PVR Ltd has agreed to purchase a majority stake in SPI Cinemas Pvt. Ltd, as India's biggest multiplex chain continues to expand its operations via acquisitions.
Gurugram-based PVR said in a stock-exchange filing that it will acquire a 71.7% stake in Chennai-headquartered SPI Cinemas for Rs 633 crore ($91 million) in cash.
PVR will also have an option to acquire the remaining stake for up to Rs 300 crore.
The deal will help PVR grow its operations in southern India, where SPI Cinemas has 76 screens across 17 properties in 10 cities.
SPI Cinemas, which is promoted by Kiran Reddy and Swaroop Reddy, operates cinemas under several brands including Sathyam, Escape, Palazzo, The Cinema and S2 Cinema. The company clocked revenues of Rs 309.6 crore for the financial year ended 31 March 2018 and expects revenues of Rs 410-425 crore in this financial year, the filing shows.
“The proposed acquisition is in line with the company’s continual growth and expansion strategy,” said the company in the filing.
South India has a robust entertainment industry, with movies in three languages -- Tamil, Telugu and Kannada – accounting for 37% of the Indian box office, said the filing citing an EY-FICCI Frames 2018 report.
The acquisition will take PVR’s total screens to 706 across 60 cities.
In an interaction with VCCircle, Kamal Gianchandani, chief executive, PVR Pictures, had said that small cinema chains are opportunities for mergers and acquisitions.
The transaction is expected to be completed within 30 days and the merger is expected to close in nine to 12 months. The transaction does not require any regulatory approvals.
Shares of PVR were trading at Rs 1,292.3 apiece, down 1.89% in a weak Mumbai market.
PVR has acquired several companies, including Cinemax and DT Cinemas in 2012 and 2016, respectively.
The multiplex chain had first raised private equity funding in 2002-03 from ICICI Ventures.
PVR has grown manifold since then, in part via acquisitions fuelled by multiple rounds of fundraising.
Last year, Warburg Pincus acquired a 14% stake in PVR Ltd, making it the private equity firm’s first investment in India’s media and entertainment sector in India. The stake was acquired from private equity firm Multiples Alternate Asset Management and PVR’s promoters. Multiples, led by Renuka Ramnath, still retained a 14% stake in PVR.
Other investors in PVR include Canada Pension Plan Investment Board, Dutch pension fund manager PGGM and the UK’s CDC.
PVR clocked revenues of Rs 2,365.4 for the financial year ended 31 March 2018, up from Rs 2,181.6 crore the year before. It reported net profit of Rs 124 crore for the financial year ended 31 March 2018, up from Rs 95.8 crore for the previous period.