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| Shrikant Bhasi |
MUMBAI: In the beginning of 2014, Shrikant Bhasi was a fringe newcomer in the business of movie exhibition with just three screens in Kerala. Twelve months, two acquisitions and over 300 screens later, he closed the year as the fastest growing multiplex mogul in the country and his flagship Carnival Group already the third largest in the industry pecking order. But by the look of it, it seems this was just the trailer.
So after closing the biggest deal in his career so far Rs 700 crore acquisition of Big Cinemas from Reliance Mediaworks just last month Bhasi is already plotting his next move. In his shopping list, say industry sources, are at least three more potential regional
multiplex chains including SRS Cinemas in Delhi, Glitz (for north and Central India) and a
Southbased operator.
Even for each of Big Cinemas' 242 locations there is a big turnaround blueprint that is being put in place set to kick in once the CCI approvals come through by the middle of this month. But one got a sense of what's imminent, when just a day after announcing the Big buyout,Bhasi took time out for a recce of the iconic Metro Cinema in South Mumbai where he instructed his management team to remove an entire row of seats in each of the screens to ensure better leg space while his CEO addressed the staff at Big in an afternoon town hall.
Parallel to this, Bhasi is also in advance negotiations with L&T to buy their 1.15 million square foot integrated commercial real estate project in Chandigarh which houses the Elante mall, office blocks and the Hyatt hotel for an Rs 1800 crore valuation. Real estate is not a business but an "investment portfolio" that generates cash flows from rent yields part of which are ploughed back into the core exhibition business. Last year, the promoters of the cash strapped Leela Hotels sold two of their IT parks in Kerala to Bhasi. Rivals and peers gawk at these audacious moves; detractors question his financial and operational bandwidth and insist that he remains a "rank outsider" but his admirers swear by his singleminded focus and attention to details. For the moment though, Bhasi seems nonplussed with all the spotlight.
"I am not in the numbers game," says the dapper 46year old agritrader turned multiplex maverick and chairman, Carnival Group. "During the Big Cinemas negotiations, I told Anil Ambani that I may not have the operational experience of my peers. But I have a definitive rollout
strategy and it's a profitable one."
It's this confidence that has always helped him breakout. Be it in Britannia where he first cut his teeth, joining as a young accounts assistant during the last year of his BComm studies and then rising from within the ranks to become a star agritrader in the late 80s. It equally came handy when he started his own entrepreneurial set up Advantage Overseas Pvt Ltd a decade later and branched out to agrifinancing for several global players like Bunge, where he still is an advisor.
"He never switches off and is endowed with tremendous mental and physical energy. He is very clear about what he wants to do and is very aggressive about reaching his goal," recalls Ravi Nigam, MD, Tasty Bites, a readytoeat foods company, and his former boss at Britannia. "But most importantly he has an uncanny ability to spot new opportunities and move in quickly."
For Bhasi a Malayalee NRI from Singapore who grew up in Bhopal a complete career switch after finding success in commodity trading and financing to move into the multiplex business around 2008 was just that. In between he even tried to replicate his structured finance learnings to bankroll and produce movies especially down south. "Financing Bollywood films was too expensive," realls Bhasi, "so we went back to our home market to finance, produce and distribute Malayalam films."
And that's when it struck him that there were just no decent screens available for screenings. "In 2008, Kerala had only 2 multiplexes and a total of 3035 theatres. We did a nationwide survey and found people wanted to go to theatres but the environment was not conducive to take families. We figured a golden opportunity exists," says Bhasi.
Right then, through a state government auction Bhasi won a tender to develop a 17,000 sq ft space above a bus shelter near the Kochi international airport. "Carnival at the bus stand" was a runaway hit 6570% occupancy versus and the 40% average for competition buoyed Bhasi to ramp up in the South expanding to Kerala and Tamil Nadu. The two acquisitions HDIL's Broadway and Big have now catapulted Carnival as a pan India player and more importantly has given it access to lucrative metro markets of north, west and east. It has in the process also increased its bargaining power with film producers and distributors for a larger share of the box office receipts. ""Once the industry converges around 34 players, a lot of equations within the film industry will change and people will exert market power. The big players will also see more automation as scale goes up. The exhibitors will also become partners in the industry with equal stake," feels Jehil Thakkar, Partner and head of media and entertainment, KPMG India.
But even as he goes on a buying spree, Bhasi is very clear that most of his organic growth in future will come from smaller beta cities. Going back to his Madhya Pradesh roots, he is planning to put up 400 screens across 128 centres over the next two years at a cost of Rs 650700 crore. Bhasi has already tied up subsidies from the state government as well as a 5year tax holiday similar to the one in Maharashtra for multiplexes.
"Places like Satna have a decent population but do not have a multiplex. Incomes are from agriculture are rising and you find people go all the way to Bhopal, stay the night at a hotel there, watch a film and come back," says Bhasi. Aware that he has to keep his overheads and ticket prices low, Carnival will use prefabricated materials for these 100125 seaters, lower the cost of per screen to under a crore and add a community centre with a small restaurant which can be a money spinner round the year.
The whole idea is to be a holistic provider of entertainment for at least four hours per person. "Watching a film at our multiplex is just one of the options. We will also provide a viewer our restaurants and food courts, spas and entertainment zones. It will reduce our dependability on film content which is variable, at best and ensure revenue flows throughout," explains Bhasi. So along
with the multiplex, Carnival has also launched its very own food courts under the aegis of Travancore Foods with QSR brands as diverse as Simbly South, Noodle Point, Kebab Station, Gulp and D'Bell cafes and lounges.
The target is to reduce box receipts to just 40% of gross revenues from the current 60% while upping the share of F&B and entertainment to 60%. "The next set of growth will come for Tier II cities but you need to pick and choose selectively. Real estate costs will be low and these markets are starved of entertainment options. But ticket prices will not be as high as the metros but that can be offset by adding F&B," says Sudhir Pillai, Partner, Walker & Chandiok, who specializes on the multiplex sector.
For his team Bhasi has already set an ambitious 1000 screens target by 2017. Next in line is also a logical entry into film distribution to improve his bargaining power with film studios. "We shall contract 500 single screens for this. We will also add our own portfolio of 400 (and counting) and aim to have a network of 900 1000 screens nationwide for distributing smaller, independent films who do not always get the right backing," says Bhasi, who himself has also made cameo appearances in Malayalam and even a Bollywood film.
But is he biting off more than what he can chew? Questions remain about Bhasi's funding capabilities to support the growth plans. So far Carnival's total investment in the two mutiplex acquisitions is Rs 820 crore. Another Rs 250Rs 280 crore will be required if he goes ahead with the next two. Even the real estate acquisition will come at a very steep valuation of Rs 1800 crore. So far his agritrading businesses and rent income provide the group's financial backbone, but its profits are not enough to support all the skyhigh ambitions.
The multiplex operations will close its first full year operations with a Rs 90 crore topline and an EBITDA margin of 1617%, the end of this financial year. Carnival a debt free company before Big Cinemas buy is securing a Rs 500 crore debt line from Yes Bank to complete the deal and Bhasi says has plans to bring in PE investors in each of the key verticals as they scale up. "He has to bring in equity either of his own or from financial investors to substitute debt. He is taking long term investment bets with short term funding and that can bite," warns a banker familiar with the plans.
It's been a trailblazing journey thus far. But to draw a filmy parallel Carnival has to last the long haul before entering the multiplex hall of fame. For that, Picture abhi baaki hain mera dost.
