunately, the ad revenue in our case, which was close to INR 38 crores in Q3, has gone down to close to INR 31 crores.

So yes, you're right, on a year-on-year basis, this is still a 24% growth over INR 25 crores. But Q-o-Q basis, advertisement revenue, if you see, there is a little disappointment, though we have done better than others. And probably, that sums up the reason why we have done better. And with this information about ad revenue, all I would say is we could have done much better, had the content [ overall ] and the industry done well on that service.

[Ankit Kanodia, analyst]

That was very, very, very helpful. Just a clarification on that. If I got it correct, more number of movies are getting produced, irrespective of whether it is a hit or a flop. Our content delivery charges will see a boost, right?

[Ashish Malushte, executive]

Yes, that is correct.

[Ankit Kanodia, analyst]

And if there are more number of blockbuster movies, we will probably see a jump in ad revenue, is that understanding correct?

[Ashish Malushte, executive]

Absolutely, correct. Only one small caveat. When you have a blockbuster which runs for multiple weeks, the billing -- the [ CDC ] revenue rate [ charge ] is such that in subsequent weeks, we generate lesser revenue. Therefore, when you have a blockbuster, we have a phenomenally better ad revenue, but the content service revenue slightly takes a dip in the subsequent weeks. On a net basis, a blockbuster is always helpful when you see -- both put together in our case.

[Ankit Kanodia, analyst]

Got it. Sir, my next question is related to our cash flow into. So last quarter, our cash flow generation has also gone up phenomenally. So I think INR 20 crores of that is attributable to the tax adjustment. But even if we take that aside, the cash flow generation has been much better compared to previous quarters.

So would you again -- what would you attribute that to? What has led to the high cash flow generation year-on-year different?

[Ashish Malushte, executive]

Yes. Yes. So again, two points here. One, let me further clarify the point to talked about, tax adjustment, because you're right that now then you have made this statement, good that you made it because I can clarify on the call.

It's not a tax adjustment. In fact, if you see my balance sheet last year, I had close to INR 48 crores of the taxes that were deducted and that were due for refund. That happened during the COVID period because the [ TDAs ] have continued to happen and we had accumulated losses. And therefore, this was remaining stuck, in a way, with the IT Department. And the amount was huge, INR 48 crores. Of this INR 48 crores in last quarter, we have realized INR 30 crores.

So it's hard cash that is received. It's not a tax adjustment. So that -- I mean that's just one clarification that I wanted to give.

[Ankit Kanodia, analyst]

Yes, I meant that on -- what i basically meant was it has nothing to do with the operational cash flow generation. That is...

[Ashish Malushte, executive]

To that extent, you're absolutely right. So one is this that has helped us in getting the cash in. And the second thing that has happened is our working capital is such that more money gets stuck in the advertisement revenue because there, the cycle is about 5 months.

But the other revenues predominantly our service fees, is where we don't -- in fact, sometimes, it's a negative working capital because we -- most of the money we [ receive ] before the release of the movie.

Now what happens is, over a period of last 5, 6 quarters when our business is stabilizing post-COVID, we have reached a stage where we don't really -- on an incremental basis, not higher amount of working capital is getting [ stuck ].

So yes, certainly, there is an efficiency on our business plan. And last year, there was one more element that we controlled, was the CapEx because broadly my business is, we make money, the money gets [ finalized ] from all the businesses. We make money, that money gets stuck in working capital, which, in our case, has now stabilized. Therefore, the generation for business is higher.

But the utilization of this, predominantly, in our case, is for CapEx. And the CapEx last year was deliberately kept down because we wanted to see how the whole of the industry is performing.

And I'm happy to say that the industry -- when I say the exhibition industry, not just the premium multiplex screens, such as PVR INOX; even the smaller segments and the smaller centers are seeing more number of screens coming up. And going forward, we'll have to put more CapEx. But last year, we controlled the CapEx, and that resulted in a better cash generation.

