Capital18 Fincap Pvt Ltd (Capital18), a private investment arm of Network18 Media & Investments Ltd, has entered into an agreement with Carnival Films Pvt Ltd to sell its majority stake in Stargaze Entertainment Pvt Ltd, as per a stock market disclosure. Stargaze operates multiplex chain under the Glitz Cinemas brand.
The transaction is expected to close before March 31, 2015.
The deal would mark the third acquisition in the multiplex business by south-based Carnival, which recently snapped Big Cinemas and HDIL's Broadway Cinema. Indeed, with this transaction, it may overtake Inox to become the second-largest multiplex chain operator in terms of number of screens after factoring in the number of screens it has signed but not yet operational.
Founded by Capital18, Stargaze started commercial operations in July 2008. It operates around nine multiplexes with 25-30 screens in eight tier II & III cities, including Raipur, Ajmer, Ranchi, Jodhpur, Bilaspur, Dehradun, Kurukshetra and Muzaffarnagar.
Stargaze clocked revenues of Rs 48.3 crore with net profit of Rs 1.1 crore for the year ended March 31, 2014.
The transaction amount was not disclosed but the firm said Capital18 will exit with a profit.
Given the costs of setting up a multiplex screen in small cities, the overall firm could be valued around Rs 90-100 crore. However, if benchmarked against listed peers on FY14 net profit multiple, it could be worth around Rs 50 crore.
Capital18 held 89 per cent stake in Glitz Cinemas. It is not immediately who owns the remaining stake and if they are also selling their shares to Carnival.
Email queries sent for further details did not immediately elicit a response.
Kochi-based hospitality-to-realty major Carnival Films operates cinema chains under the brand ‘Carnival Cinemas'.
It has been the most aggressive among its peers in striking inorganic growth over the last one year. It started the acquisition drive last year with a deal to acquire real estate developer Housing Development and Infrastructure Ltd’s multiplex chain Broadway Cinema for Rs 110 crore ($18 million).
Last month it announced a deal to buy Anil Ambani-controlled Big Cinemas.
It has over 50 operational screens while 75 screens are to come on stream soon taking the total portfolio to 125 screens. Coupled with the acquisition of Big Cinemas and Glitz Cinemas, it may pip Inox Leisure to become the second- largest player in the multiplex space behind PVR.
The deal counter for multiplexes has been fairly busy in the country. It all started with Inox acquiring Fame a few years after a takeover battle with Big Cinemas. Then PVR snapped Cinemax to become the clear number 1.
Recently Inox bought Satyam to retain its lead over Big Cinemas as the second largest player.
In another deal, Mexico's Cinepolis acquired Fun Cinemas from Essel Group and is now the fourth-biggest player in the business.
Another Mumbai-based firm KSS Ltd, formerly known as K Sera Sera Ltd, has also decided to sell a significant minority stake in its subsidiary K Sera Sera Miniplex Ltd through offer for sale.
(Edited by Joby Puthuparampil Johnson)