Earnings Call Transcript - XNSE:UFO 2026-11-04

Operator

Ladies and gentlemen, good day and welcome to the EU Club Movies India Limited Q2 and H1 F527 Earnings Conference Call. As a reminder, all participants' lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during the conference call, please signal an operator pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. The company is represented by Mr. Rajesh Mishra, Executive Director and Group CEO, Mr. Rajesh Maliste, Chief Financial Officer, and Mr. Siddharth Bharadwaj, CEO of the company. I would now like to hand over the call to Mr. Mishra for his opening remarks, post which we can start the questions and answers session. Thank you and over to you, sir.

Rajesh Mishra, CEO

Thank you. Greetings, everyone, and thank you all for joining our Q2 and H1 FY27 earnings call. Q2 FY27 witnessed healthy theatrical momentum, supported by a diverse content slate across languages and genres. July opened on a strong note, led by the strong performance of Spider-Man, Brand New Day, supported by ODIFI and Damal 4, which contributed meaningfully to overall theatrical activity. Alpha delivered a moderate performance while several smaller issues saw limited audience traction. August saw a more varied performance across the content slate. Hanuman Ansh emerged as a notable sleeper hit, significantly exceeding initial expectations and gaining momentum through strong audience word of mouth. Awara Pantu also delivered a strong theatrical performance while Bhattwara 1947 underperformed despite expectations around the film. Topset, a fairy tale for grown-ups, despite being a highly anticipated release, also fell short of expectations, highlighting the increasingly selective nature of theatrical audiences. September continued to see varied audiences' response, with Mirzapur the movie delivering a strong performance, while Haywan underperformed and saw limited theatrical attraction. Other releases contributed to a mixed content environment across Hindi and regional markets. The four others covered with one, the force of the forest, which opened with a decent response. Overall, Q2 FY27 reflected healthy theatrical activity with strong performances from both major releases and unexpected sleeper heads. At the same time, the varied performance of highly anticipated titles reinforced the importance of content quality, audience connect, and word of mouth in driving theatrical success. With a healthy pipeline of releases across languages and improving audience segment, we remain optimistic about the growth prospects of the business in the coming quarter. In total, 386 movies were released, including versions and languages during the quarter, compared to 462 in Q2 FY26 and 399 in Q1 FY27. On the screen network front, our advertising footprint now stands at 3,946 screens, comprising 2,606 multiplex screens and 1,340 single screens. Turning to the key figures for the quarter and half year ended September 2026, the consolidated revenue for Q2 FY27 stood at 1,299 million rupees compared to 1,113 million rupees in Q2 FY26. The company reported a net profit of Rs.64 million in Q2-FY27 compared to a net profit of Rs.75 million in Q2-FY26. And a net profit of 57 million in Q1 FY27. Regarding half-year performance, consolidated revenues amounted to Rs. 2,417 million, compared to 2,203 million in H1 FY26. Ebitda for H1FY27 was rupees 402 million compared to 411 million in H1FY26. On the past front, the company reported a net profit of The consolidated cash as on 30th September was Rs. 1,657 million and the net cash was Rs. 865 million after considering outstanding debt. Looking ahead, Q3 FY27 has comments on an encouraging note with the release of films such as Grisham, Jailer 2, Urtati, Prahar, etc. The outlook for the remainder of the quarter remains positive, supported by an exciting slate of upcoming releases including Ramayana Part 1, Asharu Khan Starer Kim, Avengers Doomsday, ETA, Ye Prem Moriya, and others. With a healthy content pipeline and improving industry sentiment, we remain confident about the theatrical business and our ability to capitalize on the opportunities ahead. I would like to take this opportunity to thank all our shareholders, exhibitors, advertisers, business partners, and employees for their continued trust and support. With that, I would now like to open the floor for questions. My colleague, Mr. Ashish Maluster, Chief Financial Officer, and Mr. Siddharth Varadhar, CEO, and I will be happy to take your questions. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and one on our telephone keypad and wait for return to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. Participants are kindly restricted to restrict with two questions in the initial round, and join back the queue for more questions. Ladies and gentlemen, if you have any questions, please press star and one on your telephone keypad. The first question comes from Ashish, from Indiginal Investor. Please go ahead.

