Onyx tech that is DCI compliant LED display offers captivating and larger-than-life-visuals to cinemagoers: Alok Tandon, Inox Leisure

Alok Tandon, CEO, Inox Leisure Limited, spoke about ‘Onyx’ first cinema LED tech that has been introduced in Mumbai, expansion plans and CapEx among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Players including Inox is shifting towards LED technology being provided by electronics major Samsung, using the Onyx technology. Let us know about technology?
This is the world’s first DCI certified technology where you can see a movie on the LED screen without the projector. In fact, we, Inox, has launched its first cinema LED screen in Mumbai and it is going to be the first multiplex of Mumbai to have the technology. Secondly, the technology enables a person to see the movie with an ambient light, which is facilitated by its screen, which is 10 times brighter than the conventional projectors and has an infinite contrast ratio.

In fact, the technology allows cinemagoers to enjoy more detailed, textured and visually rich content where you can feel that every colour is speaking to you. It is totally immersive. 

What are your plans with the same Onyx technology? 
We have plans to take the technology out of Mumbai but will need some time for the purpose. In fact, talks, on how to increase it and the cities where it should be taken, are on with Samsung.  As of now, I will not be able to diverge the name of cities, but we are aware of the cities and very shortly you will be seeing that we are introducing the technology in different cities. 

Do you borne any additional cost while installing this screen vis-à-vis to the normal screen?
It is a bit expensive than the normal projectors but remaining things like seats, décor remains the same. I believe that its prices will go down with its growth/expansions. 

Will this technology shift will lead to any change in ticket prices?
No not at all and they will be priced at the normal projection screen rates. We want the consumers to come and experience the technology first and form their habit with the new technology. 

I feel it is a constant game because you must keep innovating to upgrade yourself and benefit the consumers. Name other visible innovations that will help you in being up-to-date. 
Volfoni system, which is one of the best 3D systems, has been incorporated into our system. When technology is concerned, we are the first to have Laserplex, where our screens were equipped with the laser projection system. In fact, we have screens that are supported by the laser projection system and multiplexes that is equipped with laser systems. Besides, we have a special focus on our app, which comes with an inbuilt food app that facilitates the patrons to order whatever they want. Literally, we want to pamper our guests. 

Update us on Inox’s expansion plans. 
We have 552 screens at 133 multiplexes in 67 cities, at present, of which 53 screens were opened in the ongoing financial year. We have an endeavour of opening another 27-28 screens before the fiscal ends, i.e. we want to open at least 80 screens in the financial year. In addition, we have signed about 800-825 screens, which will be made functional in the next few years. We have a robust growth plan for ourselves. 

Do you have a specific strategy for expansions, if yes, let us about the focus areas?
We have a pan India focus as we believe that India is a very under screen market. If you have a look on us, then we sell around 2 - 2.5 billion tickets every year and display around 1500-1600 titles with a turnaround of around 8-9 screens per million population, which is nothing. In the case of multiplexes, 2.5-3 screen contributes per million population, which is again nothing. So, I would say that India is very-very under-penetrated where screen count is concerned, and we are looking at the pan India expansion. 

What is the CapEx? Are you well capitalised? 
Well absolutely, I have a very strong balance sheet.  Our costs come around 2.5-3crores/screen, which can be funded from the internal escrow. Our debts are very low, and our debt-equity ratio stands around .35, which is nothing. We have a strong balance sheet and that’s why we can fund this expansion plans. 

Let’s talk about the inorganic opportunities, the second way that has helped you to grow?
Kolkata is the first place, we went for an inorganic growth, where we acquired Calcutta Cinema Private Ltd (CCPL) in 2006-07. Then we went with Fame India Ltd. (Fame) and Satyam Cinemas of Delhi. So, we have done three inorganic acquisitions and organic is always there. We are always open to inorganic growth opportunities. 

Are these 800 screens that have been signed are a part of the organic growth plans?
All organic and anything above it may comprise of the inorganic growth opportunities. 

Is the new trend where mobiles are replacing the screens are having any impact on your business or it is very small and negligible? 
I will say that it is very small, and it will never ever catch-up. Because we have a DNA to watch movies and we never watch a movie alone. It is a social event for our family and friends, which means we see movies in a group. And nothing takes away the feeling of watching a movie on a large screen with uncompressed sound, crystal clear image that is not available on your phone. Secondly, there is a gap between the time when the cinema is released and is presented on any other platform. So, a true connoisseur of a movie has already watched it on the screen. 

I know that internet penetration is increasing, and people are having smartphones, but you can’t have that experience of watching the movie on the screens. 