[Ankit Kanodia, analyst]

Got it, sir. Another question is related to Caravan. So Caravan, we started long back. But I think during COVID everything was shut. And then we have again started it. And Q4, we saw a big jump in Caravan. How do you see that going forward? Do you think it will -- in the coming years, it will become -- contribute in a meaningful way to our total revenues?

[Ashish Malushte, executive]

Yes. So as we had briefed on our earlier calls, we were awaiting the impanelment of Caravan with the CBC, that is Central Bureau of Communications. And this impanelment came through in the last year. And this has helped us to garner business under this from the governments.

And there has been advertising from central and government, and we are looking at more positive continued growth in this area from the government and the corporate advertising front also on this thing. So Caravan business, we are positive about.

[Ankit Kanodia, analyst]

Got it. Got it. And sir, generally, when we cater to the single-screen theaters of the country, and a general perception in everyone's mind, I may be completely wrong, but it's just a perception which we talk about; is that more and more new multiplexes like PVR and all will get opened. And we are seeing a dropping of single screen theaters.

Under that industry backdrop, how do we see a long-term trend in our business model? Don't we see that as a long-term risk when we cater to them?

[Ashish Malushte, executive]

So typically, the industry, 20, 25 years back, was predominantly all single-screens only, and then came down multiplexes. What we have seen over the years is, the cinema number of screens have remained more or less at a steady state. That means whatever screens are closing down, equal number of screens are also opening up.

The good part that happens over here is, say, if certain screens closed down, some will not open up, they'll shut down permanently, but a lot of the single screens also get converted into multiplexes. So one single screen closing down could translate into 2 or 3 screens in the multiplex opening up.

So generally, if we see, the number of multiple screens in our network keeps rising on this account. And single screens, which are situated at good locations, especially South market is pretty much largely dominated by single screens, North we are seeing a lot of conversion into multiplexes also over there; so we will generally see single screens migrating into good quality either single screens or some of them translate and converting into multiplexes.

Either way, it will improve the product mix at our end from the perspective of quality of cinemas, from the perspective of advertising potential and all.

[Rajesh Mishra, executive]

So on this point, let me give data points for it. And I'm, again, very thankful to you that you've brought this point up for discussion that the general perception is UFO caters to single screen. The corollary of that is single screens are going down, which means this company probably is in a sunset business.

And while [ GP ], at the management level, don't really understand how the equity market behaves, and we are focused on our business; one of the views that we have is probably this view which the market has formed is not helping us in getting a right kind of position. So let me clarify.

In FY '20 Q4, out of 3,800 screens, single screen were 2,200 and about 1,565 screens, even that time were multiplex screens. Okay? So we started in 2005. That time, 100% screens were single screen. By 2020, before we hit COVID, of the network, almost 38% screens had moved to multiplexes. However, we were still considered as a single-screen company.

Now let's see what the situation is post-COVID. Post-COVID, if I see in the Q4 FY '24, I mean, on 31st March, our screen strength has come back, already gone beyond pre-COVID, which is 3,859 screens. And of this 3,859, 1,750 screens -- or 42, 1,742 screens are single screens. So single screen shrunk by almost 500.

And my multiplex screens have gone up to 2,117, by almost about [ 500, 550. ] So now my proportion of single screens is in excess of 55%. So the fact -- sheer number itself, that over 2,000 screens under the belt of UFO's digital cinema advertising network actually makes it the largest in terms of number of multiplexes network, even in the country.

Now somehow, though these data points were given out in my presentation, I'm not sure whether we have been able to really conveyed with this kind of stress and emphasis. And I would really want you to take note of this.

And therefore, it's not really fair to assume that UFO is a single-screen network. UFO is a network providing service to the entire exhibition sector. As the exhibition sector is moving towards multiplexes, so is my network.

So this was one point -- data point which I wanted to give you. And I'll be happy to discuss with you offline in case you have any discussions to be turnaround.

