Inox acquires Fame India's entire promoter stake

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Inox acquires Fame India's entire promoter stake

CNBC-TV18 learns that INOX Leisure Ltd has acquired the entire 43% stake of Fame India in a block deal of 1.51 Fame India shares on the Bombay Stock Exchange (BSE) at Rs 43.95.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Inox Leisure Q3 net profit at Rs 8.74 cr INOX in talks to buy into Fame India: Sources ALSO READ See latest News about INOX Leisure See previous management interviews See what other Experts & Brokerages are saying about INOX Leisure Nifty BSE | NSE 28/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Fame India | PVR |

Here is a verbatim transcript of an exclusive interview with Salil Pitale on CNBC-TV18. Also watch the accompanying video.

Q: What went through in terms of the valuation of Fame itself, sometime back the market cap of this company was around Rs 40 crore as far as the market was concerned and then we saw the market cap going all the way to 150-153 crore. How did you value this company?

A: Shravan Shroff has done a deal at market prices and the market price when there was a comfort at his end that the price was fine enough from his own perspective. He has taken a call to do that transaction. So the valuation was more driven by comfort on market price at the time when the deal was actually struck.

Q: What do you think of the multiplex business? What should be the valuation? PVR is a 407 market cap company with a 31 PE, Cinemax Rs 206 crore company with a 31 PE, Inox Rs 522 crore marketcap with a 19.36 PE. Could there be possibility where for Fame shareholders it would have been better if they would have taken an Inox swap, which means Inox shares instead of Fame shares and then pretty much risen the tide rather than promoter settling at x price and then you are sitting with a stock where you have not gained as the multiplex business has picked up?

A: It will be unfair to look at PE in isolation because most of these PE numbers are derived from the fact that the the first quarter for the multiplex business was a washout because there was virtually no multiplex business as theatres were shut due to the strike. The moment you look at PEs in the context of what these companies are likely to do on a quarterly basis this year and especially coming year, the valuations are not outrageous. They are fairly conservative.

From second question's perspective, I am not sure whether that's an option at all because the call has been taken by Shravan. He decided that at the price point the market is willing to offer he was willing to offload stock. From an Inox perspective, it's good because it gives them access to a fairly larger play through their ownership into Fame.

Q: The story that's been sold to most retail holders is since India is growing companies will grow but what we have seen with the multiplex businesses as India is growing, some companies are falling off other companies are growing which means the leaders are coming out and the rest are getting shredded out. What is the next sector? Where can this happen next because you could be holding the right stock in a right sectoral play but the wrong stock in terms of value itself? Where is it going to happen next after multiplexes?

A: I do not know whether I can answer the question where it happen next after multiplexes but the moot point to keep in mind is that anywhere wherein there is ownership originally the exhibition business in India was extremely fragmented. It was single theatres owned by multiple set of people across the country. With the advent of multiplexes, we have got into a stage where ownership of theatre is becoming little bit more in terms of concentrated consolidated hands. The moment there is some amount of consolidation like the one which we are experiencing right now it just gives that much strength to the multiplex players, each of the consolidated players, their operations look better and whosoever are shareholders in those companies will eventually benefit because of better consolidated set of operations in any case.

Q: If somebody is a minority shareholder in Fame what option does he have? Does he have any option or basically now he got to go with whatever the story is?

A: From a minority shareholder in Fame's perspective, right now Fame's ownership now gets into the hands of Inox, which is a very strong player in this business. So I do not think there should be any concern for the minority shareholder in any case. Inox has the best of corporate governance standard. So I do not think they will get impacted negatively in any fashion whatsoever. They give the benefit of the fact that now an Inox plus Fame is a very strong entity as we go ahead. So the benefits of that in terms of performance numbers will certainly come back to all the shareholders.