Multiplex operator Carnival Cinemas plans to raise Rs 400 crore from Yes Bank to restructure its debt and open new screens. The company last year had said that it was looking to finalise an alliance with a private equity investor to help resolve its debt crisis.
The multiplex operator plans to close this debt restructuring within 60-90 days. Yes Bank has started its process to take equity, said a source close to the company.
The multiplex operator, which has around 450 screens, is also looking to use funds to launch more screens. Carnival Cinemas plans to open 100 screens, in which the company had partially invested before the Coronavirus outbreak.
Moneycontrol reached out to Carnival Cinemas but the company declined to comment.
While the company is in expansion mode, Karan Taurani, senior vice-president, Elara Capital said that there are challenges for Carnival Cinemas.
"The company has a debt of Rs 800-1,000 crore. So, even after the fund raising they will have a sizeable debt," he said.
In addition, lot of people have left the company and Carnival Cinemas has lost a large chunk of key management, Taurani added.
The Shrikant Bhasi-led cinema chain, which was looking to get on board an equity investor to resolve its debt crisis, had faced flak from employees last year when workers took to social media stating that the company did not pay their dues.
Media reports pointed out that the company had not paid dues of around 4,000 employees. The company in December last year had said that it will clear all dues by end of FY22. Some employees had also said that they were asked to market milk and vegetables for the company's Farmse Fresh business, which was launched during the pandemic in 2021.
"Making a comeback will not be easy for the group, said a film trade analyst who didn't wished to be named. "In most of the properties, they have defaulted in terms of rentals. So, these properties have not even started," the analyst added.
Covid-19 played a spoilsport in terms of screen launches for Carnival Cinemas which had to completely shut down because of being a debt-raised company, CEO, Vishal Sawhney had said in a recent interview to Moneycontrol.
"Since we were on the brink of (getting) private equity, which did not happen, our biggest challenge post-Covid was opening our entire portfolio of screens. It was not easy in the absence of debt and the time private equity takes to come in,” he had said.
Pre-Covid, Carnival Cinemas had a run rate of 80-100 screens a year, out of which 60-70 percent were organic screen additions while the rest were acquired screens. The company estimates its screen count to reach 567 by end of FY23. It also has plans to reach the 1,000 screen mark in next 2-3 years which the company initially had aimed to achieve by 2020.
"Reaching 1,000 screen count will be a challenge because first they have to resolve the debt issue and then they can move onto expansion plans. Also, other multiplex players are getting aggressive in terms of expansion. While they will become the second largest player after PVR-INOX merger, it is important to see how they scale up from here on. But expansion will be a challenge because of team restructuring," added Taurani.
While pandemic resulted in a big setback for the cinemas, analysts say that problems for Carnival Cinemas had started even before coronavirus impacted the theatre industry.
If we look at the exhibition sector's domestic revenue, it dropped from Rs 11,500 crore in 2019 to Rs 3,900 crore in 2021, according to an EY-FICCI report. It is estimated that by end of 2022, the revenue will not be below pre-COVID level at Rs 7,500 crore. Along with revenue, screen count also declined last year. Multiplex players were unable to open screens at the same rate as they did in the pre-COVID period.Analysts say that while theatre chains were hit hard due to COVID-19, the impact on Carnival Cinemas has been much worse.