Buy Inox Leisure; target Rs 79: Karvy

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Buy Inox Leisure; target Rs 79: Karvy

Karvy Stock Broking has recommended market performer rating on Inox Leisure with a target price of Rs 79, in its 9 February 2010 research report.

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Karvy Stock Broking has recommended market performer rating on Inox Leisure with a target price of Rs 79, in its 9 February 2010 research report.

" Inox acquired 43.3% controlling stake (promoter Shroff family's stake) in its competitor Fame India for ~Rs 663 mn on Feb 3, 2010. Two days later, Inox acquired another 7.2% in Fame, from the open market and increased its stake to 50.5%. With this acquisition, Inox will leave behind PVR and become the second largest multiplex chain in terms of operational screens. Post acquisition, Inox will operate 204 screens across 55 properties, only behind BIG cinemas that has 246 screens. Moreover, Fame has a strong distribution business which generated an annual turnover of Rs 158 mn (over 10x Inox's distribution) in FY09.We believe that from a long term perspective, this is a good consolidation move for Inox and the multiplex industry which is struggling with higher bargaining power of producers & distributors and competition from TV including DTH and events like IPL. However, we expect that it will take minimum 1-2 years for Inox to synergize its operations with Fame's properties and generate a positive return for its shareholders from this deal. We expect the deal to be EPS neutral to negative for Inox, in the next 12-15 months." says Karvy Stock Broking research report.

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To read the full report click on the attachment