Mumbai: Ending months of negotiations, Anil Ambani looks set to sell a controlling stake in his multiplex business to Carnival Films which is backed by a Kochi based agri-trading company.
To start with, Carnival is likely to pick up 80 per cent in Big Cinemas, a division of Reliance MediaWorksBSE 0.00 % for an enterprise valuation of around Rs 700-Rs 725 crore. Reliance will continue to retain the residual minority stake, said multiple sources aware of the ongoing discussions. However discussions are still ongoing between both sides for a complete 100 per cent buyout of the company clarity for which will emerge in the next few weeks.
The deal – biggest in the space so far – will give Carnival access to 258 movie screens nationwide that are operated by Big, India’s 3rd largest film exhibitor and will further consolidate the movie exhibition industry in India as operators jostle to increase their bargaining power with film producers and distributors for a larger share of the box office receipts. India currently has 1700 multiplex screens with PVR leading the market with 454 screens while Inox stands at second spot with 361 screens. Interestingly, the space has already seen 3 transactions in this year alone as scaling up becomes critical for operators with economic slowdown stalling the pace of new screens. Just last week, Mexican chain Cinepolis bought 83 screens of Fun Cinemas for Rs 408 crore.
According to a 2013 industry report by KPMG and Federation of Indian Chambers of Commerce and Industry (FICCI), multiplexes account for only eight percent of India’s screens. But they rake in a third of the Indian box-office. A formal announcement of the transaction is expected in the coming week.
Sources say, the company is planning to part fund the acquisition through internal accruals of the group while the rest will be brought in by the group’s Chairman Shrikant Bhasi as part of promoter funding. Additional debt may be raised in future for refurbishments and brand expansion.
Carnival Films started out in Kerala and Karnataka and until this July focussed predominantly on the Southern markets to scale up. But it now has a bigger footprint across pockets of west, north and even eastern markets. As on date, the company has 50 operational screens under the Carnival Cinemas brand name while 75 more are to come on stream in the next 2-3 weeks taking their total portfolio to 125. This includes the 33 screens that it recently acquired from HDIL in Mumbai. Big Cinemas will be the second acquisition from Carnival within 6 months, making the late entrant the most aggressive aggregator of multiplex screens in recent times.
“Big Cinemas will give Carnival a much bigger national footprint, especially in North and Central India while consolidating their market share in West in states like Gujarat and Maharastra. Even in South where they are already strong, they will get a much bigger play now. In NCR alone, Big has close to 30 screens. So the metro and urban focus will be very useful and will compliment Carnival’s presence in Tier II, Tier III cities,” said a source following the developments closely.