[Ankit Kanodia, analyst]

That was very, very helpful, sir. And I think the one change you can make in the presentation is that when we mentioned 3,859 high-impact ad screen, we can probably give a breakup of that. how many are single screen and how many are -- that will make it more clear for all the investors. Because in our presentation, we have never mentioned that.

And very heartening to know that 50% of the mix is close to -- close to 50% is now multiplex screen. And sir, you can give me more detail...

[Rajesh Mishra, executive]

Can I interrupt here? On my presentation, Slide 11, when I'm giving you Prime screen and Popular screen category, of the Prime screens 2,492, 90% screens -- and almost 85% screens are multiplexes. So you are right to the extent, I'm not explicitly saying that what is multiplex. So you're, people do not understand what do we mean by Prime screens.

So it's a very, very valid input. And thank you very much. Not this quarter, maybe from next quarter onwards, we'll start giving it out because it's already published. We may, in fact, looking at -- look at [ republishing ] it, and we will clarify that out of Prime screens how many are multiplexes.

[Ankit Kanodia, analyst]

That would be very helpful there. So sir, as you said that probably if my understanding is correct that as more and more multiplex screen comes into our city, it is helping our business. Can you give more color into how does it help our business? Will we have more multiplex screen vis-a-vis single screen?

[Ashish Malushte, executive]

Honestly, we didn't mean that multiplex screens alone help us, single screen also help us. But nowadays, single screens are not really made. Very few -- very, very few screens are it.

Any addition to my network of any screens, whether single screen or multiplex, helps us a lot because every new screen, I don't have so-called -- if you see my manpower and SG&A, it's quite a huge cost, and there's no incrementally cost that I have to incur to service that theater.

And therefore, any new addition is good. Multiplex helps us because my ad sales team then is in a position to better sell the whole network, which is a combination of higher number of multiplexes and low single screens to an advertiser.

[Ankit Kanodia, analyst]

Got it. Got it. Sir, one last question, if I may. So in the previous calls, we have always been maintaining that the government portion of advertising revenue has not been picking up. But if I see FY '24 compared to FY '23, there has been actually a decent growth in the government plus PSU advertising revenue.

So how do you see that going up in the future? Because if I look at the pre-COVID period, this used to be a pretty high number. And right now, it's at a very low level compared to the total advertisement revenue. If you can give you some color on this, that will be very helpful.

[Ashish Malushte, executive]

Yes. So the -- your observation is right. There is an improvement that you can see in the government segment. However, I would like to tell you that we used to say that there is no continued spend from government segment, we meant cental government.

The central government used to be huge advertiser on entire digital cinema network. And in this year, when you're seeing on a full-year basis, my total ad revenue has moved from INR 17 crores to almost INR 41 crores in this segment.

The -- predominantly, out of this INR 24 crores increase, INR 16 crores increase has come from government and PSU -- I mean, the state governments and PSU. And almost INR 8 crores increases has come from Caravan. So central government has contributed in this INR 24 crores increase, only to INR 1.5 crores -- INR 2 crores of contribution.

So the good part of this analysis is that yes, our sales teams were able to then tap into these various state governments and try to get back the sales in this segment. And the positive side is central government is still on a lower or near zero level of spends.

So if there is a change in the strategy, which the central government -- I mean the ministries have about allocation of their ad spends and increases there ad spends, then entire industry, digital cinema industry, can be the beneficiary. And if that happens, we stands to be one of the biggest beneficiaries because our network is one of the highest.

So if that happens, then you will see a far more increase in the revenue. The positive side is whatever increase you have seen is, in a way, new segment that our teams have developed, which is state governments.

[Operator]

[Operator Instructions] Our next question comes from the line of Niteen Dharmawat from Aurum Capital.

[Niteen Dharmawat, analyst]

Regarding this government revenue, let me rephrase the question. We are saying that the revenue in the last quarter from the government sector has gone up, and we can see about 31%. Is this growth sustainable? And how do you see this growth in the current quarter, ongoing quarter, which is an election year? So do you see that any change that is happening from the government side spending for the cinemas?

