Mukta Arts Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Overview: Film Production & Exhibition in India

The last year was a landmark year for Indian cinema. The domestic box office crossed Rs. 133,950 million in gross collections — an all-time high and the first year ever to cross the Rs. 130,000 million mark with Hindi cinema posting its best ever performance and 37 films crossing the Rs. 1,000 million mark, up from 22 in the prior year. Growth was led by content-driven, original storytelling, a healthy revival of the theatrical “long tail” beyond big-ticket tentpoles, and a decisive industry wide shift back towards theatrical-first releases, even as global studios and streaming platforms deepened co-production partnerships with Indian filmmakers. At the same time, industry data shows this growth was substantially price-led — average ticket prices rose approximately 20% even as overall admissions declined, underscoring that footfall recovery, rather than pricing alone, remains the industrys central long-term challenge.

• Renewed appetite for original, content-led storytelling and growing global studio co-production and financing interest in Indian films, widening access to capital and elevating production standards.

• Expanding regional-language success (Gujarati, Kannada and other markets) broadening the addressable audience base beyond traditional Hindi and South Indian tentpoles.

• New monetisation avenues in animation, live entertainment and stage adaptations, and emerging production efficiencies from virtual production and AI-assisted workflows.

• OTT platforms have grown more selective and cost-disciplined in acquisitions, with digital licensing revenues declining industry-wide, tightening a key monetisation channel for mid-budget content.

• Shrinking theatrical-to-streaming windows have altered audience viewing behaviour, with a large share of viewers now delaying theatrical visits in anticipation of near-term streaming availability.

• Continued multiplex screen expansion in under-penetrated states (Uttar Pradesh, Haryana, Kerala, Maharashtra), alongside rising F&B spend per head and growing advertising and non-box-office revenue streams.

• Industry-wide moves to enforce longer exclusive theatrical windows, and the proven pull of value pricing initiatives and re-releases, both offering credible tools to rebuild footfall.

• National admissions declined even as box office revenue hit a record high, with several southern markets and single- screen properties seeing sharp footfall and screen count declines — a reminder that exhibition growth has been driven more by ticket pricing than volume.

• Indias screen density remains structurally low relative to global peers, and near-term revenue continues to depend heavily on a concentrated slate of tentpole releases.

For the Group, this environment reinforces the rationale behind MA2s continued focus on content quality, disciplined portfolio management and F&B-led monetisation, and behind the Companys diversification into animation, OTT and live entertainment as complementary, less cyclical revenue streams.

The Group delivered a year of clear and broad-based operational improvement in FY 2025-26. Consolidated Revenue from Operations grew to Rs. 1,739.1 million from Rs. 1,667.2 million, while Consolidated EBITDA rose sharply to Rs. 264.4 million from Rs. 174.2 million — a 52% increase — with EBITDA margin expanding from 10% to 15%. This margin expansion reflects genuine operating leverage across the Groups businesses rather than one-off gains. The consolidated net loss narrowed by 32% from Rs. 173.109 million to Rs. 118.003 million, marking a decisive step towards profitability.

This improvement was broad-based, with three of the Groups key operating entities — WWI, MA2 and the Bahrain multiplex business — each posting a stronger EBITDA performance than the previous year, as detailed below.

Standalone revenue from operations for the year was Rs. 148.2 million, against Rs. 203.2 million in the prior year — a decline entirely attributable to the non-recurrence of the prior years “Janaki” TV serial income, a base effect rather than a decline in the underlying business. Importantly, Other Income grew 15% to Rs. 165.1 million, driven principally by higher interest income on inter-corporate deposits, cushioning the topline impact and lifting Total Revenue to Rs. 313.3 million.

Management maintained tight cost discipline through the year: Total Expenses were held down 7% to Rs. 160.8 million, and as a result the Company preserved a robust EBITDA margin of 49% (FY25: 50%) — a testament to the efficiency of the standalone cost base even in a year without a new content release. PAT stood at Rs. 55.9 million at an 18% margin, a modest and well-explained softening from the prior years 21%.

Finance costs fell 6% on the back of loan repayment during the year, reflecting continued deleveraging of the standalone balance sheet.

