Multiplex operator INOX Leisure posted weak Q2 FY23 numbers on account of failure of big Bollywood films at the box office. This led to delay in recovery of advertising income, which was expected to reach pre-COVID levels in the second half of FY23, the company's top official said.
Cinema advertising in Q2 stood at Rs 26 crore versus Rs 30 crore in Q1 FY23.
"We are at 65-66 percent of FY20 levels in advertising. We were hoping it to be better in Q2 but it is line with Q1 because tentpole movies did not perform well at the box office. So, there will be a delay of a month or two in seeing recovery in ad income," Alok Tandon, CEO, INOX Leisure Limited, said during an earnings call.
He said that due to lower footfalls, advertisers have not extended their contracts.
"If the contracts with advertisers were for two weeks, they did not increase it to three weeks. Advertising is dependent on buzz around a movie and how the film performs in the first week. The advertiser then may give us contract for 2-3 weeks. We got ad contracts for few weeks but not for longer period that we had expected," he added.
Demand from advertisers is seeing some change in Q3 and the fourth quarter looks promising due to string content lineup, said Tandon.
Weak Q2
The company's revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and PAT (Profit After Tax) fell to Rs 381 crore, Rs 3 crore and Rs 22 crore in Q2 FY23 versus Rs 524 crore, Rs 107 crore and Rs 51 crore in Q2 FY20, respectively.
Footfalls and occupancy also declined in Q2 with 116 lakh admissions and occupancy at 17 percent. INOX had reported 184 lakh footfalls in Q1, 6 percent higher than Q1 FY20.
"We had some major challenges with content in Q2. But the current occupancy levels are not the new normal. It will get back to 30 percent. Looking forward to Q3 lineup," Tandon said.
Screen expansion
The company is looking to further expand in the south market with plans to acquire Luxe Cinemas in Chennai, which is an 11-screen property.
"Acquisition will be completed in the next couple of weeks through debt and internal accruals. It is an EBITDA positive property," the CEO said.
Out of 77 screens that INOX had planned to open in FY23, the company has opened 30 screens including three screens it opened in Kashmir in September.
Tandon said that it is tough for people to come out after 32 years of not having a cinema hall in Kashmir but the habit of people will change over there. "There were initial issues where people were not coming out. In next couple of weeks or months we will have people coming to cinema in Kashmir like other parts of the country."
INOX is looking to further expand in Kashmir, said Tandon.
On merger with PVR, Tandon said as per direction of National Company Law Tribunal (NCLT) INOX obtained shareholder approval on October 12. "We are in the process of filing second motion petition with the NCLT in the Mumbai branch. We expect the merger to be completed by end of Q4 FY23," he said.
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