[Ashish Malushte, executive]

So let me again try to rephrase the answer. And you're right that it's a better way to post the question that you have asked.

Firstly, what we clarified is that we were able to tap into the new sets of advertisers in the segment, which was state governments. Now, that has increased the spend, too. And this year, our total spend that we have got from this state governments and PSU was INR 28 crores out of the total INR 32 crores of government spend, excluding Caravan.

Now the question is whether this segment is likely to grow. Answer is yes because here, still, we are talking about maybe 4 or 5 states who have really started looking at this network. And I'm not saying they have gone full on spending on this effort. So in terms of pure opportunity, you have many other states, and these states themselves can allocate more. This is one.

Second and most importantly, central government is still not restarted their campaigns on digital cinema networks, while we are seeing campaigns happening -- slowly happening on other networks.

And honestly, we are hopeful because the efficacy of this medium was very well appreciated by various ministers. So we are still hopeful like the whole of the industry that the allocation would again start for this. Now, whether it will start, when it will start, with what intensity it will start, is something which we'll have to wait and see.

So therefore, immediate quarter, I mean it's too short a notice because currently, the government -- it's more of an election period. So the government doesn't spend -- cannot spend in this period. So we'll have to wait and see post-June how -- and it's not going to be immediately after post-June because it takes about 3, 4 months for allocation to happen to the ministries.

But when I'm looking at this particular segment, not for 1 year but over a period of time, we are still hopeful, and we think that there should be allocation back to this segment. And if that happens -- in the [ rest ] of the year, we have done INR 100 crores of revenue only from central government. And now this year, it is INR 3.6 crores.

So we should tell you and the network is same, the same kind of a network, a number of screens. So that's an opportunity for us. Let's see whether that comes our way and how soon and with what intensity it comes.

Second, on the quarter which you asked about, current quarter, as I said that the governments cannot spend because of code of conduct, and during this period, some of the political parties like this network as a medium to reach out to their voters. And this is not just this time, but we have seen in every general and state election that this is -- went the same.

The governments are forced to stop the spending. All the political parties are looking at this medium, and we take it as a pride because if the political parties believe that this is a network to reach out to people, one of them when they come in power, they should have the same philosophy continuing into the government actions.

[Niteen Dharmawat, analyst]

Okay. And regarding distribution of movies, so how many moves now we are distributing? How many are dubbed movies?

[Ashish Malushte, executive]

So two parts. One is distributor revenue, as in delivery charge that we refer to, which is almost INR 90 crores top line -- I mean, revenue line item for me. There, I charge a fee to distributors. I'm not a distributor there. I charge a fee to distributor.

And any movie, any language, any distributor, he needs to come to our network. If he wants to distribute his movie in the theater, which is on my network, and we charge a small fee of anywhere between INR 200 to INR 450 per show. And this is a revenue that I generate.

And this last quarter was -- the number was 550 movies. And when I say 550 movies, that included multiple versions of the same movie, which can be -- I mean mostly belonging to different languages.

So if you want a specific answer that out of this 550, how many were unique movies, I think my IR team will connect with you and provide you this. But right now, I don't have it. It's 550 number for the quarter, which was 512 in Q4 FY '23. And on a full-year basis, this year, we have done [ 2,117 ] films, which used to be 1,762 in FY '20. So this is a count.

This is my distribution revenue. I'm acting as a service provider. I have a very small business line that I started -- we started 2 years back. There, we act as a distributor. We act as a distributor, but we don't take any P&L risk. We take smaller movies into smaller centers. That's the niche that we have identified there. And if your question is how many movies we have distributed, then that number is very small this year.

[Operator]

[Operator Instructions] Our next question comes from the line of Aditya Sen from Robo Capital.

[Aditya Sen, analyst]

So as we know, we kind of have an idea how much movies are going to be released in this coming year. So on that basis, can you please give us some guidance on the revenue for FY '25 that we are aspiring for?

