Mumbai: The Ajay Bijli led PVR group seems set to acquire Chennai’s premier movie exhibition company SPI Cinemas, popularly known as Sathyam Cinemas, in what could end up to be the biggest deal in Bijli’s career as well for India’s multiplex sector. Multiple sources aware of the on-going discussions said save last-minute developments, the deal may close for a rather steep valuation of approximately Rs 750-1,000 crore for just 40 odd screens, located predominantly in the Southern metro. To put this in perspective, last month Carnival Cinemas paid a little over Rs 700 crore to buy out Anil Ambani’s Big Cinemas that has 242 screens across the country.
This also underscores the growing consolidation frenzy that has gripped the multiplex industry in recent times – with 5 deals in 12 months, valued at over Rs 1600 crore — as theatre operators seek to improve their bargaining power with film studios and distribution companies to gain a bigger share of box office receipts. Additionally, with a prolonged slowdown in commercial real estate (read malls that typically anchors these multiplexes), dominant players feel inorganic growth is faster than time consuming greenfield developments.
The SPI Group currently runs a cinema exhibition, distribution and production business but are known for their portfolio of some of the most iconic cinema destinations across South India and it currently operate close to 40 screens under 5 categories — Sathyam, Escape, thecinema, Luxe, their uber premium offering and S2 Cinemas and are poised to open over 50 screens by early 2015. PVR, with 454 screens in 102 locations across 43 cities, is the largest cinema exhibitor in the country today.
A company spokesperson from PVR declined to comment on market speculation.
“We are exploring several options to raise capital and are also in talks with several PE players. We have not taken any final call on the future course of action. A sale is an option but at this moment I have nothing to comment about on any valuations or potential discussions as nothing has firmed up yet,” Kiran Reddy, Chief Executive Officer of SPI Group said. Sources add that they have been in the market for for almost a year now and have been sought after by most of their peers. While most discussions fell through with the Reddy’s insistence on a significant valuation premium, PVR has pursuing the opportunity for months now. PWC and EY are believed to be advisors in the deal.
What makes SPI Cinemas such a prized catch despite a small portfolio of just 40 odd screens that are largely concentrated in just 1 city – Chennai. For one, it is amongst the most profitable operators today with one of the highest average occupancy – over 65% — anywhere in the country. It draws over 3 million customers a year.