MUMBAI: The movie exhibition sector in India is heading for a duopoly as PVR Cinemas and Inox Leisure continue to consolidate businesses organically as well as via acquisitions. While in 2013 PVR acquired Cinemax, becoming the country’s biggest cinema exhibition player with 353 screens, Inox Leisure, on Wednesday, announced the acquisition of North Indian multiplex company Satyam Cineplexes with 38 screens, thus growing into another behemoth with 358 screens across 91 multiplexes in 50 cities. Today, the two players have fairly large national footprint, with all the major territories covered. Inox’s acquisition play Inox made three acquisitions to strengthen its footprint, each addressing different regions. The first buy took care of the Eastern region while the second one beefed up Inox’s presence in Western India. With the Satyam acquisition, it got a grip in Delhi and the adjacent Northern belt. Inox’s acquisition story began in 2007, marking the early phase of consolidation in the industry. Anil Ambani’s Reliance ADAG had set the ground for it when it acquired Adlabs Films in 2005 and went on a reckless spree to add up screens. Inox entered the fray in 2007, by acquiring Calcutta Cine Pvt Ltd (CCPL) in an all-share-swap deal in 2007, gaining a foothold in the Eastern hub of India. The acquisition of CCPL (89 Cinemas) allowed the multiplex player to add nine properties in West Bengal and Assam, giving it a nearly complete monopoly in the region. Later in 2010, it acquired promoters’ stake in Fame India, adding 25 multiplexes with 94 screens to its kitty. The fight for Fame was not an easy one as Anil Ambani-led Reliance Capital also wanted a piece of it and tried to trump Inox’s open offer with its own. However, Inox, which already had a majority stake, managed to take Fame India under its wings, getting a dominant position in the Western parts including Mumbai, Pune and Nashik. “Inox was strong in East, West, South and Central India. The only missing part was Delhi and the adjacent Northern belt, which was PVR’s stronghold. With the acquisition of Satyam, it has broken into that. Satyam’s three properties in Delhi are strong in the sense that they have monopoly in those three areas, and have their own catchment area,” a senior executive of a major cinema exhibition company commented. “They (Inox) have consolidated their position across India and with the addition of Delhi, they will see a great boost in advertising revenue,” he added. As per media observers tracking the sector, Inox will have an advantage across the value chain of the theatrical business—location, distribution and advertising. While the acquisition opens up new markets, the company will be able to command a better share from distributors as well as advertisers. “While PVR promoters had to reduce stake to raise enough cash to buy out Cinemax, Inox has no such problem. In today’s scenario, it is the only multiplex which has the capability to put cash, has strong promoter holding as well as backing,” commented an analyst who tracks the sector. The change in market dynamics While the change had started gathering momentum four years back with Inox acquiring Fame, there were still three-four players left. The market is today reduced to two—PVR and Inox. They each have over one-third of share in the total multiplex revenue pie, while together, the two players command as high as 70 per cent of the total theatrical moolah of the multiplexes. Small players like DT Cinemas, Fun Cinemas, SRS and others will have to consolidate by merging with either of the two big daddies, or accept their marginalisation over time. “The expansion, both organic and inorganic, of these two will not stop here. Both have hunger to expand more and more. The market is going to get polarised and not just film studios and distributors, but food suppliers, real estate developers as well as consumers will have these two names in their brand recall,” the analyst said. These two will demand either more shows or better margins from distributors, which will make consumers come back to the screens, turning it into a habit. More consumers will mean more FNB revenues, and even real estate developers will ultimately have to consult these two players.
Posted on: Fri, 01 Aug 2014 10:37:45 +0000
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