[Ashish Malushte, executive]

So you must have noticed that we never give any projection and the estimates of the years to come. Typically, we have decided to refrain from doing so. Whether we can achieve it or not, answer is obviously yes. And that's where the business strategy revolves. But we refrain from sharing this number, and we don't even share it with anyone. We can give all the directional views, which should help many analysts or any investors to construct in his mind what can the revenue streams will be.

All I will say that my business is simple. I have these 2 key revenue lines, and my costs are split into the fixed cost or [ of ] loan, manpower cost and SG&A. Those are very clear. The growth path is also very clear there.

Other than that, all the direct costs are linked with one of these 2 revenue streams. And the revenue streams from advertisement front give me incremental 55 to 60 -- 65% to 70% incremental revenue, which is -- sorry, incremental ad revenue [ fetches ] me anywhere between 65% to 70% of operating margin. And on the [ CDC ] front, it's nearly 90% margin that I fetch incremental revenue.

So this is how our business is. So I'm sorry, but we don't really give any revenue assets for the quarter of the year.

[Operator]

Our next question comes from the line of Sunil Kateshiya, an individual investor.

[Sunil Kateshiya]

Sir, we are into the digital world, as of now, and the technology evolves on every day basis. So in advertising industry, both of the Internet advertising is being driven on programmatic nowadays or not. So are we looking into announcement of any -- I mean in technology or we can charge a premium on advertising using [ first ] kind of technology? Are they thinking on it or [ this impact ]?

[Ashish Malushte, executive]

Yes. So this is definitely a good question from your side. You're absolutely right that the advertising technologies are evolving and also evolving are the measurement techniques, the post-campaign evaluation techniques.

So we have been working on a programmatic solution, which we can provide to advertisers, which will allow them to advertise in a better manner. It'll give them more value for money and will allow them to also advertise on a sustained and regular basis as opposed to just coming on to the platform for advertising on tenfold big blockbuster films.

The idea is to engage with them on a long-term basis so that they can have extended contracts rather than in film-based advertising campaigns. So we are definitely working on that. And that will be a tool in the hands of our marketing team to go out in the market, going forward.

[Rajesh Mishra, executive]

Just to give one flavor to you. When you mentioned about programmatic ad and that is being used in the digital era to target the advertisements to the right set of people, we know that the efficacy of the spends is better.

And therefore, you are seeing that by leaps and bounds, the proportion of the digital ad has improved. And advertisers sitting at one place can select a particular region, a particular genre, a particular set of age group and then target these ads to only those users, right? That is what...

[Sunil Kateshiya]

And for that, we can charge a premium for that?

[Rajesh Mishra, executive]

Correct. Now I'm happy to tell you that the genesis of UFO -- in a way, programmatic is a new world now, for us at least last maybe 3, 4 years, it has picked up. But the genesis of UFO and network is -- in a way, was to do targeted advertisements.

So when I say that, today, when an advertiser is coming to say Mumbai region and he wants to pick up a particular region in Mumbai, then he knows that he's going to be targeting his ads for that region. In that, he knows what kind of segment is going to be coming to view a content. So he can do a combination of type of the theater and the type of content being released to [ estimate ] the kind of audience, which is likely to happen.

For example, if there is a to Chhota Bheem kind of a film coming and some advertiser wants to target the parents and the youngsters, then yes, we can do it on a cartoon on digital channel. But the same thing they can also do it on the UFO network in all the screens where, say, Chhota Bheem is getting released.

Now this is something which is not new that I'm bringing on table. This always was there, dissecting, bisecting my network and targeting that. And we were not charging any premium for this bisecting and dissecting. Of course, there used to be a benefit, if it's a network sale, huge network is getting sold. But for a smaller segment of network being picked, we were not charging a premium.

But all I'm trying to say is that in a very meaningful way, not just us, but all the digital theaters where the advertisements are played, can become a programmatic -- a programmable, programmatic advertisement sources. Only thing, the advertisers has to do a combination of the theater and the content being picked up. And that's almost seems comfortable that sitting at an office, he can feed in.