WWI, the Groups media education subsidiary, delivered consistent growth across every key metric. Revenue from operations grew 7% to Rs. 584.2 million, aided by the fourth-year revenue contribution from the 2022 admission batch, a new batch of 368 students joining in July 2025, and video production income from the KEM project. EBITDA grew a stronger 29%, from Rs. 50.6 million to Rs.65.2 million, expanding EBITDA margin from 9% to 11% — evidence that WWIs revenue growth is translating efficiently into profitability.

The increase in employee benefit costs (14%) reflects deliberate investment in institutional quality — a 6.5% annual increment cycle and the conversion of consulting faculty to staff roles — while higher other expenses reflect WWIs expanding brand visibility, including its YouTube facility and hosting the IC3 conference at BKC. With margins expanding alongside revenue,

WWI continues to strengthen its position as a long-term growth engine for the Group.

MA2 was the standout performer of the year, posting a strong operational turnaround. Reported revenue from operations grew 18%, adding Rs. 132.4 million to the top line, while reported EBITDA more than doubled to Rs. 147.7 million from Rs. 65.0 million — a 127% increase. This was driven by genuinely healthy operating metrics: footfalls (Admits) grew from 30,95,095 to 31,81,487, Average Ticket Price improved from Rs. 194 to Rs. 213.60, and Spend Per Head on Food & Beverage rose from Rs. 60 to Rs. 79 — together reflecting a stronger content slate and materially improved in-cinema monetisation.

Because MA2s cost base is largely fixed, this revenue growth flowed through to the bottom line at a disproportionately favourable rate: while total expenses grew only 6% (IND-AS 116 adjusted), revenue grew 16% on the same basis, driving the EBITDA margin (IND-AS 116 adjusted) from -2% to a positive 7%. The reported net loss narrowed by 41%, from Rs.

160.9 million to Rs. 94.1 million, and PBT losses narrowed 58%. Management views this as a clear positive inflection point and remains focused on sustaining this momentum through continued content quality, footfall growth and F&B margin gains.

A modest number of underperforming properties were exited during the year — a disciplined, deliberate step (reflected in exceptional items of Rs. 28.4 million for asset write-offs on closed properties) that has directly supported the sharp EBITDA improvement above and sharpens the portfolios focus on its profitable core going forward.

The Bahrain operation delivered an encouraging profitability turnaround despite a challenging external backdrop of subdued content availability and regional disruption through the year. While revenue declined 27% to Rs. 152.8 million, decisive cost action — including a 36% reduction in direct operating expenses and a 49% reduction in other expenses — more than offset the topline pressure. As a result, EBITDA swung from a loss of Rs. 0.3 million to a positive Rs. 10.1 million, and the PBT loss narrowed by 49%, from Rs. 18.5 million to Rs. 9.4 million. This demonstrates the resilience and cost flexibility of the Bahrain operation, positioning it well to capture upside as regional conditions normalise and the business continues to expand its 7 management-contract screens in Saudi Arabia.

Mukta VNs core programming business continued to grow, with revenue from operations up 32% to Rs. 20.8 million as the exhibition sectors recovery and an expanding roster of serviced cinema screens supported the business. EBITDA and PBT for the year reflect a high base in the prior year, when other income included a one-time write-back of Rs. 7.9 million; excluding this base effect, the underlying programming business remained on a steady growth trajectory during the year.

With respect to the Review Petitions filed against the Bombay High Courts order dated 9th February 2012 concerning the land matter, final hearings are expected shortly, and the Company remains confident of a favourable outcome.

FY 2025-26 marks a clear positive inflection in the Groups consolidated performance, with EBITDA up 52%, margins expanding across MA2, WWI and Bahrain, and the consolidated net loss narrowing by nearly a third. Managements priorities for the coming year are to sustain MA2s operating momentum through continued content quality and footfall growth, to build on WWIs expanding revenue and margin trajectory, to consolidate the Bahrain turnaround as regional conditions stabilise, and to progress the standalone Companys new animation, film and OTT and live entertainment initiatives. Together with the expected resolution of the long-standing land matter, the Board remains confident in the Groups trajectory towards sustainable, profitable growth.