UFO Moviez India Ltd Management Discussions

Presented below is an analysis of the performance of the Company for the Financial Year ended March 31, 2025 and the outlook for the Financial Year 2025-26. UFO Moviez India Limited and its subsidiaries have been collectively referred to as "UFO or Company".

Overview of the Indian Economy

The IMF has projected global economic growth at 3.3% for both 2025 and 2026—below the historical average of 3.7% observed from 2000 to 2019. This outlook comes as the global economy faces challenges from escalating trade tensions, particularly due to recent U.S. tariffs, which have introduced significant uncertainty in international trade and financial markets. Additionally, global headline inflation is expected to decline to 4.2% in 2025 and further to 3.5% in 2026, as advanced economies are anticipated to return to their inflation targets faster than emerging markets.

Against this global backdrop, India is poised to be a significant contributor to the global growth. The IMF notes that China and India together will account for nearly half of global growth in 2025. While the global economy grapples with policy uncertainties and trade disruptions, Indias robust domestic fundamentals—driven by strong consumer demand, a growing working-age population, and substantial public and private investments—position the country as a key driver of global growth in the coming years.

In line with these expectations, the IMF has maintained its forecast for Indias GDP growth at 7% for FY25 and 6.5% for FY26. This robust outlook reflects the strength of Indias domestic demand, technological advancements, and the thriving services sector. Headline inflation in India is projected at 4.4% for FY25 and 4.1% for FY26, aligning with the Reserve Bank of Indias targets. Together, these projections underscore Indias emerging role as a crucial engine of global economic recovery and sustainable growth.

Sources: IMF World Economic Outlook 2025

Overview of the Indian Film Entertainment Industry

The Indian Film Entertainment Industry experienced a 5% decline in revenue in 2024, reaching ?18,700 crore, compared to ?19,700 crore in the previous year. Domestic theatrical revenue, the largest contributor to the industry, amounted to ?11,400 crore, marking a 5% drop from

?12,000 crore in 2023.

In India, regional boundaries in cinema are rapidly disappearing. South Indian films are now widely released in the North through dubbed versions, while Hindi films are gaining traction in southern markets. With pan-India releases becoming the norm, movies today cater to audiences nationwide, united by content that transcends language and region.

The underperformance of several large-budget Hindi and South Indian films contributed to this decline, as a smaller number of successful titles dominated revenue generation. Estimates suggest that over 70% of total box office earnings were driven by just the top 10 films, highlighting the growing dependency on blockbuster releases.

Despite these challenges, the industry saw 1,823 movie releases across various languages and formats, reflecting a 1.5% increase compared to CY23. While South Indian language film releases declined marginally by 3%, releases in other languages saw an 11% increase. Additionally, over 100 English-language films were released in India, reinforcing the countrys position as a key market for Hollywood.

Sources: FICCI Frames 2025

Overview of the Indian Advertisement Industry

Indias advertising market grew by 8.1% in 2024, reaching approximately ?1.28 lakh crore. It accounted for 52% of the total revenue in the media and entertainment sector. Digital advertising dominated with a 55% share of the total advertising revenue, driven primarily by the surge in performance marketing on social media platforms, increased investments from small and medium-sized businesses, and the widespread adoption of digital channels across industries.

Despite a drop in box office performance, Cinema advertising grew by 20% to ?900 Crore in 2024, driven by regional and international content, attracting both audiences and advertisers. Events like concerts and election campaigns also added to the demand for screen- based advertising.

Over a period of time, the number of people going to cinemas is expected to rise from under 10 Crore to around

17.5 crore, especially in smaller towns and cities. With more screens being added and demand for regional films increasing, cinema advertising is likely to grow steadily. Its high visibility, local reach, and focused audience make it a strong platform for impactful brand messaging.