Even in our case, we have provided the advertisers with a tool that they can sit -- I mean, of course, through an agent, they can sit with at it, there place and feeding their advertisements, select which theaters they want to play it, send their content, which we just internally sensor it, and it plays out.

So to a major extent, what is available for advertisers on digital medium through programmatic advertisement is available on our network.

Just that we were not vocally explaining this, now I'll explain it over a call. And much before me, the sales team have already targeted communicating this in the market with some of the tools that we have developed in this direction.

[Operator]

Our next question comes from the line of Vipul Kumar from Sumangal Investment.

[Vipul Kumar, analyst]

I joined the call late, so please pardon me if there is a repetitive question. Sir, my question relates to our ad revenue. So if I see your Slide #21, we were -- in FY '15, we were at INR 1,167 million. And in FY '24, we have 1,116 million. So government finances are very good, government is spending plenty on a lot of areas.

So I mean, are we losing government due to -- means we are not offering a good value proposition? Are the advertising somewhere else? Have we lost the market share? So your comments will be welcomed.

[Ashish Malushte, executive]

So what did -- government did -- pre COVID was -- I mean, you will all remember in 2019 towards, and there were austerity measures, and they have stopped spending almost on all networks. And therefore, you will see even in 2020, while I had INR 150 crores of ad revenue, only 34% of that came from central government, which used to be almost 57% in better years, 57%, 58%. So yes, within my total spend -- the total revenue, government shrunk.

The question that you have is, whether they allocated this revenue to some other networks? At least in FY '19, '20, there were austerity measures across. As we all exited the COVID period, there were small spends that we started.

But even now, their spend has gone down significantly. I mean, if you look at up to December last year, you would have seen government ministries [indiscernible] advertising, in fact, as high as 60%, 70%, 80% reduction. They have officially -- in fact, in some of the questions that were asked in parliament, the government has formally replied, saying that, this is 1.5 years back, not recent; they have shrunk their spends.

But in one of the questions, sometime back, I had said that we hope that this is not what is a final strategy. They would look at communicating their -- the good schemes and important schemes to Indians, and us becomes a very relevant network.

So two parts. One is that there is a shrinkage in their spend. So now that they have shrunk only on digital cinema and on UFO, so nothing that our value proposition has weakened. And two, we are not seeing a heavy allocation starting from them at least till December -- December, Jan.

[Rajesh Mishra, executive]

So just one more point to add over here that the shrinkage in the advertisement volume was from the central government side, whereas the state governments have continued to advertise. And we have seen a growth over there, and we are continuing to remain positive about the growth in the state government advertising.

So largely, whatever shrinkage we see in the government advertising has happened on account of central government advertising. And state governments continue to show a healthy growth for us.

[Vipul Kumar, analyst]

So one small suggestion. So for next quarter's presentation, if you can split the government spending between the central and state government, so that will be really helpful.

[Ashish Malushte, executive]

That's a very good suggestion, sir. We will start doing it [indiscernible].

[Vipul Kumar, analyst]

And sir, my last question is regarding the parts and spares which you supply to theaters, so how do you source them? Do you have any distributorships, means theaters can directly source from the manufacturers? Now my question is, why they have to come to source the parts and bulbs and things like that to you?

[Ashish Malushte, executive]

So the way our business model is structured is we are -- 90% of our network is equipments, which are supplied on lease rental business to the cinemas. So the equipment continue to be owned by us. And as part of our arrangement with the cinemas, any maintenance of that, et cetera, is also at our end.

And what we do is we have back-to-back arrangements with our suppliers to provide us with parts. And we accordingly source the parts directly from the manufacturer, stock them and ensure that the networks are up and running across the country.

So it's not a decision of the cinema that we can buy a part from any other party and do it. It has to be done by us, and we have the contracts with the manufacturers to do that also. Also the skill set that is required to maintain these equipment is with us. So this is entirely done at our end.