You were saying that you are customizing things for people and creating a kid’s cinema. What are your plans on these ideas and strategy for it?
We want to focus on the needs of the guests and deliver them. We have designed Kiddles, a brand for children, and they are functional in Mumbai, Kolkata and Bangalore. In addition, we have a dedicated theatre in Mumbai only for kids’ movies. It is made for kids, it is for kids and whatsoever we show in the theatre is for the kids and want to continue with this business. Apart from this, other theatres and multiplexes are also working on the platform, Kiddles. 

Apart from this, we are also adding different types of cuisines in our menu to serve our patrons in a better way. We call this a three-hour vacation for the guest, so he should get an ambience, luxury and the food that he wants. 

Do you think that this technology upgrade and other additions, will enable you to command on your profitability in terms of ticket pricing?
See, ticket pricing is a factor of various things and we will price it as per the cost structure of the property and paying propensity of the people around. So, ticket prices will be rationalised in all formats of screens that we have like a normal screen or insignia screen or Kiddles. It is not so that we will be able to earn more by increasing the prices of the tickets or by adding luxury to our facilities. Because everything is the function of the CapEx also that we invest in the property.

So, I would say that whether it is a luxury screen or a regular screen our profitability percentage, as well as the IRRs, will remain the same. 

What can an investor look out for if you are not increasing your margins in accordance with the expansions, which needs investments? What is the plan on the margin front and profitability?
Our margins are increasing and if you look at our CAGR and EBITDA than it had gone up by 15 per cent year on year (YoY) and our PAT has increased substantially over the years. 

It is coming from? Is it pure top-line increase? 
It is a top-line increase. In the process, we look at all our cost with a very fine tooth comb, where we try to control the costs in the best possible way by increasing the revenues with better offerings to the patrons to make sure that they get back to us next time. We also emphasis on advertising revenues because it goes to the bottom-line. All that focus is there and if you see then the profitability has been increasing YoY. 

Explain to us the kind of growth in ad revenues and prospects on its growth?
There is a quarter-on-quarter (QoQ) growth in our per screen advertising revenues per screen. This time, we had a 40 per cent growth and our H1FY19 advertising revenues closed a little short of Rs80 crores, which was a significant increase from the last quarter. Thus, things are improving, and this is a very sustained effort that we have done over the last two to two-and-a-half years.

We have got more feet on the street, we are sitting with media planners and devising ways for them to advertise. We are doing a lot to increase our ad-revenues. 

What is your outlook on spend per head in terms of food?
It stood at Rs75 in H1Fy19 and it is increasing. In fact, we have an endeavour that it will increase 9-10 per cent in every quarter. So, it should go up 9-10 per cent YoY and that is on what we are working on like by selling more items, food with an idea that a patron buys more items without spending a lot of time in the queue and this can be attained by increasing the point of sales. 

Does the new demand for carrying outside foods to the cinema theatres, which came in news a few months back, had any impact on your business?
It aimed at allowing outside food inside the cinema halls, but I will not like to comment on it as it is a sub judice issue under the honourable Supreme Court. 

But did had any impact on your business?
It didn’t have any impact on our business, but people approached us with a question related to it and we answered them that the matter is under consideration at the court and that’s why you can’t carry outside food into the cinema halls.

There is an extra markup on almost everything like a water bottle to pop-corns. Has the industry came together and working on some plan to rationalise the rates?
The packaged products are sold on the mentioned MRP but when it comes to the unpackaged products like samosa or sandwich then you will have to see the factors from where it is coming from, the kind of kitchen where it is being prepared and type of ingredients that has been used among others, that is, there is a cost for everything. For instance, tea is charged differently at a roadside shop and a five-star hotel and this difference can be attributed to the things that create the difference like the kind of service that is being provided. 

Secondly, our guests have not said a lot on this issue as our food charges are based on the same structure under which we price our tickets, i.e. by seeing the paying propensity of the region. I will never outprice myself so that people stop buying at our place. I am a businessman and thus will have to find a spot between the purchasing power of people and the rate at which we sell our products.

What is the percentage difference between online and offline ticket sales?
Our online sales stand around 40-45 per cent and this equation is visible in metros as well as tier I and tier II cities.

Let us know about the concerns related to your business that can upset your business plans and is being communicated to the government may it is related to GST (taxation) or something else?
You said the first thing that is GST and being a public listed company, we are requesting that the GST slab should come down from 28 per cent. The second thing that is that we need strong anti-piracy measures as piracy is killing the industry whether it is of any form. Lastly, we need a single window clearance for all the licenses. 

Any plans to increase your market share, percentage-wise, at least when there are only two major players in the market?
I want to increase our market share through the technology where people want to come, Laserplex and Onyx technology that has been launched this week is the classic examples for it. They have been launched to pull more people and provide great viewing experience and food varieties. So that people start saying that we will go to Inox so that we can enjoy certain delicacies while seeing the film.