Sources: FICCI Frames 2025

Opportunities and Initiatives Screen Growth

Globally, screen growth continues to be a critical driver of theatrical recovery, with emerging markets leading the expansion. Post-pandemic, many countries have resumed investments in cinema infrastructure, especially in Asia and Africa, where urbanization and rising middle-class incomes are boosting demand. Additionally, the integration of new formats such as premium large format (PLF) screens and immersive technologies is helping global exhibitors enhance the cinematic experience and attract audiences back to theatres.

India remains one of the most under-screened major film markets in the world, with just over 9,000 screens as against --- screens in USA and screens in China,

despite being the worlds largest film-producing country. The year 2024 saw increased focus on content diversity and regional films, which is pushing demand for screen expansion in tier-II and tier-III cities.

UFO, through its wholly owned subsidiary Nova Cinemaz Private Limited (NOVA), is actively working to bridge this gap by developing Entertainment and Utility Centers (EUC) in semi-urban and rural areas across India. The company has already launched two EUC properties in Uttar Pradesh and three more are in pipeline. However, the Company will be carefully assessing the performance of these centers and accordingly chart the way forward.

Looking ahead, the Indian cinema industry is poised for steady expansion, with screen additions expected in both urban centers and underserved rural markets. The focus is shifting towards affordable, small-format theatres and digitally enabled screens, making cinema more accessible across income groups. The Government of India is also taking active interest to increase the screen density and this was one of the focus area during the recently concluded WAVES summit in Mumbai.

UFO Moviez is well-positioned to capitalize on these opportunities, further expanding its service offerings to growing screens and solidifying its position in the market.

Sources: IMF World Economic Outlook 2025

Advertisement Inventory Utilization

UFOs in-cinema advertising business has substantial headroom/opportunity for growth since the average inventory utilization of UFO is at ~3.4 minutes/screen/ show in FY25 as against average availability of around 20 minutes. With audiences returning to movie theaters and a steady flow of content pipeline, the demand for cinema advertising is expected to rise. To further enhance inventory utilization and unlock new revenue streams, the company is also concentrating on expanding the retail advertising business, aimed at tapping into hyperlocal brands and advertisers.

Organizational Restructuring

The Company has embarked on a strategic restructuring initiative with the dual objective of improving operational efficiency and creating leadership opportunities for the next generation, while acknowledging the invaluable contributions of its senior leadership. Under this initiative, several senior leaders have retired as per the companys superannuation policy but will continue in advisory roles to mentor their successors and support a smooth transition.

The revamped organizational framework is built around two key Strategic Business Units (SBUs): Digital Cinema Business and Film Exhibition (NOVA EUC), each focused-

on driving profitability and operational excellence. The company has introduced a zonal structure by dividing its operations into seven zones, each led by a Zonal Business Head who will act as Profit Centre Head for respective zones. This move aims to strengthen on-ground execution and support the rollout of its retail advertising initiatives.

Operating Performance

In-Cinema Advertising Business

UFO is a leading provider of in-cinema advertising having advertising rights in 3,821 screens (including screens of TSR films) as of March 31, 2025, comprising of 1,571 SINGLE Screens and 2,250 MULTIPLEX Screens with presence across 1,382 cities and towns across India. Its high-impact advertising platform offers advertisers an opportunity to connect with a captive audience in both Premium and Mass Market segments.

UFOs In-cinema advertising platform has benefited fragmented exhibitors as they now effectively monetize their advertisement inventory through UFO, which they were earlier unable to do due to their limited scale and reach.

In addition to the benefits of being a high impact- advertising platform, the advantages of using UFOs in- cinema advertising platform are:

Targeted advertising - reaching desired demographics

High levels of transparency - data logs of the actual advertisements played

Remote capability - allows for last minute scheduling and content changes

Advanced technology - enables multi-lingual support and subtitling,

Thereby making it a highly effective means of marketing.