Ashish, Analyst — Individual Investor

Yeah, hi, sir. I wanted to know how much accumulated losses are we still carrying on the balance sheet? And secondly, promoter's stake has been continuously falling. So, at such an attractive valuation, at any point of time, are we evaluating some sort of increase in promoter's stake?

Ashish Maluster, CFO

Yeah, so, hi, this is Ashish Malashtar. You have, so, of the two questions, let me take the second one first. It's about the promoter's stake appearing to be going down. In fact, in the last earning call also we had clarified this point that this is not a reduction on account of promoters selling the shares. What has happened is in the month of fourth quarter of last year, one of the IPO time promoter, Apollo International, The company underwent the process in UFO of de-promotorization, and therefore that company was categorized as non-promoter, as a retail investor, and that's the sole reason why we see a drop in the promoter holding. Whatever you are seeing for last two quarters. So that is the sole reason. So there is no selling or no reduction in the stake of the founder promoter group, which is Valuable Technologies, and Mr. Sanjay Gayakwad and Mr. Hete. So that is absolutely intact. As regards the chances of the promoters increasing their stake, most certainly I agree with you that the valuation is very attractive. Considering that there is a consistent profitability delivered by the company for last three years, even at the PAT level, it certainly appears to be a good opportunity. However, the decision with respect to when and to what extent the stake should be increased is entirely their prerogative. And as of now, we don't have any clear indication in that regard.

Ashish, Analyst — Individual Investor

Okay.

Ashish Maluster, CFO

We had a second question about accumulated losses. So currently, the accumulated losses for the, and let me clarify, these are the tax losses, which were accumulated during COVID period, on account of near closure of the operations of entire entertainment industry, including us, the accumulated losses on the tune of close to 119 crore, and that is the accumulated losses that In my balance sheet, in the form of a deferred tax asset, it has two components. One is what can be carried forward perpetually, and the other which we need to realize in the next four years' time.

Ashish, Analyst — Individual Investor

Sir, I just wanted to know as per company, since we have not been able to either go for a dividend or a five-day because of accumulated losses, right?

Ashish Maluster, CFO

Okay, okay, okay. So that's a good point. And to answer your question, no. The decision of the company is that there are no companies that accumulated losses in the balance sheet.

Ashish, Analyst — Individual Investor

So, given that we are very much...

Ashish Maluster, CFO

Can I complete? Can you give me a minute?

Ashish, Analyst — Individual Investor

Yes, sir.

Ashish Maluster, CFO

Because this will help all of us, other investors also, to understand this position. Right. The books of account, as per Companies Act, also there should have been losses in the balance sheet, but what we have done is, a couple of years back, we underwent a restructuring process approved by NCLT, and in that, there has been a capital reduction, through which we have made sure that these losses have been removed from the books of accounts under the authorized process. The sole reason for that is, one, the balance sheet looks streamer. And leaner and more appropriate. And two, as you have rightly said, now the company is in a position to declare either dividend or a buyback. If we had carried that company's act losses in the balance sheet, then you're right, we would have not been in a position to declare any dividend or do a buyback. But that's not the situation of your company. We have very proactively, well in time, almost two years back, taken care of this issue on the company's act front. Okay?

Ashish, Analyst — Individual Investor

But then, since we are having so much cash flows, then what is stopping us from going for a dividend or a buyback?

Ashish Maluster, CFO

Nothing. In fact, you are right. Till last year, the situation was different because the entire film industry, when I say film industry, exhibition industry, was not really sure whether the audience is meaningfully back in the theatres. But you would agree with me that last 4, 5, 6 months are very clearly telling us that...

Ashish, Analyst — Individual Investor

Yeah, and next year, that is true.