[Operator]

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

[Ankit Kanodia, analyst]

So my next question is related to Nova Cinemaz. I think we have mentioned about it briefly on our website, but we don't mention anything about it in our presentation. Any color on that as to how do we see that going up in the future? Or do we have anything currently happening on this front?

[Rajesh Mishra, executive]

Yes. So glad you asked that. Nova Cinemaz, as we have mentioned, is a long-term infrastructure project. But we are glad to tell you that around 16 screens are currently, that would be around the 8 properties that are currently in the pipeline for us to -- for the Nova network. And we are looking at opening at a couple of properties in Q1 of this year. So this is -- this project is on track, and we'll soon be seeing traction on this front.

[Ashish Malushte, executive]

So when Rajesh mentioned Q1, it's just a couple of weeks or months from now because one of that properties is ready, is waiting for the cinema license to come, which was a little delayed because of the ongoing election. The second property is almost 95% ready. And third property is again, about 60%, 70% ready.

And all these 3 properties are in the UP, close to Meerut. And this is where the first phase is getting rolled out. We're just waiting for the things to start there, and therefore, we have not given any detailed information on our earnings presentation.

But yes, [indiscernible] ask this question. We are on track. It's an infrastructure project we want to set it up right, and then we want rest of the country's entrepreneurs to pick it up as a business so that we can have a lot many centers in smaller urban areas across the country.

[Ankit Kanodia, analyst]

Yes. If you can throw more like on the business model as to how much capital is required in this kind of business? And what kind of margin and what kind of working capital mix starting with? So if you can give some more clarity, that would be very helpful because our other businesses...

[Rajesh Mishra, executive]

Are you asking about Nova project, sir?

[Ankit Kanodia, analyst]

Yes, Nova project. Nova Cinemaz.

[Ashish Malushte, executive]

Yes. So all I will say is that your company has always taken a decision of not heavily investing into either content or in the center. So therefore, even in this Nova business model, we are [Audio Gap] heavily into the whole of the infrastructure cost. There is a local business partner who invests into the whole setup.

Our investment is restricted to the equipment that we understand, which is digital cinema equipment which we provide to everyone and some of the sound and acoustics and the screen. So it's a very limited investment. That is point number one. So that should give you comfort that not that we are going to be pouring money starting theaters.

As regards to the business model there, from our side, we have [ chosen ] it and implemented in the -- want to -- will be implementing in the Phase I. But I think here, you should allow us some time because we have the bigger challenge that we all have is to make sure that the centers -- decent centers are put up in smaller urban areas. And these decent centers are turned out to be good enough to attract footfall and what happens in malls in bigger cities where the cinema becomes the anchor tenant.

Same way, even these Nova centers should turn out to be anchor for the crowd puller in those urban centers, which in turn helps a lot of a lot of commercial activities around it, and it helps the overall ecosystem, which we have seen in malls here, what a good theater can do.

So we want to make that happen first. You be rest assured that, as I said, that there is no heavy CapEx investment that we have taken it on our head. And same way, the business model more or less remains the same in case of the exhibition -- these exhibition centers. Just that the operating costs will be lower here. Of course, the ticket price would also be lower.

But as you get the footfall there, these centers are designed in such a way that there are other avenues where the footfalls can be further monetized in terms of food or in terms of retail activity or some sort of services which can be offered to them digital services.

So that's a composite model. I would request that you give us some more time. Let us first get this theaters up and running at the right centers. And we are there now, maybe 1 month, these 2 centers will be up.

And then we will explain you in detail this model because as Rajesh said, this is the infrastructure project, long-term project, plus we are very hopeful that when this picks up, it's going to provide a captive audience or captive network to UFO's core business. So we are very carefully building this business.

[Operator]

[Operator Instructions] There are no further questions. Now I hand over the floor to Mr. Tanuj for closing comments.

[Unknown Analyst]

Thank you on behalf of Ventura Securities Limited, we would like to thank the management of UFO Moviez and the participants.

[Operator]

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