In FY25, UFO generated advertisement revenue of

?11,515.13 Lacs, as compared to the previous years revenue of ? 12,202.86 Lacs. The corporate advertisement revenue amounted to ?8,392.35 Lacs, as compared to the previous years revenue of ? 7,965.96 Lacs. However, challenges continued in securing government advertisement revenue, primarily due to reduced spending by the central government. That said, advertising from public sector undertakings (PSUs) is gaining momentum and is expected to see further growth in FY26, supported by increased focus on regional outreach and in-cinema campaigns. The government advertisement revenue amounted to ?2,805.75 Lacs in FY25, compared to the previous years revenue of ? 3,197.67 Lacs.

In FY25, the in-cinema advertising business struggled to maintain the strong growth seen in FY24. While some blockbuster and regional films boosted demand at times, overall performance was slow due to lack of strong movie releases, along with the poor performance of several

big-budget films, which made advertisers more cautious. However, the release of "Pushpa 2" helped bring back advertiser interest and improved market sentiment.

Theatrical Business

The theatrical business in FY25 showcased a variety of releases across languages and genres. While the first quarter struggled with the underperformance of big-budget films like "Bade Miyan Chote Miyan" and "Maidan", it gradually improved with moderate successes such as "Srikanth" and "Mr. and Mrs. Mahi", closing on a strong note with hits like "Munjiya" and "Kalki 2898 AD". The second quarter presented mixed outcomes, featuring average performers like "Kill" and "Khel Khel Mein", disappointing titles such as "Auron Mein Kahan Dum Tha", and the record-breaking triumph of "Stree 2", concluding positively with releases like "The GOAT" and "Devara Part 1".

In the latter half of FY25, the Indian theatrical industry showcased its diversity with a range of releases. The

third quarter featured films like "Vettaiyan", "Jigra", "Vicky Vidya Ka Woh Wala Video", and "Lucky Baskhar", which delivered mixed box office results. Major successes included "Pushpa 2: The Rule" and "Bhool Bhulaiyaa 3", while titles such as "Amaran", "Singham Again", and "Baby John" performed moderately well. The fourth quarter, however, faced challenges due to the Champions Trophy and the beginning of the IPL season, which influenced audience engagement and box office returns. Despite this, significant releases like "Deva", "Emergency", "Game Changer", and "Chhava", achieved notable success. Films like "Sikander", "Skyforce", "Loveyapa" and "Fateh" further enriched the lineup, reflecting the industrys ability to connect with audiences across genres and themes. This period highlighted the enduring appeal and adaptability of Indian cinema.

For the financial year under review, the companys Content Delivery Charges (CDC), amounts to ?8,371.14 Lacs, compared to ?8,642.28 Lacs in FY24.

Financial Performance (Consolidated) Performance Overview (FY20 - 25) Revenue

Profit Before Tax (PBT)

Earnings Before Interest Tax Depreciation and Amortization (EBITDA)

Profit After Tax (PAT)

Revenue Analysis

UFO receives revenues primarily from three sets of stakeholders. i.e.

Advertisers, for in-cinema advertising,

Producers and Distributors, for secured delivery and screening of movies (Content Delivery Charges - CDC / VPF) and

Exhibitors, for equipment rentals and sales of digital cinema equipment and consumables.

Particulars	31-Mar-25 ? in Lacs	31-Mar-24 ? in Lacs	Growth ? in Lacs	% Growth
A. Revenue from operations
I. Advertisement revenue	11,515.13	12,202.86	(687.73)	(5.64%)
II. Revenue from Content Owners	11,555.62	11,778.57	(222.95)	(1.89%)
Content Delivery Charges (CDC)	8,371.14	8,642.28	(271.14)	(3.14%)
VPF Service Revenue	1,689.43	1,494.35	195.08	13.05%
Digitisation Income	1,495.05	1,641.94	(146.89)	(8.95%)
III. Revenue from Exhibitors	17,109.71	14,543.07	2566.64	17.65%
Lease rental income	5,932.64	5,722.86	209.78	3.67%
Sale of Products	11,177.07	8,820.21	2356.86	26.72%
IV. Other Operating Revenue	2,060.81	2,299.43	(238.62)	(10.38%)
A. Revenue from operations (I to IV)	42,241.28	40,823.93	1417.35	3.47%
B. Other income	160.48	183.89	(23.41)	(12.73%)
Total Income (A+B)	42,401.76	41,007.82	1393.94	3.40%

Expense Details

The following table gives an overview of the consolidated expenses of UFO.