Ashish Maluster, CFO

So, in terms of outlook, there is no uncertainty that we are seeing anywhere. Companies also making profit. In fact, there has been discussions that we have started at the board level. Maybe by Q3 or Q4, we'll be able to come back with a very clear indication, not about just the, not about the dividend payout for a year, but a very clear policy, which we have been adopting from 2015 to 2020, and it was declared. The same policy in terms of what is the policy of company for capital distribution. That will be coming out, but not now, maybe Q3 or Q4.

Ashish, Analyst — Individual Investor

Okay. Thank you, sir. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, if you have any questions, please press star and one on our telephone keypad. Ladies and gentlemen, if you have any question, please press star and one on our telephone keypad. The next question comes from Silas Naik from Scott. Please go ahead, sir.

Silas Naik, Analyst — Scotts

Yeah, good afternoon. There has been a significant improvement in our performance at the revenue level, and even improvement in receivables, as you promised last quarter. But my query this time is primarily on the operating direct cost, which has increased by 150 million. And it is not attributable to actually an advertisement revenue share, which I thought could have been the reason. So I wanted to know what is driving this cost higher and how can we reduce it because the revenue growth at the top line is not contributing to the profit growth at the bottom line. So can you just clarify on this?

Ashish Maluster, CFO

Yeah, and first of all, thank you very much for bringing this point up for discussion. Because just a cursory look at the numbers gives a not correct picture, and therefore it needs a clarification. So let me help you with some data points. So your observation is correct, that while everything else is absolutely looking better quarter on quarter. Operating direct costs all of a sudden seems to have gone out of group and have increased beyond the revenue increase. And that should be your area of concern. But the reality is, I will give you the numbers, sir, for your quick reference. Operating direct costs have gone up by 28% year on year for this quarter. Q2 last year compared with Q2 this year. But of this, there are four key components. One is advertisement revenue share. That has gone up only by 2%. There is a VPF revenue share that has gone up by 16% which is more in line with the VPF revenue. So this area of increase should also not be of a concern. Other direct costs have gone up by 5% from 89 million to 93 million. That is also not a concern. The single largest moor is the cost of goods sold that has gone up from 19 crore. to 32 crore which is 66% increase in the cost if you look at it in isolation so first to give you a clarity that what has gone up in direct cost is only and only one line item which is sale of equip the cost relating to sale of While the costs have gone up, you would see that corresponding revenues have also gone up of sale of product. In fact, sale of product revenues have gone up by 66%. From 25.4 crores, it has gone up to 42.2 crores. And as a result of which the net margin has gone up by 68%. So, all I am trying to tell you is that there are two parts to the whole discussion. One, why the operating costs have gone up disproportionately when looked at it in isolation. The simple answer to that is because the single largest constituent of 66% increase is cost of goods. Second part is, is it a concern? Most certainly not. That increase in cost has got correspondingly higher increase in the absolute revenue, which you can see, sale of product revenue. And ultimately, the net margin has gone up from this revenue stream up by 68% on a year-on-year basis. So this is the reason why you see a sort of a disparity in number, but in reality, it is an absolutely healthy picture of your company.

Silas Naik, Analyst — Scotts

So, in that context, when we are making lower margin on services, if I ask you the sales of goods both from the top line and the cost, so what is the actual picture? Can you just give me what is the actual revenue growth if you minus this segment, right? And also, if you minus this segment from the cost, what is the profit growth? Can you give me that number?

