Mumbai: Cinema chain Inox Leisure Ltd said on Wednesday it bought 43.3% in rival Fame India for Rs66.48 crore, making it India’s No. 2 multiplex chain, pushing its shares up by the 20% limit.
The combined network of the two operators will have 55 multiplexes and 204 screens in all, with Fame bringing in 25 operational multiplexes and 95 screens, Inox said in a statement.
Indian multiplex operators have been clashing with producers in the past few years over revenue shares and new releases were held up for about two months last year for this reason, and such moves will help operators bargain better, analysts said.
“This is a good deal for the industry, signalling a consolidation in the industry which will give more bargaining power to the multiplex operators,” said an analyst tracking the industry. “But the deal is a tad expensive considering the PVR deal.”
Last November, rival multiplex operator PVR Ltd said it would buy the cinema exhibition business of DLF for Rs20.02 crore.
Inox, promoted by Gujarat Fluorochemicals Ltd, acquired the stakeholding of Fame’s promoters through a block deal executed on the BSE in opening trades, the company said in a statement to the stock exchange.
Inox will make an open offer for an additional 20% as per regulatory guidelines, which could cost about Rs30 crore, Deepak Asher, director of Inox group said on CNBC TV18.
Inox’s operating margins were 28% while Fame’s was 10-12%, another analyst said, adding Fame had foreign currency convertible bonds (FCCBs) coming up for redemptions, which could weigh on margins.
Fame had a debt of about Rs140 crore, of which about Rs85 crore were in FCCBs due for redemption next year, Asher added.
Fame would continue to remain a separate company as Inox explored all options of consolidating Fame in the next few months, Asher added.
The acquisition will be funded through a loan from Gujarat Fluorochemicals, it added.
In opening trade on Wednesday on the BSE, Inox bought 15.1 million shares in Fame through a block deal at Rs43.95 each.
Enam Securities handled the deal for Inox while Yes Bank advised Fame. Inox shares, which surged as much as 20% in the session, have eased to trade up 9.3% at Rs83.85 at 1:04 p.m., while Fame shares are trading down 0.3%, after falling more than 4% earlier in a broader market that was up more than 2%