Particulars	31-Mar-25	31-Mar-24	Growth	% Growth
	? in Lacs	? in Lacs	? in Lacs
Operating direct costs	20,037.35	17,653.97	2,383.38	13.50%
Employee benefit expenses	8,729.34	9,231.50	-502.16	-5.44%
Other expenses	7,727.39	7,362.40	364.99	4.96%
Total Expenses	36,494.08	34,247.87	2,246.21	6.56%

Operating direct costs

Operating direct costs in financial year ended March 31, 2025 increased by ? 2,383.38 Lacs to ?20,037.35 Lacs from ? 17,653.97 Lacs in financial year ended March 31, 2024 primarily on account of (i) advertisement revenue share paid to exhibitors was higher by ? 1,438.54 Lacs from

? 5,373.43.39 Lacs to ? 6,811.97 Lacs during the financial year ended March 31, 2025, (ii) increase in consumables and spares by ? 147.35 Lacs from ? 369.20 Lacs during the financial year ended March 31, 2024 to ? 516.56 Lacs during the financial year ended March 31, 2025, (iii) content delivery charges (CDC/VPF) sharing was higher by ? 240.52 Lacs from ? 1,016.02 Lacs during the financial year ended March 31, 2024 to ? 1,256.55 Lacs during the financial year ended March 31, 2025, (iv) increase in Bandwidth charges by ? 116.28 Lacs from ? 401.08 Lacs

during the financial year ended March 31, 2024 to ?517.35 Lacs during the financial year ended March 31, 2025. The operating direct cost during the year was higher compared to the previous year since these costs are directly linked to the revenues.

Employee benefit expenses

Employee benefit expenses during the financial year ended March 31, 2025 was lower by ? 502.16 Lacs to ? 8,729.34 Lacs in financial year ended March 31, 2025 from

?9,231.50 Lacs in financial year ended March 31, 2024.

Other expenses

Other expenses in financial year ended March 31, 2025 were higher by ? 364.99 Lacs to ? 7,727.39 Lacs from? 7,362.40 Lacs in financial year ended March 31, 2024

primarily on account of (I) increase in legal, professional and consultancy charges by ? 416.97 Lacs from ? 1,686.47 Lacs during the financial year ended March 31, 2024 to ? 2,103.44 Lacs during the financial year ended March 31, 2025, (ii) commission on advertisement revenue was lower by ? 464.46 Lacs from ? 1,848.86 Lacs during the financial year ended March 31, 2024 to ? 1,384.40 Lacs during the financial year ended March 31, 2025 due to decrease in Advertisement sales, (iii) increase in commission on other revenue by ? 195.65 Lacs from ? 34.28 Lacs during the financial year ended March 31, 2024 to ? 229.93 Lacs during the financial year ended March 31, 2025 due to increase in sale of product, (iv) higher electricity expenses by ? 38.94 Lacs from ? 250.14 Lacs during the financial year ended March 31, 2024 to ? 289.08 Lacs during the financial year ended March 31, 2025, (v) Provision for diminution in value of investment increased by ? 224.04 Lacs from ? 141 Lacs during the financial year ended March 31, 2024 to ? 365.04 Lacs during the financial year ended March 31, 2025.

Key Financial Ratios

Earnings before interest, tax, depreciation and amortization (EBITDA)

Consolidated EBITDA stood at ? 5,907.68 Lacs for the financial year ended March 31, 2025 compared to ? 6,759.29 Lacs for the financial year ended March 31, 2024.

Profit before tax

Consolidated profit before tax stood at ? 1,673.82 Lacs for the FY 2024-25 compared to ? 2,269.83 Lacs for the FY 2023-24.

Profit for the year attributable to equity shareholders

of UFO

Consolidated profit for this financial year attributable to equity shareholders of UFO stood at ? 956.41 Lacs compared to ? 1,636.04 Lacs for the financial year ended March 31, 2024.

