MUMBAI: The Ajay Bijli led PVR group seems set to acquire Chennai's premier movie exhibition company SPI Cinemas, popularly known as Sathyam Cinemas, in what could end up to be the biggest deal in Bijli's career as well for India's multiplex sector. Multiple sources aware of the ongoing discussions said save lastminute developments, the deal may close for a rather steep valuation of approximately Rs 7501,000 crore for just 40 odd screens, located predominantly in the Southern metro. To put this in perspective, last month Carnival Cinemas paid a little over Rs 700 crore to buy out Anil Ambani's Big Cinemas that has 242 screens across the country. This also underscores the growing consolidation frenzy that has gripped the multiplex industry in recent times with 5 deals in 12 months, valued at over Rs 1600 crore as theatre operators seek to improve their bargaining power with film studios and distribution companies to gain a bigger share of box office receipts.
Additionally, with a prolonged slowdown in commercial real estate (read malls that typically anchors these multiplexes), dominant players feel inorganic growth is faster than time consuming greenfield developments. The SPI Group currently runs a cinema exhibition, distribution and production business but are known for their portfolio of some of the most iconic cinema destinations across South India. According to the company's website, it currently operate close to 40 screens under 5 categories Sathyam, Escape, thecinema, Luxe, their uber premium offering and S2 Cinemas and are poised to open over 50 screens by early 2015. PVR, with 454 screens in 102 locations across 43 cities, is the largest cinema exhibitor in the country today. Ajay Bijli, Chairman & Managing Director, PVR Ltd did not respond to ET's email query. Attempts to reach him or his top management on their mobiles also did not yield any result. A company spokesperson declined to comment on market speculation. "We are exploring several options to raise capital and are also in talks with several PE players. We have not taken any final call on the future course of action. A sale is an option but at this moment I have nothing to comment about on any valuations or potential discussions as nothing has firmed up yet," Kiran Reddy, Chief Executive Officer of SPI Group told ET. Sources add that they have been in the market for almost a year now and have been sought after by most of their peers. While most discussions fell through with the Reddy's insistence on a significant valuation premium, PVR has pursuing the opportunity for months now. PWC and EY are believed to be advisors in the deal. Earlier in December, newspaper reports had said that the two sides were in negotiations
JEWEL IN THE CROWN
What makes SPI Cinemas such a prized catch despite a small portfolio of just 40 odd screens that are largely concentrated in just 1 city Chennai. For one, it is amongst the most profitable operators today with one of the highest average occupancy over 65% anywhere in the country. It draws over 3 million customers a year. One of the sources mentioned above said the Reddy family owned chain is expected to post an Rs 8588 crore EBITDA by the end of this financial year. Recent multiplex transactions in India have been sealed at 1012 times EBITDA multiples, almost double that of global averages. As per data available from the registrar of companies, in FY 14, SPI Cinemas posted around Rs 39 crore of EBITDA on revenues of Rs 189.4 crore. The company had Rs 186 crore of debt then
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