FY16 advertising revenue could grow by 40%: UFO Moviez

UFO Moviez is targeting a 30 percent compounded growth in advertising revenues over the next three years, Kapil Agarwal, Joint Managing Director of the company tells CNBC-TV18. This year, he expects ad revenues to grow 40 percent. Agarwal says there is scope to improve ad minutes per screen from the current duration of 4 minutes. As of H1FY16, the company had 4940 screens. Annually, the company releases 1600 movies, he adds.On the Caravan Talkies business, Agarwal says the company has 91 vans operational that show films. Below is the transcript of Kapil Agarwal’s interview with CNBC-TV18\\'s Mangalam Maloo and Reema Tendulkar.Mangalam: Could you give us a sense of how many movies have you distributed in the quarter so far? What is the outlook for the next quarter as well and at the same time I remember you had said that when movies run for long it is slightly negative for you guys and we did see some blockbusters coming in this quarter itself. So, does that have a negative effect on the company?A: Yes, annually we distribute in the range of 1,600 movies a year. So, that 1,600 number has been going up every year. So, we started with 300-400, now we are at 1,600 plus. So, it is difficult to tell you what happens quarterly but annually because it is really not in our hands how many movies are released every quarter but overall 1,600 movies get released in a year and ours is more of an annual business. So, to that extent that is where we are.Reema: Your advertising revenue went up 37 percent in the first half of the year. Is that growth rate sustainable, is there scope to improve advertising revenues even further?A: Basically what we are looking over the next three years is a close to 30 percent annual year-on-year (Y-o-Y) growth in the advertising revenue. In the current year in our estimate we should be delivering in the range of around 40 percent. So, as the base keeps growing but it is still at the 29-30 percent growth over the next three years it seems sustainable to us because we are utilising currently under four minutes of inventory. So, there is a lot of headroom for us to enhance the utilisation.Reema: What is the headroom available. You said the current ad minute per screen is sub four, to be precise 3.83 minutes. What is the headroom available in three years?A: Today when we see the multiplexes they are utilising in the range of 18 to 20 minutes. So, over a period of time, if you look at over next 5-6 years we should go between 10-15 minutes. So, there is a substantial headroom for us to grow and I also come back to the previous question when you asked that when the blockbusters come our business gets affected. Yes, the theatrical revenue gets affected when the blockbusters come because we don\\'t charge beyond a point from the distributor. We pass on that benefit to the distributor in terms of our charges but when the blockbusters come more and more ad revenue comes. So, actually that compensates itself. So, blockbuster means the theatrical revenue or the revenue from distribution goes down but the ad revenue goes up as the blockbusters come because more and more advertisers do advertise. So, overall that is where we are.Mangalam: Coming to your next growth trigger which is the Caravan Movie Talkies, you did indicate in your post second quarter earnings call that by October all the 80 vans will be operational. So, are they operational and what kind of revenue trends are we seeing right now. At the same time what could the margin impact be this quarter?A: Overall we have currently 91 vans are operational as we speak as on today. So, we have actually crossed that number of vans. This business like any other business is in the process of stabilisation. So, we are stabilising this business and in the long term we see a lot of growth coming from this business. So, that is where we are in Caravan Cinema because till last quarter there was absolutely no revenues because of the monsoon season. So, now the revenues have started growing and in the current quarter which is the Q4 we see growth in revenue coming in this.Reema: You said in this quarter at least it started generating some revenue. Could you give us a sense of how much that could be, how much are you expecting in the coming quarter and then in FY17 when you get a full year of stabilised operations, what could be the revenue generated from Caravan Talkies?A: We will be publishing those figures publically in due course. It is not possible for me to share the figures right now but the quarterly results are just around a month away. So, we will be publishing the figures and you will know all the figures and that is when we will talk about those revenues.