Particulars (Consolidated)	Unit	31-Mar-25	31-Mar-24
Debt Equity Ratio	Times (x)	0.23	0.18
EBITDA Margin	Percentage (%)	13.99	16.48
Net Profit Margin	Percentage (%)	2.27	3.99
Interest Coverage Ratio	Times (x)	3.39	3.81
Debtors Turnover Ratio	Days	91.40	72.50
Current Ratio	Times (x)	1.61	1.69

In accordance with the SEBI (Listing Obligations and Disclosures Requirements 2018) (Amendment) Regulation 2018, the Company is required to give details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios.

Explanation for ratios where there has been a change of 25% or more from March 31, 2024 to March 31, 2025:

Net profit margin has decreased on account of lower Ad revenue in the current year due to lack of good content and increase in ad revenue share.

Debt equity ratio has increased in FY25 on account of an increase in borrowings in the current year to fulfill the capex requirement. Long-term borrowing has increased by

1,396 Lacs as compared to current year.

The increase in Debtors Turnover Days is primarily the result of higher closing receivables following a sales uptick in the second half of the year. All outstanding amounts are within the normal credit cycle.

Outlook

In the upcoming fiscal year, the film industry is positioned for growth and innovation, driven by Hindi cinemas increasing focus on mass-market storytelling

and the adoption of advanced technologies to enhance audience experience. Rising per capita income and greater investments in affordable cinema infrastructure will further support this expansion. These trends are expected to positively impact both the film exhibition and advertising sectors, creating a favorable environment for the companys revenue growth.

A consistent flow of diverse content across languages and the growing middle class, boost advertiser confidence. With advertising projected to grow at a healthy 7.5% CAGR over the next 3 Years till the end of 2027 and increasing spending from the growing SME advertiser base, UFO is well-positioned to seize emerging opportunities. Overall, the Companys performance is expected to improve as both the theatrical and advertising business revenues are expected to experience healthy growth.

Furthermore, the company is cautiously expanding its presence in the exhibition segment through its subsidiary, Nova Cinemaz Private Limited, under the NOVA EUC initiative. Two pilot properties are already operational in Uttar Pradesh, with three additional centers planned across two states. Novas asset-light strategy continues to be a key enabler, particularly in semi-urban and rural markets with significant untapped potential.

The Company is well-positioned to leverage emerging opportunities as the industry recovers, with strategic initiatives aimed at strengthening performance and driving long-term value creation.

Threats / Risks and Concerns

Any uncertainties in the macro-economic environment, changes in the advertising market, natural disasters, epidemics, pandemics, forced measures, etc. could impact UFOs performance. The duration of advertisements played and spending by advertisers is seasonal and episodic and reflects overall economic conditions, as well as the advertisers budgets and spending patterns. It is difficult to predict when these changes occur and whether they will have a transient impact or are long-term trends. These changes could been account of increased competition from television, print, radio, major multiplex chains, cinema advertisement aggregators or new advertising platforms like digital, online, over-the-top (OTT) media services, etc. The advertisement performance could also be impacted by factors that could reduce viewership on the advertisement network, which could result from the release of movies on other media platforms/OTT along with or before its theatrical release, reduction in exclusive theatrical release windows, increase in the average cinema ticket prices as compared to other avenues of entertainment, lower disposable income on discretionary spending and decline in the gross box office collections. Box office collections could also be impacted by lower audience interest due to the quality of available movie content and the marketing efforts of movie producers. Any such reduction in viewership may affect the attractiveness of UFOs advertisement platform to advertisers. Advertisement spending is greatly influenced by the availability of a measurement metric and the outcomes of measurement of audiences on a media platform.

The COVID-19 pandemic has resulted in movies getting released on other platforms such as OTT due to the closure of social entertainment avenues like cinema screens. This could result in changes in release patterns such as simultaneous release of movies in Cinemas and OTT going forward and/or narrowing of the release window on OTT after theatrical release. There could also be a change in consumer behavior like increased consumption of new movies on OTT, if available, resulting in lower cinema footfalls and thereby impacting theatrical revenues and in- cinema advertisement spends.

