Inox Concall FY2020 Q4 Summary

Inox Concall FY2020 Q4 Summary
Covid-19 has severe impact- one of the toughest times for business which used to be functional 365
days. Roughly the operations were closed for 60 days.
Due to govt regulations of lockdown, all 626 screens in 147 locations are closed.
Management focusing on 3 things-
1. Cost optimization
2 largest cost areas are Rentals and Fixed Cost. Company is not paying any rents under the force
majeure clause. Rentals will be decided on revenue sharing basis. So, if revenues earned are higher,
Inox may end up paying higher rentals, but the downside is protected.
Fixed costs include employee salary and electricity charges. Company has decided to cut salaries and
reduce the employees. Once things normalize, the multiplexes are expected to operate on single shift
only either from 12 noon to 9 pm or 3pm to midnight, whatever suits the customers.
There is no cash inflow and but the cash outflow including interest payments is amounting to 15-18
cores per month, which excludes any rental payments. So, all the capex plans have been shifted to
1 0 1
second half of FY2021. Planning to add 50 screens in FY2021 and 80 screens in FY2022.
o od
Free cash flow and liquidity for future growth plans remains intact. Company is Net-Debt Free with 100
S
v_
crs of liquidity including undrawn limits with banks which means the company can withstand next 4-6
a
months of lockdown. D/E is 0.08 now and company can go to 1:1 if needed. The company has 4.3 Mn
h
es
treasury shares which can be sold anytime and also it owns 6 of its multiplex properties, which can be
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monetized if required (worst-case scenario). The company will be using the Debt route first, and won’t
be diluting equity at these levels. Debt to be raised can be around 400 Crs.
The company works on contractual basis with outsource staffing agencies. Some contracts got expired
on 31 March, and will not be renewed now. For the others, the company has paid them for 30 days of
the notice period and ended the contract.
2. How to prepare for new normal when operations normalize

Co will encourage cashless and paperless transactions, check temperature of employees, customers
and vendors, discuss the seat allocation process, program the show to avoid simultaneous entry, exit
and intermissions to avoid crowding, use sanitizers everywhere, and follow stringent cleaning and
disinfecting procedures.
3. Outreach to all stakeholders

Training the employees virtually
Multiplex Association of India has made representations to GoI for their support.
Action plan for future-

• Will promote loyalty programs aggressively
• Give attractive offers on tickets and F&B
• Promote private screening- a newer concept
Management expects in the first 2-3 months, the occupancy can be as low as 10-15% but cinemas will
be the last one to open up.
@Keshav_Sood101
Management is confident that customers will come back since the quality of content and the pipeline
of movies looks solid.
Threat of OTT Platforms
Some small budget films might release on OTT, but big budget films will come to theatre first.
Movie releasing in theatrically has more sources of revenues compared to releasing on OTT. However,
some distributors and producers have decided to go to OTT, which is affecting Inox's business.
Imagine the level of competition among films to get the screen share on First Page on Netflix while
releasing their film on OTT. Also, there is no revenue sharing in OTT platforms, the producers get paid
up-front. Comparing Inox with Netflix funding-based model is unreasonable, coz Netflix uses $5bn
every year. Even Paytm stopped giving cashback offers, therefore cash bleeding OTT models are not
sustainable. Those studios who decide to release one film on OTT and not in theaters will be dealt with
accordingly. Everybody must respect each other’s business models and when one party refuses to
respect that there will be consequences, so I am not concerned about these people trying to make
these odd statements on OTT, it is just that each segment has its own consumer base and own timing.
A filmmaker and content creator earns more money by releasing first theatrically and then on OTT. He
is not going to make the same amount of money if he is going to release only on OTT first.
Inox has been using its real estate with alternate content. Last year Inox was the exclusive partner for
screening Cricket World Cup, did some concerts too. Inox is about experience based on 3 pillars-
luxury, technology and service- which you can’t get at home.
Future M&A possibilities-

0 1
Many leveraged players in the markets will not be able to pay their rentals and might even default
1
helps increasing the EPS.
S o od
which will give opportunities to Inox to either bid for those properties or go for M&A activities only if it
Scale of the industry-

h a v_
es
India has the lowest cinema penetration in the world. India has 8 screens per million, while China has
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~50 screens per million. So long term feasibility of the business is strong.
On revenue projections-
TV channels and newspapers have seen revenues fall almost 75%. So, for Inox also, the FY2021
numbers will be a disaster, but FY2022 numbers should be back to normal.
My Concerns-
1. Debt levels might rise in the future
2. Revenues and profits will be hit big-time
3. Impact of OTT yet to be seen
4. Mr. Siddharth Jain talks a lot about stock markets (when the mgmt talks about stock markets and
share prices, be cautious)
@Keshav_Sood101

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Inox Concall FY2020 Q4 Summary

Management focusing on 3 things-

2. How to prepare for new normal when operations normalize

3. Outreach to all stakeholders

Action plan for future-

Future M&A possibilities-

Scale of the industry-

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