PVR to buy DLF’s DT Cinemas for Rs500 crore4 min read . Updated: 10 Jun 2015, 08:58 AM IST
Acquisition will help PVR expand presence in North India and help DLF bring down its debt burden
The move will help PVR expand footprint in North India and help DLF bring down its debt burden.
DLF’s cinema business DT Cinemas is housed under a subsidiary called DLF Utilities Ltd. It has 29 screens with approximately 6,000 seats at eight locations in National Capital Region (NCR) and Chandigarh.
In the next 12 months, DT Cinemas plans to add 10 screens at two properties in the NCR. PVR has 467 screens across 105 locations in 43 cities.
“As a result of the proposed acquisition, PVR will have a presence in 44 cities with 115 multiplexes and 506 screens," PVR wrote to stock exchanges.
The transaction will be subject to regulatory approvals.
“It has been our strategy to expand our film exhibition business both organically and inorganically over the years. This acquisition in is pursuance of our core strategy to offer a world-class cinema experience to the discerning Indian consumer," said Ajay Bijli, chairman and managing director, PVR.
“We have paid a fair value for the asset. We’ll be meeting with our board members soon and decide on the funding plan. It will be mostly through a combination of debt and equity, primarily equity," Bijli said over the phone.
In September, PVR had passed a resolution to raise ₹ 500 crore through a qualified institutional placement. In 2012, when it had acquired Mumbai-based Cinemax India, private equity funds Multiples Alternate Asset Management Pvt. Ltd, promoted by Renuka Ramnath, and its then existing investor L. Capital Asia Llc had backed the acquisition.
Shardul Amarchand Mangaldas & Co. was the legal advisor to PVR in the DT Cinemas deal. EY India and Luthra & Luthra were the financial and legal advisors, respectively, to DLF.
On 20 May, Mint had reported that PVR was close to buying DT Cinemas for nearly ₹ 500 crore.
The multiplex business has seen a spurt of consolidation since last year.
PVR hadn’t joined the race, until now, and now plans to look for more assets.
“We’ve been growing organically since we did the Cinemax acquisition, and we have been adding 60-70 screens annually which we plan to do for next 3-5 years. But if there are good inorganic opportunities, which are a right fit for our business, we will acquire it," said Bijli.
“...we still believe that this is the tip of the iceberg, and India is a grossly under-served market when it comes to cinema exhibition. There is a large appetite for movies and even the supply side is quite strong, and with rapid urbanization, there is a huge scope for multiplex businesses to grow in India," he added.
A DLF executive said the deal was in line with the company’s strategy to focus on the core business and divest non-core assets. “It is also reflective of the value embedded in our core assets and demonstrates our commitment to increase shareholder value. It shall provide the management a more focused approach for enhancing value especially in our retail mall business," said Saurabh Chawla, senior executive director, DLF.
More buyouts are likely to play out in the cinema exhibition space, an indusrty analyst said.
“Even though significant assets have been bought out, there will be more acquisitions in the coming two years in this space. Growing organically is a difficult proposition for these companies as it is dependent on state approvals and fewer malls being built," said Jehil Thakkar, head-media and entertainment, KPMG India.
The consolidation wave began in July 2014, when Inox Leisure Ltd, the second largest exhibition chain by screens, bought Satyam Cineplexes Ltd for over ₹ 200 crore, including debt. With this, Inox expanded its presence to 50 cities, with 91 multiplexes and 358 screens.
In December 2014, Carnival Films Pvt. Ltd, backed by commodity trader Shrikant Bhasi, bought Anil Ambani-controlled Big Cinemas in ₹ 700 crore deal. Within a month, Carnival Films bought Stargaze Entertainment Pvt. Ltd from a unit of Mukesh Ambani-controlled Network18 Media and Investments Ltd for an undisclosed amount.
“The next set of consolidation is expected in the southern and eastern regions in the country. Apart from these two regions, we do not see any significant consolidation happening in this space, as the top four players have now cemented their position by buying some of the key assets," said Ajay Shah, partner, EY India.
In the last few years, DLF has exited several non-core businesses to reduce debt. Its debt rose by ₹ 628 crore to ₹ 20,965 crore in the March quarter from the preceding three months.
On Tuesday, DLF Ltd ended at ₹ 110.60 on BSE, up 0.77% from its previous close, while the benchmark Sensex fell 0.16% to close at 26,481.25 points.
PVR Ltd ended at ₹ 666.40, down 0.90%.
Madhurima Nandy in Bengaluru contributed to this story.