Ashish Maluster, CFO

Yeah, so there are, again, two parts to the way you should. Look at it. One is that sale of products certainly is there to stay and doing good, and it fetches lower gross margin as compared to my service revenue. This is point number one. And it is meaningfully lower, but still significantly meaningful. It is in the range of anywhere between 18 to 24 percent, if you see historically last maybe 20 quarters of the company. So it's a good margin. Whereas my service margin is anywhere upwards of 55% in advertisement revenue, and in VPA plus ADC, again, it is in the range of 60-65%. Now, the reason why we should not do what you are trying to do, what you are trying to do is you are trying to reduce the revenue of sale of product from the total revenue. And the cost of, say, relating to the sale of product from the total cost. And then trying to look at the numbers. The thing that happens is all the other costs, which are significant, Manpower and SG&A, those costs will then get entirely loaded on the other revenue streams, which is not, which should not be the case. So, more ideally, somebody can do an allocation of this cost, and then they can arrive at what is the profitability. And it is straight in my numbers. There is nothing hidden there. Same ratio should be applied for SG&D and Manpower to arrive at whatever is the gross level profitability and net level profitability. All the numbers are given. If you or anyone else needs the help, then me and my team are available. You can connect with us and we'll help you to arrive at that net level profitability now.

Silas Naik, Analyst — Scotts

Fine, I'll take both your explanations, but here's another problem is I understand the margins in product is lower and margins in service is higher. So if that is there, I can understand the margin of profit going down, but why at the absolute level when both the segments have done well, why at the absolute level also that profits have gone down then? So is there something else which is missing, some other cost which is there, which is not tripping, because if the product is also done well, services are done well, okay, margin might go down at the same profit level, but absolute level it should not go down, right? So what is driving that absolute level going on?

Ashish Maluster, CFO

Your question is why the EBITDA margin has gone down?

Silas Naik, Analyst — Scotts

Really? You are saying the margin has gone down because of the product sales, right?

Ashish Maluster, CFO

No, no, no. I am trying to understand your question. You are saying that both the service revenue has done well, product revenue has done well, even at the net level.

Silas Naik, Analyst — Scotts

Then why at the PAT level the profits have gone down?

Ashish Maluster, CFO

So that is what I am saying. So before PAT should we look at EBITDA level?

Silas Naik, Analyst — Scotts

EBITDA, I don't have a number in front of me, you can just add to that.

Ashish Maluster, CFO

I can tell you that as well. So at the EBITDA level, if you actually see, there is a 2% reduction.

Silas Naik, Analyst — Scotts

That should not have happened in that case.

Ashish Maluster, CFO

Correct. And that is where you should look at my manpower cost, which has one component of the incentive component. And that incentive component has gone up by about a crore, one crore this year. And this has contributed to a reduction in the cost, in the overall margin. Now, the question comes is, why should the incentive should go up? Two answers to that. One, last year, this quarter, the allocation of the incentive was lower, and therefore, that absolute number of last year's Q2 or last year's H1 was lower. Comparatively, this year's Q2. Where the policy was in place from beginning, the allocation has been done more realistically, and therefore you have a higher value, absolute value of the incentive. The difference is to the tune of 1 crore, and that exactly is going to hit at the net level. If I remove this element and try to look at my profitability before the variable, then on an EBITDA basis, it has gone up by 2%. Now, again, the question would be, if the revenues have gone up by 17%, why EBITDA is going up only by 2%? And answer to that is, there is an year-on-year increase in the absolute fixed salary and smaller level, although increase, but a smaller level increase in my SG&A expenses, which is typical of all the companies. So, that's the reason why we are seeing a lower EBITDA margin here.

Silas Naik, Analyst — Scotts

So, when does the operating leverage kick in for you? I mean, if this is the case, then, at what level you can say is this?

Ashish Maluster, CFO

So, the current level of advertisement revenue and current level of service revenue is reasonably at a higher level than that threshold post which the operating leverage would straight start kicking in. Hypothetically, let's imagine that I had 10 more crores of ad revenues. Suppose Toxic had done well, which it didn't do well, and suppose Hanuman Ansh was part 2, like Durandar 2, so that the advertisers would have been able to assess it well and done a better allocation of their budget. If that would have been the situation, assuming that 10 crores of more advertisement revenue, let's take 6 crore of more advertisement revenue, okay? 6 crore of additional advertisement revenue would fetches at least 70% margin. This is at a PBD level margin. I'm trying to tell you is that with that, my current PBT, what you see, would have gone up straight by 70% of 6, so almost by 4 crores it would have gone up. So the current reported 9.6 crore PBT would have gone up by 4.2 crores, so almost 45-50% increase in my PBT. Now, this is the level, so you're right, one needs to know what is the level at which the Operating margin would start disproportionately kicking in the benefit. So this is the current level at which it will actually start.

