Mumbai: Carnival Films Pvt. Ltd, backed by commodity trader Shrikant Bhasi, has agreed to buy multiplex company Stargaze Entertainment Pvt. Ltd from a unit of Mukesh Ambani-controlled Network18 Media and Investments Ltd for an undisclosed amount, barely a month after it bought the Anil Ambani-controlled Big Cinemas.

Stargaze operates multiplexes in emerging urban centres of India under the brand name Glitz Cinemas. The acquisition will give Carnival 30 additional screens, said P.V. Sunil, chief executive officer of the Kochi-based company.

Capital18 Fincap Pvt. Ltd, which controls Stargaze, said it expects to complete the transaction in the current fiscal year. The sale will result in a profitable exit for Capital18, the company told BSE in a filing. The deal is valued at around 90 crore, said a person familiar with the development who asked not to be identified.

The deal is the fourth such transaction in India’s movie exhibition industry this year. Multiplex operators are acquiring other firms to boost their bargaining power with film producers and distributors, and to gain a bigger share of box office receipts in India’s 9,200 crore movie industry. The four transactions are estimated to be valued at more than 1,410 crore.

One of the main reasons why existing dominant players are looking to expand through acquisitions is that there are not too many malls (which typically house multiplexes) and organic expansion (or building new multiplexes) takes a long time, said Ajay Shah, partner, transaction advisory services, at consulting firm EY. “With these acquisitions, people can scale their businesses faster and they get the pricing power once they have economies of scale. Bigger firms are now looking at expanding and becoming pan-India players," Shah said.

On 15 December, Carnival Films agreed to buy multiplex operator Big Cinema, a division of Anil Ambani’s Reliance MediaWorks Ltd, for around 700 crore.

Inox Leisure Ltd, India’s second-largest multiplex operator, acquired Delhi-based Satyam Cineplexes Ltd for nearly 240 crore, paying 182 crore in cash and taking over its debt in a deal that expanded Inox’s presence to 50 cities, with 91 multiplexes and 358 screens; Housing Development and Infrastructure Ltd sold its multiplex business Broadway Cinemas to Carnival Cinemas, and Mexican multiplex chain Cinepolis bought Fun Cinemas, the multiplex chain promoted by Subhash Chandra’s Essel Group through E-City Ventures. All transactions have happened in the past six months.

Carnival Films started with three screens at Angamaly in Kochi, and now has reached 300 screens largely through acquisitions.

Bhasi, 46, chairman of Carnival Group, said India has only 11,500 screens for a population of 1.3 billion while China has over 25,000.

“There is indeed a big space for us. Moreover, scale gives us reach and better bargaining power," said Bhasi, who has also acted in Malayalam movies.

Carnival CEO Sunil said the acquisition would give his company 30 more screens, three of which are under construction, in places where it currently doesn’t have a presence.

“Glitz screens are spread in Chhattisgarh, Rajasthan, Punjab, Uttarakand and Haryana," Sunil added.

Carnival Films, which runs multiplexes under an eponymous brand, will, once the Big and Stargaze acquisitions are complete, own around 430 multiplexes by 31 March.

Bhasi, who is based in Singapore, said Carnival is aiming at 1,000 screens by 2017.

Carnival has interests in hospitality, media, real estate, entertainment and multiplexes. It has also produced and distributed movies in Hindi and Malayalam.

“Even as Carnival as a more recent entrant has been aggressively acquiring assets across the country and looking to build scale, the leaders perhaps could continue to focus only on such assets as are complementary to their existing presence. There is no doubt, of course though, that for good assets, the competition will push valuations north," said Vivek Gupta, partner, mergers and acquisitions, at BMR Advisors.

PVR Ltd is currently the largest multiplex operator with 454 screens spread across 102 properties. On 1 December, Mint reported that PVR is in talks to buy Chennai-based SPI Cinemas (formerly known as Satyam Cinemas) to expand its reach in the southern market. The second position has been held by Inox Leisure, which showcases movies through its 358 screens.

It added nearly 50 screens after it acquired Satyam Cineplexes earlier this year for approximately 240 crore including debt.

Bhasi said Carnival Group is planning to fund the Stargaze transaction by way of promoters’ contribution and some equity infusion by private equity firms.

“We are talking to two Singapore-based and American private equity firms to sell a minority stake to fund this deal. We are in the final stages of discussions on equity sale and we will be able to conclude the deals in next 15 days," Bhasi said.

He said Carnival would be now focusing on Tier II and Tier III cities as a part of its next phase of expansion.

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