Risk Management

Similar to any other business, UFO is exposed to various risks that can affect its operating performance, cash flows, financial performance and sustainability. In order to mitigate these risks and maintain a smooth flow of operations while complying with strict regulations, UFO has established a robust risk management framework that involves identifying, assessing, monitoring, and mitigating potential risks. Effective implementation of risk management strategies is vital to ensure the creation,

protection, and enhancement of value for stakeholders and shareholders of the company. Additionally, UFOs risk management framework is regularly reviewed and updated to address emerging risks and changing market conditions, demonstrating the companys commitment to maintaining a sustainable business model.

Overall, UFO has emerged as an organization that has a strong focus on improving processes, reducing operational risks, enhances service quality and improving overall performance.

Internal Controls

The Company has in place adequate controls, procedures and policies that ensure orderly and efficient conduct of its business, including adherence to its policies, safeguarding of its assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. Our internal control system is commensurate with the size, scale, and complexity of its operations. During the year, such controls were assessed and no reportable material weakness in the design or operations were observed.

UFO has engaged an independent firm of Chartered Accountants as its Internal Auditor. The scope of Internal Audit includes a review of the efficacy of business processes and a review of the procedures and policies in place as designed by the management across all functional areas and assessing the internal controls in all areas. Also, the Internal Audit findings are discussed with the process owners and corrective action is taken as necessary.

The Audit and Risk Management Committee reviews reports submitted by internal and statutory auditors and meets the auditors to ascertain, their views on the adequacy of the internal control system and apprises the Board of Directors from time to time.

Based on the recommendation of the Audit and Risk Management Committee, the Board of Directors have concluded that as of March 31, 2025, its internal financial controls were adequate and operating effectively. The same is also confirmed by auditors through their report on Internal Financial Control.

Human Resources and Industrial Relations

FY25 was a year of strategic transformation in Human Resources, focused on talent development, organizational alignment, and operational efficiency. A workforce restructuring was carried out to align with evolving business priorities, introducing new roles to enhance agility and rationalizing others to streamline operations.

Employee wellness remained central, with initiatives like Yoga at Work launched for senior leaders to promote mindfulness and stress management. A company-wide blood donation drive also reinforced our commitment to community and social responsibility.

Our learning and development approach was refined to be more targeted and impact-driven, prioritizing roles with the greatest business influence. As of March 31, 2025, total employee strength, including group companies, stood at 508.

Three flagship initiatives will drive our HR vision forward- EDGE: Tailored leadership training for seven new Zonal Heads, Executive Coaching: One-on-one support for senior leaders stepping into broader roles and FASST: Soft skills training for field engineers to enhance customer engagement.

Together, these efforts reflect our commitment to "Empower & Elevate," ensuring our people are equipped to meet todays challenges and lead tomorrows growth.

Material developments in human resources: Recruitment and Selection:

UFO has a talented pool of employees and prides itself in providing effective and efficient services to its clients. The focused recruitment and selection process followed by the Company ensures that it hires the best talent for the job aligning with the overall goals of the organization. UFO takes pride in having a stable manpower strength coupled with a low rate of attrition that gives it a strategic advantage in realizing its long-term business objectives.

Training and Development:

The Company from time to time plans and arranges for the training of its employees for their overall development to achieve its long-term business objectives.

Industrial Relations:

UFO believes in maintaining cordial and friendly relations with its employees and resolves conflict, controversies and disputes, if any, between the employees and management in an amicable manner.

Cautionary Statement

Certain Statements made in the Management Discussion and Analysis Report relating to the Companys objectives, projections, outlook, expectations or predictions, estimates and others may be ‘forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections and so on whether express or implied. Important factors that could make a significant difference to the Companys operations are demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on these forward- looking statements that speak only as of their dates.