facebook-page-view
Advertisement

Mexico’s Cinepolis to buy remaining bits of DT Cinemas

By TEAM VCC

  • 02 Sep 2016
Mexico’s Cinepolis to buy remaining bits of DT Cinemas

Mexican cinema operator Cinepolis, which has been scouting for inorganic expansion in India for almost a decade, has struck its second deal in the country in as many years.

Real estate company DLF said on Friday that it has agreed to sell two assets comprising seven screens across two locations in Delhi for Rs 63.67 crore ($9.5 million) to Cinepolis.

Advertisement

These two theatres, with seven screens, are part of the eight multiplexes with 29 screens that DLF subsidiary DT Cinemas runs in Delhi-NCR and Chandigarh. DT Cinemas also has two under-construction units with 10 screens in Delhi-NCR.

DT Cinemas has sold bulk of its business to PVR Ltd, the country's largest multiplex chain operator.

Advertisement

In May, the CCI gave a conditional approval to the transaction after PVR agreed to a revised deal that excluded the two DT Cinemas properties mentioned above.

Under the revised deal, PVR is buying six operational and two under-construction assets from DT Cinemas with 32 screens for Rs 433 crore. It has agreed to various other conditions that will in effect freeze expansion in its key markets of Noida and Gurgaon for three years. PVR will also not open new screens or acquire any existing ones in the South Delhi area of the national capital for five years from the date of completion of the transaction with DT Cinemas.

DLF had previously said it was selling DT Cinemas to exit non-core business interests to pare debt. It has in the past sold its hotels and wind power business, besides exiting its insurance joint venture. It had ventured into the movie exhibition business leveraging on its real estate assets in 2003.

Advertisement

For Cinepolis, this deal would be geographically significant. It operates at five locations in New Delhi—in North, West, and East Delhi regions—and runs 17 screens. It does not have any assets in South Delhi and this deal will give it that presence.

The Mexican firm, the first international movie exhibitor to enter India, started its operations in 2009. It now has 226 operational screens under the brand names of Cinepolis, Cinepolis VIP, Cinema Star and Fun Cinemas across India.

Cinepolis acquired Fun Cinemas in December 2014 from Essel Group, emerging as the fourth-largest multiplex operator in the country behind PVR, INOX and Big Cinemas. Since then, the company has continued to scout for acquisitions to meet its target of 400 screens by 2017.

Advertisement

It is unlikely to meet this target. It will be difficult for any firm to add 160 to 180 screens in just 15-18 months organically. Moreover, given the spate of acquisitions in the mid- to large-sized multiplex chains, there are no large assets available for those banking on an inorganic growth strategy.

Separate media reports, however, have said China’s Wanda is in talks to buy multiplex chain in India. The Economic Times early in the day said Wanda is in talks to buy PVR.

There has been a raft of deals over the past six years starting with Inox acquiring Fame Cinemas in 2010 after beating Big Cinemas. After that PVR raised the stakes as it acquired Cinemax in 2013 to emerge as the top player in the industry.

Advertisement

Over the past three years, Inox bought Satyam for Rs 182 crore in July 2014 while Carnival Cinemas acquired property developer HDIL's multiplex unit for Rs 110 crore, besides buying out Anil Ambani-owned Big Cinemas for about Rs 700 crore.

All these firms are betting on under-penetration of the multiplex business in the country. Even though India produces more movies than any other country in a year, the number of screens per person is just a fourth of China. The market is still dominated by standalone single-screen theatres. Just about a fifth of the total cinema screens in the country are part of a multiplex.

In fact, one of the two assets that Cinepolis is to buy from DT Cinemas—DT Savitri—is also a single-screen unit.

This makes consolidation difficult as four large players have already emerged. Rising disposable incomes among the masses, including the impact of the seventh pay commission that will boost salaries of government employees, is likely to push up demand for entertainment expenses. This is also likely to benefit cinema chain operators.

Like this report? Sign up for our daily newsletter to get our top reports.

Share article on

Advertisement
Advertisement