Silas Naik, Analyst — Scotts

So in that case, can we look at the third part?

Ashish Maluster, CFO

I was saying the reason why operating leverage will meaningfully kick in is because at this stage you would see my manpower and SG&A costs impact on my increased revenue already factored in. Those costs are not going to go up. As I said, incentive is also rationalized in line with what the revenues are.

Silas Naik, Analyst — Scotts

Is there no other opportunity for cost reduction, you are saying, in the entire scheme of things currently?

Ashish Maluster, CFO

Of course, there was a huge opportunity that was there two and a half years back, and you can refer to our previous calls and also the numbers, and see how the cost reduction both on manpower and the SG&S was brought in when we were exiting COVID period. And right now, I think this energy should be focused more on. We're getting this operating leverage out instead of just focusing on cutting corners. So that exercise was extensively done. Would love to spend time with you and show you exactly in numbers, not just explaining you verbally, but in numbers of how the reduction was achieved without really affecting the business, which is visible because even after those reductions, the revenues have gone up, profitability has gone up.

Silas Naik, Analyst — Scotts

Sure, sir. That's great. Now, my last question is, now you might have an idea as to how the Q3, because you sell advertising in advance, so with the good bunch of movies coming with the big names, do we have a kind of a projection as to what we can do in advertising revenue in Q3? A kind of a range, I mean, not give a figure, it's like a kind of a range which can we look at?

Siddharth Bharadwaj, CEO

So, this is Siddharth Bharadwaj. I would like to address this question. You are absolutely right. The content lineup for the, not only for Q3, but Q4 also looks... Very exciting. The interesting part is many of them are from an established IP, which means either they are sequels or they are backed by a major star or a studio, right? Hence, there is a lot of excitement. We are seeing a lot of excitement on the advertiser side where they are willing to look at not film by film basis but as a bunch of films together. So we are confident that the next two quarters will be far more exciting for us. As a company, then the trailing quarters, and that was a concern also because last year, quarter four, we had Durandar, quarter three also we had Durandar. So, but this time the lineup is fairly good. In November, we have Ramayan. We have already seen a lot of excitement. We have already done Jailer and Drishyam 3 in October, Godzilla, a Bajatia film, ETA, which is a good film at the start of December, Avengers, Doomsday, and Dune. which are releasing alongside King, would give us a good runway for delivering a fairly good quarter and H2 number for your company.

Silas Naik, Analyst — Scotts

Can you look at anything above 400 million? 400 million per quarter in the next two quarters?

Siddharth Bharadwaj, CEO

So we would refrain from committing a revenue number. Because we have never done this in the past. But I'm sure from the lineup of the film, if you're tracking the performance of the company, you'll be confident and we are confident that this should be a better quarter than expected.

Silas Naik, Analyst — Scotts

And we won't have any surprises on the cost, right? We won't have surprises on the cost in the next two quarters?

Ashish Maluster, CFO

So, most certainly, we have discussed all the cost element. At length, there are not going to be any surprises when you see the revenues going up. Everything has been factored. And those were never there in our company's balance sheets ever in the past, surprises.

Operator

Ladies and gentlemen, if you have any questions, please press star and one on our telephone keypad. Ladies and gentlemen, if you have any questions, please press star and one on our telephone keypad. Ladies and gentlemen, if you have any questions, please press star and one on our telephone keypad. Thank you, sir. As there are no further questions, now hand over the floor to the management for closing comments.

Rajesh Mishra, CEO

Thank you all for joining today's call. We sincerely appreciate your time, continued engagement and support. Should you have any further queries or require any additional qualifications, our team will be happy to assist you. We look forward to updating you on our progress next quarter. Thank you and have a great day, everyone.

Operator

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