How will PVR gain from Cinemax buy?
After days of speculation and denials, multiplex operator PVR confirmed on Tuesday that it is in talks to buy shares of rival Cinemax India's promoters.
November 27, 2012 / 20:18 IST
Moneycontrol Bureau
After days of speculation and denials, multiplex operator PVR confirmed on Tuesday that it is in talks to buy shares of rival Cinemax India's promoters.Cinemax shares opened lower on Tuesday but later reversed losses to hit a new high of Rs 177.70 on NSE. At 11:30 hrs, the stock was up 3 percent at Rs 177.60. PVR shares were up 0.7 percent at Rs 245.As of Monday's close, Cinemax had jumped 132 percent in the last one month, while PVR gained over 8 percent."It is engaged in active discussions with the promoters of Cinemax India for a potential purchase of their shares in Cinemax. However, no definitive agreements have been entered into in this respect," Gurgaon, Haryana headquartered PVR informed the stock exchanges.Cinemax, owned by the real estate group Kanakia, had already said last week that its promoters were "evaluating options" for sale of their shares in the company. Promoters currently own around 69 percent of Cinemax. After acquiring the Kanakia's stake, PVR could at a later stage look at an open offer to mop up the remaining shares.What will PVR gain from getting an entry into Cinemax?Cinemax operates 39 properties, with 138 screens. It has a strong presence in Western India, and what's particularly important analysts say is that it is present in 14 locations and 45 screens in Mumbai, where average ticket prices are higher.Currently, Inox Leisure and Fame India (Inox bought a majority stake in 2010) together have 256 screens and Anil Ambani owned Big Cinemas, which had lost out in a bitter battle to buy Fame, has 254 screens. PVR currently has around 210 screens.PVR has a target to have 500 screens, so acquiring Cinemax will help PVR scale up and become the largest multiplex company in India, Amit Patil, analyst at Angel Broking, told moneycontrol.com.Cinemax's second quarter consolidated net profit surged 70 percent sequentially to Rs 16 crore, while sales were up 21 percent to Rs 111 crore. PVR reported a consolidated net profit of Rs 16 crore on net sales of Rs 189 crore, last quarter.PVR will reportedly require around Rs 500 crore to buy Cinemax promoters stake, which Patil believes could be a good deal, considering it is a profit making company and like PVR is a premium brand.He expects PVR will buy out minority shareholders through an open offer and delist Cinemax in future. But what needs to be seen is whether PVR will merge Cinemax with itself or keep it separate. In case, it does decide to merge Cinemax, then PVR will incur additional costs in renaming and refitting the acquired properties to its standards, Patil adds.He has downgraded PVR to "neutral" from "accumulate" post the recent run-up in the stock.Also Read: BNP Paribas positive on aviation, telecom, mediaNachiket Kelkar
nachiket.kelkar@network18online.com Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
